Is Austerity to Blame for Europe's Economic Woes?

[Chris]

http://www.youtube.com/watch?feature=player_embedded&v=vQu7V9pMK48#!

What actually failed was a mix of spending cuts and tax increases. Those who focused on spending cuts were more likely to see economic expansion/growth. Those that tried to stimulate the economy through spending were less likely to see exampansion.

[Peter1469]

There really hasn't been any austerity. I guess they adopted our base line budgeting.

[RollingWave]

You might wanna consider...


Taxation revenue as a part of the GDP

Germany: 2008 - 37% , 2012-40.6%
UK : 2008 - 34% 2012- 39%

it's hard to draw to draw the conclusion that tax increases is the one and only issue here... since Germany ALSO raised taxes as a % of the GDP (though by a smaller margin) while the UK still have a lower taxation as a % of the GDP compared to Germany and have been consistently lower in that regard as well. the two country also have different problems going foward, Germany has less short term issue but it's demograpihc looks terrible (which is partially tied to their current strength, since unlike other major European country they have a much tougher immigration law, which means less immigration but also means your going to rely almost entirely on your own current citizens for kids) and it would be hard to imagine them not having structural problem in the longer run if their retired age folks begin to become almost as large as their working age onces.


Though economic growth and public debt level are not unlinked, trying to adddress them as one and the same is often problematic, trying to draw simple logic and lines on these issue (like taxes = bad) is almost always a terrible idea.

[Peter1469]

There is no austerity unless you consider not increasing last years budget to be austerity.

http://marginalrevolution.com/marginalrevolution/2012/05/how-savage-has-european-austerity-been.html

This is base line budgeting and nobody can tell me why it should not be eliminated. Slash government spending now, r wait for the total collapse and start over with rational government spending. And it won't include a cradle to grave comfort-blanket for the lazy members of society.

[RollingWave]

also keep in mind that..

Federal Budget of Germany (in billions euro)

2008: 283.2
2012: 306.2

so yeah... Germany didn't exactly cut spending either. at the end of the day the whole debate spinng around tax cut vs spending as if the two are a complete zero-sum game for economics is an oxymoron IMHO, the real issue remains on the fundemental rules and infrastructure of the state, the labor laws, the education setup, the immigration policy, the quality of infrastructure etc... taxation is obviously also a big part of this, but these debate are starting to sound as if tax are the end all of economics.

[Chris]

You're right, rollingwave, the economy is not zero-sum and all this is more complex and dynamic than anyone or group of central planners can design.

[Peter1469]

Germany certainly does sit back and ignore their economy. They micro-manage it much more than you would like. During the recession they told their corporations to cut employee hours so that people would not have to be laid off. But Germans are used to working together- with other Germans. They do hate the Turkish immigrants that have flooded the country.

[RollingWave]

You're right, rollingwave, the economy is not zero-sum and all this is more complex and dynamic than anyone or group of central planners can design.

We'd agree that Economy is not hard science, aka there's no abosaluet law like the law of gravity that is limited by nature, so in that sense I think it's generally a bad idea to be abosalute on any sort of statement.

My main argument is that not all economy are like the US, a free market approach is probably more logical for the US (and to a lesser extend also the EU) because it is BIG, it is in fact the biggest, even China is still half of the US, but it is foolish to assume that all economies are like that, when most country are much smaller, either in literal terms or economic onces, and in that situation the role of government and economics becomes much more questionable.

When economies are smaller in scale, monopolies or (very) imperfect markets are much more likely to form naturally, it's hard to argue that if a country is run by one or few company / family that it'll be economically good (let alone politically) or that a totally underdeveloped country just letting everything be will somehow magically advance a few hundred years of developement in a few years.

In reality, government will exist in an economy, what they do will always impact economy, be it taxation or legislation, even more laissez-faire advocate will not seriously argue for no laws or no taxes obviously, since a stable state must exist as a pre-condition for any sort of economic theory to function. it needs relaible and effective law, it needs a stable society (if everyone's running around rioting and burning shite all theories are out the window obviously) , it needs a stable international relationship, almost everyone agree on these parts.

But hence comes the problem, what is a stable society? what is effective law? this may sound like a simple question but the degree of interpetation is essentially the difference between the so called "left" and "right" these days.

IMHO, theres' obviously no perfect solution, only trying to find a reasonable balance between risk and reward like almost anything else in human society. and the balance point will alwys change with time and circumstances, the right answer for the US is probably no the one for other places and vice versa.