Debate Club

Evidence Shows European Austerity Was a Colossal Mistake

By SHARE

The eurozone's descent back into recession this year has come as no great surprise to many economists. By scaling back government spending, austerity policies on the continent and in the U.K. have reduced economic demand -- which, of course, is the last thing you want to do if the goal is boosting growth.

Contrast Europe's situation with that of the United States, where the economy has been steadily reviving thanks, in large part, to years of fiscal and monetary stimulus, including a payroll tax holiday that only just lapsed in January. Or look at China, which enacted one of the largest stimulus efforts of any nation after the financial crisis, when measured as a share of gross domestic product, and had a 7.8 percent growth rate last year.

[See a collection of political cartoons on the European debt crisis.]

So the evidence is in: Austerity was a mistake for Europe. And the fallout has not just included negative economic growth. Austerity has taken a huge social and psychological toll, as well. Suicide rates have soared, particularly in southern Europe, as people lost everything -- and then also fell through a shredded safety net. Drug use is on the rise and health systems have faced big cutbacks, leading to untreated illnesses and other problems. Meanwhile, extremist right-wing politics are increasingly popular and are particularly attractive to young people who feel a lack of hope. The smell of tear gas has become common in some European capitals.

The last time Europe faced such economic pain and social instability we saw the rise of fascism in Germany, Italy and Spain.

And all for what? The austerity policies that are inflicting so much misery have actually backfired, leading to less growth and ongoing fiscal imbalances given the lack of tax revenue coming in amid near-record levels of unemployment. It's a simple fact, but true, that the best way to reduce deficits is to put people back to work so that they're paying money into national treasuries as opposed to taking it out through public assistance. Europe has learned this lesson the hard way. Abandoning failed austerity policies is long overdue.

David Callahan

About David Callahan Cofounder of Demos

Tags
austerity
economy
European Union

Other Arguments

#1
154 Pts
European Countries Can't Continue on Their Spendaholic Track

No – European Countries Can't Continue on Their Spendaholic Track

Veronique de Rugy Senior Research Fellow at the Mercatus Center at George Mason University

#2
32 Pts
Europe's Self-Defeating Austerity

Yes – Europe's Self-Defeating Austerity

Josh Bivens Research and Policy Director at the Economic Policy Institute

#3
24 Pts
Austerity Advocates Have Been Wrong About Everything

Yes – Austerity Advocates Have Been Wrong About Everything

Dean Baker Codirector of the Center for Economic and Policy Research

#4
9 Pts
Nations Can't Forgo Austerity Without Delivering Reforms

No – Nations Can't Forgo Austerity Without Delivering Reforms

Gordon Gray Director of Fiscal Policy at the American Action Forum

#5
-2 Pts
Austerity Has Made Europe's Real Problem Worse

Yes – Austerity Has Made Europe's Real Problem Worse

Adam Posen President of the Peterson Institute for International Economics

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