By Teresa Welsh |
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.
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.
About David Callahan Cofounder of Demos
Veronique de Rugy Senior Research Fellow at the Mercatus Center at George Mason University
Dean Baker Codirector of the Center for Economic and Policy Research
Gordon Gray Director of Fiscal Policy at the American Action Forum