Actually if you look at the economic growth of the 'austerity' countries it has been better than the economic growth of the 'stimulated' countries. They are both feeble, but Austerity is marginally outperforming stimulating at the current time, and down the track it will beat it hands down.
Yes, it sucks either way, but when debt is the problem, more debt is not the cure. 'Stimulating' is just borrowing future funds to try and get things going now, which, at best, just moves the problem down the road.
Many people are quick to try and string up politicians who point out the truth. Sadly this means the politicians who push the problem forwards and reassure people are the ones that get voted in. And the problem gets pushed further down the track and gets even more malignant.
Greece is a smoking ruin and getting worse. The UK was outperforming Ireland until the new UK government started swinging a chainsaw around in an ideologically-based austerity drive, and now its growth has vanished.
Ireland is improving (hello from Cork) in relative terms because it genuinely had nowhere further south left to go. 20% of the population is on the dole, property prices are down 60% from 2007 and are still falling, mobility of potential jobseekers has been curtailed by the fact that they can't sell up and move because their mortgages are worth twice what the house is.
We also took the old government out back and swung an axe into its head in February. The party of government for 80% of the entire history of Ireland as an independent state is now polling in fourth position. Its erstwhile coalition partner is within the margin of error of zero.
You cannot but imperil private sector growth by removing massive amounts of cash from the economy all at once[1]. Public employees spend that money they're paid.
Couldn't it go either way though? I mean ultimately it just depends on what returns they can get. My impression is that the New Deal in the Depression gave good ROI because the infrastructure improvements opened up new avenues of growth. However if you have massive corruption like in Greece then you're probably better off with austerity.
When you build the Hoover dam and the interstate system, yes.
When you loan money to stimulate defense contractors, non-competitive solar manufacturers and for all sorts of other boondoggles and build bridges to nowhere, no.
The problem is that the process of spending on infrastructure rarely is positive in most places for a whole host of reasons. Therefore, austerity is better because it avoids malinvestment. Doing nothing is better than wasting capital.
If you borrow money to spend, the spending has to create more return than the cost of the borrowed money, or the money is wasted. This is true in the case of the individual, the company and the government. Individuals rarely invest money for greater returns (think : new cars), companies that last always invest for greater returns, but governments have few incentives to do so.
They would much rather make a big splash and announce jobs now, than worry about whether or not they are creating something worthwhile.
The problem, of course, is always in measuring the positive returns of large public spending. But again, in times of over-borrowing, governments should always err on the side of caution.
Yes, it sucks either way, but when debt is the problem, more debt is not the cure. 'Stimulating' is just borrowing future funds to try and get things going now, which, at best, just moves the problem down the road.
Many people are quick to try and string up politicians who point out the truth. Sadly this means the politicians who push the problem forwards and reassure people are the ones that get voted in. And the problem gets pushed further down the track and gets even more malignant.