Why Austerity Doesn’t Work

Photo courtesy of University Hospitals Birmingham

It seems the word “austerity” is on the lips of everyone concerned about the international economy these days.   Many EU countries have been forced to take drastic measures in order to reign in their national debts despite public outcry about the spending cuts. In the United Kingdom, David Cameron’s Conservative government slashed spending AND raised taxes to get his nation’s debt under control. The result? Queen Elizabeth’s subjects may now be entering a double-dip recession.

It may be counter-intuitive, but slashing government spending when an economy is shaky or just barely beginning to recover isn’t a great strategy. As Nobel Laureate, Paul Krugman recently said on the BBC, "We are not a household. We are an economy. Your spending is my income, and my spending is your income."

In this video Brown University Professor, Mark Blyth, explains why austerity doesn’t work. He argues that, yes, we should pay off national debts, but only after the private sector has fully recovered.