Austerity measures In economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two. ... The negative impact of Austerity Measures in Bhutan. ( source: the Bhutanese) Austerity Measures are proving to do more harm than good in our country. For a small economy like us which is already reeling from the lack of credit, the government’s austerity measures came like an unintentional ‘one two’ punch knocking the economy off its feet. The issue for a large government debt and a government spending beyond its means was raised several times. The new PDP government’s solution of strong austerity measures may actually be making a bad situation even worse. The main reason why austerity measures are not of any help, especially in Bhutan, is because the government and government owned companies are still the biggest players.Austerity is not only slowing growth down, but also leading to higher unemployment as agencies and companies are not hiring and in many cases cutting down on manpower. The term austerity measures’ became popular in the late 1980’s and early 90’s as part of the Washington consensus that prescribed some vey Market Fundamentalist measures to economic problems by Washington –based institutions like the World Bank, International Monetary Fund and the US Treasury Department. Their solution to a budget deficit is to significantly cut down on government expenditure and sharply increase taxes After the 2008 crisis, many international countries especially in the euro zone adopted austerity measures. In most cases, austerity measures failed miserably and made matters worse. What was generally observed is that austerity measures slowed down economic growth, created higher unemployment and increased the debt to GDP ratio. There is now growing international consensus that austerity actually makes matters worse and restricts economic activity at a time when it is needed most. Though the world has learned its lessons and is adapting, Bhutan is still going by the failed Washington Consensus mantra that has been particularly harsh on least developed countries. It is of no surprise that both the RMA and Ministry of Finance are advocating austerity measures that include very high taxes and stringent control of government expenditure. Even the World Bank and IMF are simply spouting the Washington consensus. The government should come out of its current austerity path if it wants to save what is left of the economy create jobs and strengthen our finances.
Posted on: Sat, 25 Jan 2014 05:11:14 +0000
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