DOES AUSTERITY MAKE ECONOMIC SENSE? Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University. He was interviewed on Radio 4 this morning during the Today Programme and if you get a chance we recommend that you listen to the fascinating discussion on i-player once it becomes available. What he said in a nutshell however, confirmed what increasingly large numbers of people are beginning to believe: the idea that austerity is somehow unavoidable in order to get us out of economic difficulties, makes no sense at all. While the belt tightening approach to debt works well for a single household in trouble, it does not work well for an entire economy, for the spending cuts only worsen the problem. “This is the paradox of thrift: belt-tightening causes people to lose their jobs, because other people are not buying what they produce, so their debt burden rises rather than falls.” What Schiller advocates instead is higher taxation of the rich and increased public spending on projects of benefit for wider society – a type of spending quite different from the individual profligacy and consumerism which gives the idea of spending a bad name. He says “…, stimulus is about collective decisions to get aggregate spending back on track. Because it is a collective decision, the spending naturally involves different kinds of consumption than we would make individually – say, better highways, rather than more dinners out. But that should be okay, especially if we all have jobs.” Increased public spending could address some of the longer term threats to society. Investment in the green economy, for example,could create huge numbers of jobs and seek to solve some of the greatest problems we have yet to face. In the shorter term, higher rates of taxation and increased public spending could serve to reduce rather than increase the divisions between rich and poor which are beginning to stir up potentially huge unrest and which threaten to destabilise the economy yet more. Read more by clicking the link below….
Posted on: Tue, 25 Nov 2014 09:50:09 +0000
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