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The idea that spending by consumers and governments drives the economy is the basis for today’s anti-austerity "hosannas." The new French president, François Hollande, has promised to open the spigots and spend Europe back to economic health. If only it were that easy.
The recent elections in Europe have many policymakers and pundits proclaiming “an end to austerity.” Here is Washington Post columnist Eugene Robinson:
Economic austerity is a dangerous, self-defeating intellectual fad. Perhaps I should say that’s what it was, given Sunday’s election results in Europe. Perhaps I should also say good riddance. Voters in France, Greece and even Germany — a hotbed of the austerity cult — told their political leaders, in no uncertain terms, that boosting economic growth is more important than cutting government spending.
It’s said the grass is always greener on the other side of the fence, but what about the other side of the Atlantic? In this series, we are looking at the different approaches the United States and European Union have taken in the aftermath of the global recession, the former focused on spurring enterprise, the latter on austerity measures.
Over this past week, markets across the world were caught in turmoil. One major source of this upheaval was found, once again, in Europe. More specifically, Spain. Spain's bonds have reached interest rates once deemed unsustainable (over 6%), which in turn not only makes it harder for business to finance their work, but also undermines the ability of Spain to continue funding its deficits. For a country with over 23% of its workforce unemployed and an economy desperately in need of growth, this hurts.
In this series, we are looking at how tough economic times have led the United States and Europe down two different paths – one focused on budget cuts, the other on investment and enterprise. These are austere times for businesses, families and governments on both sides of the Atlantic, but the different ways in which the United States and Europe have engaged and addressed the difficult economy reveal important lessons for encouraging entrepreneurship, small business and the inevitable jobs growth that follows.
According to economist John Cochrane's recent post in Bloomberg View, "austerity isn't working." For those who've been following this blog recently, you'll know that we've started a series on what free enterprise looks like in the era of austerity.
There has been a flurry of reports and findings lately that the American economy is growing again. U.S. manufacturing is strengthening and the country’s gross domestic product has surpassed pre-economic crisis levels. This is welcome news, but it doesn’t mean the country is out of the woods yet. In fact, America’s current rally is just another step on the long road to recovery.
Daniel Drezner, a professor at Tufts University, thinks that the developed world is at an "inflection point" when it comes to austerity. Leaders in Europe are beginning to blanch at further austerity measures now that it's effect is fully sinking in. The commentariat, always a fickle bunch, are turning up the heat. Even the technocrats are getting in on the action, deploying various forms of monetary loosening to keep money flowing as public balance
Daniel Drezner, a professor at Tufts University, thinks that the developed world is at an "inflection point" when it comes to austerity. Leaders in Europe are beginning to blanch at further austerity measures now that its effect is fully sinking in. The commentariat, always a fickle bunch, are turning up the heat. Even the technocrats are getting in on the action, deploying various forms of monetary loosening to keep money flowing as public balance s
An austere wind is blowing, whipped up by budget cuts and regulatory and economic uncertainty. What of the job creator in this climate? Will our economy simply dry up or will the weight of recession be blown away? Robert Shiller of Yale took to a poem recently -- "The building Trade is quite destroy’d, Artificers are not employ’d" -- in wondering whether history or academia had any answers to this stiff gale. He found some tempered hope, but not much more.