In the past couple of days, the world witnessed the newly-elected prime minister of England, David Cameron and his chancellor of exchequer, George Osborne, proposing a package of drastic budget cuts that will affect almost every government-provided service in England from health and environment to BBC's international bureau.
While it is tough to argue against the necessity of balancing a budget deficit as large as 11% of the GDP, it is perfectly legitimate to question the timing of this austerity package. After all, you don’t need to be an expert in Microeconomics to realize that cutting about half a million jobs, just when the economy is barley moving out a devastating recession, is not a wise idea!
Read the following article from Paul Krugman in NYTimes. I quoted below, some of his facts and arguments:
"the sudden consensus among Very Serious People that everyone must balance budgets now now now wasn’t based on any kind of careful analysis. It was more like a fad, something everyone professed to believe because that was what the in-crowd was saying."..."No widespread fad ever passes, however, without leaving some fashion victims in its wake. In this case, the victims are the people of Britain, who have the misfortune to be ruled by a government that took office at the height of the austerity fad and won’t admit that it was wrong."..."Over-reliance on the financial industry largely explains why Britain, which came into the crisis with relatively low public debt, has seen its budget deficit soar to 11 percent of G.D.P. — slightly worse than the U.S. deficit. And there’s no question that Britain will eventually need to balance its books with spending cuts and tax increases. The operative word here should, however, be “eventually.” Fiscal austerity will depress the economy further unless it can be offset by a fall in interest rates. Right now, interest rates in Britain, as in America, are already very low, with little room to fall further. The sensible thing, then, is to devise a plan for putting the nation’s fiscal house in order, while waiting until a solid economic recovery is under way before wielding the ax."..."The British government’s plan is bold, say the pundits — and so it is. But it boldly goes in exactly the wrong direction. It would cut government employment by 490,000 workers — the equivalent of almost three million layoffs in the United States — at a time when the private sector is in no position to provide alternative employment. It would slash spending at a time when private demand isn’t at all ready to take up the slack."..."What happens now? Maybe Britain will get lucky, and something will come along to rescue the economy. But the best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it."
I personally believe that England’s conservative party is fully aware of the consequences of these foolish actions. They are simply, and deliberately, following the footsteps of their American counterparts, in order to kill the welfare-state by strangulation!
As Bill Maher stated while ago: “Democrats have moved to the right and Republicans have moved to the mental hospital”. Apparently, England’s conservatives are heading the same way. Shame on Nick Clegg and Liberal Democrats for selling all their values for such a cheap price: sharing the seat of power for a brief season!
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