The arguments for austerity have from the beginning been couched in pearl-clutching moralizing about how consumers and citizens in various countries/housing markets/racial groups have behaved poorly and need to suffer in order to learn the lessons of good clean living. Or something – the message has frankly never made sense, but its persistence is remarkable.
This is especially true given the clear signs that – as predicted – it doesn’t work. Jonathan Portes from the NIESR provides just the latest proof statement in the following chart, which compares the path of UK output during recessionary periods going back to the Great Depression.
David Dayen makes an excellent point about the timing:
The British economy was on the rebound about 30 months out from the recession’s start, but around mid-2010 it started going sideways, and has remained in that position ever since. The new conserative Prime Minister of Britain, David Cameron, took office in May 2010 and immediately instituted his austerity regime. The chart above shows the result: an economy now in worse shape than it was during the Depression.
I’m sure things will go just as splendidly in Greece and Spain. But I’m also certain that the people making these decisions will remain impervious to factual argument because their beliefs are not based on facts but a theology of the purging of sin through suffering. Unless you’re a bond holder, of course.