Democracy Fights Austerity [View all]

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from Consortium News:



Democracy Fights Austerity
May 8, 2012

Much of Europe has swallowed the bitter medicine of austerity on orders from conservative economic theorists, only to find that the supposed cure has made matters worse. Now, elections in France and Greece indicate that Europeans want a new approach that stimulates growth, ex-CIA analyst Paul R. Pillar notes.

By Paul R. Pillar


The commonly accepted story line about the French and Greek elections on Sunday is that the outcome is a rejection by voters of the austerity that Merkozy-dominated European decision-makers have been imposing on the eurozone. The result, as some critics might put it more bluntly and negatively, is a defeat of disciplined economic policy by short-sighted populist sentiment.

In general, displacement of disciplined decision-making by raw popular anger is not good. But from the standpoint of Europe’s economic health and its effect on the health of the global economy, backing away from austerity is the main thing needed right now. To understand why, read any of Paul Krugman‘s frequent forays into the subject.

The idea that austerity breeds confidence which in turn breeds private sector initiative and prosperity simply hasn’t proven valid where it has been tried. Stimulation of demand is needed to keep Europe from dropping into a deep double-dip recession.

The election results do give reason for concern. Parts of François Hollande’s platform look ill-conceived. The beneficiaries of Greek voters’ rejection of the mainstream parties that had signed on to austerity are the far-left and far-right fringes; in this respect the Greek result is a disturbing move toward extremism. On the basic dimension of austerity vs. stimulation, however, voters have moved the European economic debate in the correct direction, even if most of them did so for the wrong reasons. .............(more)

The complete piece is at: http://consortiumnews.com/2012/05/08/democracy-fights-austerity/