Dean Baker: The United Kingdom Does Austerity So We Don’t Have To

[eridani]

http://www.nationofchange.org/united-kingdom-does-austerity-so-we-don-t-have-1335972608

The UK economy does not appear to have done any better in terms of the rest of the picture. If austerity boosted business leaders’ animal spirits, it is not showing up in the data. Nearly every component of the private sector has contracted over the last two quarters with construction leading the way, falling at a 0.8 percent annual rate in the fourth quarter of 2011 and a 12.0 percent rate in the first quarter of this year.

When taxes rise and government spending falls, and there is no offsetting boost from investment, our old friend Mr. Arithmetic tells us that the economy contracts. And that is what is happening now in the UK The economy shrank for the second consecutive quarter, pushing it back into recession. While the UK economy was growing rapidly at the time the Conservatives came to power in May of 2010, the economy is now smaller than it was in the summer of that year.

This is all very bad news for people living in the United Kingdom. There has been no job growth since the summer of 2010, and the unemployment rate has risen from 7.7 percent to 8.1 percent in the most recent data. It seems certain to rise more in the months ahead. If anything, the situation is likely to worsen over the course of the year as more of the spending cuts take effect.

[fasttense]

1. But austerity lovers have another agenda and it has nothing to do with a healthy economy.

"But there are many people in positions of power who want to push austerity for reasons that have nothing to do with economic growth, and they are prepared to lie, cheat, and steal to advance this agenda. For this reason, however much we may sympathize with the people of the UK for their suffering, we should be thankful that they have given us such a beautiful example of how austerity wrecks an economy."

[jwirr]

2. Ever since we have been practicing the Milton Friedman form of economics various countries have

tried austerity from Argentina to today. Has it ever worked? And if so did it work only for the rich or did it work for everyone? There-in is the problem.