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Mon Feb 25, 2013, 04:25 PM

How Austerity Stifled The British Economy (And The Rest Of Europe) In Three Charts


Last week, the United Kingdom received its first ever credit downgrade, as continued austerity has dragged down the country’s economic growth. Britain’s conservative government, however, is forging ahead. Finance Minister George Osborne yesterday called for the UK to “stick to its course.”

The UK, though, is a prime example for why austerity should be avoided in a weak economy. As this chart from Reuters’ shows, the U.S., which embraced stimulus after the 2008 financial crisis, is in much better shape than the European countries that went for austerity:

As this chart shows, the UK has not at all lived up to the projections for economic growth that were made in 2010:

Austerity has actually had the opposite of its intended effect in the UK, killing growth while not bringing down debt. And that’s held true across Europe, as this chart from economists Paul De Grauwe and Yuemei Ji shows:

and more from De grauwe and Yuernei Ji...
(emphases my own)
Panic-driven austerity in the Eurozone and its implications


How well did this panic-induced austerity work? We provide some answers in Figures 4 and 5. [font size="3"]Figure 4 shows the relation between the austerity measures introduced in 2011 and the growth of GDP over 2011-12. We find a strong negative correlation. [/font]Countries that imposed the strongest austerity measures also experienced the strongest declines in their GDP. This result is in line with the IMF’s recent analysis (IMF 2012).

Figure 4. Austerity and GDP growth 2011-2012

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Reply How Austerity Stifled The British Economy (And The Rest Of Europe) In Three Charts (Original post)
Bill USA Feb 2013 OP
Turbineguy Feb 2013 #1
CJCRANE Feb 2013 #2

Response to Bill USA (Original post)

Mon Feb 25, 2013, 05:14 PM

1. Austerity in this case

means insuring that the top of the heap garners most of the wealth.

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Response to Bill USA (Original post)

Wed Feb 27, 2013, 04:07 PM

2. For a dynamic economy, money needs to circulate

and go in and out of as many pockets as possible.

It's obvious that if you take money out of the economy that will slow things down.

First the banks took money out by creating a huge financial blackhole that needed taxpayer bailouts (and then refused to lend it out again), then governments decided to take even more out of the economy (in the name of austerity).

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