Christopher Johnson - British
Austerity is a socioeconomic policy aimed at bringing down national debt to secure the economy – in the UK this is typically done through cuts to public services, reducing the quality of life for many people, particularly those who are already vulnerable such as disabled people, single parents, or those living in deprived conditions with low incomes already. The theoretical reason for austerity – and the reason why it can seem so appealing – is simple, in that it reduces government spending, thereby reducing the national debt, which should both increase trust from lenders, ensuring that interest rates remain low and that they will roll over existing debts, both of which should ensure that a country does not default on its debts, particularly if these debts are in a currency which the country itself does not issue, and it should also stimulate economic growth. However, neither of these arguments actually work in practice and austerity actually has both the potential and does make these problems worse, increasing national debt and slowing economic growth.
Austerity is not effective at actually driving good economic growth for a country. The basic argument behind why it should be quite complex, but even theoretically will only work in certain scenarios. In theory, when an economy is operating at its maximum capacity for the situation, lower public spending will cause an increase in private investment due to the space in the economy which has opened up for it, spurring on economic growth. This is a flawed argument. First of all, it assumes that austerity is implemented in circumstances like this, which is simply not true. The biggest periods of austerity in history are the period following the 2008 financial crash and the Great Depression, during which rates of unemployment were very high, meaning the economy was not actually operating at its maximum capacity, as a large portion of the workforce was fundamentally not producing anything. This also assumes that private investment will always naturally come to fill gaps in the market which the government previously filled, which isn’t necessarily the case, as private investment will operate in the interests of profit, meaning key functions carried out by government won’t be filled. Instead, the real effects of austerity are actually a major decrease in economic growth, to the extent that economies can stagnate. When public services are cut, this does not do anything to grow the economy in anyway – it simply means that people have fewer public services, which can often cause people to constrain their personal budgets, only spending on necessities, which will mean the economy grows less. Additionally, during periods of austerity, wages decrease and unemployment increases, directly in the public sector and indirectly in the private sector. This means people simply have less money to spend, meaning less money goes back into the economy, resulting in a negative multiplier effect, where the lack of money will create more issues for businesses, who will be forced to lay off workers or cut wages, further reducing the money being spent. This loop of destruction is self-fulfilling, as the lack of economic growth will not necessarily change government policy to try and switch to a different approach, but rather encourage further cuts to public spending. GDP can also decrease, as government spending itself is a component of GDP, which can cause investors and business to lose confidence, which will further damage the economy. Actual examples of this are clear – in the period of austerity from 2012 to 2019, the economy in the UK grew by approximately 15.8%. Contrasted to the period of the same length between 1997 and 2004, where the economy grew by 22.7%, it is clear that austerity actually ruins the economy.
However, the economy is not necessarily the key goal of austerity. Often, austerity is more centred on reducing national debt more than anything else, with its proponents often being willing to accept economic hardship in the short term in order to reduce debt, which should have benefits over a much longer period of time by not offloading this debt to future generations. It is true that austerity does by its very nature initially reduce national debt – a budget which has a lower deficit, or even a surplus than previous budgets will incur less national debt. However, this will not necessarily drive down national debt, as there are other effects of austerity on national debt. The main reason austerity completely fails to bring down national debt is the simple fact that the economy is growing slower. This will mean that the government is bringing in far less revenue in taxation, often not enough to compensate for inflation. This lack of income will simply mean that the government will not be able to pay back national debt and will still suffer from a budget deficit, creating more national debt in the process. Additionally, the conventional arguments for austerity only assume that the cuts to public services will decrease spending and do not account for the fact that payments in some other areas will have to necessarily increase. For example, a larger amount of unemployment and people on low wages will mean that more people will have to claim benefits, increasing government spending. This will leave the government with a choice about what to do here: either cut benefits, which, setting aside the immorality of refusing help to some of the most desperate people in society, will mean that the economy is in a far worse place, as it is producing income far less efficiently as, rather than receiving the necessary help in order to contribute to society again. The other option would be to simply keep paying these benefits, which will continue to drive national debt up. In either scenario, austerity has left government with a choice with no alternative to making people’s lives worse. Any policy which can leave a government with a choice like this is never a good policy, as it neglects the key role of government. In real terms, it is also clear that national debt keeps rising under austerity politics. In the years between 2010 and 2019, national debt rose by roughly 14.3% of GDP. When compared a similar post-recession period between 1994 and 2003, this is very poor – national debt actually fell during these years.
It is clear that austerity does not actually achieve what it sets out to do. Austerity makes the economy as a whole far worse and less productive, as people aren’t working and have less money to spend and doesn’t actually help with the national debt, as the cuts to public services do not make up for the vastly more negative impacts that it has. Proponents of austerity will typically argue that the cuts, and the pain they cause are necessary in order to ensure that the economy recovers more quickly and that the burden of national debt is not passed down to future generations. Considering that austerity does not actually do this, it is clear that this is a disastrous policy. It does not actually help anybody. If, as put by Edmund Burke, society is a contract between the dead, the living, and the yet to be born, then who does austerity serve? Nobody. It is a policy that should be consigned to the history books, consistently failing to achieve its objectives, failing to help people, failing to grow the economy, and failing to reduce national debt..
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Well written!