Austerity Cuts: the Best Way to Wreck an Economy
Great interview from the conservative-leaning Bloomberg TV explaining why austerity measures in Italy, Greece and Spain are worsening the economies of these countries. Mariana Mazzucato, economics professor at the University of Sussex, warns that current and proposed austerity measures in the UK and US will have a similar effect.
Professor Mazzucato offers an extremely coherent explanation of why austerity measures – such as cutting public services and reducing corporate taxes and regulation (i.e. red tape) have never stimulated economic growth anywhere – and why they never will. (Disclaimer – as a dedicated growth buster, I dispute that more economic growth is either healthy for the planet or a solution. That being said, austerity cuts are always a bad idea. They kill people, as well as causing vast human suffering and major political unrest).
She also debunks the myth that recent German economic growth is due to belt tightening. She points to a number of specific ways the German government has intervened over the last decade to stimulate economic activity. These have included substantial government subsidies for training and apprenticeships, research and development, manufacturing innovations and manufacturing, in general.
As former Reagan administration HUD director Catherine Austin Fitts outlines in a recent article in the Daily Bell, commercial and investment banks no longer loan money to the manufacturing sector. Investment in manufacturing takes longer to produce a return, and they prefer the quick profits they can make from derivatives trading and real estate loans.
Thus, according to Mazzucato, the mistake made by Italy, Greece and Spain wasn’t excessive public spending – but public spending that neglected activities essential to economic development. The ones private banks refuse to fund.
If video won’t play here’s the link: Bloomberg TV