Pain of Austerity Brings No Future Gain

In a nutshell, the economy comes down to this: we have available labor time and natural resources with which we can produce some stuff and distribute it. Unemployment now means lost production now that can never be recovered in the future.

Unemployment now just means we produce less than possible now. The sacrifice does not enable us to produce more later. In fact, to the extent we invest less now, fail to create infrastructure now, omit to develop skills or educate ourselves now, we have less capacity to produce later. That leaves a real burden on future generations.

Proponents of austerity can make ideological claims all they like about the supposed superiority of private over public spending but until we are at full employment such claims are irrelevant in any case. Without sufficient spending of some kind, there will be unemployment and lost opportunity.

Austerity brings no future gain. A currency-issuing government achieves nothing by “saving” some of its currency for later. There is no meaning in government saving what it can issue at will. No matter how much government inflicts harm through cutbacks, its capacity to spend in the future remains unchanged.

It’s very simple, really. Austerity now causes pain and suffering now for no socially beneficial purpose whatsoever.

3 thoughts on “Pain of Austerity Brings No Future Gain

  1. So good. Totally agree. Reminds me of something Robert Solow said a few years ago:

    “The trouble is that the great world — including a large part of the intellectual world — has lost sight of the fundamental difference between budgetary costs and real resource costs. An unemployed worker and an underutilized or idle plant is not something we’re saving up for the future. Today’s labor can’t be used next year or the year after. And the machine time in a plant that’s down can’t be redone two years from now or three years from now. Three years from now we hope that the plant will be running for current uses. So there’s that important sense in which idle resources are almost – and maybe literally – free to the economy. The problem is to get them used in a reasonable way.”

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