Austerity: has it worked?


Michael Roberts Blog

Most governments in capitalist economies have engaged in what is loosely called ‘austerity’ policies since the end of the Great Recession in 2009.  More precisely, austerity policies are those where the government aims to reduce its annual deficit on spending and revenues and shrink the overall debt burden, plus introduce ‘reforms’ to weaken the labour rights and conditions at work to keep wage costs down for the capitalist sector.  The fiscal part of these austerity measures mainly involved cutting back on government spending, both in public sector employment, wages, public services and investment projects.

Those economists and governments that advocated austerity claimed that by getting debt ‘under control’, costs would be reduced and companies would invest, consumers would spend and economies would recover quickly.  Keynesians and others who opposed these measures reckoned that austerity would drive down ‘aggregate demand’ as government spending was cut, taxes raised and wages held down. …

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