Weekend Economists Second the Notion! December 12-14, 2014

[Demeter]

57. Paul Krugman Warns That Severe Austerity Measures are Pushing Countries to the Brink of Fascism

Last edited Sat Dec 13, 2014, 02:37 PM - Edit history (1)

http://www.alternet.org/economy/paul-krugman-warns-severe-austerity-measures-are-pushing-countries-brink-fascism?akid=12573.227380.gd0z9P&rd=1&src=newsletter1028600&t=3

The problem with ideologues is that they do not learn from their mistakes, not even after they repeat them and things go wrong again. Paul Krugman returns to one of his favorite subjects in his Friday column: the mismanagement of Greece's fiscal crisis, which erupted five years ago and has ongoing terrible side effects that are damaging the whole world. "But I’m not talking about the side effects you may have in mind — spillovers from Greece’s Great Depression-level slump, or financial contagion to other debtors," Krugman writes. "No, the truly disastrous effect of the Greek crisis was the way it distorted economic policy, as supposedly serious people around the world rushed to learn the wrong lessons."

Greece is again in crisis and Krugman is wondering if (hoping that )the world will learn the right lesson this time.

The first time, the conversation became all about cutting government spending and obsessing over deficits. That this worsened unemployment and blocked any chance for growth was simply denied by fiscal austerity hucksters like British prime minister David Cameron and U.S. budget hawk Paul Ryan. We're all going to be Greece, they hysterically warned. Minus the sunshine. Krugman:

In reality, Britain and the United States, which borrow in their own currencies, were and are nothing like Greece. If you thought otherwise in 2010, by now year after year of incredibly low interest rates and low inflation should have convinced you. And the experience of Greece and other European countries that were forced into harsh austerity measures should also have convinced you that slashing spending in a depressed economy is a really bad idea if you can avoid it. This is true even in the supposed success stories — Ireland, for example, is finally growing again, but it still has almost 11 percent unemployment, and twice that rate among young people.

Meanwhile, austerity measures in Greece, cutting public employment, cutting social programs, and raising taxes have hardly cured its woes. A quarter of Greek workers are unemployed. Lots and lots of suffering have not, Krugman points out, yielded much reward. This has lead to some fairly interesting, and worrisome in some cases, political developments. Krugman again:

The remarkable thing, given all that, has been the willingness of the Greek public to take it, to accept the claims of the political establishment that the pain is necessary and will eventually lead to recovery. And the news that has roiled Europe these past few days is that the Greeks may have reached their limit. The details are complex, but basically the current government is trying a fairly desperate political maneuver to put off a general election. And, if it fails, the likely winner in that election is Syriza, a party of the left that has demanded a renegotiation of the austerity program, which could lead to a confrontation with Germany and exit from the euro.

The important point here is that it’s not just the Greeks who are mad as Hellas (their own name for their country) and aren’t going to take it anymore. Look at France, where Marine Le Pen, the leader of the anti-immigrant National Front, outpolls mainstream candidates of both right and left. Look at Italy, where about half of voters support radical parties like the Northern League and the Five-Star Movement. Look at Britain, where both anti-immigrant politicians and Scottish separatists are threatening the political order.

It would be a terrible thing if any of these groups — with the exception, surprisingly, of Syriza, which seems relatively benign — were to come to power. But there’s a reason they’re on the rise. This is what happens when an elite claims the right to rule based on its supposed expertise, its understanding of what must be done — then demonstrates both that it does not, in fact, know what it is doing, and that it is too ideologically rigid to learn from its mistakes.