What Austerity Looks Like, In Three Graphs
by Gary Reber
Erza Klein, in his Washington Post Wonkblog on May 10, 2012 shows the unemployment rate and the structural budget deficit across all of Europe. “Structural budget deficit” is a technical term: It means the deficit that’s been created by what the government is doing rather than what the economy is doing. If policy were “expansionary” –– which is the opposite of austere –– the structural deficit would rise when unemployment rises, because the government would be spending more to support the economy. Instead, it’s falling even as unemployment rises.
“Zoom into the country level and you can see this even more clearly. Here is unemployment in Spain, Italy, France, Greece, Portugal, and Ireland. As you can see, it’s skyrocketing:”
“And here are the structural budget deficits for the same set of countries. As you can see, they’re falling:”
Economist Nouriel Roubini doesn’t think much of premature austerity. “The Eurozone has an austerity strategy but no growth strategy,” he observed recently. Without that, Roubini said, austerity and reform become “self-defeating” — not only will the absence of growth worsen government deficits, but “the social and political backlash eventually will become overwhelming.”
While government can lead the way out of the continuing economic depression, it is imperative that government policies and program stipulate and require that as a perquisite to being awarded government contracts and/or grants that the companies receiving the “investment” substantiate that they are significantly broadening the private, individual ownership of their companies as they use the monies to expand.
It is imperative that America puts itself on the path to prosperity, opportunity, and economic justice by connecting the majority of citizens, who have unsatisfied needs and wants, to newly invested productive capital assets enabling productive efficiency and economic growth.
At present the United States economy, nor for that matter any other economy does not operate as a private-property democratic-capitalist, free-market economy. What needs to transpire is an understanding of binary economics along with instituting credit mechanisms that will implement the goal of broadening productive capital ownership in ways wholly compatible with the U.S. Constitution and the protection of private property.
Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.
Leaders must begin to focus on FULL PRODUCTION while instituting policies and program to ensure that as the economy grows that the new productive capital (the non-human factor of production emboidied as corporate asset investment) that is brought forward to produce products and services be financed using insured pure capital credit to empower ordinary Americans to acquire and pay for it out of the future (savings) earnings of the investments. As growth excellerates, at least in the short term, full employment will result as superautomation, robotics, and digitally computerized processes will not replace ALL labor workers. But a future is possible that provides economic security for ALL Americans and frees increasingly more people to pursue their own “loved” creative interests, not necessarily comforming to the traditional “job” requirement to earn a living wage.