Why Is Austerity A Dangerous Idea

The author is the David S. and Ann M. Barlow Professor of Political Economy and

The argument can be made that economic freedom is a necessary precondition to political freedom, yet the unilateral focus of these reforms begs the question whether during the writing of the Washington Consensus, economic liberalization was solely a means to international development, or an end in itself. The historical support is for the latter, as John Williamson later reflects that there was, “a widespread attempt to tighten fiscal policy, extensive financial and trade liberalization, virtually universal elimination of restrictions on inward foreign direct investment, a lot of privatization, and quite a bit of deregulation. [But] the things that got most widely neglected were reforming public expenditure priorities, maintaining a competitive exchange rate, and extending property rights to the informal sector”

In the views of the politicians, the economy was not one of a ‘Golden Age’. As the British Cabinet Paper wrote, ‘It is clear that ever since the end of the war we have tried to do too much…we have only rarely been free from danger of economic crisis’. This illustrates the fact that although the economy was not falling apart, it was not stable and not prosperous. There was also a lack of a plan to deal with the economy; the government merely adjusted the system as it went along, which sometimes resulted in high rises of inflation or sudden consumer booms that did not correlate with its ability to pay for them – causing a deficit.

During this essay I will compare the difference of economic and policy development of Ireland, north or south in relation to the United Kingdom. As of today Ireland themselves are bit more advanced, exchange secondary economy. Ireland was among the starting gathering of 12 EU countries that started streaming the euro on 1 January 2002 “Although Ireland had aspirations to become a member of the Community as far back as 1961 it was not until 1972 when a referendum confirmed Ireland’s entry into the European Community with 83 per cent of voters supporting membership. Ireland formally acceded to the then EEC in 1973”. (Loughran, 2015).

The rate of economic and political change in recent decades has been dramatic. The Anglo-Saxon emphasis on neo-liberal economic ideology has drifted East, with the (Brown, 2000) ‘rise of China’ and other emerging economies. The trend in recent decades has focussed on the need to privatise great swathes of the economy and to reduce trade barriers, leading to less protectionism. This emphasis on private sector control became apparent in the 1980’s with (Hutchinson, 2008) ‘Thatcherism’ and ‘Reaganism’ seeking to reform the post-War consensus. The dramatic changes in America and the United Kingdom were not restricted to those economies however. The European

Debates - these battles of mental fortitude and intellectual dexterity are arguably the cornerstone of a thriving democracy. Picture this - a latino social Democrat from Los Angeles observes a flooring critique of the distinguished saltwater economist Paul Krugman delivered by Niall Ferguson, a famous Harvard economic historian. What he notes, aside from Ferguson’s eloquence, is Ferguson’s attempt to remain intellectually honest as he discusses political polarization occurring in the modern political system as it relates to macroeconomic realities. A palpable dearth of political distortion surfaces in Ferguson's ideological argument as he describes both modern “caricatures of austerity and caricatures of stimulus.” For those unfamiliar, austerity

The author’s main purpose of presenting his proposal with gruesome ideas was to draw the attention of the wealthy people of Ireland, who are capable of bringing the change in the society, but have done nothing to help the situation. The author’s intent is to motivate these wealthy people to find a workable solution for these issues.

According to recent analysis from the International Monetary Fund (IMF), in 2010, the UK is estimated to have had the fourth highest level of structural government borrowing amongst the 29 advanced economies for which comparable data are accessible. This structural government borrowing is one of the main underlying issues that the Budget, over the reign of this current government, will try to address. However, at least according to plans published so far, the UK is intending the fourth largest fiscal consolidation among this same group of countries and so by 2017 the IMF predicts that the UK will have a lower level of structural borrowing than many other advanced economies, being below the average in the Euro area and below the average among the G20 and G7 countries.

While classical liberalism and mercantilism have fundamentally different ideological roots, both theories have profound implications beyond the international economy, creating ripples in the worldwide political and social climate. Thus, each theory needs to be evaluated to maximize the economic policy’s benefits and minimize its negative consequences. Along this line, the concept of freedom in classical liberalism offers clear benefits to market growth, yet the invisible hand does not always intervene to save these economies from the catastrophic effects of inequality and irrational human decisions. Therefore, a balance between freedom and state intervention needs to be reached. Keynesianism offers one approach to maximizing freedom, while still maintaining a safety net in terms of limited state intervention. The issue of security is relevant and important to consider within an economic system, yet the aggressive approach of malevolent intimidation demonstrates a social and political shortcoming within the mercantilist theory. Ultimately, in order to address the issues of inequality, imperialism, and violence within our international community, we have to start by understanding the impact of our globalized economic policies. Once we do this, we can start to move towards a more peaceful, equal, and flourishing society.

9. Review Klein, Chapters 2 and 3. She explains the influence of US economists, especially Milton Friedman, in designing development strategies, and of the US in installing or supporting governments that would carry them out in several countries that had been pursuing a ‘middle’ development path of ‘regulated’ capitalism in which the state played a large role in supporting social welfare and the development of local businesses. You can expect test questions on this material, including the role of the US in ‘regime change’ in these countries, the role of US-trained economists afterward, and the path that these countries were supposed to pursue.

In addition, the rhetorical device ethos is important to support a writer’s claim. An academic journal, The Slaves of Institutionalism? A Comment of Bell and Hindmoor, by Michael Moran, illustrates the impact that ethos has on the audience. The main point of the article is to critique other international political economy written analysis on the 2008 global crisis from other writers’ point of view. The author critiques the work of other colleagues, but does so in a respectable manner. It contains many citations that make the author’s argument credible and valid. Moran

By the end of 2008, the European Union began experiencing rippling effects of the United States financial crisis. Several member countries, most notably on the southern end of the continent, faced high levels of debt and unemployment. Portugal, Iceland, Ireland, Greece, and Spain, derogatively referred to as “PIIGS,” required extensive economic support from the EU in order to repay government debts and bail-out private banks. Disbursal of aid in 2010 proved successful in promoting economic recovery in some countries; however, the vast majority observed only slight economic improvement which led to doubts regarding the effectiveness of the harsh austerity measures implemented. Ireland has most clearly benefited from the financial support of the European Union as the country’s unemployment rate has dropped below ten percent and is expected to witness 4.5% GDP growth in 2016. Portugal, on the other hand, shows little fiscal improvement as evident in an unemployment rate of 13% and an expected GDP growth of only 1.6% in 2016. Although both countries faced tough financial crises in 2010, Ireland has notably outperformed Portugal in resolving the situation. The weak economy in Portugal, as well as continued fiscal hardship in the remaining “PIGS” countries, threaten the preservation of the European Union as financial inequality between the members persists.

Since the global financial crisis of 2008, the UK government has been implementing various policies to combat the recession and stimulate economic growth. This essay will look at how effective the fiscal and monetary policies used since the crisis are in achieving the four-macro economic objectives. In addition, I will provide my input on the best way the UK government can carry out these policies.

The liberal perspective on political economy is embodied in the discipline of the Western economics (Gilpin, 1987). It emphasizes the individual interests, the freedom and the maximization of economic benefit. Economic

This paper was prepared for GD530 Economics and the International System, taught by Professor Snow