Europe's New Aus-scarity Program

Nothing terrifies a European finance minister like "it takes a suitcase full of currency to buy a cup of coffee" inflation fears, much like what happened in Germany after World War I. You get fear-mongering statements like this quote from the May 18, 2010 theflucase.com: "Europe will soon be in economic ruins, wracked by hyperinflation, social upheaval and prone to wars and totalitarian regimes. The nightmarish history of the 1930s, the Great Depression and the rise of Nazi Germany will repeat itself, but this time on an even larger continent-wide scale." Indeed, the over-borrowing – from credit cards to mortgages, from corporate take-overs to government deficits – gave rise to the current meltdown and threatens to devalue currencies based on such unsustainable debt levels. This is the emotional morass where the current austerity programs gripping Europe were born.

But there is the very considerable reality that excessive austerity programs can actually trigger or prolong the very economic collapse that was the Great Depression; Britain managed to snatch a nascent recovery from that huge 1930s debacle and plunge the UK back down into the depths of economic collapse by invoking the very same kind of job-killing austerity programs that it is embracing now. It seems that hyperinflation is a greater "terror" to this conservative British government than mass unemployment and the resulting economic malaise that could linger for many years more than economists initially predicted.

Strangely, the very nation that gave birth to Keynesian economics – England – appears to be the most hell-bent on ignoring this historical economist's admonitions: "The British economist John Maynard Keynes may live on in popular legend as the world’s most influential economist. But in much of Europe, and most acutely here in the land of his birth, his view that deficit spending by governments is crucial to avoiding a long recession has lately been willfully ignored… In Britain, George Osborne, chancellor of the Exchequer [which is British for "finance minister"], delivered a speech on Wednesday that would have made Keynes — who himself worked in the British Treasury — blanch… He argued forcefully that Britons, despite slowing growth and negligible bank lending, must accept a rise in the retirement age to 66 from 65 and $130 billion in spending cuts that would eliminate nearly 500,000 public sector jobs and hit pensioners, the poor, the military and the middle class because of what he insisted was the overwhelming need to reduce the country’s huge budget deficit." New York Times (October 20^th).

So rises the Tea-Party-esque tone of most of the balance of Europe, a factor which plays hob with America's own desire to stimulate exports – reviving a moribund consumer economy – by exporting, including to Europe. The problem, of course, is that the austerity programs in Europe are likely to kill of consumer demand down to a level that would make the U.S. consumer look like spendthrift drunker sailor. Clearly, the American incumbency has taken the Keynesian perspective, seeking to use government stimulus to create jobs or at least incent job-creation. There is a healthy balance in all of this, but the European model appears to mirror killing malignant cancer cells by killing the patient as well. Trust me, if history is any indicator, no good will come of these misguided efforts.

I'm Peter Dekom, and someone keeps dumping dirt in the hole we are trying dig out of!