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Home / Yanis Varoufakis: Thoughts for the Post-2008 World / The three tribes of austerity: enemies of big government, Germany’s social democrats, and tax-cutting Republicans – op-ed in Project Syndicate

The three tribes of austerity: enemies of big government, Germany’s social democrats, and tax-cutting Republicans – op-ed in Project Syndicate

Summary:
No policy is as self-defeating during recessionary times as the pursuit of a budget surplus for the purpose of containing public debt – austerity, for short. So, as the world approaches the tenth anniversary of the collapse of Lehman Brothers, it is appropriate to ask why austerity proved so popular with Western political elites following the financial sector’s implosion in 2008. The economic case against austerity is cut and dried: An economic downturn, by definition, implies shrinking private-sector expenditure. A government that cuts public spending in response to falling tax revenues inadvertently depresses national income (which is the sum of private and public spending) and, inevitably, its own revenues.

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An accidental economist Let me begin with a confession: I am a Professor of Economics who has never really trained as an economist. But let’s take things one at a time.

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