A Turning Point for Austerity?
Daniel Drezner, a professor at Tufts University, thinks that the developed world is at an "inflection point" when it comes to austerity. Leaders in Europe are beginning to blanch at further austerity measures now that it's effect is fully sinking in. The commentariat, always a fickle bunch, are turning up the heat. Even the technocrats are getting in on the action, deploying various forms of monetary loosening to keep money flowing as public balance sheets shrink. As The Economist put it, we're seeing the "backwash from the euro-zone crisis." Drezner lays out each of the movements pushing now against austerity:
- A recent European Union summit called for ‘‘growth-friendly consolidation and job-friendly growth," which is in effect a rejection of the austerity measures now being seen in Greece and Italy.
- "The data is starting to come in on governments that have embraced austerity whole-heartedly, and it's pretty grim."
- "Even commentators who would be tempermentally sympathetic with austerity are starting to ... question whether it's a solution", including Niall Ferguson.
- "The fall in [U.S.] government spending reduced fourth-quarter growth by 0.93 percent."
- The European Central Bank is rapidly expanding its balance sheet with the debt of struggling economics on the periphery of Europe, while the U.S. Federal Reserve recently announced that it would keep interest rates at all-time lows for the next three years.
Not everyone seems to be jumping on the anti-austerity bandwagon. The editors at Bloomberg View, for instance, point out that "experience suggests that any country’s borrowing will ultimately run into market constraints, and that governments are better off getting their finances in order before that happens." Nevertheless, it seems that the tides of debate are turning against austerity at a time when a lot of tough decisions (especially for Europe) remain.