The Fool’s Gold Of Austerity

by Stuart Shapiro

It’s been a while since I’ve sung the praises of Joe Stiglitz, and he recently gave an interview decrying the foolishness of those advocating austerity on either side of the Atlantic.

The question of social protection does not have to do with the structure of production. It has to do with social cohesion or solidarity. That is why I am also very critical of Draghi’s argument at the European Central Bank that social protection has to be undone. There are no grounds upon which to base that argument. The countries that are doing very well in Europe are the Scandinavian countries. Denmark is different from Sweden, Sweden is different from Norway – but they all have strong social protection and they are all growing. The argument that the response to the current crisis has to be a lessening of social protection is really an argument by the 1% to say: “We have to grab a bigger share of the pie.”

Austerity has a time and place.  You can raise taxes and cut spending (if you do it wisely) when times are good (I’m looking at you George W.).  When times are bad, doing so makes them worse.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.