This will be a brief diary, because I've only got half an hour before my lunch break ends. However, I had to share this neat Krugman column on the European austerity frenzy.
Consider Spain’s woes. What is the real economic problem? Basically, Spain is suffering the hangover from a huge housing bubble, which caused both an economic boom and a period of inflation that left Spanish industry uncompetitive with the rest of Europe. When the bubble burst, Spain was left with the difficult problem of regaining competitiveness, a painful process that will take years. Unless Spain leaves the euro — a step nobody wants to take — it is condemned to years of high unemployment.
Short version: they suffered from a housing bubble, much like those fostered by one percenters here and in Canada (Real estate is an investment! Take out home equity loans! The good times will always be here! Credit is your friend!). The bubble burst. The credit left. However, unlike states throughout the country
that could rely on federal dollars due to being part of the US, Spain didn't have that option. They had the shared currency, but not the shared safety net (ironically) of a shared central government. The inevitable result? An economic contraction, which was also experienced by other smaller countries (e.g., Greece and Portugal).
Regarding the issue of "austerity"...
Part of the explanation is that in Europe, as in America, far too many Very Serious People have been taken in by the cult of austerity, by the belief that budget deficits, not mass unemployment, are the clear and present danger, and that deficit reduction will somehow solve a problem brought on by private sector excess.
Beyond that, a significant part of public opinion in Europe’s core — above all, in Germany — is deeply committed to a false view of the situation. Talk to German officials and they will portray the euro crisis as a morality play, a tale of countries that lived high and now face the inevitable reckoning. Never mind the fact that this isn’t at all what happened — and the equally inconvenient fact that German banks played a large role in inflating Spain’s housing bubble. Sin and its consequences is their story, and they’re sticking to it.
Worse yet, this is also what many German voters believe, largely because it’s what politicians have told them. And fear of a backlash from voters who believe, wrongly, that they’re being put on the hook for the consequences of southern European irresponsibility leaves German politicians unwilling to approve essential emergency lending to Spain and other troubled nations unless the borrowers are punished first.
Short version: the same mindset that gets 99%ers here to vote for 1% tax-cutting worshippers like Reagan, Bush 1 & 2, and innumerable Republican governors, is well alive in Europe. People get scared and think the solution is to punish people who seemed to have more stuff than they did, or people who weren't as lucky as they were. Truthfully, this mindset is much older than our country, and dates back to when people used to blame mental and physical illnesses on demons, depravity, and moral weaknesses.
Bad things happened to you, which means you must have been a bad person. In psychology, it's known as the fundamental attribution error. It's also reflected in the tongue-in-cheek idea of continuing the beatings until morale improves. Whatever you call it, however, the results are always the same: it doesn't work. You can't punish a country into a stronger economy. Krugman gets it. I get it. A lot of people protesting "austerity" measures all over the world get it.
But until enough people everywhere get it, it's a tactic the rich are going to keep on pushing, much like trickle down economics (which I'd argue is essentially the other head of the austerity coin).
We've got to get talking to people about this.