The U.S. economy continues to stagnate and our political leaders continue to embrace austerity. One major reason for this policy stance is that stagnation has done nothing to dent the earnings of our top corporations and their owners.
The challenge for our political leaders is convincing the rest of us to accept this situation. For sometime now their strategy has been to predict recovery right around the corner. All we need, they say, is a bit more austerity to reassure financial markets and growth will naturally resume.
Their claims were initially buttressed by a few highly touted economic studies, but those studies have now been discredited. See here and here. Practice also makes clear that austerity is not the solution to our economic problems.
This strategy was tried first and most aggressively in Europe. The chart below, taken from a blog post by the economist Ed Dolan, provides one indicator of the self-reinforcing consequences of austerity. Half the countries in the euro zone are in recession, and several big ones are heading that way. For example, Germany’s average annual growth fell from 0.7 percent in 2012 to 0.4 percent in the first quarter of 2013.
The European experience holds another lesson for people in this country. It will take sustained popular organizing to get policy makers to change course.