October 21, 2018

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The Risks to Growth from Policies of Austerity

Policies of Austerity

Austerity

The Risks to Growth from Policies of Austerity

As this is now “a risky and dangerous time for the world economy,” the deep cuts in public spending the British government intends to implement next year will leave the UK “badly exposed to the new economic storm that is coming,” says Ed Balls, who for many years was a key policymaker as a close ally of former finance minister Gordon Brown.

A “perfect storm” is one where “continued deleveraging by banks and the private sector meets premature fiscal retrenchment from governments and a drastic tightening of consumer spending, as tax rises, benefit cuts and rising unemployment hit home.”

Balls says cutting public spending and raising value added tax in these circumstances is “economically foolish.” A lesson of history is that one should be wary of anyone who tells you that there is no alternative to a policy, or that something must be done because the markets demand it. [Read more…]