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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

austerity economics « Previous | |Next »
June 7, 2011

Trickle down economics is the implicit theory of economics held by the Coalition' underpinning its 'reduce the debt' rhetoric. This assumes that raising interest rates and slashing government spending in the face of unemployment will somehow make things better instead of worse.

The reason given for the above view is that austerity is actually about growth: ie., slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence.

PettyBtrickledown.jpg

The Coalition's response to objections that fiscal austerity would be self-defeating — not only would they impose large direct pain, but they also would, by worsening the economic slump, reduce revenues — is to wave them away. Austerity would actually be expansionary because it would improve confidence. Government deficits are assumed to crowd out private sector borrowing, thus discouraging business investment.

Underpinning this rhetoric are an anti-government assumptions that regards the dangers of deficit spending as an unimpeachable fact or axiom, and that all government spending is deadweight waste and only private investment is productive. It tries to justify these assumption by pointing to regulatory excess and the waste and inefficiency that exists with many government programs. To pretend that austerity helps economies rather than destroys them, bank lobbyists claim that shrinking markets will lower wage rates and “make the economy more competitive” by “squeezing out the fat.”

The economic reality is that an economic crisis is the method by which a capitalist economy partially purges itself of the effects of past mistakes while imposing pain and misery on ordinary people. Anything that stands in the way of profit maximization, whether unions, regulation, or taxes, has to be swept away. The stand is under the banner of “free markets”, defined as economies free from public price regulation and oversight, free from consumer and environmental protection, and free from taxes on the rich.

This is the economics advocated by the mining industry that, like the banks, has not shown much interest in economy-wide wellbeing.

| Posted by Gary Sauer-Thompson at 8:32 AM | | Comments (3)
Comments

Comments

Austerity "restores confidence".
That's why the retail chains are wailing about the consumer downturn as people react to uncertainty and fear for the future, by postponing spending- largely superfluous discretionary spending buying the non productive junk that that the private sector retails as its conception of what the market can unnerringly deliver to consumers.
I wondered, from the second paragraph, whether GST might have been amongst the unfortunates to watch Gutman and Pyne disrupting QA last night, including with another silly Dorothy Dixer about the nanny state.
The system delivers feudalism for the corporates, not efficient use of resources for the benefit of the community.

paul,
I did watch Nanny State Q+ A last night. I have to admit I wasn't impressed by Sandy Gutman aka Austen Tayshus. Maybe his role was to be an Agent provocateur whose job description was to liven things up as Q+ A had fallen into a rut.

It looked as if he interpreted this to mean that he had to offend everybody on the panel. I noticed that he went for those on the left who were targeted as over-serious zealots. I thought that he was practically aggressive towards Lee Rhiannon and Paul McGeough around Israel.

Like a rabid dog.
The main beneficiary was Roxon, in the end.
At least they had the decency to show the clip of Abbott advocating a carbon tax, when he thought no one was listening.
Don't forget, he told us himself, he some times doesn't tell the truth when he does, sometimes does when he didnt mean to, and HE'D decide whether he'd told us the truth; not us!.