Austerity

"No man is an island, entire of itself." -- John Donne

The problem with austerity as a national policy is that it doesn't work.

"A dangerous idea." -- Mark Blyth, Brown University.

"A country is not a company." -- Paul Krugman, Princeton University

   The news that the government in France has toppled as its austere economic policies failed to revive the economy comes as no surprise. Austere budgeting may help a household muddle through hard times, and a firm may need to trim expenses briefly to help it survive. One family, however, cannot affect the larger economy of a city or a metropolitan region, and a major firm cannot radically damage the entire country with austere reductions.
   The effects, however, can ripple through larger segments. When a large company trims its budget by reducing its workforce, those unemployed workers have less to spend on food, clothing, shelter and luxury goods. In turn, this reduces the income of grocers, tailors, builders and jewelers. Food sales drop, rental income falls, gasoline sales and auto repairs are delayed as vacation trips are canceled, and all these vendors suffer as the economy of a neighborhood, a city or a region declines.
   Austerity may work for an individual or a family for a short time, but a nation -- the largest of economic entities -- will only drown in a self-perpetuating recessionary whirlpool.

   Nevertheless, some politicians and their economy wonks continue to preach the glories of austerity as a national savior, even as history has documented that only the 1 percent benefit, since their daily bread does not depend on having a job. 

   One family can adopt austerity until its finances improve. One company can adopt sharp cutbacks until sales resume, and the economic damage will be limited to those workers who are laid off.
   On a larger scale, when one company dominates a regional economy, the economic damage can be widespread. When a government does it, the entire nation suffers directly, and the malaise can quickly spread to other nations.
   And, as reported, the collapse of the government in France threatens to drag the eurozone countries into a new recession.
   The lesson is not new. An economy survives on trade, purchases, sales and money flow. When the money stops flowing, the economy stops. And if families and businesses cannot or will not spend, the government must, until those disabled by recession recover.
   Or as the economy minister in France, Arnaud Monte Bourg, said to the newspaper Le Monde, "The priority must be exiting the crisis, and the dogmatic reduction of deficits should come after."