Bill Mitchell — European Union is destroying the future for its citizens

One of the problems of neoliberalism is that it is anti-people. This makes it hard for governments to actually impose austerity and so they work out ways to lessen the visibility of their pernicious policy choices, except if you are in Greece that is. The ways they deflect the political fall out are many and include use the depoliticisation strategy – like appealing to TINA demands from external bodies such as the IMF (circa British Labour Party 1976), claiming central banks are independent, and hacking into expenditure items that delay recognition in the public eye that damage is being done. This blog post focuses on the latter. I have been studying the shifts in government spending in the European Union since the GFC and it is apparent that final consumption expenditure and outlays on social benefits have not been the focus of the austerity to the same extent as government spending on capital formation (public infrastructure). It is much harder politically for governments to cut recurrent spending because it usually impacts on people straight away. Cut a pension and the hurt is visible. Cut lots of pensions and there is a political problem. But cutting back on public infrastructure is less visible and the damage takes time to manifest as the depreciation process sets in, maintenance delayed and additional new capacity is lagging. But make no mistake – cutting capital spending undermines the future productivity of the nation and paves the way for a diminished future for our grandkids, the very ones, mainstream economists claim they are protecting by advocating austerity....

This policy trend began in the UK under Margaret Thatcher and in the US under Ronald Reagan, in no small part owing to the influence of Friedrich Hayek and Milton Freedman. On the "left," the "bastardization" of Keynes by Paul Samuelson contributed to it. But the stage had already been set by the conventional approach to economics that Keynes had argued against. Now we are reaping the whirlwind.

Bill Mitchell – billy blog
European Union is destroying the future for its citizens
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia