Austerity Measures Harming Economic Growth

Austerity IMF

I read this article in The Guardian. You can find it here. Apparently the latest report from the International Monetary Fund (IMF) has discovered, at long last, that subjecting people to austerity measures actually harms economic growth.

If you restrict a crop’s access to well nourished soil, water and sunlight it produces a poor yield and may even wither and die. If you stop farm animals from getting adequate food, water and care, not only does their yield, in terms of meat, milk, wool, eggs or whatever you are farming them for, decrease, they may also die. A country’s economy and the welfare of its people seems to be affected in the same way by austerity measures.

I would have thought that this was obvious, you need to put more money into the pockets of the largest demographic, who would then have more to spend. This increases demand for goods which in turn is good for businesses. It also reduces the need for credit and the many consequent bankruptcies. Businesses can take on more staff due to increased demand, so unemployment and dependency on welfare benefits goes down.

Increased wages and spending gives the government more money back through taxation, which in turn can service and reduce the national debt and be spent on infrastructure, welfare and public services.

The current system favours those who already have a lot. While they may purchase more expensive items the smallness of the demographic means that they don’t buy many of them and a higher proportion of their wealth is static, locked away in property or other investments on which they may or may not pay taxes.

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