Dean Baker: The Great British austerity experiment

[ProSense]

The Great British austerity experiment

With deficit hawks poised in the US, we watch with great interest UK economic policy. It's not looking an enviable example so far

Three months ago, I noted that the United States might benefit from the pain being suffered by the citizens of the United Kingdom. The reason was the new coalition government's commitment to prosperity through austerity. As predicted, this looks very much like a path to pain and stagnation, not healthy growth.

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But the pain for the people in England could provide a useful example for the United States. After failing to see the $8tn housing bubble that wrecked the US economy, the austerity crew in the United States has been newly emboldened by the hugely partisan media that desperately want to eviscerate the country's bedrock social programmes: social security and Medicare.

The elite media and the politicians whom they promote would love to see the United States follow the austerity path of the UK's new government. However, if this path takes the UK into dangerous economic waters, it could provide a powerful warning to the public in the United States before we make the same mistake.

The British economy looks like it is doing its part. The fourth-quarter GDP report showing that the economy went into reverse and shrank at a 2.0% annual rate is exactly the sort of warning that many of us here were expecting. Weather-related factors may have slowed growth some, but you would have to do some serious violence to the data to paint a positive picture. Of course, the austerity in the UK is just beginning. There will likely be much worse pain to come, with a real possibility that the country will experience a double-dip recession, or at least a prolonged period of stagnation.

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[hedgehog]

1. These people must all have been absent the day Maynard Keynes was mentioned.

[LeftishBrit]

3. But very present on the day that Milton Friedman was mentioned, unfortunately.

[LeftishBrit]

2. k&r

Though I hope that, however good a cautionary tale our Tory-dominated government provides for others, that they soon just STOP IT and GO AWAY.

George Osborne is such an idiot!

[OHdem10]

4. I think they are stupid enough to consider themselves smarter

than Keynes. It does seem they could have taken
a look at history in US and seen what happened
when Hoover tightened the economic belts in US.
--yes, he ushered in the Great Depression.