|
All across the world, in the wake of a global financial crisis, bordering on catastrophe, the truisms of economic theory which have held sway for almost half a century have been shown to be anything but reliable.
You cannot, nor could you ever, cut your way out of a demand led recession. It is utter folly to reduce government spending at precisely the time when it is most needed. People who are unemployed, like their employed counterparts, need food, shelter and consumable goods. Providing state benefits for those people does not remove that money from the economy. It goes back into the market in the form of goods and services purchased.
Removing those state benefits, removes those people from the mainstream market and pushes them into the black market.
At the same time, as those people are pushed into social crisis, basic maintenance costs give way to emergency rescue costs (leaving healthcare until expensive emergency treatment is required - homeless families requiring relatively expensive housing solutions through local and national initiatives, usually underpinned by legal requirements to ensure safety of children - and family breakdown bringing in the need for social service solutions because of the same legal requirements - increased levels of mental stress triggering crisis, etc)
People in work, meanwhile, become far more cautious with their money. Like the investors who become far more cautious with their investments and businesses who become far more cautious in their ventures, working people become more aware of potential risks to their family economy. An increasing fear factor around unemployement, exacerbated by swingeing cuts to local services, does not help increase the confidence and therefore spending activity of working people.
It was not socialism, or social capitalism that sent the global economy into near total meltdown. It was not high taxes on businesses and corporations that caused the American economy to tank, nor was it an overreliance on social safety nets. And the way out of the mire is not to blindly follow an economic paradigm which has so often and so recently been shown for a fallacy.
|