Thursday, October 21, 2010

300,000 New Jobs -- In England

Fiscal austerity appears to be working in England, according to this Allister Health article in the British "Spectator":
There will be real hardship for the soldiers and public-sector workers who are laid off. But job losses will not be the main problem the British economy faces over the next few years. The overall British story now is one of steadily rising employment, with 300,000 more jobs this year. The private sector continues to create jobs faster than the government is cutting them, and by the end of the cuts there should be a million more jobs than there are today.
And this editorial in the same issue:
The newspaper headlines may speak of 500,000 public-sector job cuts over the four years, but the same unreported forecasts suggest that 1.5 million new jobs will be created over the same period. The purpose of the cuts is to create more jobs, and better-paid jobs.

[Chancellor of the Exchequer George] Osborne was...right to point out that the amount paid in debt interest — £63 billion — is lower as a result of his being more ambitious in his spending reforms. This is a tangible benefit of austerity. Confidence in Britain’s economic future has lowered the cost of government borrowing, helping to secure the supply of cheap credit on which the tentative economic recovery depends. And it is working. The economy is creating jobs faster than the government will cut jobs: the result is more jobs, less poverty and quicker recovery. This, again, is the purpose of cuts.

That's Osborne, above (and no, he's not 17; he's 39). England's budget cuts (an average of 4% a year in overall government spending this and the next three years) are devastating for those who lose their jobs or depend on government services. Is it worth it if it helps the economy recover? People will have a variety of answers to that question. And then there are those who insist austerity doesn't work at all, such as Paul Krugman of the New York Times, who visited Germany in June and wrote as follows (his column is reproduced here from the British Guardian, along with its links):
Many economists, myself included, regard [Berlin's] turn to austerity as a huge mistake. It raises memories of 1937, when FDR's premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany a few scholars see parallels to the policies of Heinrich BrĂ¼ning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.
No sign so far in either England or Germany of such dire consequences, Meanwhile, in the U.S., after massive stimulus expenditures that have piled debt on debt, the recovery is stalling, and job creation is anemic.

When economists such as Krugman respond to the lingering crisis by arguing that we should spend even more, I'm tempted to think that their motives include an ideologically-rooted desire for the larger and more powerful and intrusive federal government that stumulus-based policies will inevitably leave behind. On the other side of the policy argument, the tea party's secretive sugar daddies talk about getting back to sound free enterprise principles, but they're just out for themselves, having benefited plenty from government largesse.

I wish macroeconomics were more of a science than an art, which might enable us to get the politicians and pundits out of it completely.

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