let
graham
international uh... political economists are from the washington stood at brown
university mark life arthur um...
the just released austerity the history of a dangerous idea thank you uh... for
joining us today
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so me let's start with um...
this audiences is a fairly familiar with the broad outlines of all why austerity
is problematic
but before we get into
i had this idea will not die
from whence it came uh... please just walk us through the the the three
problems the you outline with the uh... the
problems with austerity
brothers
general problems
sometimes need a student led the team d and response but honestly bottom king's
either but it's pretty much commonsensical
the first one is distributional let's remember the fact that uh... all the way
through the two thousand six
i don't remember too many republicans jumpin up and down about the increase in
national debt to sixty one percent of g_d_p_
brought on by cox cartoon walls of choice the one funded through any cop
station
so that obama will instead of a financial crisis you bail at the box and
then the net effect of that is to push up about eighty to eighty five percent
of g_d_p_
by the end of the data on a percentage a_t_p_ everyone's freaking out in the
solution is we need to cut back social security
so the symbol question of equity as well in on the line one of causation
why isn't the one you be a lot of some of the wealthiest members of society
than basically give offset protection to them in the rain comes the people of the
people of the people of the bomb end of the income distribution go on government
services
into the billions sweatshirt humongous proportions
this second wave that's a problem is compositional
while it make sense for any single family are far more even a country to
reduce the debt
dot contingent upon having a name come from which to save
and everyone symbol previously contracts is going on that you lose a limb just
not the net effect is to increase the its top of that
relative to the site of the economy
uh... the economy contract structure seems good done in the decade either of
those small
and the front lawn durable all krugman for a moment
is that the confidence fairy story really is a fairly stoic
the idea of the business called risk on the russian bop in response to
government cut if you go through the formal models used to by economist to
justify this at oxley says the following
despite the economy falling about you the u_s_ despite a flooded but michael
how the job next week or you don't know the drill pay your mortgage
the government of the site of the slush money per cent of public spending
you done or the twenty years are you going to be paying less taxes
boyd to buy this you decide to spend lots of money in the future of not they
are bike during the recession and depression despite the economy falling
about you the os dies the definition of a fish story so the question of fairness
and equity in causation
there's a fallacy of composition about doing or what once was simply doesn't
work
and the last one is it's a fairly slow listen focus only on the phone
sitcom position because
just walk us through v
relationship between of the government
the government carrying debt at a time when everyone else has tried to deliver
each and vice versa and and um...
that dynamic right there which which
flies in the face of what we're told when a family has to tighten their belt
and government should to it's just the opposite
yellow i just said you know make sense for any family or even a state
the really of the codigo rebel distinction going on here what to think
about this for a woman
wanna finally decide this even stop spending
it presumably still has an income for which you can see it
econo issued its own currency
econo issue to intact
usually econo bring people into the family and talk some across generations
to be credible payments for about that
states can do a lot of what do you agree with the united states
and judicial you global reserve asset which everyone invested when the economy
is in trouble
the dynamics of kind of dufferin so the whole thing about is just like a family
right whether it's the stadium housewife of uncle malcolm or missus flaps over
houston pool cover republicans the dates dot at the nonsense story
but the more important when the more important way of thinking about it
before
and marginal economy the
fraction which he got eighty percent that the g_d_p_ which sounds like a
lawsuit four-fifths of the fraction
now let's say the government decide is going to take a twenty percent of all
expenditures in the economist college spending and half
really credibly commit to this policy
and what you've done a few days a week on four five and a four four
did not have all one oh rather than appointing even a hundred percent at the
g_d_p_
that is what happened to every country in europe that is undergone a missed out
of the program since two thousand and ten the novel more debt arrive in the
last even controlling for the recession manufacturer financial crisis
self-defeating
we do this from the nineteen forties and they'd nineteen forties and the main
twenty depressed right the cut and cut and cut uncut
and ninety five a one because of a remember correctly
a hot buttons
fifty percent of g_d_p_ at the g_d_p_
by nineteen thirty two hundred seventy despite the cops
now what what do you make of that
the argument that we would hear that well uh... in that uh... example you
gave of of four fsd
the bottom line is it if if the government uh... stocks borrowing money
uh... to find
diese it's pet
and it will uh... open up
the opportunity for the private sector to borrow that money and put that money
to good use
august the possible motive crowding out right now it's what's happening in the
government all along with a little more money and there's no money left the
private sector
you should see that real interest rates will rise because of crudely about the
price of money
and whether we hope we have a real interest rates on the four my income
back into the botched because by monkey suppressing the real price of cobble but
if you look around the world and fresh fruit on the floor everywhere
meanwhile best missus setting or enormous stockpiles of kash
uh... give you a cada you'll find a corporate profits even during this
recession have never been ohio
so the idea of the comments eating up all the available cobble simply
incorrect
the borrowing money that is out there because people want a hold the global
resolve also because the world is fundamentally unsound
that's what's going on this is why comments that i wont stop other gush
because they don't know what that investing just i was the republicans
the setting on basically it was out of our targeted
before they had to
the history of this idea of austerity we also justice pre as speak briefly about
that i mean uh... that uh... that that trade
as on this dynamic when we look around
world right now we're seeing how austerity is destroying europe ities
um... at least
in this country to a certain degree a lesser degree and is at the very least
slowing down our recovery about but give us a a sense of what the implications of
trade are also on this dynamic
alternate very important to keep you up as particularly in in the case of very
european union
the loss of countries are all tied together will a common currency argue on
each of those major trading partners
so if we all decide to call it once dot all four fifths coming under four four
pts
and what he did you trying to regional economy overall it actually make the
situation wars
so if you have oleanna dependent with trade then trade becomes a channel
through which will stay out of the complains effect rather than makes
things bava
the view look at the e_u_'s reports on this please stay with us that it is
walking on one of the indicators
is that people are importing last in the exporting more
well we can all of us are costly com all exporter once was actually dropping at
the import of shrinking
because the economy's co-op segment entitled the monday consumption has
fallen
so it's a question of how you look at this from the street from the rosy
tended to have you
of the european commission everything's fine and eventually will get me out
bug from the way that i looked at my mother people look at our what u hav
there is a according to decided to keep itself