Real Austerity

Abstract

Austerity has been hotly debated as either an elixir or a poison for tough economic times. But what is austerity? Real austerity means that the government and its employees have less money at their disposal. For the economists at the International Monetary Fund, «austerity» may mean spending cuts, but it also means increasing taxes on the beleaguered public in order to, at all costs, repay the government’s corrupt creditors. Keynesian economists reject all forms of austerity. They promote the «borrow and spend» approach that is supposedly scientific and is gentle on the people: paycheck insurance for the unemployed, bailouts for failing businesses, and stimulus packages for everyone else.

Austrian School economists reject both the Keynesian stimulus approach and the IMF-style high-tax, pro-bankster «Austerian» approach. Although «Austrians» are often lumped in with «Auste-rians,» Austrian School economists support real austerity. This involves cutting government budgets, salaries, employee benefits, retirement benefits, and taxes. It also involves selling government assets and even repudiating government debt.

Despite all the hoopla in countries like Greece, there is no real austerity except in the countries of eastern Europe.

For example, Latvia is Europe’s most austere country and also has its fastest growing economy. Estonia implemented an austerity policy that depended largely on cuts in government salaries. There simply is no austerity in most of western Europe or the U.S. As Professor Philipp Bagus explains, «the problem of Europe (and the United States) is not too much but too little austerity—or its complete absence.»