Transcript: Thom Hartmann: World Economy on the Brink of Disaster? 25 January '12
President Obama said the state of our union is “getting stronger”.
Unfortunately for our neighbors across the pond - the same can’t be said about the United Kingdom - and a half-dozen or so other European countries as well.
It’s been more than a year and a half since David Cameron and his Conservative Party rose to power in the U.K. on a platform of bringing austerity - spending cuts and government layoffs - to a nation fighting a recession and mounting debt.
You know - that same kind of austerity that Republicans here are trying to bring to the United States with massive budget cuts.
After a year and a half - the results are in - austerity flat-out doesn’t work.
Let’s just look at the numbers.
In the final quarter of 2010 - when Cameron’s austerity agenda went into effect - the British economy shrank by a half percent.
Then it rebounded slightly in the first three quarters of 2011 - but not exactly the type of growth that could turn around an economy.
And now today we learned that in the last quarter of 2011 - the British economy is once again going backwards - contracting at two-tenths of a percent.
The IMF slashed economic growth forecasts for the UK in 2012 - and more and more Brits are turning against Cameron’s austerity.
That was on clear display last August - when young people who couldn’t find a job and were watching the British social safety net fray - decided to set London on fire for five straight days.
And for the last two years we’ve seen similar riots in Greece as austerity was shoved down the Greek peoples’ throats too.
That economy, by the way, shrank more than 5% last year.
How much more evidence do we need that austerity is a bad idea?
Austerity isn’t for the good of the economy - or frankly even for the good of the people.
Austerity is a religion - it's a belief system - and there is no proof, anywhere that it will stimulate an economy.
But it does hit average working people - and particularly badly hits poor people - oh, and by the way, it doesn't affect the lives of rich people a bit.
You think that may have something to do with why all these banksters and millionaire pundits on TV and the millionaires who make up the majority of our national politicians in the Republican Party like austerity so much?
As long as the people are forced by austerity to pay the price for the damage caused in the 2008 Bush financial collapse - and not the banksters - not the billionaires - then International markets are happy.
And this is why it's both stupid policy and morally wrong.
An economy is NOT just supposed to be a tool to be used by rich people to increase their riches.
An economy is a living, breathing organism - made up of all of us - and depends on all of us - or at least most of us - to be financially secure.
For the economy to keep breathing - people need to have jobs so they'll have enough money in their pockets to buy things.
Each time working people go out and buy stuff - the economy breathes.
But austerity starves an economy - especially during times of recession or weak economic growth like Europe is experiencing.
Think of this as the living, breathing body of the economy - it's made up of all of us - each of us are cells and organs - like cells - doing our part to contribute to our body's economy so that it grows and flourishes.
But when our body economy goes into recession - it's like the food supply gets cut off.
People lose their jobs - people lose their homes - no one is spending money.
The cells stop working - the organs slow down or fall away, the body economy begins to disintegrate.
People have no money so they are not buying things, and since they're not buying things, companies have no demand so they're not hiring anyone.
Our body starts to vanish, pieces of it going away, it needs food to stay healthy - it needs an employer and a spender of last resort.
And guess where that food comes from - that spender of last resort - when it's not available in the marketplace? It's the government.
After World War 2 - this is what Germany looked like [rubble] - the German economy was essentially dead. Everything was bombed out.
But today - this is what Germany looks like [skyscrapers].
How was the German economy saved? Here's a hint - it wasn't through just letting the "Free Economy" do its work.
And it wasn't because the German government said we have no money, so let's cut spending.
No, the German economy - and nation - was saved through massive government spending. Through the Marshall plan - we gave huge amounts of money to Germany to rebuild - and the Germans DID rebuild - they got the food they needed and they got their economy back on its feet again - and today Germany is the fourth largest economy in the world - and the largest economy in Europe.
That's what government spending does when an economy is destroyed.
But austerity holds back the much-needed food - it cuts off the demand for goods and services that puts people back to work and resuscitates the economy.
And it lets the anorexia of recession just continue to eat away and eat away until the body economy dies.
It'll make debt worse - since people aren't collecting paychecks and paying taxes, but instead are getting government benefits - so revenues go down and expenses go up.
I asked world renowned economist Steve Keen why austerity is even an option - and he gave me this blunt answer:
Steve Keen: Austerity, even without something as stupid as the Maastricht Treaty, austerity actually pushes you backwards, and each time you attempt to do it you end up with a bigger debt problem than you had beforehand.
Thom Hartmann: Why would these people buy into this notion that you can somehow cut yourself to prosperity?
Steve Keen: I know. It's because, unfortunately, a totally insane theory of economics which is superficially plausible but fundamentally insane has taken over the economics profession.
Yet this fundamentally insane idea is exactly what we're seeing played out in the U.K. and in Greece - and bizarrely - it's what Republicans want to bring to the United States.
Let's not follow Europe down that rabbit hole into economic collapse through austerity.
An economy isn't here for the banksters and the rich - it's here for all of us.
And no nation in the history of this planet has ever cut its way to prosperity.
So let's stop trying.
That's The Big Picture.