European Austerity: A Myth?

France will have a new President.

Yesterday in France, the Socialist Francois Hollande defeated the sitting French President:

…Hollande defeated centre-right incumbent Nicolas Sarkozy on Sunday…

It seems that the President-elect ran on a platform of austerity-rejection:

Hollande has promised more government spending and higher taxes — including a 75-percent income tax on the rich — and wants to re-negotiate a European treaty on trimming budgets to avoid more debt crises of the kind facing Greece.

I’ve always believed the left when they claim that Europe is undergoing a time of “fiscal austerity.”  Then I bumped in Coyote, who questioned it:

It is almost impossible to spot this mythical austerity beast in action in these European countries.  Sure, they talk about austerity, and deficit reduction, and spending increases, but if such talk were reality we would have a balanced budget in this country.  If one looks at actual government spending in European nations, its impossible to find a substantial decline.  Perhaps they are talking about tax increases, which I would oppose and have been occurring, but I doubt the Left is complaining about tax increases.

Seriously, I would post the chart showing the spending declines but I can’t because I keep following links and have yet to find one.  I keep seeing quotes about “commitment” to austerity, but no actual evidence of such.

So, I thought I would look.

And it’s interesting what I found.  Because France is in the news, let’s check out France:

I’m not seeing the austerity in this picture. It seems to me that General Government Final Consumption, all government current expenditures for purchases of goods and services, has gone up every single year since 1990.

Maybe when they say “Europe is experiencing austerity measures” they mean countries not France.  Greece is in the news, let’s go check out Greece:

Now THERE is austerity.  But barely.  Greece has experienced a reduction of government spending for a single year.  And even then only back to what it spent in 2009.

Italy?

Nope.  None.

Portugal?

Zero austerity.

One more, let’s pick….Finland:

Not Finland either.

It would seem that with the exception of Greece, there is no European austerity “problem.”  Europe seems to be growing their government just fine and just as they’ve always done.

The problems experienced in Europe right now are not the result of reduction in spending.

10 responses to “European Austerity: A Myth?

  1. You have to look at 2011 and especially2012, you’re only going through January 2010, that’s before talk of austerity budgets really took hold. Hollande was talking about real aspects of the EU pact and Sarkozy’s plans — none of that is captured in data that go through January 2010. Moreover spending increases automatically in a recession because of large numbers of unemployed. If you look at Greece, their austerity (especially in the last year) has led to a spiraling downward of the economy. Great Britain embraced real budget cuts and now is in a double dip recession. Cutting government spending alone slows the economy — it’s more harmful than the equivalent amount of tax increases.

    • You have to look at 2011 and especially2012, you’re only going through January 2010,

      There is little data on 2011 or 2012. And even if the data DID suggest that government outlays were less in 2011 than they were in 2010, that would represent a single year; hardly a trend made.

      If you look at Greece, their austerity (especially in the last year) has led to a spiraling downward of the economy.

      I would suggest that Greece’s troubles have little to do with any sort of austerity. These people have been building a time-bomb for years now.

  2. I am sick to death of lefties bashing austerity measures and saying they never work . Well I give the example of Canada in saying it does work . Canada was in trouble and turned it around in the 90s . They did not borrow and spend their way to prosperity like Europe and Obama think you can do .

    http://articles.latimes.com/2010/jul/11/business/la-fi-econ-canada-20100711

    • I am sick to death of lefties bashing austerity measures and saying they never work .

      They confuse two things:

      1. Economics
      2. General good will and concern for their fellow man

      It would be hard to complain that the Leftist is doing what she does out of malice; rather, she has an honest desire to try and make life better for other people. Sadly, she feels that the proper role of State is to carry out her personal vision of charity and thus, ignores economics.

      That’s why its usually so difficult to argue with the left, when faced with the fact that their policies result in despair, they simply resort to, “You hate kids and serve the rich!”

  3. Actually, Alan, it’s not just “lefties,” its a wide range of economists. I like the article you cite. Consider:
    “But on healthcare, as well as on such critical issues as the deficit, unemployment, immigration and prospering in the global economy, Canada seems to be outperforming the United States. And in doing so, it is offering examples of successful strategies that Americans might consider.”

    Yes, on health care Canada is definitely out performing us, we can learn from them!

    Note this as well:
    “With the economic downturn, Canada pumped up public spending to stimulate growth, as other nations did. Even so, its fiscal shortfall this year is projected at $33 billion, comfortably below the 3%-of-GDP threshold that economists consider a manageable level of debt.”

    See – they aren’t doing austerity now! They, like the Germans (and Scandinavians), got their economic house in order in the 90s when it was easier to do so (not in the midst of a great depression like event). Like Germany they have guaranteed health care, a vibrant economy, and a better standard of living than the US. So yes, please, I agree completely, let’s learn from Canada! We should not have embraced deregulation, massive tax cuts for the wealthy and other insane acts that have created a real mess we have to pull ourselves out from.

    I also agree we should shift spending and power to the states and move resources away from DC. Canada is a SUPERB role model for us! Thanks, Alan!

  4. BTW, my thoughts on Hollande’s election is that the conventional wisdom is wrong – this is actually going to be good for the EU: http://scotterb.wordpress.com/2012/05/08/a-good-election-for-france-and-the-eu/

  5. Scott ,

    It was the LA Times. They naturally had something nice to say about socialized health care in Canada .

    ” See – they aren’t doing austerity now! ”

    Canada is in great shape. They can do austerity, stimulus, socialized medicine, or whatever they want now . You miss my point . In the 90s thanks to misguided socialized fantasies they were in bad shape . They got out of it by real austerity . You guys cheer that Europe is rejecting austerity . They have had a false austerity.

    The funny thing is I read somewhere else that it was the lefties in Canada that did the austerity back in the 90s . Now if Hollande fools everyone and does what Sarkozy promised and failed to do , he can save France . France is a nanny state basket case . The French rioted when they raised the retirement age from 60 to 62 . And by the way, I hope you are aware that Germany, the strongest of the EU socialist nannies has a retirement age of 67 .

    As Krauthammer said, the Europeans can change governments, they can’t change economics. If Hollande follows through on his Keynesian programs, investors will punish France like they are punishing Italy and Spain .

    President Obama by trying to remake America into Europe is following a failed model .

    So we agree on shifting power from Washington to the states ? That way if some states want to be EU nannies and go bankrupt, ( California, New York State ) , they won’t take down the rest of us .

  6. Tarheel Red State

    Laissez faire economics and austerity have only been successfully implenented in Dictatorships. While Friedman loved Pinochet, who implemented his economic plan. While I know pino loves this economic thinking, I would hope he isn’t a fan of Pinochet’s methods… He did use the name pino, though…kinda makes you think, though does’t it…

    Of course they are trying it now in China, but at the expense of human rights and liberty.

  7. Economic development in China, Chile, Taiwan, South Korea and EVERY successful third world state that industrialized is very state-guided development. Japan after WWII was much like pre-war Japan in its economic arrangements, with intense state help to export industries. Germany was more free market, but compared to laissez faire theory not much at all. Pure markets just don’t work – as with socialism, pure capitalist ideology rests on applying an simplified theory onto a complex reality. That’s why ideology always leads in bad directions, while pragmatism tends to create solid policy. The main problem in the GOP these days is that they’ve become slaves to ideology to the extent that pragmatists like Senator Olympia Snowe (a Republican I’ve voted for for than once) has gotten so disgusted she decided not to run for re-election.

    Austerity is NEVER a path out of recession. The economic theory is clear – it slows the economy. That’s why Britain’s budget cutting has led to a double dip recession and Cameron is in trouble. The problem is real though – debt to GDP levels are so high that simple stimulus spending isn’t going to work as well since the higher debt load will harm the economy. What’s needed is a more active state in trying to guide shifts in spending and investment. Historically, that’s what works. Leaving things to the market — again, looking at history — tends to create a small very wealthy core of elites and a weakened economy.

  8. Pingback: Austerity In The EU: Myth? | Tarheel Red

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