Whilst Greece heads back to the polls (possibly to return a ‘can’t pay, won’t pay’ leftist government, Liam Halligan in last Sunday’s Telegraph has a timely reminder that some Irish politicians might care to mull over… It concerns the false dichomy between austerity and growth…
In reality “growth versus austerity” is a false and dangerous dichotomy, a misleading policy choice that has been formulated and fed to electorates in Britain and elsewhere by opportunistic politicians and their pet intellectuals.
“Economic growth” isn’t a decision a government can opt for. It is, instead, an outcome – an outcome we want and need, and which can be achieved in a variety of ways, none of which is guaranteed.
And in case you are still wondering, he goes on to say this…
There are, on the other hand, many ways to guarantee that growth won’t happen. One way is for a country to borrow and spend far beyond credible limits so that, in the end, bond markets refuse to roll over their sovereign debts. Growth won’t happen in the midst of a creditors’ strike, when sovereign bond markets are in meltdown and interest rates spiralling out of control.
Similarly, growth won’t happen when there is capital flight and soaring inflation, the result of a plunging currency, after a nation has printed so much money that global investors, sick and tired of asset debasement, ultimately cut that country loose. Growth won’t happen, either, when there is civil unrest, the result of governments being unable to pay basic bills because credit markets have collapsed.
While there are few certainties in economics, the above no-growth scenarios, however harsh, are backed by decades, centuries even, of historic evidence, to say nothing of basic common sense.
So roughtly, no austerity, no growth? Seamus Kirk in the Dundalk Democrat has a slightly different tack on the same matter:
“Ireland runs out of funding from Europe by the end of 2013. After that we will need more money to fund our hospitals, gardaí, infrastructure, transport & social welfare. The only way we can guarantee additional funding from Europe through the ESM is by voting Yes. In fact, it is less likely that we will even need funding from Europe if we vote Yes. The markets are much more likely to have confidence in Ireland’s economic future and to lend to us at cheaper rates, if they know that we have the backing of Europe and the ESM should we need it.”