Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the “austerians” insisted that the reverse would happen. Why? Confidence! “Confidence-inspiring policies will foster and not hamper economic recovery,” declared Jean-Claude Trichet, the former president of the European Central Bank — a claim echoed by Republicans in Congress here. Or as I put it way back when, the idea was that the confidence fairy would come in and reward policy makers for their fiscal virtue.
The good news is that many influential people are finally admitting that the confidence fairy was a myth. The bad news is that despite this admission there seems to be little prospect of a near-term course change either in Europe or here in America, where we never fully embraced the doctrine, but have, nonetheless, had de facto austerity in the form of huge spending and employment cuts at the state and local level.
So, about that doctrine: appeals to the wonders of confidence are something Herbert Hoover would have found completely familiar — and faith in the confidence fairy has worked out about as well for modern Europe as it did for Hoover’s America. All around Europe’s periphery, from Spain to Latvia, austerity policies have produced Depression-level slumps and Depression-level unemployment; the confidence fairy is nowhere to be seen, not even in Britain, whose turn to austerity two years ago was greeted with loud hosannas by policy elites on both sides of the Atlantic.
And with Spain and now Britain's Q1 GDP numbers showing big fat recession signs (and a healthy chunk of the Eurozone following suit at this point) the notion that "austerity is the answer because it creates certainty and confidence!" is about as dead now as Sarkozy's chances in France's upcoming elections. Poor little Confidence Fairy didn't have a chance, you know. You didn't clap loudly enough, Europe. (Austerity can only be failed...)
Never forget of course that for the last several years, the "serious" people have been telling us that we had to follow suit or face economic ruin. US GDP numbers for Q1 came out this morning at 2.2% growth, and while that's down from 4Q 2011's 3.0%, it's still better than what Europe's austerity cultists are feeding upon right now. Our own zombie-eyed granny starvers (thanks, Chuck) have told us for years now that this was necessary if not vital to our survival, and failure to do so would mean another financial crash. Meanwhile, the actual application of throttling the spender of last resort in several European countries has -- surprise! -- led to a double-dip recession with no end in sight and even more cuts called for. We need more of the same stuff that not only isn't working, it's causing more problems. That never happens with conservatives and economics.
Yet, we face the same exact calls here from Republicans and more than a few Democrats. They're hoping you don't pay any attention to the fact that what they've said we have to do has been tried and is currently failing miserably in Europe. Mighty Krugthulhu has of course been saying this for a while now, and all but ignored in the halls of power. It's looking like that particular era may be coming to an end and none too soon. Maybe those steely gray beard-tentacles of his can latch on to a few heads and extract the Stupid while he's at it.
What a fairy tale that would make. Ia! Ia!