I think I've already talked about this on this board before, but couldn't find the thread and wanted to give you all an update.

As I'm sure you've all noticed, the mantra of politicians in the wake of the recession and Eurozone crisis has been 'austerity!', and pretty much nothing else. This is the miserable result of all the right's election victories over the last decade. Economic rightists are in power all over the continent, and are using the recent crises as an excuse to push their ideological agenda of small government, presenting it as a pragmatic retreat from the socialist excesses of the past. Because, obviously, the best way to recover from a recession is to repress demand by laying off government employess and reducing social welfare benefits.

Now, however, we've got three elections coming up that may mark a turn in the tide.

Firstly, the Presidential elections in France. Socialist Francois Hollande is the clear favourite to win the second round. He had a slight lead over the Sarkozy in the first, and all the main left-wing candidates have advised their supporters to vote for Hollande as the lesser evil. Sarkozy can't count on the same support from the right. 20% of the country voted for the far-right Front National, and many of them will be impossible to woo over for a mainstream candidate. Worse (for Sarkozy), the harder he tries to woo them the more likely he will alienate supporters of the centrist liberal, Bayrou, and his own moderate supporters. France will probably soon have a Socialist President for the first time since the early 90s.

Next up we have Greece, a country where austerity is being pushed hard at the insistence of Germany and the IMF, but where it is so unpopular that the government parties have put up an unelected Brussels economist as Prime Minister in a vain attempt to deflect public outcry. It hasn't worked, since opinion polls show the collective support for the three parties in government having dropped from about 80% at the last election, to about 40% now. I'm less confident about the outcome of this election, since Greece's election rules mean that 40% will probably still be a majority. However, it wil be a much smaller majority, and it will take less dissatisfaction within the government parties to tear apart the fragile left-right coalition. It will also mean a much bigger voice in Parliament for the far left.

Finally, there's the Netherlands, where the government fell apart over the budget last week. The liberal right-wing PVV are still looking like the biggest party in the opinion polls, but the second biggest party is the far-left Socialist Party, followed closely by the centre-left PvDA. Things hang in the balance, since it's not clear what majority coalition will be possible, but with such a huge gain for the left, a pro-austerity goverment will be difficult to make.

I'm hoping this is the start of a change all over Europe. Our own government here is teetering on the brink of collapse, and the Social Democrats are forecast to gain if we have new elections. Maybe we can finally nip this counter-productive nonsense in the bud.

I hear that Britain officially just entered a double-dip recession thanks to Cameron's cuts. Any chance that will pull apart his coalition?

I've also heard the argument that one of Europe's main obstacles to recovery is the Euro, because it prevents individual countries from using monetary policy to lower their interest rates, devalue their currency, and boost their exports. So they have to do it the painful way, through deflation. Greece may get so bad that they'll have to exit the Euro, and it'll be really ugly.

It seems sensible to me that a government is spending more money than they get in, then they must either increase their income or reduce their expenditure. Greece, as I understand, has got into such terrible trouble that they're pretty much forced to either do both at full speed, or go bankrupt (which gets very ugly very quickly). I don't know so much about the rest of Erope, but from the little that I do hear, the Euro is in some trouble; the austerity measures, as unpopular as they may be, are a way to try to reduce that Trouble. If they're all cut out, what will happen to the Euro?

Greece's debt, bad as it is, is still less a per-capita problem than the US.

The problem is, that the Euro zone is too much integrated to allow some countries emergency measures on their own (such as devaluating their currency) but it is to little integrated that keeping Greece as net receiving province would not be disruptive too. It's pretty normal for a country to have a couple of poor provines, thats ecconomy does not yield as much as the rest of the country, and they receive more through countrywide programs, then the country gets from them. But usually they don't decide on their own taxleves, social programs, army ect.

The other problem is that often the EU does not have a powerful goverment to make decisions on matters concerning the whole union, but rather a set of rules binding the the memberstates to prevent them from doing something to damage the unionion or do freeloading. But unfortunatly ecconomy is not (yet?) such an exact science, that you can come up with a set of rules and procedures to handle all situations. So whenever something unexpected happens, the memberstates have to come to a consensus what to do, while there is a crisis going on.

Unfortunately, the austerity measures are working out to have the same effect as a family trying to tighten their belt by quitting their jobs. By driving up unemployment depressing the economy even further, the steep budget cuts are resulting in nearly as much loss of revenue as the money saved. And it may be lowering potential future output by doing permanent damage - very high unemployment for an extended period erodes the skills of the workforce.

Apart from Greece, most of the European countries currently in trouble didn't get into trouble by overspending. On the eve of the financial crisis, Spain and Ireland had pretty low levels of debt to begin with, and ran regular budget surpluses too. What got them into trouble was their real estate bubbles bursting, which led to banking crises, which led to the economy falling off a cliff and depressing revenues, plus bailouts. The EU has been uniformly prescribing austerity regardless of the causes of the problem.

A big part of that mess is the lie Germany is telling everyone (including themselves) about how they got out of their last economic mess. To hear them tell it, they paid for their reunification costs by simply cutting back; and everyone else can weather their own storms by simply living within their means too. It's a lovely story which happily enough obligates Germany to do exactly nothing about the current mess.

Now it's true that Germany did tighten their belts back then; but what really happened is that they ran massive trade surpluses every year which paid for everything. For obvious reasons this story is less useful for others in trouble (not to mention the German sense of self satisfaction and their unwillingness to contribute); against whom is everyone in Europe supposed to run a large surplus at the same time? Even the Americans aren't bleeding that much money these days.

Are right wingers correct about anything?

yes

Short Clever Answer: No.

Longer More Nuanced Answer: When one says 'right wing' who does one mean? There are many schools of 'conservative' most of which can be swapped out with 'selfish' and they are indeed becoming increasingly homogenized thanks to the clever and diabolical work of one Ruprecht Murdoch who is, as we speak, taunting us all with the downfall he is extremely unlikely to actually experience. Demonic pact and all that.

I digress.

Let us speak generically of 'conservative' and ignore all the areas in which they are wrong save a summary:

Reality Denial: All factions, races, creeds, colors, nationalities, tribes and philosophies are guilty of this in all human history to one degree or another, but it is my observation that conservatives are far more guilty than 'liberal' or 'change the status quo' factions simply because, by dint of wanting things not to change, they will hang on like the dying knight in Monty Python's Quest For the Holy Grail in clinging to their wrong ideas, no matter if they are presented to their eyes as if the noon day soon. Indeed, when reinforced by their fellow reality deniers they can say 2+2=5, that there are four lights, and that yes the sky is a nice shade of green today so long as they will not betray the tribe. As I said, all humanity is guilty of this at one time or another, including myself, but Tribe is strong in the 'right wing' and growing stronger every passing year.

Humanity may not survive it.

But I still disgress.

So in what ARE conservatives right? Narrowing our scope to as generic a term 'conservative' as we can without swallowing incorrect ideas or base theories of assumptions about rights, religion or the inherent nature of humanity but simple observed Reality Reality academic history as viewed by consensus?

The value of the individual. I don't care how important your nifty state government idea is, if it devalues the value of the individual, its worthless.

The quintessential importance of liberty towards that dignity.

That it is worth taking a moment to consider that even if the problem you're concerned about is real, one might want to consider the options being proferred as a solution and take a few moments to ponder alternative solutions before putting your hand in the garbage disposal (this is particularly ironic in liue of the Iraq War given that their historic role of "wait, what?" was thrown away)

The ugly boring accountant counterpoint to the brilliant, loving, caring head in the clouds 'left wing' that might not have thought about how to actually MAKE. THAT. WORK. just yet.

That there will always be an economy in any society with human beings in it, and therefore rich and poor and you'd better deal with it somehow, and there will be greed and you'd better deal with that somehow and capitalism is (as of 40 years ago) the best idea presented so far.

That someone is going to have to pay for this.

That that someone is 'us' and the 'rich' will likely be me and you at some point.

That the police cannot teleport and you have a right to be able to defend yourself until help can arrive.

They're right about all kinds of things, but sadly, even the things that they're right about, they tend to do with hate, venom, avarice and darkness, especially these days and anyone on the right side that doesn't is in the minority.

And the best sign you can tell that a conservative is in denial is if they say that the majority right is not infected with these things at the moment, and therefore utterly not worth listening to.

To be fair, 'right-wingers' are a pretty diverse bunch. The government that just collapsed in Holland was a minority coalition of the liberal right and one of the Christian right* parties; supported by the populist nationalist right. The government fell apart because the nationalists would not support austerity measures. It's a bit unfair to generalise about them.

*Not to be confused with how you might think of 'Christian Right' in the US - the CDA are quite a moderate, centrist party - the extreme, evangelical Christian right have their own, much smaller party, with only two 2 representatives in the lower house.

The big problem here is the ideology that seems to have become the guiding light of the mainstream, centre-right parties in Europe, with a lot of influence from the US and from Thatcherites in Britain. And this is why claims like this annoy me:



This is not an ideology of pragmatism, much as it may hide behind the wording. It's an ideological commitment to small government - cutting the budget is treated as some sort of magical panacea - everything will become better once we're 'living within our means'. Cue lots of moralising about profligate Greeks and spendthrift Spaniards. Which is leading to exactly the problem Kea describes:



Maybe we do need to cut budgets, and should be looking at sensible ways to reduce long-term expenditure. But that isn't going to get anybody out of recession. On the contrary, the successful passing of austerity budgets has plunged the UK bank into recession - and this is in a country which had no debt crisis - debt as a proportion of GDP in 2010 was only slightly higher than it had been for most of the period since the 1970s, and substantially lower than it was in the aftermath of World War II. And now thw proportion of debt to GDP is rising, thanks to the absence of any economic growth - a situation that won't change if the government continues to cut social spending and raise consumption taxes, as austerity advises.

If we need to cut long term spending, then this should be accompanied with large scale stimulative spending projects. An idea I heard mooted the other day was to build a solar panel on every low-income home - but funnelling lots of money in government contracts for the actual construction, and reducing the power bills of people who need to spend the extra saved straight back into the economy. Without this, we're pretty much dooming the continent into spiralling recession for the foreseeable future.

As far as I understand it, a recession is what happens when there's less spending money to go around. Less spending money means less money gets spent, fewer people earn good salaries, there is even less spending money, and so on, in a nasty little cycle of despair. Businesses prepare for 'less spending money' by reducing employment, contributing to the problem. (It may even be possible to induce a recession by simply persuading the media outlets that a recession has, in fact, started).

So. A recession can be caused by an oversupply of national debt (the government must pay money out of the country to pay back the debt); this, I understand, happened in Greece. To fix this in the short term, a government can cut other (internal) costs to better be able to afford the debt; in the long term, it needs a decent trade surplus. It's an external problem (debt) - a proper fix requires an external solution (trade surplus). Possibly against several countries.

But I'm told that in some countries, the recession was caused by a housing estate bubble collapse. That's entirely internal problem, surely there's an entirely internal solution? Okay, so perhaps austerity measures are not the right entirely internal solution, but as long as they're not actually running a trade deficit (or at worst are running a minor one) there must surely be something that can be done to fix the problem. Putting solar panels on low-income houses might work (how common are hailstorms?), I mean, it's purely internal after all. Reducing taxes on certain kinds of businesses might also help (encouraging more commercial activity, ending up with more money in circulation); actually, anything that encourages commercial activity might help. A series of government-sponsored workshops on "How To Start Your Own Business" might even be enough, I don't know.

The solar panels idea was just an arbitrarily chosen example - I don't know how feasible it would be in practice. The idea was just some form of Keynesian stimulative spending. Energy production seems a good place to focus this, because finding ways of shifting to alernative energy sources is supposed to be official EU policy anyway - two birds with one stone.

I think that reducing things like sales taxes are a better idea than reducing taxes on business, however. Reducing corporate taxes doesn't do much to solve the immediate problem of reduced consumer demand, which a reduction in sales taxes would - indirectly pumping more money into the businesses selling stuff.

If you have five minutes of spare time, read Paul Krugman's baby-sitting co-op analogy for a quick and dirty explanation of what recessions are. It's worth it, I swear.

Hmmm. Recessions are obviously more complicated than I thought. So the liquidity trap is a recession caused by not having enough cash moving around to pay for things... but simply issuing more cash won't always get you out of a recession, either (anyone who wants to try that should first explain how they're planning on avoiding what happened to Zimbabwe after they issued a whole bunch of 'more cash'). You have recessions caused by having too little cash, and you have recessions caused by hyperinflation (which is in turn caused by adding too much cash too quickly).

The first thought to come to my mind is that increasing taxes on the rich, and spending the increased taxes, would put more money into circulation. However, this only works if the rich are putting their money aside; hiding it, in effect, in an old sock under the mattress. But people who do that are unlikely to be rich; the rich would gain a fair portion of their wealth through investing (stock market, banks, that sort of thing); it doesn't take a very great leap of insight to realise that the interest gained by putting money in a bank account is better than the interest gained by hiding it under the bed, after all. And the financial institutions circulate money through the economy in the form of loans at any rate; that, and stock market investments, which could be seen as a form of loan given to certain businesses (with slightly uncertain payback terms). So it's not as if rich people's money is not circulating through the economy; by and large, it is circulating (albeit on a leash, with the intention of coming back with friends).

...economics seems like a complicated and difficult subject, filled with traps and snares for the unwary.