'Never waste a good crisis'

4 October 2012

'Never waste a good crisis'

Emile Roemer - Politicians and economists have at the moment an important decision to take. How can we get the budget in order and at the same time find a better way out of the crisis? Neoliberal economists and politicians believe that harsh spending cuts strengthen the economy. They are increasing the contribution people have to make to the cost of treatment under the health care system, and widening the income gap because they think that people will as a result work harder and take better care of themselves.

Rather than seeing it as a problem, true neoliberals view the current crisis as an outstanding opportunity to wreak further destruction on social security and public provision. ‘Never waste a good crisis’ said Milton Friedman, the godfather of neoliberalism. What he meant was not that we must learn from a failing neoliberal policy but, on the contrary, that a crisis can be deftly employed to make government smaller and income differences greater.

In the opposite corner from the neoliberals are the Keynesians, who assert that the government must not turn a blind eye to problems but should rather intervene if consumers and firms are reluctant to spend. What they want is to break the vicious circle of shrinkage, spending cuts and still more shrinkage and get the economy moving again. In order to do so they urge investment in the short term so that a complete demolition of health care and social security can be prevented.

In contrast to the Labour and Liberal Parties which this week sealed their first ‘partial agreement’ to govern together, I don’t believe that still deeper cuts will help us escape the crisis. We should instead be investing in the economy, creating jobs, dragging the building industry out of its slump and giving people once again faith in the future. What’s needed now is for the government not to deepen the crisis but to cushion it. This is an essential lesson which economists, for example, could learn from their Nobel Prize winning colleague Paul Krugman.

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