What’s in it for me? Discover the numbers behind austerity policies.
Austerity is a controversial subject, and one that economists have been arguing about for a long time. Since the financial crisis of 2008, the issue has become even more urgent. Simply put, how do you reduce a government’s deficit without ruining the economy?
To find the answer, academics Alberto Alesina, Carlo Favero, and Francesco Giavazzi turned to data. They compiled a huge dataset that included austerity cases in 16 developed countries, from the 1980s to the 2010s, and worked out the effect those policies had.
The results were surprising. Austerity wasn’t always the political kiss of death it’s commonly assumed to be. In some cases, it actually worked quite well, and even led to governments being reelected.
However, the authors discovered that there are two different types of austerity, and that they’re not the same at all. In fact, as you’ll discover in these blinks, cutting government spending produces very different results than raising taxes.
In these blinks, you’ll learn
- why politicians shouldn’t fear austerity measures;
- where Keynes went wrong with his views on austerity; and
- what happened in Greece after the financial crisis.