Thursday, June 21, 2012

Austerity Hawks are Bringing the Europe Union To Its Knees

The focus of the austerity hawks is on banks’ balance sheets-- not creating wealth through real productive achievements. There is little attention being paid to developing a broader, people sensitive programs that are tuned for the growth (not shrinkage) of the specific economies. As one result of its continued emphasis on austerity the European Union (EU) is faced with a recession that crosses 27 member countries. There is severe social unrest in many of them.

Austerity is not synonymous with efficiency. It creates social unrest that works against any possible improvement in efficiency. Funds sitting on a bank’s balance sheet will not increase demand or wealth unless applied to real projects. Austerity is a clumsy attempt at a pure financial fix when a more subtle correction in governance is required. The only way to real growth is intelligent effort and productive labor.

To beat a recession you must get the wheels of productivity generating cash flow and demand for its products. Bank balance sheets mean nothing unless they are providing the resources needed for the excitement of a producing free market. The prime task of the financial sector of each country should be to ensure that the resources and attitude the population needs to efficiently operate in a productive mode are available.

There is a substantial difference between economic growth and the damage caused by the politically inspired elimination of services that accompany austerity programs Focusing on creating wealth rather than destroying it seems a far superior approach It does require gaining real value from your national resources, including the labor of citizens.

We will have a chance to compare results of a growth based economic solution as opposed to austerity oriented plans. The French Socialist Party has just won a strong victory in France, replacing the austerity oriented UMP Party as President and Head of Parliament. They now have their sought for mandate to push for growth strategies, not austerity measures, to battle the Eurozone’s debt crisis. Although results will be influenced by many factors this could be an important data source in a complex problem that no one fully understands. We need to play close attention to how it performs.