In addition to the economic truth that tax cuts and growth do not have much of a relationship, what we’ve learned over the past few years is that austerity during a depression is a bonkers idea. And here’s some more evidence of that today.
Britain’s latest numbers show a bigger drop of GDP than expected.
Britain’s economy was even weaker than expected at the end of last year, underlining the country’s struggle to avoid another recession.
GDP fell 0.3% in the fourth quarter, more than the 0.2% drop previously estimated by the Office for National Statistics. The downgrade was mainly prompted by weakness in the country’s dominant services sector.
Economists had not been expecting any change to the 0.2% fall, and the news that Britain’s economy went into the new year in an even worse state will raise fears it could notch up a technical recession – defined as two consecutive quarters of contraction.
If Britain is headed on the road to recession, Spain is already there, the consequence of more wrongheaded austerity policies.
Spain’s economy is suffering its second recession since 2009, the Bank of Spain said, a development that obstructs the government’s efforts to reorder public finances as it prepares the budget for this year.
“The most recent information for the start of 2012 confirms the prolongation of the contraction in output,” the Madrid-based central bank said in its monthly bulletin today.
Spain’s gross domestic product declined 0.3 percent in the fourth quarter of last year, less than two years after emerging from the last recession. Prime Minister Mariano Rajoy will present his 2012 budget on March 30, amid growing pressure from investors and European peers to rein in the deficit, which was 8.5 percent of GDP last year.
When Atrios writes about all this he always adds the line “Fortunately there’s a policy for that.” And we really shouldn’t stop the mockery, nor should we forget this moment. Textbooks should be written about this. When European nations had the opportunity to put to the test conservative notions about the economy, they installed them. They substituted austerity for stimulus as the reaction to a depressed economy. And the result was a MORE depressed economy. This should be brought up in every conversation on economics approximately every 2.3 minutes.
And it’s still happening, by the way. Spanish PM Rajoy’s new budget promises to be “very austere.”
Nobody has learned a thing.