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Thursday, October 11, 2012

Economy The IMF Learns the Truth about Austerity

Posted by Charles Mudede on Thu, Oct 11, 2012 at 7:42 AM

It doesn't work and it hurts the poor...

THE IMF has held up its hands and admitted it got it wrong when calculating the effects of austerity in Ireland.

The organisation said that it completely underestimated how the Irish economy would perform under strict spending rules.

The International Monetary Fund (IMF) said in an academic report that it believed for every €100 of austerity through higher taxes and spending cuts — this would impact €50 in terms of growth and unemployment.

However, the real effect meant that the austerity cut €90 to €150 out of the system.

The admission is likely to make Finance Minister Michael Noonan's job far more difficult ahead of yet another austerity budget in December.

"[The IMF] said in an academic report that it believed..." Yes, an academic report by deep-thinking academics, people who know the science of wealth and money, people who have the numbers down. But the truth of the matter can be found in one sentence near the end of a book, 23 Things They Don't Tell You About Capitalism, by the South Korean economist Ha-Joon Chang:

Economics, as it has been practised in the last three decades, has been positively harmful for most people.

Thanks goes to Gregory Heinz for the tip.

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Comments (13) RSS

Oldest First Unregistered On Registered On Add a comment

"But, but, capitalism is the best idea mankind has ever had! Look how rich it's made us!"

-Says a small group of extremely wealthy people with a disproportionately influential voice in our society.

Posted by MR M on October 11, 2012 at 8:23 AM

@1: Maybe, but if it were not for capitalism, you would not likely have the device you typed that on.

So perhaps there are benefits for people other than the richest.

When was the last time you had not eaten for a day aganst your will?

Posted by Theodore Gorath on October 11, 2012 at 8:42 AM

Deep thinking academics tend to over-estimate the benefits of government spending.

Posted by Ken Mehlman on October 11, 2012 at 8:45 AM

For me, one of the most troubling statements Mitt Romney made in the presidential debate was his warning against austerity. He cited Spain as an example. Then, astonishly, he prescribed austerity measures: dramatically reduced government spending. The guy knows money and economics. So surely he knows that he is, in fact, promoting austerity at the same time that he says that he opposes it.

It was like hearing someone say that we should avoid pigment at all costs and then recommend painting.

I can only presume that he was relying entirely not only on the American people's ignorance, but on the American media's ignorance as well. So far as I know, he has not been called on this bit of mixed messaging.

Posted by Charlie Mas on October 11, 2012 at 8:50 AM

Jesus, it took them this long to figure this out? Because an entire generation of IMF imposed austerity in Latin America went exactly according to plan.

Or, come to think of it, maybe it really did.

Posted by TVDinner

on October 11, 2012 at 8:51 AM

@4 Mittens has voiced support for both sides of pretty much every public policy debate I can think of.

Posted by Ken Mehlman on October 11, 2012 at 8:58 AM

@5 It took them this long to admit it. Also, Latin America suffering doesn't have the media visibility of European suffering.

Posted by Ebenezer on October 11, 2012 at 9:00 AM

@7 Actually, thanks to those IMF imposed austerity programs, Latin America has weathered the current economic downturn rather well.

Posted by Ken Mehlman on October 11, 2012 at 9:06 AM

The Poor are always hurting, that's why they're called poor.

Posted by Sargon Bighorn on October 11, 2012 at 9:15 AM

9, Yes, but now there's more of them.

Posted by treacle on October 11, 2012 at 10:13 AM

@6,

No I didn't.

Posted by Mitt Romney on October 11, 2012 at 10:17 AM

@6,

Yes, he did.

Posted by Mitt Romney's Staff on October 11, 2012 at 10:18 AM

This week, at a seminar at the London School of Economics, I asked Professor Ha-Joon Chang, world renowned economist, if he could name a time in history when austerity measures ever led to prosperity. He said no.

http://jondanzig.blogspot.co.uk

Posted by Jon Danzig