The U.K.’s slide into its second recession in three years has cast doubts on the effectiveness of austerity plans – well, at least among commentators who had already challenged the effectiveness of such plans. Already, there is a growing backlash to austerity measures in places like France, the Netherlands and Spain, mostly because a large number of people don’t like the pain associated with big cuts to government spending.
Now, the U.K.’s dismal economic performance over the past two quarters could easily give this backlash some heft, simply because it provides evidence that budget cuts during weak economic activity can make a bad situation worse.
Here’s Paul Krugman’s reaction to the U.K.’s economic contraction in the first and fourth quarters: “Now, the defense I hear from [U.K. Prime Minister David]Cameron apologists is that the austerity mostly hasn’t even hit yet. But that’s really not much of a defense. Remember, the austerity was supposed to work by inspiring confidence; where’s the confidence? Basically, the expansionary aspect should already have kicked in; it’s all contraction from here. Needless to say, Cameron and Osborne insist that they will not change course, which means that Britain will continue on a death spiral of self-defeating austerity.”Report Typo/Error