Austerity

Activity

Dissemination of research outcome through Prime Economics platform

Description

The current policy agenda of neoclassical macroeconomics, as expressed within conservative political circles in the United Kingdom and European Union, is that fiscal contraction is the lever that can bring about recovery from the current economic downturn. Allegedly, the reason is that when business sees that the government balance sheet is improving - and public debt declining - there will be greater confidence in the country’s economic prospects and this increased confidence will lead to higher investment. This in turn will lead to growth and the road to economic recovery. Contrary to traditional predictions, it turns out that over a long historical span, fiscal contractions deteriorate rather than improve public debt as a percentage of GDP. This implies that fiscal austerity exacerbates the lack of demand and deteriorates rather than enhances the prospects of economic recovery.

Austerity and inequality lie at the heart of current political discourse, and have an impact on the health and wellbeing of all in society, but particularly those at the bottom of the income distribution. This research agenda delivers a clear message to macroeconomic policymakers that fiscal austerity is detrimental to economic growth, and has particular significance given the economic headwinds faced in the current macroeconomic environment.

Period	1 Jan 2014 → 8 Jul 2022
Held at	Economics