The Age of Austerity in the West in Response to the Global Economic Crisis

The Age of Austerity

The gloomy economic conditions all over the world have prompted governments to cut back on social spending and curtail budgetary expenditures on sectors like health, education, and provision of basic services. The intention behind this entire pullback from spending is to promote fiscal discipline and impose austerity on the peoples of the world.

This age of austerity means that citizens in the developed west including the US and the Europe can no longer look to the state to take care of all their needs and to provide them with social security nets as well as subsidized services. This has major repercussions as until now Europe and the US were held up as role models for providing basic services at dirt-cheap rates.

The situation is especially dire in Europe where for much of the 20th century, the people were used to the state looking after their needs. Therefore, the latest round of austerity has not gone down too well with the people of Europe who are protesting in large numbers in almost all the peripheral countries of the Eurozone where Austerity is being implemented. This has led to prolonged periods of social unrest punctuated by strikes and large-scale protests by labor unions and citizen movements.

Arguments for and Against Austerity

The argument made for austerity is that the good times are over and especially so when one considers the rather easy life that many in the West got accustomed to, the point being made by the governments is that it is time to buckle up, tighten belts, and ensure that growth is given priority over reckless spending. However, the same argument is being contested by the people who point to the fact that they got used to the welfare state model and hence, did not plan for this situation where they are being forced to contend with unemployment, reduced salaries, and cutbacks to social schemes.

The case of unemployment is especially telling as many youth are without jobs and without state support, which is turning into a deadly cocktail that can degenerate into social chaos and spell trouble in these countries.

Further, the people are also angry at the prevailing situation, which they blame on the bankers and the governments who got them into the present sorry state of affairs. Whichever side one belongs to, it is clear that the Age of Austerity is here to stay and therefore, the people in the West have to get used to an austere lifestyle where most luxuries that they took for granted earlier have now been taken away from them.

Need for Austerity

Apart from this, Austerity is also needed from a fiscal prudence perspective as well as from the diminishing returns from growth perspective. To take the latter aspect, it is clear by now to many people the world over that the growth rates seen in earlier decades are not going to be actualized anytime soon because of depleting resources, overpopulation, and a general rate of return that follows the law of diminishing returns where growth hits limits and even productivity jumps cannot make up for it.

As for the fiscal prudence angle, countries that have overspent their money and indebted the future generations are now realizing that more debt is not the answer to existing debt and hence, they must cut back on spending and ensure that their budgets are balanced and in tune with the harsh economic realities. This is the crux of the argument that governments in the West are trying to tell their people that for the sake of future generations, they must sacrifice something now.

Concluding Thoughts

Finally, the austerity versus spending debate has only intensified in recent months and we would be looking at the theoretical basis for the debate as well as the social consequences of the same in subsequent articles.

It would suffice to state here that once people get used to an easy life, it is difficult to make them adjust to hardships and hence, the governments and the policymakers must take this into account when try to impose austerity on their citizens.

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Managerial Economics