Austerity

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Austerity (from the Greek αὐστηρότης austērótēs , German , 'astringency, seriousness, rigor' ) means “discipline”, “privation” or “thrift”. The term is mainly used in economic contexts and is a name for a strict state budget policy that strives for a balanced state budget and a reduction in national debt ( austerity policy , restrictive fiscal policy , austerity policy ). Budget cuts and tax increases in times of poor economic development are defined as austerity measures.

economy

In an economic sense, the term austerity was first used in the United Kingdom during World War II . This characterizes the spending cuts made by the Chancellor of the Exchequer and Minister of Commerce, Stafford Cripps , which were intended to achieve a balanced balance of payments , full employment and cover the costs of the war . Britain was on the verge of insolvency after World War II. As a synonym for a strict state spending policy or restrictive fiscal policy , the English word was later borrowed into German and initially used in word combinations such as austerity policy , austerity measures or austerity program and later in the regressional form austerity (austerity policy) . The designation is also seen in the professional world as a political catchphrase to vehemently criticize the need to consolidate the budget.

Goals of the austerity policy

An austerity policy in the form of tax increases or spending cuts is intended to limit the state's net new indebtedness or reduce the debt burden. The aim is to prevent national bankruptcy , lower risk premiums on government bonds and comply with international agreements such as the Stability and Growth Pact . If these goals are achieved, the state's financial room for maneuver increases and, as a rule, confidence in the economic policy of the state concerned increases.

Effect of the austerity policy

There are different opinions among scientists about the effects of austerity policies. Some authors consider budget consolidations in permanently highly indebted states to be inevitable (as long as they cannot devalue their currency), but in the German-speaking area less often refer to this as "austerity policy", while other authors use the term "austerity policy" to emphasize the risks. Even the question of which European states have pursued an austerity policy is debatable.

Criticism of the austerity policy

The effects of a state austerity policy depend in particular on the economic situation. While the pursuit of an anti-cyclical financial policy (i.e. saving during the upswing and a loose financial policy during the downswing ) is at least theoretically broadly supported, an austerity policy in times of crisis is viewed much more critically. In practice, however, austerity policy is mostly carried out in response to over-indebtedness in the state budget in order to prevent national bankruptcy . The alternative of continuing the debt policy often fails because the lenders are unwilling to provide further credit because they no longer believe in repayment.

One of the most important critics is the American economist Paul Krugman . He believes austerity measures are wrong and argues that they will aggravate an existing recession. In particular, he criticized the OECD's recommendations in favor of austerity policy, although they were not based on their own forecasts. The current austerity policy is basically not working, said Krugman. Even if companies under the conditions of a slump in demand would be willing to continue investing and ask capital, the would drop demand for capital is not in the expected interest-absorbing manner, as companies have less profits they reinvest could. Austerity enhancing loud national accounts the financing needs of enterprises. A lower interest rate would therefore not help companies. Contrary to theoretical assumptions, austerity policy does not create trust in times of major economic problems, but rather makes it more difficult for the affected state to steer sovereignly through the crisis. The burdens would possibly be distributed unfairly through cuts in the social budget and would then more likely affect the poor. From the perspective of Keynesianism , a cut in government spending can lead to a decline in economic growth - in some cases even to a vicious circle of private savings ( precautionary funds ), falling government revenues and additional savings needs for the affected government budget. From the experiences during the Great Depression in the 1930s, concluded Hans Gestrich 1936 that during a recessionary economic phase of the trial of deficit reductions, however, reproduced budget deficits: "In the Depression, the position of the state treasury will be determined by decliners tax revenue corresponding to the falling incomes of taxpayers, on the one hand on the other hand, through at least the same but probably increasing expenditure. [...] The fact that the rigorous deficit coverage through tax increases and spending cuts deepens the depression and - unless some stimulus from other sources helps to get the economy going - creates the budget deficit again and again, a number of European countries in the period from 1930 to 1935 must experience one after the other; especially Germany until 1933, where particularly conscientious financial politicians felt obliged to manage the budget in this way because of the debt burden that had already been piled up in the years before. ”Keynesianism therefore relied on the opposite strategy of deficit spending in the economic sales crisis .

In addition to more recent perspectives on the global economic crisis , experiences from a three-digit number of other crises shape the current macroeconomic discussion. Criticism of the Keynesian argument is given that it does not explain how stimulating government demand can and should be financed in the long term, especially when deficit and debt levels are high. The Kiel economist Kai Carstensen comments: “What comes along under the unfortunate and economically absurd motto 'More growth instead of more saving' is actually called 'More consumption on credit', has nothing to do with growth and is precisely the strategy only brought countries like Greece and Italy into distress. "

An IMF study from 2012 shows that incorrectly timed austerity programs can reduce economic growth to a large extent. It should be noted that an austerity program increases the debt level in the first year and only decreases later. Therefore, one should not carry out further austerity programs in the following years, because each of these austerity programs would initially reduce growth and increase the debt level. Various other studies confirm this finding by the IMF by showing that the so-called fiscal multiples in the case of the European austerity programs were significantly higher than had initially been assumed at the time of conception. The objection to this line of argument is that, although austerity programs follow negative growth effects, they are necessary and effective in relation to previous over-indebtedness.

In 1936, Wilhelm Lautenbach considered compensatory increases in domestic corporate investments to be decisive for the success of the austerity policy.

Paul Krugman referred to the US fiscal stimulus in response to the 2007 financial crisis (which, in his opinion, was too small). In European countries with lower government spending, however, there was a worse development than in the USA. Daniel Gros points out that the eurozone, despite significantly lower deficit spending than the USA or Great Britain, did no worse in terms of economic growth and unemployment. He concedes that austerity policy does not exactly stimulate growth, but that it is inevitable in order to keep the national debt manageable. The higher the volume and the longer the deficit spending, the more pronounced the state budget has to be consolidated afterwards. Jeffrey Sachs called Krugman's view of the economic stimulus plan crude Keynesianism, which was not as clever as Keynes' views. He accused Krugman of failing to distinguish between useful and useless expenditure and of assuming constant demand multipliers. He also criticized the Obama administration for adopting this view. In 2015, Sachs accused Krugman of being against the reduction of deficits and thus making false forecasts. He noted the decrease in the US budget deficit from 8.4% of GDP in 2011 to an (estimated) 2.9% of GDP in 2014 and a decrease in the US structural budget deficit and the decrease in the UK structural budget deficit at each at the same time falling unemployment.

Reducing deficits and reducing unemployment is therefore not a contradiction in terms. According to Sachs et al. a. through a greater burden on the rich, not through government deficits. Krugman, on the other hand, referred to Eurostat data from 2010 to 2013 to support his view that higher government spending tended to improve the economic situation. Bill Mitchell replied to Sachs that there had been no major austerity measures in the US during this time and that fiscal stimulus support had continued.

Austerity in Germany

The economist Paul Krugman regards the economic policy of the Chancellor Heinrich Brüning at the beginning of the world economic crisis as a conscious austerity policy. In contrast, the economic historian Albrecht Ritschl argues that Brüning was not able to pursue an expansionary economic policy at all , since Germany found itself in a predicament due to the high foreign debt and reparation obligations. The Economist pointed out that the loan word austerity , which is common in crisis countries, is hardly used in Germany itself; there one speaks more of austerity. In the German media, the Agenda 2010 of the government under Chancellor Gerhard Schröder was described as an austerity policy.

Austerity in Greece

A number of Keynesian economists believe that austerity policies have exacerbated the economic crisis in Greece. Other economists counter that in Greece for decades (with a few exceptional years) and increasingly from 2000 to 2009 there has been excessive private and government debt. Acutely manifested in a crisis of confidence on the capital market after increased false information on debt and budget deficits under socialist and then conservative government responsibility, debt for consumption growth that was not actually generated ultimately led to Greece being unable to get any more loans on the capital market.

According to Daniel Gros, Greece is "obviously not the first country to apply for emergency financial aid to postpone cuts to the national budget and then complain of excessive budget cuts when the crisis is over". That happens more often when a government believes it no longer depends on outside help. However, Greece chose a bad time for this, because at the same time a further rescue operation for the IMF and ECB loans is needed and the Greek banking system still needs ECB aid. The Greek government debt ratio of 170% of GDP appears to be large, but since the majority of these are subsidized Troika loans, Greece has to pay interest of 1.5% of GDP - less than Ireland or Italy - and the terms are unusual in the market long.

For economists like Hans-Werner Sinn it was clear that Greece would have to go into a sharp depression. According to economists like Krugman, Thomas Piketty and Joseph Stiglitz , the example of Greece shows that endless austerity policies lead to endless depression. Economists like Paul Krugman and Hans-Werner Sinn consider a new private debt crisis to be avoidable if Greece opts for a Grexit , since the currency devaluation would lead to a quick restoration of international competitiveness .

Ricardo Hausmann believes that the severe recession ultimately only corrected unnatural - not investment, but consumption-driven - credit bubble growth in the 2000s. The average economic growth of Greece from 1998 to 2014 is still higher than z. B. that of Cyprus, Denmark, Portugal or Italy. In Paul R. Gregory's opinion , Paul Krugman's recommendation to fight the debt crisis through deficit spending makes no more sense than a doctor would treat a drug-addicted patient with drug-induced cardiac arrest with heroin.

It is also argued that the austerity policy is not to blame for the economic crisis, but the Greek structures and the refusal to change them permanently. A similar austerity policy in Portugal, Ireland, Spain and Cyprus worked far better because the export sector was stimulated through internal devaluation . The lower government spending was partially offset by higher export demand, so that overall economic demand fell far less sharply. These countries are now seeing economic growth again and are again able to get loans on the capital market. In the case of Greece, the internal devaluation has so far hardly stimulated exports. a. because the most important Greek export items turned out to be less price-elastic . In addition, almost all Greek parties oppose structural reforms - such as reducing the unusually large bureaucracy. SYRIZA campaigned with the promise to reverse the few privatizations and to order wage increases every year regardless of productivity developments. This has deterred domestic and foreign investors.

The timing of the structural reforms carried out in Greece is also the subject of discussion. For example, an investigation by the IMF came to the conclusion that the short- and medium-term growth effects of structural reforms strongly depend on whether a country's economy is in a weak or a strong growth phase. According to calculations by the IMF, for example, a relaxation of the protection against dismissal or a reduction in unemployment benefits during a phase of strong growth usually has a positive effect. In Greece, however, these reforms were implemented during a recession, which usually weakens the economy even further. The IMF attributes this to the fact that, although the incentives may be higher when unemployment benefits are lower, in an economic crisis like the Greek one, there would be fewer free jobs available, so that the hoped-for effect would not materialize.

In the opinion of Kenneth S. Rogoff , Jeremy Bulow and Aristos Doxiadis, the austerity discussion also obstructs the view of much more important macroeconomic crisis factors. The crisis is mainly due to the capital flight of over 100 billion euros, which was only partially offset by the Emergency Liquidity Assistance (central bank loans approved by the ECB by the Bank of Greece ). On the other hand, there was no “bleeding” by the lenders, Greece had received much more money from the euro countries by mid-2014 than it had to pay to them. In addition, the banking crisis is another cause of the economic crisis, since 33.5% of private debt alone went bad, which inevitably triggered a credit crunch .

Michael Spence takes on a mediating position . In his view, there is a misunderstanding in the usage of austerity : Keynesians understand it to mean a reduction in government deficits so quickly that the savings effect is overcompensated by the costs of a severe recession. For the Germans, on the other hand, austerity is the restoration of flexibility, productivity and international competitiveness through wage restraint and structural reforms. In his view, the right balance must be struck between budget cuts that are too rapid and dangerously slow budget cuts. Restoring stability and growth is only partly a question of reviving short-term aggregate demand. It is also about structural reforms and structural adjustments, which not least lead to the fact that the overall economic demand is made up more of investment and less of consumption.

Other meanings of the term "austerity"

In older times, austerity was also used as a foreign word in the upscale German literary and scientific language in other meanings, such as an ethical-philosophical term for "rigor, inflexible tenacity (of virtue and morality)", for which in the Latin tradition especially inflexibility Catos d. J. was proverbial as virtus austera Catonis , or as an aesthetic-art-scientific term for an ostentatiously economical design or furnishing that is limited to the bare essentials, such as is attributed to the medieval architectural style of the Cistercians (Cistercian austerity) .

literature

See also

Web links

Wiktionary: Austerity  - explanations of meanings, word origins, synonyms, translations

Remarks

  1. ↑ Duden entry "Austerity"
  2. ^ Ferry Stocker: Modern Economics. Logic of the market economy . 6th edition, Munich 2009, ISBN 978-3-486-58576-6 , p. 321 ( online )
  3. ↑ FT Lexicon: Definition of austerity , accessed: July 2015; Longman Business English Dictionary: Definition of austerity budget
  4. ↑ to the narrower definition of the term: Austerity in the Gabler-Wirtschaftslexikon
  5. ↑ Broder Carstensen, continued by Ulrich Busse: Anglicisms Dictionary: The Influence of English on German Vocabulary after 1945 , Volume 1, Walter de Gruyter, Berlin a. a. 1993, Nachdr. 2001, pp. 65-66
  6. ↑ Unity in Diversity: How Europe can continue. In: Ökonomenstimme.org. Retrieved on September 13, 2016 (four of the five current "economic modes", ie members of the Expert Council for the assessment of macroeconomic development, last paragraph).
  7. ^ Discussion of the time on austerity policy with contributions by Stefan Homburg , Sebastian Dullien , Martin Höpner , Klaus Schrader and Ronald Schettkat in Wirtschaftsdienst (2015) Vol. 95 (4), pp. 231–248
  8. ^ Paul Krugman: Paul Krugman: Death of a Fairy Tale In: Economists view, online April 27, 2012, accessed July 2, 2015
  9. ^ Paul Krugman: The Pain Caucus . In The New York Times , May 30, 2010
  10. ^ New York Times, Paul Krugman , The Awesome Gratuitousness of the Greek Crisis
  11. ↑ Heiner Flassbeck : Thomas Mayer on austerity in a world without profits. :
    “The loss of demand is not offset by an increasing supply of capital that could lead to falling interest rates. - Why? - Because one’s attempts to save reduce the income of others. If private households and the state try to save, then profits fall first, i.e. H. corporate income. If they stick to their previous investment plans (which is unlikely when the workload falls), they can now only raise part of the capital required from the profit - the company's internal capital supply has decreased. So you would have to ask the banks for more capital for the same investment activity as in the case without additional savings. What the savers have saved and brought to the bank consequently meets a higher demand for capital. The effect on interest is zero: it cannot decrease and therefore investments do not increase. Consequently, there is no automatic demand substitute for the lower consumer demand. "
  12. ↑ Michael Frenkel, Klaus Dieter John: National Economic Accounts , 7th edition, Munich 2011 (especially pp. 23–31)
  13. ↑ Wolfgang Streeck, Jens Beckert: The fiscal crisis and the unity of Europe . In: Federal Agency for Civic Education online January 17, 2012, accessed on February 16, 2013
  14. ↑ Artur P. Schmidt: Austerity is the opposite of solidarity . In Telepolis , January 2, 2013, accessed February 16, 2013
  15. ↑ Andreas Uhlig: Slow emergence from a dream world . In NZZ , online October 1, 2012, accessed on February 16, 2013
  16. ↑ Claus Offe: Europe in the trap . In sheets for German and international politics . online January 2013, accessed February 16, 2013
  17. ^ Fiscal Adjustment in IMF-Supported Programs. (PDF; 536 kB) International Monetary Fund, 2003
  18. ^ Hans Gestrich: New credit policy. Stuttgart and Berlin 1936. ( PDF ; 652.3 kB) p. 90
  19. ↑ On the way to the third haircut - capital.de
  20. ↑ World Economic Outlook 2012. Coping with High Debt and Sluggish Growth (PDF; 10.5 MB), International Monetary Fund, accessed on March 29, 2013 (English)
  21. ↑ Wolfgang Münchau: The great multiplication table . In Spiegel Online , October 31, 2012, accessed on March 29, 2013
  22. ↑ Austerity policy in the euro zone: A shot in the own knee . In: Makronom . November 8, 2016 ( makronom.de [accessed November 8, 2016]).
  23. ^ Wilhelm Lautenbach: Problems of excess liquidity . Berlin 1936, p. 7: “If the state suddenly withdrew as a client on a very large scale, this would cause embarrassing shock effects; only to the extent that the private sector replaces him as an investor can he withdraw without causing the risk of setbacks. "
  24. ^ Paul Krugman: I Guess It's a Form of Flattery , March 8, 2013
  25. ^ Center for Economic Policy Research , Daniel Gros, Austerity is unavoidable after a bout of profligacy
  26. ↑ Jeffrey Sachs: Professor Krugman and Crude Keynesianism , March 9, 2013
  27. ↑ Jeffrey Sachs: Paul Krugman has got it wrong on austerity. In: The Guardian. January 6, 2015, accessed October 27, 2019 .
  28. ↑ Jeffrey Sachs: Paul Krugman and Obama's Upswing , Project Syndicate Jan. 5, 2015
  29. ^ Paul Krugman: The Record of Austerity , January 6, 2015; see. also Paul Krugman in Conversation with Jeffrey Sachs , May 2015
  30. ^ Bill Mitchell: Sachs v Krugman - No contest, Krugman wins , January 7, 2015
  31. ^ Paul Krugman : That '30s Feeling . In The New York Times , June 17, 2010
  32. ^ Albrecht Ritschl: Germany's crisis and economic situation 1924–1934. Akademieverlag, Oldenbourg 2002, p. 201. ISBN 3-05-003650-8
  33. ^ Review of the book by Albrecht Ritschl
  34. ↑ "... one would think that ... 'austerity' was a dubious Teutonic gift to the world" - Vol. 416, No. 8947, p. 24
  35. ^ Debate social policy in Europe: Hartz IV now for everyone. In: taz.de. July 23, 2012, accessed October 27, 2019 .
  36. ↑ a b Klaus Schrader, Claus-Friedrich Laaser, Never found the connection: The causes of the Greek tragedy in Wirtschaftsdienst 2010, pp. 541-543, accessed May 21, 2019
  37. ↑ Causes of the crisis in Greece, Chapter: The road to the debt state p.1. Retrieved September 12, 2016 .
  38. ^ Project Syndicate, Daniel Gros, The Greek Austerity Myth
  39. ↑ CESifo, 2010: Hans-Werner Sinn on the dangers of a real devaluation in the crisis countries ( Memento of July 8, 2015 in the Internet Archive ): “Yes, but then it has to reduce its current account deficit. There are only two ways to do this. One is a depression and a drop in wages and prices that would bring the country to the brink of civil war. The second way is an exit from the euro with a devaluation. "
  40. ^ New York Times, Paul Krugman , Greece Over the Brink
  41. ^ Project Syndicate, Ricardo Hausmann , Austerity Is Not Greece's Problem
  42. ^ Forbes, Paul R. Gregory , Note to Krugman: Greece Proves Keynesian Economics Wrong
  43. ^ Project Syndicate, Daniel Gros, Why Greece is Different
  44. ^ New York Times, Aristos Doxiadis, What Greece Needs
  45. ^ Project Syndicate, Kenneth Rogoff , Why the Greek Bailout Failed
  46. ↑ Forbes, Tim Worstal, The Reason Austerity In Greece Didn't Work , “The answer, it appears, is that the underlying structure of the Greek economy is such that it just couldn't take advantage of the meager benefits that austerity did provide . "
  47. ^ Project Syndicate, Ricardo Hausmann , Austerity Is Not Greece's Problem
  48. ^ Project Syndicate, Michael Heise, Ireland's Lessons for Greece
  49. ↑ Structural Reforms : Between Demonization and Glorification. September 6, 2016, accessed September 7, 2016 .
  50. ^ IMF Survey: Structural Reforms in Advanced Economies: Pressing Ahead and Doing them Right. In: www.imf.org. Retrieved September 7, 2016 .
  51. ^ Center for Economic Policy Research , Kenneth S. Rogoff and Jeremy Bulow, The modern Greek tragedy
  52. ^ New York Times, Aristos Doxiadis, What Greece Needs , “If so, it matters little what they manage to negotiate on debt and fiscal deficits. Unless Greece can export more, the country will fail to grow in the anti-austerity phase of this crisis, just as it failed under austerity. "
  53. ^ Project Syndicate, Michael Spence , Clarity about Austerity
  54. ↑ Friedrich Kirchner: Dictionary of basic philosophical terms . 5th edition, edit. by Carl Michaëlis. Verlag der Dürr'schen Buchhandlung, Leipzig 1907, p. 79
  55. ↑ Friedrich Kirchner: Dictionary of Basic Philosophical Terms . (Philosophical Library, 24), 2nd edition, Georg Weiss Verlag, Heidelberg 1890, p. 46
  56. ↑ Adolf Reinle: The art of the renaissance, baroque and classicism . (Art history of Switzerland, Volume III), Huber Verlag, Frauenfeld 1956, p. 36, cf. P. 25