How Well-meaning Politicians Hurt the Country’s Economy

I am not cynical enough to believe that all of our government officials are “on the take”. I like to think that the cases of corruption we hear are examples of a few bad apples spoiling the basket. I like to believe that most politicians have the best interests of the people at heart, and that if their initiative fails, failures are the result of well-intentioned ignorance and adherence to a flawed ideology, rather than a cynical machiavellianism.

Whatever the motivation behind politicians, those on the political right are unified in their ideology, an ideology that their detractors call “neoliberalism”. The overarching goal of neoliberalism is “smaller government” which means, lower taxes, less government regulation of industry and particularly,  lower spending on social programs which are seen as inherently inefficient and wasteful.

I have to admit, I’m about fed up with neoliberalism. Embedded in this ideology lies a moralization about who deserves what. There is an underlying belief that by bolstering support for the poor through special programs and welfare, we take away people’s initiative to work. The poor are seen as lazy malingerers who take advantage of the good hard-working tax payer. It’s an arrogant assumption – a cynical belief that the privileged class has a higher moral standard than the poorer class, and of course, it’s erroneous.

Reality is starkly different. The truth is that poverty and addiction form a vicious circle, and in order to empower people to “pull themselves up by their bootstraps” you have to provide them with the bootstraps. Those bootstraps are free education and free health care.

Accompanying the  moralistic stand of neoliberal purists, is the irritating fact that they’re also WRONG in their assessment of how economies work. They believe that economic growth can only be gained by reducing taxes to individuals and corporations in order to stimulate investment. To accomplish this, they cut back on the funds to public service, notably, public health care and education.

In reality, what this policy does is leave health authorities and school districts without enough revenue to provide full service. In such situations, it is the poor and middle class who lose out on service, as they can’t afford private options. Cutting these services has two net results for the economy: first, unemployment increases as the number of public sector workers shrinks; and second, costly social problems result, as there is less infrastructure available to keep small problems from developing into big problems.

In their book, The Body Economic: Why Austerity Kills, David Stuckler and Sanjay Basu discuss how austerity budgets, which have been prescribed by the International Monetary Fund for countries in financial crises, are very harmful to the people and economies of those countries. Consider their summary of the situation in Iceland after its economic collapse in 2008 due to the mortgage backed securities crisis:

Not only did the IMF underestimate austerity’s economic harms, but it overlooked the even greater damage that resulted from cutting public health. Health and education had the largest fiscal multipliers, typically greater than 3. In contrast, defense multipliers were significantly less than 1, and so were bailout packages for banks. There figures made sense, because much of the money spent on defense doesn’t actually build jobs in manufacturing and technology domestically anymore, unlike in previous years. Much of it actually leaves the economy, going to foreign contractors and to pay for non-recoverable costs like fuel for fighter jets. Nor do banker bailouts tend to stimulate the economy, as funds are more likely to end up stashed in offshore bank accounts and less likely to get reinvested into providing jobs or technology. Health and education programs, by contrast, conferred both short- and long-term economic payoffs. In the short term, these sectors were able to better absorb funding and turn it into productive work for teachers and nurses and technology firms. IN the long term, the products of investments in education and health services were smarter and healthier workforces.

The neoliberal ideology has advised policy world-wide over the past three decades. It is only recently that economists have begun debunking it, and countries have begun embracing more progressive ideals. Leaders need to start listening to more progressive voices, and not to large corporations, who are ideologically driven, and just plain wrong. For the sake of decency if nothing else, this needs to happen. It’s not acceptable that the middle class is eroding, that the poor are getting poorer. We have more wealth in the world than any other time in history. It’s about time we started to distribute that wealth.


Note: Comments must focus on issues. Any comments containing derisive tone or insulting language will be deleted. You may disagree vociferously, but you must be respectful. For example, no sarcasm is allowed.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s