Paul Krugman, genius that he is, recently published some facts about Iceland’s post-crash recovery. Iceland did the opposite of austerity, BTW. They punished bankers and politicians, not the poor and middle class.
“Guess Who’s Emerging From the Crisis?
Iceland, of course. Kitchen-sinked and cleaned-up, the Icelandic central bank has just decided to push up rates by 25 basis points to combat signs of inflation amidst “robust” domestic demand.
From Statistics Iceland:
GDP is still below previous peak, but I think one could argue, much more so than in say America, that a significant part of that peak involved a Ponzi financial sector that isn’t coming back. I think I was one of the first outsiders to notice that Iceland’s heterodoxy was yielding a surprisingly not-so-terrible post-crisis outcome. And yes, the recovery is better than Estonia, and much better than Latvia.”
Of course, austerity can work too. Just look at the Irish Miracle! Conservative politicians all over pointed to Ireland as the path to follow: austerity and belt-tightening would bring back the good economies! Woops, turns out that Ireland has just been a tax haven for skanky corporations, and the Irish Miracle is bullshit:
“The remarkable success of this tax haven means that roughly 20 percent of Irish gross domestic product is actually “profit transfers” that raise little tax for Ireland and are owned by foreign companies. Since most of these profits are subject to the tax code, they are accounted for in Ireland where they are lightly taxed; they should not be counted as part of Ireland’s potential tax base. A more robust cross-country comparison would be to examine Ireland’s financial condition ignoring these transfers. This is easy to do: a nation’s gross national product excludes the profits of foreign residents. For most nations, gross national product and G.D.P. are nearly identical, but in Ireland they are not.
When we adjust Ireland’s figures accordingly, the situation is dire. The budget deficit was about 17.9 percent of G.N.P. in 2009, and based on European Commission projections (and assuming the G.N.P.-G.D.P. gap remains the same) it will be roughly 14.6 percent in 2010 and 15.1 percent in 2011, while the debt-to-G.N.P. ratio at the end of this year is expected — by our calculation — to be 97 percent, and 109 percent at the end of 2011. These numbers make Ireland look similarly troubled to Greece, with a much higher budget deficit but lower levels of public debt.”
Confronted with clear and unequivocal evidence that austerity does not work, has never worked, and only punishes the most vulnerable of a countries citizens, I’m sure politicians will start punitive actions against banks, raise taxes on the uber-wealthy and corporations, and start providing services for their people once more!
I’m also sure my flying monkeys will bring me a solid-gold fairy wand! I will finally be able to reverse global warming with a magic spell! It’s going to be so awesome!
OMG.
Selective hearing. Politicians, who are wealthy to start with and wealthier every year in office, have selective hearing.
Also, Iceland is largely atheistic. So the politicians can not throw out religious moral non-issues that distract people. I don’t direct that at people like you, my pope. I direct it at people like my neighbors who are all right now filling their yards with vote no signs because they care more about keeping this a dry county than protecting women’s rights or seeing Myth McConnell for the asshat he really is.
Economics isn’t a “hard science” though. What works in one case, in one country, at one point in time, with one population, and one history, isn’t necessarily translatable to another. Not that I’m a fan of the Washington Consensus. Just that if there’s one thing I learned in schoolz, it’s that social scientists can’t prove or predict very many things.
I also doubt people in Iceland are better off right now, because their crisis was so much worse. About 90% of the population lost their life savings.
Good point … however, the evidence that austerity sucks and doesn’t work is overwhelming, so austerity is a chump move at this point.