In a historic vote last night, the Greek people stood up to European bullies who wanted to put them through another round of austerity measures as a price for staying in their club.
Economists such as Paul Krugman of The New York Times have repeatedly emphasized that a nation’s economy needs a stimulus to pull out of a recession, and austerity measures only work in the long run. In fact, nations such as Greece are only making matters worse by enacting austerity as the economy shrinks faster than the additional taxes or cuts in spending imposed.
So the only thing gained by austerity in the short term is the infliction of pain on the population at large.
It’s worth noting that macro-economics is totally different from sitting down in your kitchen to balance your household budget. Economic activity carries a multiplicative effect when spending stimulates the business world, and the resulting increase in revenue and dynamism holds no parallel to the kitchen table analogy.
In other words, macro-economic theory predicts that austerity is exactly the wrong thing to do. As if we need more proof at this point, President Herbert Hoover attempted to heal the U.S. economy through austerity. And we all know how that turned out.