Austerity ≠ Progress

I agree with Republicans. I agree that the United States should not let itself become the next Greece.

Hence, I agree that we should not indiscriminately slash government spending on the unfounded assumption that austerity fuels prosperity.

Critics argue that there cannot be economic growth without fiscal austerity. Really? Where in fact is this true? Is this true in the United Kingdom? To your right, you will see a graph of GDP growth in the United Kingdom over the last four years. Notice the dip in GDP growth in the 3rd quarter of 2010 following the implementation of Chancellor of the Exchequer, George Osborne’s austerity measures. The UK treasury downgraded its economic outlook for 2011 from 1.7% to 1.5%. Does this smell like prosperity? I think not.

In pre-election debates last year, Gordon Brown lashed out at David Cameron and the Tories for threatening to sink the UK economy back into recession. The now defunct Labour leader's cries were loosely headed by the "sweeping" victories of the Conservative Party in parliamentary elections last spring. What has become of the economic policies of the Conservative - Liberal Democrat coalition?


Inflation rose to 4.4% at the end of 2010. There will be ever increasing demands by proponents of of tight monetary policy to increase interest rates to prevent an inflationary spiral. Unsurprisingly, austerity is not fueling growth. Rising inflation will force the government to raise the interest rates, thereby, increasing the costs of borrowing, which would in turn diminish demand and further sink the economy as the private sector lags to fill the gap left by diminished government spending.

Let us now venture across the pond. Republicans would have you believe that austerity is the only option. Without austerity, they argue, the bond markets would make the financing of the United States government impossible. Further, Republicans highlight that without austerity there cannot be any increase in business investment in the economy. If the government were to make broad-based and deep cuts to spending and investment, the private sector would fill the gap to re-stimulate the economy and lead us on the road to economic recovery.


After the IMF and EU-led bailout of the Greek economy and the implementation of austerity measures and budget cuts, did the Greek economy rebound into the heights of Aristotelean Athens? The GDP figures for the past six quarters sure aren't supportive of this argument.

This, however, is not something new we seen from the Republican party and the ideological right in the United States. Austerity breeds prosperity is just another in long line of empirically unsupported arguments coming out of the Right Wing. And there are many: Alan Greenspan, et al. - financial de-regulation leads to economic growth. The Laffer Curve - lowering taxes increases government revenues. The Neo-Conservatives - overthrowing Sadaam Hussein is necessary to win the Global War on Terror. As Paul Krugman reiterates, let us not fall for this new "ignorance wrapped in a fallacy."

Republicans have told us time and time again that without austerity, the bond market "hawks" that forced borrowing rates to go up across Southern Europe and Ireland will swoop the shores of the United States. These hawks are nowhere to be seen. Interest rates remain at historic lows. Core inflation in February rose slightly to 1.1%. These bond vigilantes have yet to take on US Treasury Bills as their next victim. But, as Republicans would argue, the threat alone is sufficient to shore up defenses. We cannot fall prey to the bond vigilantes and we must appease their advisers, Moody, Fitch and S&P.


I, for one, am thoroughly unimpressed by the arguments for fiscal restraint. Surely, I, along with those who see the negative, immediate effects of austerity, are not calling for an opening of the flood gates of government spending. Simply, we are stating that it is unnecessary to so adamantly seek the retraction of government spending during a recession of such magnitude as this one. I urge policymakers and the American public to look towards Greece and the United Kingdom as examples, not of fiscal restraint, but the Hooverville consequences of slash and burn government spending.

Sometimes nothing can be a real cool hand

In the debate over how to respond to Colonel Muammar al-Qaddafi's retrenchment of power against rebel forces in Libya, US foreign policy decision-makers should apply the spirit of Paul Newman's words concerning poker in Cool Hand Luke, "Sometimes nothing can be a real cool hand."

The United Kingdom, France, the Arab League and Senators John McCain and John Kerry have all called for the creation of a No Fly Zone (NFZ) over Libya. The diversity of humanitarian deterrence proponents should not be a basis for the justification of the creation of a NFZ.

The only certainty in Libya is the apparent uncertainty of the turmoil.

We do not know who controls the Libyan rebel movement, beyond the confines of the National Transitional Council. Provisional councils have been established, but it would be shortsighted to assume control or influence of any one group, tribe or political affiliation over the rebel movement. 

Neither are we entirely sure of the motivations of all those involved in these movements. Are their grievances economic, social, religious or political? Or, are individuals taking advantage of a power vacuum, or perceived power vacuum in Libyan politics? It is difficult to judge the motivations of those who defected from Qaddafi's military so quickly. Could they re-align with the regime if the rebel movement proves unsuccessful?

Then, there is the growing realization that the struggle between the Qaddafi regime, the pro-Qaddafi forces and African mercenaries on the one hand and the Free Libya rebel movement, the National Transitional Council and Qaddafi defectors on the other hand is defined on regional, territorial and tribal lines. These geographical and familiar delineations put pressures on the foundations of advocates of “humanitarian intervention.” Effectively, the United States and the International Community would no longer be defending helpless Libyan civilians, but picking sides in a Civil War.

In fact, Libya today resembles more Colonial Libya than the modern state of Libya. Essentially, the country is starting to split, if it hasn’t already, between Benghazi and Tripoli. Benghazi was previously the capital of Cyrenaica, an Italian colonial administration that spanned the eastern part of modern-day Libya. Tripoli was the capital of the Italian Tripolitania. These administrations remained separate until merged together with Fezzan to form what we know today as Libya. 

This deconstruction of the arbitrary Italian 1934 borders by the National Transitional Council poses questions not only to the system of boundaries with which we operate in the Middle East today, but attachment of the United States and other Western allies have to these nominal borders.

The paradox then is whether to solve problems in part created by the Italian colonization in Libya (empowering and preferring Benghazi vis-a-vis Tripoli) with further “colonization.” In other words, does the United States solve the Libyan crisis with NFZ’s, Special Op’s and targeted strikes? Does the United States follow the Italian example and empower one side of the country over another? Or, does the United States follow in Paul Newman’s example and play the only “real cool hand” they have (and do "nothing")?

Doing nothing, in this sense, does not have to be doing nothing in the strictest definition of the action. Doing nothing can certainly involve moving against Qaddafi's assets and isolating him internationally. Both actions are strong measures, which invariably cost the United States very little.

The complexity of the situation in Libya is compounded by the obscurity of American Foreign Policy towards the Middle East following the ouster of President Ben Ali from Tunisia earlier this year. The inability to either commit to regional autocrats or support regime change outright has left the United States without the tactical credibility to be taken seriously by regional and international powers. When President Barack Obama calls Qaddafi to “leave immediately,” but does not implement a program to provide aid for his ouster, Qaddafi feels emboldened to stay.

Thus, while the United States moves to find long-term responses to the Arab Spring, let us not be tempted to give answers to questions we don't know all the facts about. The United States has been dealt a difficult situation in Libya: a tenuous rebel alliance, with a poor central command structure and differing incentives. With this "hand," it may be difficult to justify going all-in (military intervention, i.e. Afghanistan) or raising the bet knowing the cards at hand (NFZ, i.e. Iraq 1991), but doing nothing, although unattractive in the press, provides the most measured response and in this case can be a "real cool hand."