Economic Recovery: Productive Investment or Destructive Austerity?

It is an indication of failure of Structural Adjustment Programme (SAP) which is also known as globalization or Washington consensus* or neo-liberalism as nations are finally forced to work through austerity. At the beginning, the US Treasury Department, the IMF and World Bank were the major stakeholders (designers) of the SAP. ‘‘Private investment was highly encouraged for profit and the role of government was defined as a coordinator and welfare provider but now, private sector obviously as a profit maker, has done tremendous progress, whereas government is forced to apply austerity measures and finally ‘welfare state’ is being questioned.’’* .

GREECE

There are many examples of globalization, which is not working properly as it has been discontented. Latest example, Greece just refused the deal of bailout set by creditors including the IMF and the EU Central Bank through referendum. According to Professor Joseph Stiglitz ‘‘Greece’s debt restructuring in 2012 is a case in point. The country played according to the “rules” of financial markets and managed to finalize the restructuring rapidly; but the agreement was a bad one and did not help the economy recover. Three years later, Greece is in desperate need of a new restructuring’’ Now economic crisis inside Greece and mistrust between members have deepened. Greece is the outcome of roles played by international community, both what they did and what they didn’t. Indeed, Greece is a member of the EU but it seems that they have unsettled dispute. Greece has been told to accept austerity measures by slashing pension and other social benefits despite its hesitant to do so*

Of course Greece must take responsibility to protect internal interest and national economy but also international community has also no excuse to escape from the responsibility as they have been playing game from the very beginning. ‘‘If an organisation which is considered less effective to avert the problems like unemployment, austerity, illegal migrants and deficit then questions may arise such as why should members pay for those organizations? Greece, Spain, Italy and so on are desperately seeking solutions.’’ The never-ending austerity that Europe is force-feeding the Greek people is simply not working. Now Greece has loudly said no more* AUSTERITY.

UNITED KINGDOM

Another member of the EU, the UK is seeking alternative way out of financial crises. Great Britain is offering an opportunity to its citizen to express their final verdict by a referendum whether leave or remain in the European Union by 2017. Basically objective of the EU is more ‘power balance’ in line with Washington consensus when new order existed after the collapse of the USSR and West Germany rather than economic perspective.

Being a blind supporter of austerity* , the Tory government has already announced a plan of £12 billion funding cut from benefit when elected for second term. But ‘‘Council leaders across England and Wales have warned that ‘‘another round of funding cuts would devastate local services’’[1] Meanwhile on the same day of budget announcement ‘’ Hundreds of anti-austerity protesters gathered in Parliament Square in London despite the ban* and members of the trade union of underground rail worker were in the 24-hour industrial action (strike) to increase 2 percent their pay*. but Bosses of the train companies were saying ‘‘that a 2% pay rise plus lump sums of cash was a great deal, especially in the current climate.’’*

In 8th of July, 2015; The Chancellor of the UK George Osborne announced his austerity budget for this year 2015/16. According to him ‘new national living wage’ would be introduced for all workers aged over 25, starting at £7.20 an hour from April 2016 and set to reach £9 by 2020’*. On the other hand, he also announced welfare cut like- scrapping maintenance grants for university students from low-income households. Previously, kids in England and Wales from families with annual incomes less than £42,620 were eligible for non-repayable grants of up to £3,387 a year. The thing is  benefits cut start immediately, but need to wait till 2020 to be benefited from the ‘‘ national living wage’’.*

It is said that- ‘‘Thirteen million UK families will lose an average of £260 a year due to Budget changes to working-age benefits, says the Institute for Fiscal Studies (IFS).*   ‘‘Tax credit changes could hit three million families, which are likely to lose an average of 1,000 quid. People receiving tax credits would be “significantly worse off”.*  In order to make cost savings there is likely to be greater private involvement in running National Health Services (NHS).*  Labour leadership contender Jeremy Corbyn has strongly criticised “This is a Budget that is essentially an attack on the poorest

The UK’s economy is not bad even it is safer as it has its own currency to manipulate international trade, but need to careful. Only enjoying with austerity is a kind of contraction of economy, it doesn’t help in the long run. So government must be bold to get out from narrow minded thinking to find the better options outside the EU as well; otherwise it will be a wrong medicine for the chronic disease.

INVESTMENT OR AUSTERITY?

Hard-working people are against funding cuts (austerity) and even Keynesian economics believe that austerity is negative to economic growth.* . Cutting benefits push people to come out to the job market and increasing minimum wages motivate them to work. Benefit cut on education like maintenance grants or increasing tuition fees forces people to think ‘if I am happy without studying why should I go to university to bear all the loan!’ if young people are not motivated to gain higher education then the nation will have killed skilled manpower. Due to this, a country will have to be ready to accept migrants to fulfil the gap of job market; and if inflation and business goes wrong super managers will cut the jobs.

The Government wants to stop migrants having benefits but the British nationals are being victimised by losing their benefits in the name of stopping migrants. To fix this, either the EU law should be changed or UK should leave the membership. The UK has already asked to the EU authorities to reform on migration and benefit policy but unable to see the green signal. So government may thinking that staying in the EU is better than leaving. So there is no alternatives but to accept such unpopular remedies.

I think, austerity is a temporary measure to protect the national economy from the recession. Once economy improves, government can re start the welfare system. It is uncertain until and unless programmes make sure government is working through productive investment.

Government should explore the economic possibility outside the EU as well. There is still huge investment opportunities around Asia and Africa region. Shortage of housing in the UK is big problem*  , which is seeking huge investment. Jeremy Corbyn, Labour leader, has strongly criticised that the Chancellor had “done nothing” to address the housing shortage*, Heathrow expansion, Northern powerhouse (H2 rail) are ambitious plan. The coalition government (2010-15) announced an investment plan  on infrastructure but the progress is still in waiting*.  Investment opportunity on it from investors can also be offered. The UK’s economy is not bad even it is safer as it has its own currency to manipulate international trade, but need to careful. Only enjoying with austerity is a kind of contraction of economy, it doesn’t help in the long run. It is short run rescue plan. Economics always says that expenditure is definitely not a problem if earning is smoothly going on. So need to learn how to earn. Sticking with failed austerity*  is spoiling the nation even more. So government must be bold to get out from narrow minded thinking to find the better options outside the EU as well; otherwise it will be a wrong medicine for the chronic disease.

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