Question

What does "austerity" mean? What theoretical arguments lie behind its adoption as policy? What are the counter arguments? What have been the effects, here and abroad? How much policy autonomy to countries have in a global economy?

Answer 1

soln.:

Austerity is the government action during economic adversity where Government decides to cut down public expenditures or to rise the the Tax rates or both, In the current scenerio many countries adopted this policy due to global reccession.

Theoritically the arguement that support this austerity is that the policy of reducing budgetery deficit, with cutting down public expenditure and mobilise resources to the private producers yield growth for the nation. Which is the only way to come out of the situation of economic crises. This policy advocate bailout packages for the private producers to reinstate themselves and to grow to induce national economy to beat the reccession and the slowdown.

But on the contrary it is very much hard for the weeker section of the society (poor people), as sources mobilised to the bailout packages for private expenditure. this shift in funds drastically affect the commonman because any minute cut in the public expenditure put its huge impact on the welfare of the society.

In United States austerity affects the unemployment benefits so people starts protesting and its impact shown on the elections as it was an issue of debate between democrats and republican. But as United states economy is capitistic in nature by high austerity the US grew quite faster then others, but it was not able to save US from the outperformances of the OECD counteries.

Whereas when many members of Eurozone follow austerity during european debt crises their citizens suffers the most, the protests started on mass level even the United Nations warned coutries like Greece on the consequences of Second auterity package which was expected to be violent. even in france during president election The winner 'Francois Hollande' opposed the Austerity and promises the measure to nulify its impact on the economy.  

In mordern economy Global interventions are very high due to the involvement of international agreements and it is well known the policies like austerity unstablises the government which further disturb the economy and results in a domino effect over country so the Governments are having very less autonomy in taking such decisions like austerity.