25 September 2017
Gary Wright

Gary Wright

Gary Wright - BISS Research

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Austerity alternative?

09 May 2012  |  1934 views  |  0

The last few years have seen Governments introducing austerity measures as the solution to the gigantic sovereign debts, which have accumulated over decades. Of course it’s not just Government debt but also the mass personal debt that society has undertaken as a result of Government strategies to grow economies. The sensible, will view the obvious solution as to reign in expenditure to try and rebalance income against costs, but in Greece and now France the population appear to have dispensed with the sensible and governments must look for alternatives to austerity to rebuild their economies. How realistic is this view and in these unprecedented times does an alternative have a better chance of success?

Let’s start by assuming Governments could go for growth, effectively printing more money and putting it into massive infrastructure projects; a bit like the Hoover Dam project in the USA, in the 1930s. What would be the immediate and long term affects?

Short term there would be an initial benefit, with more employment and an on-going benefit in the economy as the money peculates throughout society. This could be a kick-start providing the projects were large enough and long enough to provide sustainable economic returns. So building dams and the like would be good but projects of ten years plus would be needed to have much chance of a long term impact. The feel good factor in society would increase and this would certainly attract politicians who are always motivated by votes.

Long term, the problem could be inflation and that could lead to a 1970 style crisis as pensions and savings values are eroded; probably not a good idea with ‘baby boomers’ nearing pensionable age.

If a global spend programme undertaken by all Governments was instigated would that change the economic dynamic and reset the barometer? Arguably such a global spend programme would effectively reset the economic benchmark. Idea being, if all countries were in the same boat, would any drown?

It’s an interesting thought!

What’s certain is that austerity weariness could lead Governments towards radical solutions that are actually in conflict with what would normally be sensible. So rather than have a global economic austerity programme, which looks like it is not working, or at least is not working fast enough,  take a chance on  something else, like the gamblers last throw of the dice. What would you do?

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job title Analyst
location London
member since 2007
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CEO of B.I.S.S. Research, founder of the BISS Independent Accreditation for all systems and services provided to financial services companies internationally. Guest Lecturer at Reading University and...

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