If your friends all jumped off a bridge would you follow? What if you saw the big, messy, splat on the rocks that the first to take the leap made. Looks like, according to the New York Times, that austerity measures have cratered the Irish economy.
Quoting from the most relevant parts of the article.
As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
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Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Currently the world financial system is in the hands of the economic equivalent of the folks standing on a street corner proclaiming that the "end is near." 2008 saw the rise of a new group of "experts" who predicted the financial crash. 2010 confirmed these "experts" enthronement with the Greek debt crisis. What is being overlooked is that these experts have predicted that the financial sky was falling every single year for a decade or more. By in large the group of fund managers urging austerity run ultra paranoid funds that, in more normal times, are used to hedge against worst case scenarios.
The problem with taking the advice of such managers is best explained by analogy. Say there's a guy on the street corner that says a meteor is headed for earth. Astronomy tells us that, eventually, the earth will be hit by a big rock from space. Lets say this happens tomorrow. Now lets pretend that same street corner preacher starts saying that the sun will fall out of the sky if we don't start making sacrifices to the cheese god. That paranoia (rock falling) intersected with the an event (rock falling from the sky) does not mean that the paranoid had some form of deep insight. Or to put it a bit more bluntly: if you predict a recession every single year, eventually a recession will happen.
What the Irish experience should be showing us in big, blinking, letters is that austerity doesn't work. If you cut public spending in a recession you get EXACTLY the effect that you would expect from cutting spending in a recession. Lets stop lining up to make sacrifices to the austerity cheese god, and look at ways to get out of the current crises. I believe Arthur M. Schlesinger, Jr. has a couple books that might be relevant...