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In a recent article, Zakaria concedes over the overwhelming evidence, that austerity has made Europe's economy worse off.

From a double dip recession in the UK to full blown depression in Spain, the evidence is that "you see government workers who have been fired tend to buy fewer goods and services, for example -– and all this means falling tax receipts and thus even bigger deficits."

But the problem, as he sees it is that "governments spend in bad times and then spend more in good times" because "politicians have gotten elected over the last four decades in the West by promising voters more benefits, more pensions and more health care."

Thus the answer, to borrow a phrase from Paul Krugman, is to "bleed the patient" even if it doesn't work in the first place, reduce the benefits or reduce democracy. But is this even accurate?

First of all, the Eurozone crisis is not because of overspending due to democracy, as Paul Krugman has pointed out, all the struggling GIPSI countries, (Greece, Ireland, Portugal, Spain, and Italy) all had combined surpluses prior to the recession and it was massive Bank loans generating bubbles that left the countries devastated. As Krugman points out "Don’t think runaway politicians; think German Landesbanken lending money to Spanish cajas, fueling a real estate bubble"

Debt to GDP of Greece, Ireland, Portugal, Spain, and Italy
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Indeed, even if the European people demanded more benefits over the years, the actual evidence doesn't show it. However, it would be hard to prove that the people voted for banks to make massive loans in order to spur bubbles.

And as can be seen, austerity simply doesn't work.

Image and video hosting by TinyPic

So why is Zakaria claiming that it was reckless spending even though the evidence shows that spending went down when times were good? Either hes spent too much time with Germans who wholeheartedly believe it, or he dislikes democracy which can be an impediment to economic growth.  

Note: both charts created by Paul Krugman.  

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Comment Preferences

  •  He's so arrogant (4+ / 0-)

    I can stomach looney tune wingnuts more than these over educated elitists who figure the masses have been getting more than they deserve.  

  •  Regarding spending ... (2+ / 0-)
    Recommended by:
    pollwatcher, johnny wurster

    Krugman's chart shows debt-to-gdp but that is not the same as spending. Is there any validity to Zakaria's claim that the GIPSI's spending was increasing unsustainably prior to the Debacle of 2008?

    Congress shall make no law abridging the right of the people peaceably to assemble.

    by edg on Fri May 11, 2012 at 03:18:58 PM PDT

  •  Way too simplistic (5+ / 0-)
    Recommended by:
    FG, nextstep, Catte Nappe, erush1345, HeyMikey

    Are you really claiming that....

    it was massive Bank loans generating bubbles that left the countries devastated.

    that did in Greece?  You would be the first to claim that one.

    The Greek government borrowed too heavily, the Spanish real estate bubble killed the Spanish banks,  Ireland screwed itself when it guaranteed the debt of its banks,  Italy has no growth and a real problem with the timing of its refinancing.

    One size does not fit all in this situation.

    •  My bad, here's a caveat (0+ / 0-)

      Every country except Greece. But notice Greece's fiscal situation did not affect the trend of the 5 others, most of which have bigger economies.

      The fact is, even if Greece was running surpluses the loans and bubbles would have created debt just as it did in the US.

      And predictably, all the elite "centrists" would be talking about how it's because of lack of fiscal discipline. Notice in the article he never once used the word "Greece" he was talking about Europe as a whole.  

      •  ...and Italy.. (0+ / 0-)

        Not a bank problem I said, debt levels are high, but not unsustainable if you have a reasonable refinance schedule and some growth...they got nada.   And Ireland only became a problem when the government stupidly decided to cover the bank debt.

        •  I'm pretty sure Italy was fine (0+ / 0-)

          in terms of debt prior to the crisis. As far as I can tell the only country that actually was irresponsible was Greece and like I said that wasn't mentioned in the article.

          Even still, Ireland could not have said to have a spending problem given it's actual record of debt.

  •  Actually, democracy WAS part of the (5+ / 0-)
    Recommended by:
    charliehall2, JackND, downsouth, wsexson, mickT

    problem in Europe, but not the way Zakaria thinks...the current clusterf&*@ arose as a result of Europe going ahead with currency union but then (because of voter rejections) holding off on fiscal union, so that there was a single European currency without the central authority over national economies needed to keep things on an even keel. Countries such as Sweden that have generous social safety nets have fared better thanks to being outside the currency union.

    As for Zakaria, he is simply listening to and repeating the Conventional Wisdom of the investor class--the clowns who created the financial crisis. Unfortunately this class is not constrained by national boundaries, while working people are...the real power is beyond the reach of democracy ("the markets")

    "All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out." --I.F. Stone

    by Alice in Florida on Fri May 11, 2012 at 03:35:34 PM PDT

  •  It is a mix (3+ / 0-)
    Recommended by:
    killjoy, erush1345, HeyMikey

    Look, Greece was irresponsible with its fiscal policies and has been for many years. It lied about its fiscal situation to get into the Euro Zone; everyone knew about it, and they were let in anyway. Ireland deliberately created a bubble out of nothing. They are both paying the price today.

    But there is really nothing fundamentally wrong with Italy or France. Those countries can easily handle their level of public spending and public debt.  And Spain and Portugal just aren't as wealthy as the rest of western Europe.

  •  Concentration of wealth is the enemy (0+ / 0-)

    It doesn't matter what form the people's government takes if all of the wealth is concentrated in a small number of corporations and individuals.

    Democracy is neither the problem nor the solution.

    There was a time when it appeared that democracy worked better than other forms of government, but pervasive corruption has rendered any such advantage moot.

    Show me an economy where the largest percentage of the population is doing well and over time is not a net exporter (no country can survive as a net importer in the long haul), and I will show you the model that other countries should follow.

    The minions of wealth concentration are greed and corruption and everyone of us owns a piece of this spawn of Satan.

    We don't need to look to Europe, we need look no farther than the nearest Walmart and the people who shop there.

    Cheaper is not better when the long term result is destroying every small retailer in sight.

    We don't need to look to the Landesbank when we have Bain Capital and Goldman Sachs sucking the wealth created by others labor out of everything they touch.

    Fareed got this one wrong, but not because he blamed democracy, but because he didn't blame wealth concentration, greed and corruption.

    Those who can make you believe absurdities can make you commit atrocities. Voltaire

    by leftover on Fri May 11, 2012 at 03:50:57 PM PDT

  •  Democracy ca 2012 is owned by banksters not people (0+ / 0-)

    Most everyone with the luxury of having a voice in the MSM has a cultural tie to the media,  Zakaria included.  

    As much as he seems intelligent and honest,  do we expect him to be a populist too, who willingly touts the rights of the average citizens of the world to control their destiny and hear totally candid truth from the media?    

    There are three major enemies to free society in our world.   A media that is totally controlled by elite friends of banksters, and governments that are controlled by global corporations,  and global banksters who control politicians.  

    End the money in politics and every lobby of special interests and we might get our government back.

    The enemies of a fair and equitable society are the banksters,  the new world order that wants countries without borders or sovereignty and laws,  and a world run totally by the mega rich and their 1st and 2nd and 3rrd cousins.  

    Victims of bigotry are the poorest, least influential members of society.......never the wealthiest, most educated, most overrepresented in high levels, and most influential. Bigotry hurts the least influential. To claim or say otherwise is absurd.

    by dailykozzer on Fri May 11, 2012 at 04:03:20 PM PDT

  •  Spending stayed constant, GDP went down. (1+ / 0-)
    Recommended by:

    So of course debt increased as a % of GDP.

    (link for spending:

  •  Austerity is doing two things (2+ / 0-)
    Recommended by:
    Catte Nappe, HeyMikey

    which Leftists have been unable to do.  Which is (a) cutting down low level (but widespread) culture(s) of corruption in these countries, simply because no one has the money to pay extra for services that are legally obligated anymore.   And (b) slowly but definitely killing off the culturally conservative center Right parties that enable, or are the established channels of, the cultures of corruption and sustained institutionalized economic inefficiency and obstructions to economic development in these countries.

    I don't dispute that austerity is awful.  But you don't bail out companies without a significant change in management and business strategy.  Likewise the EU would be foolish to sustain governments that willingly got these countries in trouble in the first place.

  •  I think you mischaracterize (2+ / 0-)
    Recommended by:
    erush1345, HeyMikey

    He is describing as much, or more, than he is prescribing. He is explaining the diverse views.  This appears to be the nub of his messaget:

    Many Germans and northern Europeans I have talked to do seem to understand that, economically, the smart thing to do might be to spend now and to cut later. But many in Europe, especially in Germany, believe that later will never come.

    from a bright young conservative: “I’m watching my first GOP debate…and WE SOUND LIKE CRAZY PEOPLE!!!!”

    by Catte Nappe on Fri May 11, 2012 at 05:19:56 PM PDT

  •  FZ (0+ / 0-)

    was also enthusiastically supporting the Iraq war when it started.

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