If you have been following the news, you will know that Spain’s unemployment rate has exploded to 25%. You may even be more concerned about the fact that people with Master’s degrees are unemployed. But this is not a new situation. Since the economic crisis of 2008 the European Union has struggled to keep its economic union intact. Ireland, Greece, Portugal, Spain, and Italy are the countries that have been most affected.
Government deficits are another problem. According to the BBC, the General government net lending or net borrowing as a percentage of GDP for the Euro zone in 2011 was of 13.1 in Ireland, 8.5 in Spain and 9.1 in Greece. ere are enormous amounts of information, statistics, and graphs trying to explain the causes and consequences of the economic crisis.
“Technocrats” are seen in the news explaining the economic reasons behind the crisis and the need for austerity measures. We can see how every day there are information bombardments with an infinity of technical terms that only those acquainted with economic theory can really grasp. While, on the other hand, European cities have been swept with protests against these measures that are considered to further increase the harmful effects of the crisis.
Let’s stop for a minute and consider the key principles that should be the priority in deciding the future of economic policy and to a certain extent social policy. What is the role of the state or the economy and finance organizations if not to best represent and to safeguard the needs of the people? Many would argue that the situation is not a simple one and they would likely saturate you with technical terms and statistics.
Nonetheless, what is at stake here? Austerity measures, that is, cutting government spending (generally in terms of welfare), are taking place in Europe as a way of stopping deficit as a result of the increasing borrowing in order to pay off the national debts. In government’s news releases, we see how they are mostly concerned with trying to avoid the state from going bankrupt. Assuming that the government runs the state, and that the state is the sum of all members of society, the structural backbone that enables each one of us to develop within a framework for action, we can fairly argue that avoiding state bankruptcy is in the best interest of the people.
Austerity measures, which themselves have not been absolute resolutions for decreasing deficit, have their cost. By cutting government spending, generally those who depend on the welfare of the state are going to be most affected. Needless to say that in times of economic turmoil there are higher amounts of people unemployed, which means more people depending on the state welfare. Taking that into consideration, does it make sense to cut welfare in times where people need it the most? Most answers to these questions are that there is no other way to stop deficit-generating economic growth and, furthermore, creating jobs. is is a recurrent statement in Economics.
Economics is a subject that bases itself in mathematics and rationality. It also bases itself in behavioral assumptions that humans may or may not undertake. It has many methodological ambiguities within its framework of analysis. There have been new advances on more socially oriented economic policy in order to try to keep up with the negative consequences of the natural cyclical crisis of a capitalist system. The crises of 2008, like the one in 1929, demonstrate that there are certain mechanisms that are not working properly and must be looked at.
Leaving aside the theoretical discussion, what is at stake is the well-being of the people. If the only solution to safeguard the interest of the people is to cut the much needed support, then there are reasons to be suspicious.
I am a believer of human imagination and creativity. It is hardly the case that there is a single way of solving a problem as it is to having the possibility of one, and only one, economic system. It is important not to simplify the situation but if the existing solutions do not work, and have never worked, then it is time to invest in many brilliant minds around the world whom have the enthusiasm and the ability to look for more exible and feasible solutions. Let’s not forget that this economic crisis was caused by risky speculative financial activity which can be totally avoided and must be accounted for.
The economy is a human invention, and likewise it is on us to control it.