Europe has been lauded for its commitment to austerity measures as a means of restoring its economies. But a quick look at the state of those economies reaffirms what any economist should already have known, writes Paul Krugman in the New York Times: The effort is backfiring. Krugman explains that by one key measure of economic health—"changes in real GDP since the recession began"—Britain is in worse shape now, four years after the start of the recession, than it was four years into the Great Depression. Italy is in a similar state, and Spain is poised for a double-dip recession.
The culprit: the idea that to spur economic growth, government spending should be slashed, rather than increased. International Monetary Fund researchers warned against the idea, but it took hold because it gelled with supporters' "ideological agendas." Now we're seeing disastrous results. The worst part: "Half a century ago, any economist could have told you that austerity in the face of depression was a very bad idea. But policy makers, pundits, and many economists decided, largely for political reasons, to forget what they used to know," Krugman writes. "And millions of workers are paying the price for their willful amnesia."