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Austerity behind the slash-and-burn policies in Europe. Really ?

par Michel Kelly-Gagnon
vendredi 31 mai 2013.

Chronique publiée le 31 mai 2013 dans plus d’une quinzaine de journaux de la chaîne canadienne Sun Media, ainsi que sur une cinquantaine de ses sites Web.


I know that many people are skeptical whenever statistics are being quoted to prove a point. As the saying goes, statistics can be made to prove anything, 50% of the time.

But when you discuss government policies, reliable data often make the difference between misleading assertions and a well-supported analysis.

One such debate is the effects of so-called "austerity" policies in Europe. Everyone seems to take for granted that austerity measures have meant drastic budget cuts, but they never mention any numbers to back this up.

Last weekend for example, a columnist in a Montreal daily wrote about the "slash-and-burn" policies adopted across Europe these past few years, which had the effect of "throwing millions out of work."

The Institut economique Molinari, based in Paris, took the trouble to check the official government statistics available on the website of Eurostat, the European equivalent of Statistics Canada. And guess what they found ?

Spending actually never ceased to increase in the European Union as a whole since the beginning of the crisis. During the past three years, which is when so-called austerity policies are supposed to have been pursued, nominal spending grew by 6.3%. Government revenues went up twice as fast, at 12.9%, thanks to numerous tax increases.

If you look at spending as a proportion of GDP, it did decline somewhat since 2009, by 1.7%. But that is still four percentage points higher than in 2007, just before the crisis started.

We hear a lot about countries where drastic budget cuts have been implemented, such as Greece and Portugal. They are indeed among the very few where expenditures actually fell. However, both in nominal terms and in proportion to GDP, the governments of these two countries spent more in 2012 than in 2007.

If that is downsizing government, then words don’t mean anything.

Reducing the speed at which you increase the size of government doesn’t mean cutting government.

Cutting some programs while you expand others even more doesn’t mean cutting government.

Announcing some modest cuts after hugely increasing budgets in previous years doesn’t mean cutting government.

Given this, it’s impossible to take seriously all those followers of Lord Keynes who call for a reversal of drastic austerity measures that are killing the economy. Check your numbers first.

What Europe is suffering from is not too much austerity. It is too much government.

Michel Kelly-Gagnon est président et directeur général de l’Institut économique de Montréal. Il signe ce texte à titre personnel.

Austerity behind the slash-and-burn policies in Europe. Really ? |Money | Toronto Sun
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