Austerity agenda ‘is a fraud,’ economist argues

Globe & Mail columnist argued cutting back doesn’t reduce debt

Jim Stanford’s lecture was the latest of the DFA’s Issues in Higher Education discussion series. Photo: Nikki Jamieson

According to Jim Stanford, all schools should be able to afford their own swimming pool.

Back in the 1960s and 70s, schools in Toronto had pools, which was great for teaching kids how to swim. Nowadays, that isn’t so much the case. But it wasn’t the price of water that changed.

“These pools are in the school, and the government is saying we can’t afford them,” said Stanford. “(Toronto) is probably twice as rich (compared to the 60s), twice as much Gross Domestic Product… How can you possibly say this city cannot afford to have pools in the schools?”

About 60 people attended the Dalhousie Faculty Association’s last lecture of 2014, Money, Myths and Manipulation: Debunking Austerity Economics, featuring Stanford, an economist, author and Globe & Mail columnist. His talk focused on the topic of government spending or how cutting back on spending is not necessarily the key to economic recovery. As DFA president Catrina Brown said, “I’m not an economist, but I know when I’m being manipulated by all this talk of austerity.”

For those who are not economy majors, austerity refers to the practice of government lowering spending in order to reduce budget deficits. Stanford argued that austerity is not necessary to dig a country out of debt.

According to Stanford, there are three main myths of austerity, all which are untrue:

  • We can’t afford ‘these things’ anymore
    • health care
    • education
    • pensions
  • Governments must cut (or we’ll end up like Greece)
  • We have no choice
Why it doesn’t work

“In reality, governments that that go about blindly cutting with knee jerk austerity… will end up making the problem worse,” said Stanford. “The economic foundation for austerity is a fraud. The fundamental claim that we cannot afford stuff that we used to take for granted is wrong.”

Since our capacity to work and nature’s capacity to provide resources and a place to work are the only limiting factors of production, we are currently at our highest level of possible production, Stanford argued. He said an exception was the Second World War, when practically everyone was employed due to the war effort.

The numbers in economics can be misleading. For example, the unemployment rate only refers to the unemployed and those actively seeking employment, rather then everyone who doesn’t have a job. Stanford maintained that we can afford “these things” as long as we work for them.

He said Greece ended up worse off because the country gave in to the International Monetary Fund’s demands to cut services in an attempt to decrease its debt. By cutting so much, the country decreased its GDP, which increased its debt ratio.

Finally, there are other alternatives to austerity in times of crisis, such as reinvesting in the economy, he argued. Debt isn’t always a bad thing; without it, no one would be able to afford to buy a house.

“I thought it was really interesting that he had solutions to everything,” said Kailey Fleet, a Dal student. “We can have all these jobs here, then we’ll create all this money and we can just pay off our debt.”