The Eurozone Recession A Lesson For The United States.

 People who advocate for austerity here in the United States need to take a look at the current state of the eurozone.  Currently the United States government has been deadlocked on what to do with the nations economy.  People from the left are arguing that we spend and tax more where the right is arguing that we go ahead and begin deep cuts to bring ourselves back to a responsible deficit.  The only issue I have with the right is that by implementing a policy of just cuts will just have a downturn affect on our nation.

  First off the current state of the European Union is described in a Washington Post article in the following way “Austerity measures have inflicted severe economic pain and produced social unrest across the eurozone, where the average unemployment rate is a record 12.1 percent and higher in some places.” When the article mentions that in some places the unemployment rate is much higher they are in no way exaggerating that claim.  The unemployment rate in Spain is currently 26.7% and in Greece the unemployment rate stands at a high of 27.2 percent.

  As people rush the streets with their concerns of the nation the government continues to follow this style of economic policy.  The people of the nations with in the Euro-bloc are being affected by a policy which does not sway in the interest of the people but for the banks.  Banks have recorded record profits over the past couple of years and yet they are reluctant to begin investing into public infrastructure projects that can spur some economic growth.

  Second of all German Chancellor Angela Merkel has been very stringent in holding nations who have borrowed from the IMF, European Central Bank, and the European Union to the strong austerity measures that has held the eurozone in its longest recession in fourteen years.  As stated in a Washington Post article “The recession is not nearly as deep as the one in 2008-09, which ran for five quarters but it is now the longest in the 14 year history of the euro.”  The program that this country is so hungry to apply is damaging the chance for citizens of their respected country gain a foothold into the middle-class system.  With cuts to programs such as education and no investment to the countries infrastructure jobs will seem far from coming back.

  To add to how austerity has not affected the eurozone but also other parts of the world can be seen by looking at the American car company Ford and their profits for last month in Europe.  The Washington Post article stated the following “Last month, U.S.- based Ford Motor Co. lost $462 million in Europe and called the outlook there ‘uncertain.'”  With the gap between the Rich and the Poor growing the one important aspect that contributes to a strong economy is the purchasing power and how much of that is distributed.  

  As austerity continues banks as stated earlier are seeing record profits and the stock market is hitting record highs.  People then who have investments into the market are making a nice gain however, not a majority of Americans have stock options or 401k plans.  Even though companies are recording record profits as well and contributes to the gain in the stock market unemployment rate in the eurozone and even in the United States lay in double figures.  Austerity is not dissipating the economic problems it is continuing the sluggish growth we have seen over the years.

  As the purchasing power is only limited to a small group of people it becomes very hard for companies to sell their product.  Because if only a small group of people can have the purchasing power to drive an economy then the car will stay in park and not move.  The minority who has the purchasing power can only buy so much before running out of things to buy.  This resembles to what happened prior to the Great Depression one group had the power to buy and another group who struggle to even have something to eat before going to sleep.

 If Europe continues their plan of austerity then we will only see the unemployment rate increase and more unrest in the streets.  Once you have the people of a country protest the moves that the government is making maybe it should have those very politicians stop and seriously consider the moves that they are making.  Spending has to be a partner in economic growth without it you continue to slash jobs and contribute to an already sluggish economy.  

  However, when a country begins the planning for spending it has to be aimed at a project which can be useful not only for the short term but also for the long term.  If a country has a advanced infrastructure system in placed, companies are more inclined to invest within those advanced nations.  Revenue is an important piece to the engine which makes the government run.  With out the revenue the government can not pay its military or federal employees.  

  The eurozone should be a lesson to the members of Congress and Senate who have boosted the austerity plan that Europe has been utilizing since the collapse of Lehman Brothers.  The real unemployment rate here in the United States sits at 13% not the 7.5% the country tends to use.  If we adopt the very same European policies that have had a adverse affect in the eurozone then our unemployment rate may rise to 20% or even higher.  Fiscal responsibility can be attained if political ideology can be held outside the doors of the Capitol.  The article by the Washington Post stated the following “Instead of keeping the spending taps on – as the U.S. has largely done – the region concentrated on austerity even though able to plug the gap left by the retrenching state.”  Suggesting that the United States and its “stimulus” package has helped the United States stymie away from another recession unlike the eurozone.     

  Parts of the eurozone have begun to advocate for spending to spur economic growth and their have been hints that some European leaders may begin to follow the growing call for spending to help boost the economy.  Time can only tell what way the United States will go for our economic policy but it is important to know that straight cuts will only hinder our country and hurt any future prospect of economic growth.

 

http://articles.washingtonpost.com/2013-05-15/business/39264961_1_eurozone-recession-european-union

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