Extreme austerity to cause 'lost decade'
EXTREME AUSTERITY measures being implemented here would cause a “lost decade” marked by economic stagnation with “tragic” human consequences, one of the world’s foremost authorities on global finance has warned.
Prof Stephany Griffith-Jones, financial markets director at the Initiative for Policy Dialogue in Columbia University, New York, was addressing the TASC autumn conference in Dublin yesterday.
Tasc, an equality and economic think-tank, is hosting a conference which continues today entitled From Debt to Recovery.
Prof Griffith-Jones, who has advised Brazilian, Chilean and Czech governments through financial crises of the 1980s and 1990s, said “the overall response being imposed on European governments is wrong. My experience with developing countries in the ’80s, where they had borrowed too much, liberalised their financial sectors too much, is that their crises were made significantly worse as the rescue package was the same every time – extreme austerity. People forget completely about growth.
“Of course there is a need to reduce excessive borrowing, but you have to move to a virtuous circle. There needs to be consumer demand. You have to cut spending gradually while investing in public infrastructure.”
She suggested the Government make use of one of the nationalised banks, “like Allied Irish Bank” to act as main lender to SMEs. “It’s your bank. You own it. You should be using it to invest in enterprise, in the green economy.
“I have seen the impact of extreme austerity, where growth is crushed, spending slows and stops, and people have a lost decade, where a generation is lost to unemployment or leaves the country. These policies are not without human consequence.”
Prof Jeff Madrick, former economics columnist with the New York Times, spoke on efforts to regulate the financial establishment in Wall Street, particularly the Dodd-Frank Wall Street Reform Act, passed into law in July 2010.
Praising the Occupy Wall Street protest in New York, he was “proud to say” 57 per cent of Americans back the protesters.
Director of Tasc Dr Nat O’Connor said austerity could work “mathematically”. “But at what cost for individuals, for communities and for the economy?”