The UK and USA make for interesting case studies in their differing responses to the global recession. Cameron’s Conservative government opted for austerity – huge cuts to the public sector. Based on the (loony) theory of “expansionary austerity” this was supposed to lift the economy (via a visit from the mythical confidence fairy). Obama’s administration opted for a stimulus package. Based on sound Keynesian economics this “counter cyclical” spending by the government provides input to the economy when it is needed.
The outcomes in the USA have certainly not been everything that Obama might have hoped for, but even so, guess which approach works best:
(Credit: NYT Syndicate. Sourced from here).
Kind of a pity, don’t you think, that Key and the Nat’s decided, in their “wisdom”, to follow the UK on the “expansionary austerity” path? The NZ economy will eventually pick up again of course. But when it does it will be in spite of what this government has done, not because of it…