Four years after the worst economic crisis since the Great Depression, the world economy is still stagnating and we have two plans of action to choose from to get us out of this crisis; austerity or growth. The contention of those in favour of austerity is that nations have been spending too much in recent years (or decades) and this spending must be stopped and cut back. This means cuts in social programs and a period of general hardship, but this all necessary in order to undo the consequences of a previous period of excess and it simply must be endured. A program of growth, on the other hand, focuses on government spending in order to invest in national economies and spur economic growth. Proponents of this path argue that a path of austerity would, in fact, harm the world economy by taking huge amounts of money out of it.
The election of Hollande has brought these two paths head to head with each other. Until now, Angela Merkel and Nicolas Sarkozy, as leaders of the two most powerful nations in the Eurozone, have been imposing a path of austerity on the rest of Europe. Last Sunday, Merkozy was broken up, and, while Hollande’s economic agenda isn’t as clear as Sarkozy’s, what is clear, is that he rejects the path of austerity and will be advancing one that is growth oriented. Merkel remains dedicated to austerity, and her position, as the leader of Germany, remains strong, though significantly weakened without France behind her, and this will be important if there is a clash with the Greek government.
The question of austerity or growth, and the election of governments that favour growth, isn’t just a matter of differing opinions on ecomic policy. The attitude behind austerity was that democracy had gotten out of hand, people had insisted on so many public services that countries had to take on massive amounts of debt that they would never be able to pay back, and now sensible, pragmatically minded people had to step in and put things right again. Greece became the poster boy of democracy run-amok with massive corruption, tax evasion, and retired grandmothers receiving more pension than they were owed. From its introduction, austerity has meant policies created by elites that disproportionately harm the middle and lower classes, enacted with the sense of paying a penance after an era of gluttony.
The election of Hollande in France and Syriza in Greece signal that the people are beginning to assert themselves against uncaring technocrats and indifferent elites. Simply being opposed to austerity enabled a neo-Nazi party to gain seats in the Greek parliament. And some people who voted for the far right Le Pen in the French election in April, voted for the socialist candidate, François Hollande, in the run-off.
Austerity has held a monopoly on the economic discussion in Europe for the last two years and the elections last weekend have just thrown the choice of which path the continent will follow up in the air.