08 « May « 2012 « Quotulatiousness

May 8, 2012

Absurd meme of the month: that European countries have imposed draconian fiscal austerity

Filed under: Economics, Europe, Government, Media — Tags: Budget, Debt, EU, Newspapers, TV — Nicholas @ 11:00

For all the gasping about the impact of fiscal austerity on weakened European economies, it’s hard to detect from the actual numbers:

(Image from the Mercatus Center)

See all those coloured lines dropping precipitously? Me neither.

Veronique de Rugy asks where the “savage” spending cuts can be seen:

Austerity is destroying Europe, we are told. In fact, this “anti-austerity” slogan was a big reason for the victory of newly elected socialist François Hollande to the presidency of France. Interviewed in The Economist a few weeks ago, Hollande’s campaign director said “We are not disciples of savage spending cuts.”

But then, I look at the data and I am asking: What “savage” spending cuts?

Look at [the chart above]. It is based on Eurostat data which you can find here. Following years of large spending increases, Spain, the United Kingdom, France, and Greece — countries widely cited for adopting austerity measures — haven’t significantly reduced spending since 2008. As you can see on this chart:

These countries still spend more than pre-recession levels

France and the U.K. did not cut spending.

In Greece, and Spain, when spending was actually reduced — between 2009–2011 — the cuts have been relatively small compared to what is needed. Also, meaningful structural reforms were seldom implemented.

As for Italy, the country reduced spending between 2009 and 2010 but the data shows and uptick in spending 2011. The increase in spending represents more than the previous reduction.

In addition to failing to curb spending, several governments have raised taxes (which has a negative effect on growth in the economy and can — contrary to popular wisdom — actually reduce the total tax collected as people and companies change their habits to minimize the impact of the tax change).

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“If this drought continues much longer, we’re going to run out of umbrellas”

Filed under: Britain, Environment, Government — Tags: England, Infrastructure, Weather — Nicholas @ 10:40

Rob Lyons on the amusing juxtaposition of a “hosepipe ban” in the south of England and the wettest April since record keeping began:

It never rains but it pours scorn. That must be how many of England’s water companies feel as millions make fun of them. Having just declared a hosepipe ban and spent a fortune on posters declaring ‘WE ARE IN DROUGHT’, the heavens have opened. Result? The surreal combination of drought restrictions on water use going side-by-side with the wettest April since records began in 1910.

It is as if the declaration of drought were a latter-day raindance. Comedian Jimmy Carr quipped what everyone was thinking: ‘If this drought continues much longer, we’re going to run out of umbrellas.’ The combination of dramatic flooding in some parts of the country that are under drought restrictions caused one friend of mine to coin the term for our current water status: ‘flought’. Pictures of Thames Water’s bus adverts juxtaposed with people in the street huddling under brollies made newspaper front pages.

Yet, while the current situation is bizarre, the water companies do have a point. If the current storage sites are running low of water after two years of well-below-average rainfall, then we need to start preserving stocks. One month of heavy rain is welcome, but unless we have a particularly sodden summer and, more importantly, a damp-and-dreary winter, supplies could start to look very sparse indeed. That’s particularly true in the south and east of England, which depend on underground aquifers to store a large proportion of water supplies. The levels in these aquifers rely on winter rain to drip through the rocks above. Summer rain tends to run off, evaporate or get absorbed by growing plants. A quick look back to February and the warnings coming from Thames Water and others show how serious the problem had become before the deluge.

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Now available for download: License to Work

Filed under: Bureaucracy, Economics, Government, Liberty, USA — Tags: Criticism, Jobs, NannyState, Poverty, Regulation — Nicholas @ 10:14

The Institute for Justice has released a new study, License to Work: A National Study of Burdens from Occupational Licensing, which shows the negative effects imposed on (especially) poor and minority workers across the United States:

The report documents the license requirements for 102 low- and moderate-income occupations — such as barber, massage therapist and preschool teacher — across all 50 states and the District of Columbia. It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.

On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than a year to earn. At least one exam is required for 79 of the occupations.

Barriers like these make it harder for people to find jobs and build new businesses that create jobs, particularly minorities, those of lesser means and those with less education.

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Hayek and Keynes

Filed under: Books, Economics, History, Media — Tags: Banking, Criticism, Money, Socialism — Nicholas @ 08:32

Brian Lee Crowley recounts some of the interactions between F.A. Hayek and John Maynard Keynes in the National Post:

This year marks the 20th anniversary of the death of Friedrich August Hayek, the Viennese-born Nobel Prize-winning economist and philosopher, who led the intellectual equivalent of the D-Day charge against central planning in the postwar era. His lessons are worth remembering in 2012, especially now that left-wing politicians in France, Greece and elsewhere seem intent on forgetting them.

Hayek’s great adversary was John Maynard Keynes, whose faith in the ability of government economic planners to “correct” the operation of markets inspired generations of disciples in government and academe. In the long run, Hayek got the better of the argument with Keynes. Indeed, his ideas contributed to the fall of the Berlin Wall, and continue to influence economic thought to this day.

Hayek and Keynes were punctilious professional colleagues and scholarly rivals. Yet for all the correctness that characterized their relations — Hayek was, for example, Keynes’s guest when the London School of Economics fled the Nazi bombings to the relative safety of Cambridge — the Austrian could not shake a profound distrust of Keynes.A brilliant economist, captivating teacher, witty conversationalist and bon vivant, Keynes seemed to almost everyone who knew him a Renaissance man and one of his country’s most powerful minds. Hayek found Keynes glib and superficial, but it was Keynes’ intellectual dilettantism that most appalled him. When Keynes wrote A Treatise on Money in 1930, Hayek spent a year carefully analyzing it, and then wrote a devastating review. At their next meeting, Hayek was outraged when Keynes airily said that he now agreed with Hayek, having long since changed his mind. Hayek always regretted that this incident led him to neglect replying to Keynes’ next book. By the time Hayek was alive to the danger, it was too late.

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