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Are ruling elites losing faith in policy of spending cuts?

Major cuts for public sector services and public sector workers have become widespread in Europe and the USA.  Here's some of the "lowlights" as reported in the Report on Business of the Globe and Mail:  

  • Ireland led Europe’s major economies into the austerity arena, imposing some of the toughest belt-tightening measures on the continent. The Irish plan slashed pay for public workers by up to 30 per cent, sharply reduced the minimum wage and changed tax thresholds to include more low-income workers.
  • In Greece, the government’s latest austerity package aims to cut 150,000 public sector jobs, reduce wages by 15 per cent and increases the value-added tax charged in restaurants and bars to 23 per cent from 13 per cent. ... Under the new bailout package, Greece has promised to pursue €50-billion in privatizations...
  • In Spain, where the unemployment rate is the highest in the euro area at 21 per cent, the government is cutting pay for public sector workers by 5 per cent, freezing pensions and raising the retirement age to 67 from 65. (My emphasis -- Doug)
The cuts in social spending have also slowed the economies of Europe, leading to major declines in production in Greece and 16% unemployment.  The Globe notes:
 "As the crisis wears on, young people are among those paying the highest price. The youth jobless rate now sits at a staggering 45 per cent in Spain and 26.9 per cent in Ireland."

It has not come to this anywhere in Canada -- yet.  But the experiences in Europe will influence how ruling circles in Canada respond to our current economic issues.

But even within ruling elites there are divisions on whether the policy of public sector cuts will sink the economy or lead to its revival.   Obama has now proposed a $447 billion public sector stimulus to deal with high unemployment: quite a shift from the very recent deal with congress to reduce spending.   Even the Harper government appears to be positioning itself for a move away from cuts if the American government does the same.

Whether a new emphasis on public spending will be focused entirely on handing out cash for business, or if it might also provide direct benefit to working people is less certain.

In Europe, there has also been significant fightback by the working people whose lives have been undermined by the cuts -- ultimately, those protests may also lead to better solutions.

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