At last summer's G20 Conference, Stephen Harper worked hard to get all the participants to buy into the Austerity Myth. That myth is based upon the belief that, in Paul Krugman's words, "sound money and balanced budgets [are] the answers to all problems."
It's the same myth which 39.6% of Canadians bought in our recent federal election. Unfortunately, writes Krugman in today's New York Times, it is public policy grounded in fantasy:
Underlying this insistence have been economic fantasies, in particular belief in the confidence fairy — that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence.
Unfortunately, the confidence fairy keeps refusing to make an appearance. And a dispute over how to handle inconvenient reality threatens to make Europe the flashpoint of a new financial crisis.
Working from this theory, the European Union bailed out Greece and insisted that government spending be cut to the bone. The same model was applied to Ireland, Portugal and Britain. And what have been the results? Things have gone from bad to worse. In all cases, the private banking system was saved, while the public picked up the tab. And the public now must endure the consequences, because the so called "best and brightest" have concluded that, while pain is not good for elites, it is good for the common man.
Stephen Harper, who has always seen himself as a card carrying member of the best and brightest -- with his newly minted majority -- plans to implement the same "wisdom" here. As Krugman writes, " . . . if this seems incredibly foolish, who ever said that wisdom rules the world?"