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In his latest New York Times column, Professor Paul Krugman points out that, despite the fact that fiscal-constraining, austerity-minded policies in Europe have yielded no positive results, governments in Europe will not change direction and spend more for fear of soaring borrowing costs. Krugman dismisses this fear, citing Japan as an example.
Check out his article here
I think part of the reason why governments in Europe are unwilling to shift their economic mentality has to do with a cultural characteristic that our modern society share, that being our need to see immediate returns for our investments and efforts.
We live in a culture where most things are attributed with immediate responses. Everything needs to be faster and faster; from text messaging, internet downloading, to boiling water, we expect things onto which we divulge money or energy or time to pay dividends right away.
A relevant example would be President Obama’s recovery act, commonly known as the stimulus. Many people were expecting the stimulus to spur job growth and lower unemployment right away, as if the act was a magic pill that could turn the economy around like a switch, and critics were quick to label it as a failure when it wasn’t helping the economy at their (unrealistically) projected rate. But, 2 years later, in 2011, we see a steady recovery as the stimulus money was being spent and businesses began hiring again.
So, in this tale of the ‘austerity fairy’ that Krugman speaks of, governments in Europe are perhaps fearing that they might not see immediate results should they start spending, and would have to start worrying about losing public support and their jobs.
Patience is hard to come by these days. Obama asked Americans to be patient with him, now they are beginning to see results. Will someone in the European political arena stand up and do the same?