Austrian Economics - A Lost Science

            I thought I’d take a moment to see what I could learn about the economy in Brittan. I assume we could find articles that tell us how wonderful the British Economy is recovering from the current economic disaster, but I found these articles also: I’m cutting and pasting what I think is important followed by my personal observations following the COMMENT.

The Decline of the British Economy Feb 2009

            Hardly any country has seen its fortunes hit harder by the global downturn than Great Britain, once a model practitioner of free market economics

British economy crawls free of record recession  Jan 26, 2010

            the value of all goods and services produced in the economy -- grew by just 0.1 percent in the three months to December, aided by the services sector, after a 0.2-percent contraction in the third quarter.

            Like many Western countries, Britain's public debt has rocketed as the government spent billions on financial stimulus measures and banking-sector bailouts in an attempt to avert economic meltdown. COMMENT: The question is how much of this “recovery” is due to new production or business in the private sector?

            "We urgently need a new model of economic growth that includes a credible deficit reduction plan that keeps mortgage rates low, creates jobs and doesn't choke off recovery." COMMENT: When we see this happening, then perhaps we can say that the economy will make a true recovery, but I’m not holding my breath in anticipation that it will happen in the next 10 years.

            But Darling argued that the recovery could be compromised by cutting public expenditure too soon. COMMENT: They seem to be like fish in the bottom of the ocean, saying “what water? I don’t see any water!” Since gov spending adds to the GDP shouldn’t we be asking how much of the increase in the GDP is due to new wealth creation? I’m talking about private sector jobs.

            "If you start to take money out of the economy and start cutting (spending) too early you will end up wrecking the recovery." COMMENT: The Keynesian theory is that we prime the pump to get it started, but what was wrong with the pump in the first place and has that been repaired before we rely upon the pump drawing water from the well with out the aid of a government suction pump? The failure was not easy credit. The failure was in why we needed easy credit to sustain consumption.

            Britain's Office for National Statistics said Tuesday that the economy shrank 4.8 percent in 2009 -- the biggest annual contraction on record. The government had forecast contraction of 4.75 percent in 2009, followed by growth of 1.0-1.5 percent this year. COMMENT: It shouldn’t surprise anyone that government and special interest predictions of good times ahead have often been followed by disaster. Consider the hype about the housing prices that were supposed to continue to rise between 2005 and 2007. All the while Austrian economists were warning against a collapse.