2 ms·

Europe’s Last Act?

• a3n 11y ago
  > The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. https://en.wikipedia.org/wiki/Gross_domestic_product#Components_of_GDP_by_expenditure https://en.wikipedia.org/wiki/Gross_domestic_product#Compone... If, according to the above wikipedia overview, the major component of GDP is consumption, then it seems intuitive to this non-economist that: - A program of austerity, as described in the article, is intended to boost exports. Lower wages make it cheaper to produce those exports, and the benefit goes to buyers of those exports. The population is under wage pressure, and doesn't believe that things will be better soon, so they spend less, and cannot support as many secondary and tertiary jobs. The overall population suffers, to the benefit of the countries that buy their exports, and to the benefit of the exporting companies (which is a smaller component of GDP than consumers, but probably better organized). Also, once exported, the exporting country's citizens do not enjoy the use and benefit of the exported item. - A program of spending is intended to boost the spending ability of consumers. Consumers are more confident, and are more likely to support secondary and tertiary jobs through their spending. The benefit is to the citizens and businesses of the country. Oddly enough, if citizens have enough cash, they'll buy more imports, to the benefit of other exporting countries. The US, for example, buys a lot of iPhones and microwaves. Build roads and networks, and we all benefit from the building and the using. Build whatevers for export, and we tend toward piecework or slavery under foreign countries.