Politics can be a strange science. This last week, Chancellor Angela Merkel of Germany was called “the most dangerous German leader since Hitler” for her “austerity measures” (making a budget and sticking to it?).
She is being demonized for cutting spending, and for sticking with her decisions to not ‘bail out’ others. They say that “Merkel won’t budge. She is a purveyor of the conventional wisdom which says that the economy is like a household that can’t borrow or spend more than it earns. But economies are not households – or credit cards! – and common sense tells us that the solution to a downturn caused by a prolonged drought in demand is not to reduce demand further (by slashing spending).”
Actually, economies are households, thousands, even millions of them. And slashing spending is not necessarily equal to reducing demand. Demand comes from a useful product being desired and then being purchased. Cutting spending in itself has to do with budgeting– the horse must come before the cart.
And, of course, there is proof of this being a winning strategy from yet another woman leader– Margaret Thatcher– who also was demonized and criticized for what she did– eventually creating a robust economy that was good for her citizens. It was painful, but it worked. The house of government must be in order, just like each of us must have our house in order.