Editor’s note: This commentary originally appeared in the Dallas Morning News on May 24, 2015.
A hard-earned lesson is only worth the pain if it’s correct.
This month, David Cameron led his conservative party to a resounding victory, gaining a clear majority in the British Parliament. Cameron staked his campaign on his economic policies that, recently, have seen strong output growth in the U.K. Foremost among the Tory claims is the triumph of austerity.
Austerity is a hard-earned lesson. Shredding the social safety net during a recession causes widespread pain, especially among the poor and those who had reached the middle class. This tough medicine could be merited if it produced a quicker turnaround to economic health, but it doesn’t.
The experience of Britain shows this. In the wake of the 2008 crisis, Britain had an even sharper decline in output than the United States, or the eurozone as a whole. From its lowest point in early 2009, the British economy had grown by 2 percent by the time Cameron was elected prime minister in May 2010. Once in office, Cameron made good on his campaign promises.
Austerity did not deliver. Economic growth stalled in the summer of 2010 and stayed flat for the remainder of the year. Only when the austerity policies were reversed did the U.K. start to grow again. Even so, it took over five years for the economy to reach its pre-crisis level. By contrast, the U.S. returned to its pre-crisis level of national income in less than 3 years.
The British experience supports, by counterexample, the standard economic prescription — the government needs to step in when the private sector pulls back. Claims of the growth-enhancing effects of austerity through bolstering confidence were proved wrong in the U.K., just as they were elsewhere in in the wake of the crisis.
Incumbent politicians often count on voters’ short memories. Recent British growth does not support the claims of austerity’s advocates. The true effects of austerity in the United Kingdom were seen in 2010, not in 2015. But in 2015, Cameron’s campaign profited from his claims of economic stewardship (as well as from Scottish nationalism, which drew support from the Labor Party, and his opponent’s weak campaign; The Economist magazine writes that “the Conservative Party was lucky in its enemies”).
Our own, very protracted 2016 presidential campaign has already begun in the U.S. As always, economic issues are sure to be high on the agenda. The financial and economic crisis of the past eight years will continue to cast a shadow over the discussion. The lesson to politicians from the British results might be that claims about economic policies need not be strongly supported by the facts.
This lesson can be proved wrong if American voters remember the events of the past eight years.
Voters should question claims about the growth-enhancing benefits of austerity. They should remember the disruptive effects of the sequestration that shut down the government and contributed to the duration of the weakness of the economy. They should realize that financial sector reform is important to avoid another boom-bust cycle like the one we have just lived through. And they should also consider how austerity directly hurts friends and neighbors, and perhaps themselves, by removing the safety net just when it is most needed.
If they forget these things, there will not be any hard-earned lessons, just hard times.