Remember that austerity is exactly what the US Republicans are also promoting. They’re oblivious to the downside of austerity and even pretend as though downsides are non-existent. Meanwhile in Europe, we’re seeing the UK drift back into recession and the austerity program is only now kicking in. There will be a lot of economic pain in 2012.
“The answer, even though they see over and over again that austerity leads to collapse of the economy, the answer over and over [from politicians] is more austerity,” said Mr Stiglitz to the Asian Financial Forum, a gathering of over 2,000 finance professionals, businessmen and government officials in Hong Kong. “It reminds me of medieval medicine,” he said. “It is like blood-letting, where you took blood out of a patient because the theory was that there were bad humours. “And very often, when you took the blood out, the patient got sicker. The response then was more blood-letting until the patient very nearly died. What is happening in Europe is a mutual suicide pact,” he said.