Austerity Analysis

Austerity: The History of a Dangerous Idea was written by Mark Blyth, and published by the Oxford University Press in 2013. The text conceptualizes the theory of austerity, and provides countless scenarios in which austerity has failed to combat inauspicious economic conditions, for example, the Great Depression of the 1930’s, and the Great Recession of 2007. Austerity is a fiscal policy mechanism used by governments during business cycle contractions to reduce government deficits, usually by increasing taxes, reducing government expenditure or a combination of both tactics. Austerity utterly contradicts Pareto improvement because the objective of Pareto improvement is to not improve the overall conditions of individuals by worsening

Hoover, decided to combat alarming levels of employment, production, and gross domestic product in the form of the Great Depression using austerity. The government paid farmers, and other food producers not to produce goods. There was a surplus in production, due to the economic downturn, and decreased wages, the marginal propensity to consume for individuals, and households decreased substantially. Hoover “tightened his belt”, and watched his people perish. He was adamant that getting Americans back to work would fix the crisis, however, he did not grant relief to the American people in the form of socially reformed welfare programs to combat what they were facing. Hoover’s approach to fighting the crisis was completely opposite to the Keynesian approach. Whereas, the Keynesian theory dictates that governments should increase spending during recessions and tax less, Hoover spent less during the recession, “ the tightening of his belt” and taxed relatively more. Many families moved out of their homes, and into shantytowns or “Hoovervilles”, crime increased, proper health care for the poor became an elusive dream, the quality of education decreased, and prostitution for some women was the only way they saw possible to feed their families. The aforementioned are a few of the social impacts that austerity had on America during the Great Depression. Although during this time the middle class was on the void of extinction there were quite a few families that made fortunes as a result of the misfortune of others, for instance, the Marriotts. There were also those families that increased their fortunes like the Rockerfellers. National income continued to dwindle with exorbitant unemployment rates consumption, and investment decreased. Hoover did not increase government expenditure to increase the national income, he decreased the government expenditure and the economy propelled further into the recession. What changed you