Austerity

In economics, austerity is when a national government reduces its spending in order to pay back creditors. Austerity is usually required when a government's fiscal deficit spending is felt to be unsustainable.

Development projects, welfare programs and other social spending are common areas of spending for cuts. In many countries, austerity measures have been associated with short-term standard of living declines until economic conditions improved once fiscal balance was achieved (such as in the United Kingdom under Margaret Thatcher, Canada under Jean Chrétien, and Spain under González).

Private banks, or institutions like the International Monetary Fund (IMF), may require that a country pursues an 'austerity policy' if it wants to re-finance loans that are about to come due. The government may be asked to stop issuing subsidies or to otherwise reduce public spending. When the IMF requires such a policy, the terms are known as 'IMF conditionalities'.

Austerity programs are frequently controversial, as they impact the poorest segments of the population and often lead to a wider separation between the rich and poor. In many situations, austerity programs are imposed on countries that were previously under dictatorial regimes, leading to criticism that populations are forced to repay the debts of their oppressors. [Harvey, D (2005) A Brief History of Neoliberalism] [Klein, N. (2007) The Shock Doctrine] [Chomsky, N (2004) Hegemony or Survival]

Examples of austerity

* Austerity in Israel (1949-1959)
* Special Period (Cuba, 1991 onwards, after the collapse of the Soviet Union)
* Post-War United Kingdom "see",: , Rationing in the United Kingdom, Utility furniture.

References