Tuesday, September 15, 2015
Does Spain's Recovery Prove That Critics Of Austerity Were Wrong?
Paul Krugman makes two arguments against the the claims made by the austerity advocates: In the first place, Spain's recovery has been rather weak relative to typical recoveries. Moreover, austerity did what it was supposed to do. That is, it made Spain's exports more competitive through a very painful process of high unemployment and wage deflation. The critics of austerity made a similar assumption about the effects of unemployment and wage deflation. They supported an approach, however, that would have been less painful, and might have led to a stronger recovery.