The case for austerity measures rests on the Great Debt Lie and the myth of the structural deficit.
The 2008-9 recession was the worst we have experienced globally for sixty years, and it was predicted by no-one. The Labour Government responded to the global crisis with fiscal stimulus. From the start of the financial crisis, Labour took decisive and clear action (including temporarily cutting VAT to boost demand), and it has become increasingly clear that it was this decisive action that brought about the green shoots of recovery by the last quarter of 2009. (Radeke, 2009).
This, combined with the usual effects on GDP of a recession, meant that the budget deficit rose. But without such swift action we simply would not have the signs of tentative recovery that we saw as a result. So what went wrong? What happened to the ‘green shoots of recovery’ that were carefully nurtured…
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