The Austerians have been driving economic policy in Europe lately, cutting government budgets dramatically in order to eliminate "crowding out" and thus spur economic growth. So has economic growth increased? Erm... No. In fact, much of Europe now is seeing economic collapse on a scale that exceeds the Great Depression, with enormous increase in unemployment and sizable declines in economic output.
So what's the retort of the Austerians? Well, their retort is to lie -- to say that despite huge budget cuts, their retort is to claim that there is no austerity in Europe because the unemployed are receiving unemployment insurance. At which point it's, WTF? Are the unemployed supposed to simply drop dead in the streets from starvation and exposure?
The Hayekian response seems to be, "yes". Or, rather, the actual argument of Cafe Hayek is that the unemployed workers are voluntarily unemployed, they’d have jobs if they only lowered their wages to the point where their value to employers exceeded their wages. I.e., the Great Vacation explanation for the New Great Depression, same one they use for the Old Great Depression. This of course ignores two points: a) that there is a bottom to wages imposed by survival (i.e., people will not voluntarily accept wages that are insufficient to provide basic food, shelter, and clothing), a point explicated further on Angry Bear where it's pointed out that when machines replaced horses for many tasks, the result was mass slaughter of horses whose feeding costs now exceeded their economic worth (i.e., Hayekians want humans whose feeding costs now exceed their economic worth to be slaughtered? Soylent Hayek?) and b) employers won’t hire additional employees at any cost above $0 if there is no demand for their product, because employers are in business to make money, which means having as few people on payroll as possible to meet current demand, which means the only way they’ll hire *at any wage above $0* is if demand increases.
But of course these unpleasant realities don’t happen in the bubble universe that Hayekians live in, where basic biological needs don’t exist and employers are charities. Of course, in *our* universe, neither of those statements are true…
- Badtux the Reality-based Penguin