Against austerity

A right-wing economist contends that Europe should follow the example of the BRIC countries and help the middle classes kick start economic growth. His left-wing counterpart defends the welfare state and warns against mindless austerity.

Economic growth requires a strong middle class, economist Péter Novoszáth writes in Magyar Nemzet (print edition). Quoting the latest figures from the OECD, Novoszáth writes that growth indices are strong in countries where internal consumption is dominant. European governments which have been following neoliberal doctrines for so long, he suggests, should perform a U-turn and help the middle classes by reducing utility tariffs, as the Orbán government has done. In an aside, Novoszáth maintains that strong middle classes serve as engines of social and intellectual reproduction.

In Népszava, László Andor, EU Commissioner for Employment, Social Affairs and Inclusion defends the welfare state. Across Europe, he argues, countries with a high ratio of redistribution and social expenditure  have been least hit by the financial crisis. The Scandinavian states and Austria were able to keep growing during the crisis despite high tax rates and generous welfare policies. In addition to growth, welfare spending is also an important tool in maintaining social stability and cohesion, for this tends to mitigate inequality. All this suggests that economic growth should not and cannot be stimulated at the expense of welfare, Andor concludes.

Tags: austerity, EU, growth, utility tariffs, welfare