If the Republicans in Congress had had their way, we would have seen extreme austerity measures and huge decreases in federal government spending. In short, exactly what politicians in Europe pushed through. And the results of such austerity in Europe? As the chart above indicates, unemployment has soared in Europe while declining in America. The same holds true for GNP growth as shown by the chart below where America is out preforming austerity stunted Europe. But real world experience means nothing to GOP ideologues not to mention their totally untethered from reality Christofacsist base.
Five years later, only America has surpassed its pre-recession output. For now, it appears to be on a steady, if disappointing, growth trajectory. Japan had the worst recession of the bunch but rebounded quickly. It has since struggled amid seismic disasters and various China troubles. Britain and the euro area have until recently followed very similar trajectories, but British output turned up nicely in the third quarter while the euro area officially re-entered recession.
The really distressing thing is to try and project these lines forward a bit. Japan is in recession. Britain may be out of it, but on the other hand may not. The euro zone has not grown for over a year, is almost certainly contracting faster in the fourth quarter than it did in the third and may well continue shrinking into 2013.
And then there is America, trudging steadily upward to the beat of its own drummer. How long can the divergence between America and the rest persist? And on what terms will these lines cross again? One thing seems reasonably clear: America will not be able to rely on demand from the rest of this bunch to keep its line going up. Most of all, it will have to count on the durability of domestic demand.
And how does one prime the pump of domestic demand? Through government spending which provides buying power to consumers who in turn purchase products that further prime the economic pump. The Germans and British rejected this reality (and Germany forced the rejection on to other European Union nations). Yes, the U.S. government deficit needs to be reined in. But when and how it is done is critical. A heavy handed approach as has been the case in Europe kills economies as opposec to strengthen them. Will the GOP learn from any of this? Sadly, I'd say that chance is doubtful.