Abstract:

Paper explains that the policy of austerity looses in two fronts: as coherent set of economic ideas and as economic policy. The austerity is a dangerous doctrine, as it pushed millions of people, especially in the EU, in unnecessary suffering. As idea it is doctrine of rich 1% aimed to protect their privileges which increases inequality. That is why austerity has so much support among financial elites, politicians and media, which are both under control by the former. The experience of different countries with austerity led to catastrophic results in 1930-ties, in 1980-ties and during recent global financial crisis.

The econometric analysis shows that the applied monetary and fiscal austerity had significant negative impact on GDB growth. There are better ways out of crisis than austerity which leads to internal devaluation and deflation. The best solution is priority of economic growth, which requires fiscal and monetary stimulus. That is exactly the opposite to the requests of the austerity doctrine. 

Key Words: austerity, history of economic thought, fiscal policy, monetary policy