When the IMF begins to rethink fiscal multipliers…

…it’s probably best for politicians to reconsider their adherence to ‘austerity’. As Larry Elliott notes in the Guardian yesterday no such luck in the UK where George Osborne is stubbornly wedded to ‘deficit reduction’ at seemingly all costs, up to and including a triple dip recession (see the latest figures from the UK economy, not looking great in that respect).
Elliott draws attention to the fact that the IMF’s chief economist Olivier Blanchard is concerned over Osborne’s approach:

Three factors probably lie behind Blanchard’s decision to go public with his concerns. The first is that the IMF, while supporting the need for budget deficits to be reduced, believes action should not be so aggressive as to derail growth. The second reason is that it has done some recent work on fiscal multipliers – the knock-on effects of tax and spending changes on the wider economy – and found them more powerful than it previously thought. The third reason, obviously, is that Osborne’s forecasts of a recovery lurking just around the corner have proved totally wrong. The economy has flatlined for the past two years and if the City is right about the fourth quarter 2012 growth figures there will be fears of a triple-dip recession this winter.

But let’s be clear. Much the same can be said about the European wide orthodoxy on this matter. We hear much the same stuff in this polity.
In a way, and this follows on from posts earlier this week, it exemplifies the confusion (and quite a deliberate one at that) between the use of austerity as a methodological tool and an ideological crowbar used to rework the socio-economic dispensation existing across much of the EU and to the satisfaction of neo-liberalism.