The conservative Tory government’s austerity policies are pushing the United Kingdom toward an unprecedented triple-dip recession, as the UK’s economy contracted 0.3 percent in the fourth quarter of 2012. If the economy slumps again in the first quarter of this year, the two consecutive quarters of losses will mark Britain’s third recession in four years.
British Prime Minister David Cameron and George Osborne, the nation’s finance minister, eschewed stimulative policies when the Great Recession began, choosing instead to pursue swift deficit reduction to address the nation’s long-term debt. The result has been unfortunate: as this chart from the Guardian shows, the British economy has now contracted in four of the past five quarters (the London Olympics, which helped the British economy, occurred during the one quarter of growth):
When he instituted the first round of austerity in 2010, Osborne said his package of tax increases and spending cuts would reduce the deficit from 4.8 percent of Britain’s economy to just 1.9 percent. Three years and a second recession later, the deficit is at 4.3 percent. But even as his plan to revive the economy to reduce deficits has led to further recessions, Osborne remains steadfast in his belief that deficit reduction is the correct path to follow:
George Osborne said he would not “run away” from the problems facing the UK economy: “We have a reminder today that Britain faces a very difficult economic situation. A reminder that last year was particularly difficult, that we face problems at home because of the debts built up over many years and problems abroad with the eurozone, where we export most of our products, in recession.”
While the British raced to austerity, the United States turned to stimulus in 2009. Instead of pushing us into a second recession, The American Recovery and Reinvestment Act turned around the American economy, which has far outperformed the British economy ever since:
Still, President Obama’s second attempt to stimulate the economy, the American Jobs Act, was blocked by Republicans, and Washington has turned its attention toward immediate deficit reduction since, even as unemployment remains stubbornly high and the economic recovery is far from robust.