Thursday, 17 September 2009

Austerity - the economics and the politics

A subject that has suddenly become hot and discussed-about in the country today, thanks to some recent news items.

I'll keep it short. What beats me is this - If Shashi Tharoor stays in a 5 star hotel at his own expense, why on earth should that become an issue? How an individual spends his money is entirely his business (provided he obeys the rules of the land).

I'm no economist, but I think I have my fundamentals right when I say that the only way for an economy to survive is by commercial activity. Regardless of whether the money is spent on luxuries or necessities, the activity of spending money in exchange of goods or services is what keeps an economy rolling - and helps the people in it make a living. Austerity-measures on the individual goes directly against this. I don't think there are any examples of economies that have recovered from bad patches by curtailing spending by the individual, it is on the contrary by getting people to spend, that economies have bounced back.

Now, austerity does make sense when tax-payer money is involved. The logic being that the money spent on certain areas (like business class flights for example) can be spent on more important welfare schemes like the NREGS.

But, having said that, to expect the individual to exercise a similar discretion is Utopian and may even backfire. All this noise about austerity has nothing to do with economics, but distressingly, everything to do with politics.


shijo said...

Sir ,
You made me a great fan of ur blogs by handling few socially relevant subjects in ur last blogs

Nithin Rajan said...

Thanks Shijo:)

Anildeep said...

VK talking i assume ..
but and i see the water taps slowly being opened .. but i guess its for the better half to really open the flood gates ...

kochuthresiamma p .j said...

can u get the pranab mukherjee to read this post?

Nithin Rajan said...

yea he'll catch the next economy flight to Trivandrum to see me;)