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The response to the crisis since the 1970s, including the latest one of 2008, have been inspired by the economic policy launched by the conservative revolution that started almost at the same time that Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States won the elections in 1979 and 1980, respectively: a conservative, neoliberal, market-driven response to economic, social and political problems. Both leaders started their terms by formulating two new economic policy objectives: the reduction of inflation and the reduction of the public deficit while placing confidence in the market as a mechanism for providing maximum efficiency in automatic balances and individualism instead of cooperation.

The implementation of this conservative response involved the application of a series of structural adjustment policies that removed the blockages that affected private initiative, enabling companies to recover profits and change the balance of social power. These adjustment policies focused on reducing aggregate demand, and specifically aimed to reduce the external deficit by using the traditional instruments of demand now in a restrictive sense: control of the money supply and credit, cuts in public spending, control of wages and devaluation of the national currency. Simultaneously, this model was accompanied by measures that relaxed the labour market rules, liberalized the financial markets and limited state intervention.

These structural adjustment measures have been applied with more or less intensity in almost all the countries of the world as the macroeconomic correction mechanisms. Especially after the great crisis of 2008, the European Union responded with an intensification of the so-called austerity policy with the implementation of the Troika. The Troika was a programme imposed together by the European Commission, the International Monetary Fund and the European Central Bank to certain countries (Greece, Ireland, Portugal, Cyprus, Spain, Hungary, Latvia and Romania) establishing austerity instruments in exchange for financial assistance. To deal with the debt that the crisis had left as the states took over the huge invoice that resulted from the rescue of the banking sector, very large cuts were imposed in public and especially social spending, thus trying to ensure that governments did not have to face such a large bill. However, these cuts in public spending entailed a negative multiplier effect much greater than expected, which instead of improving it produced a re-emergence of the recession in almost all of Europe, with the inevitable aftermath of more unemployment and more debt. At the same time and paradoxically, Germany, the country that made the strongest enforcements of these austerity measures in the above-mentioned countries, countered the crisis by setting up stimulus packages to incentive its domestic demand. 


Austerity measures were applied in less developed countries as well. As analysed before, economic crisis problems were followed by external debt problems. Following the conservative response, the main target of which has been the reduction of public deficits, international organisations ‘came to the rescue’ by granting loans establishing strict conditionality clauses. In this way, the agencies that granted them ‘aid’, the World Bank and the International Monetary Fund (IMF), ensured that emerging countries’ governments responded to the principles and interests of the great creditor powers. To respond to the payments, governments were forced to reduce consumption and imports, as well as public spending, which, according to the prevailing liberal beliefs, was always understood to be harmful.

The consequences were dire everywhere but even more severe in the poorer countries where the reduction of the welfare state meant a huge increase in poverty, unemployment and social unrest with record levels never before reached. In short, so far, austerity policies have enabled companies to recover profits and change the balance of social power, but they have not been able to guarantee lasting stages of stability and well-being, nor have they avoided major economic problems, such as mass unemployment, the waste of resources, poverty and inequality.

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