The good news is that many influential people are finally admitting that the confidence fairy was a myth. The bad news is that despite this admission there seems to be little prospect of a near-term course change either in Europe or here in America, where we never fully embraced the doctrine, but have, nonetheless, had de facto austerity in the form of huge spending and employment cuts at the state and local level.<\/p>\n
So, about that doctrine: appeals to the wonders of confidence are something Herbert Hoover would have found completely familiar \u2014 and faith in the confidence fairy has worked out about as well for modern Europe as it did for Hoover\u2019s America. All around Europe\u2019s periphery, from Spain to Latvia, austerity policies have produced Depression-level slumps and Depression-level unemployment; the confidence fairy is nowhere to be seen, not even in Britain, whose turn to austerity two years ago was greeted with loud hosannas by policy elites on both sides of the Atlantic.<\/p>\n
None of this should come as news, since the failure of austerity policies to deliver as promised has long been obvious. Yet European leaders spent years in denial, insisting that their policies would start working any day now, and celebrating supposed triumphs on the flimsiest of evidence. Notably, the long-suffering (literally) Irish have been hailed as a success story not once but twice, in early 2010 and again in the fall of 2011. Each time the supposed success turned out to be a mirage; three years into its austerity program, Ireland has yet to show any sign of real recovery from a slump that has driven the unemployment rate to almost 15 percent.<\/p>\n
However, something has changed in the past few weeks. Several events \u2014 the collapse of the Dutch government over proposed austerity measures, the strong showing of the vaguely anti-austerity Fran\u00e7ois Hollande in the first round of France\u2019s presidential election, and an economic report showing that Britain is doing worse in the current slump than it did in the 1930s \u2014 seem to have finally broken through the wall of denial. Suddenly, everyone is admitting that austerity isn\u2019t working.<\/p>\n
The question now is what they\u2019re going to do about it. And the answer, I fear, is: not much.<\/p>\n