Austerity is a word that has serious connotations in an economic sense. Austerity is defined as a state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to cut expenditures in an attempt to shrink their growing budget deficits.
Austerity measures are generally unpopular because they tend to lower the quantity and or quality of services and benefits provided by the government. Cost cutting measures also force the state to reduce its hand in the economy and find innovative and noble ways of developing the country thereby getting better value for spend.
Beginning in 2009, several nations were forced to embark on unprecedented austerity measures. These measures were necessitated by budget deficits that soared to record levels because of actions these countries took to stimulate their economies following the massive credit crisis and global recession of 2008. Stimulus therefore accelerates economic decline since countries are never able to finance their way back to growth levels which increases capacity for the state to pay its debts.
Socialist countries such as Trinidad and Tobago are particularly vulnerable being absolutely dependent on stimulus since its economy is not structured to facilitate or encourage continuous business development and growth.
Trinidad has been largely dependent on state spending on nebulous project initiatives which lack imagination, bring no attendant benefit, causes duplication in several different ministries and agencies of government, and is not sustainable or has any value added benefit.
In the interim, the problem persists, and in short time the money dries up into consumption of goods usually not produced in the market, with most if not all wealth leaving the country to pay for products used by the public.
Failure to implement austerity can lead to economic collapse, which many nations never seem to recover from, and ensuing decades become tough with only the poorest people unable to migrate to greener pastures.
In essence, the poor who are often the most misled among the society tend to resist austerity as they are completely dependent on handouts, welfare systems and freebies from the state. The poor are also the most volatile of groups within an economy and tend to vent their frustration through unstable and untenable means.
However, austerity is also beneficial as the state restructures its economy and focuses on the things that will allow it to become more competitive, productive, and most importantly in a state of continuous transformation.
Austerity forces governments to get out of business, allows the market to determine the real value of goods and services and reduces high inflation caused by stimulus derived from borrowed funds.
Trinidad and Tobago is running an average of 25% inflation meaning that one thousand dollars will only have the purchasing power parity of 750 in 6 to 12 months time. When the state has to spend unnecessarily it forces a number of things to happen triggering false demand and supply conditions.
High inflation and debt is a formula for disaster as it forces upward pressures on the employer to increase wages which pushes the cost of goods and services even higher thereby making the market unattractive to investment, undermining competiveness.
Austerity is a welcome sign and something that we should not have to go through again after nearly 12 years of trying economic times during the worst recession in our independent history between 1983 and 1995. Are we back there?
Austerity measures are generally unpopular because they tend to lower the quantity and or quality of services and benefits provided by the government. Cost cutting measures also force the state to reduce its hand in the economy and find innovative and noble ways of developing the country thereby getting better value for spend.
Beginning in 2009, several nations were forced to embark on unprecedented austerity measures. These measures were necessitated by budget deficits that soared to record levels because of actions these countries took to stimulate their economies following the massive credit crisis and global recession of 2008. Stimulus therefore accelerates economic decline since countries are never able to finance their way back to growth levels which increases capacity for the state to pay its debts.
Socialist countries such as Trinidad and Tobago are particularly vulnerable being absolutely dependent on stimulus since its economy is not structured to facilitate or encourage continuous business development and growth.
Trinidad has been largely dependent on state spending on nebulous project initiatives which lack imagination, bring no attendant benefit, causes duplication in several different ministries and agencies of government, and is not sustainable or has any value added benefit.
In the interim, the problem persists, and in short time the money dries up into consumption of goods usually not produced in the market, with most if not all wealth leaving the country to pay for products used by the public.
Failure to implement austerity can lead to economic collapse, which many nations never seem to recover from, and ensuing decades become tough with only the poorest people unable to migrate to greener pastures.
In essence, the poor who are often the most misled among the society tend to resist austerity as they are completely dependent on handouts, welfare systems and freebies from the state. The poor are also the most volatile of groups within an economy and tend to vent their frustration through unstable and untenable means.
However, austerity is also beneficial as the state restructures its economy and focuses on the things that will allow it to become more competitive, productive, and most importantly in a state of continuous transformation.
Austerity forces governments to get out of business, allows the market to determine the real value of goods and services and reduces high inflation caused by stimulus derived from borrowed funds.
Trinidad and Tobago is running an average of 25% inflation meaning that one thousand dollars will only have the purchasing power parity of 750 in 6 to 12 months time. When the state has to spend unnecessarily it forces a number of things to happen triggering false demand and supply conditions.
High inflation and debt is a formula for disaster as it forces upward pressures on the employer to increase wages which pushes the cost of goods and services even higher thereby making the market unattractive to investment, undermining competiveness.
Austerity is a welcome sign and something that we should not have to go through again after nearly 12 years of trying economic times during the worst recession in our independent history between 1983 and 1995. Are we back there?
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