We explain what austerity is and the origin of the term. Also, what are the characteristics of economic austerity?

What Is Austerity?

Austerity is the condition of absence of luxuries, adornments and excesses, that is, the satisfaction of only the minimally indispensable. Thus, that which conforms to these principles, that is, that is severe, sober or rough, can be call austere or austere, for example: “an austere diet”, “an austere greeting” or “an austerely decorated apartment”.

This term comes from the Latin austere, which translates “rough” or “difficult”, and which in turn comes from the Greek austere, that is, “rough” or “dry”. Hence, the term is associated with the unkind, that is, to what lacks adornments, excesses and is satisfice with the minimum. It is possible, in certain areas, to find the word used with its original meaning of “rough to taste”, that is, sour or astringent.

Austerity should not be confuse with asceticism, which is the voluntary renunciation of luxuries and comforts, for the sake of moral or spiritual enlightenment. One can live in austere conditions because he is poor, for example, or because he has be deprive by others of all kinds of comforts, without this implying any kind of spiritual or moral value.

The term is often use in economic and political jargon, to refer to the administration of assets and capital under a criterion of scarcity, that is, spending as little as possible, as if the resources were going to run out at any moment. . This is know as economic austerity or fiscal austerity.

It can help you: Economic Sciences

Economic Austerity

Economic austerity is a criterion that is apply to economic policies, and that proposes the greatest possible reduction in public spending, that is, the money that the State invests in society. This is also known as cutback policy and is a particularly common practice among governments with a liberal or neoliberal orientation.

Usually. These types of policies are implement when it is feared that a nation will not be able to meet its foreign debt commitments. Therefore, its refinancing capacity decreases before private investors.

Entities such as the International Monetary Fund (IMF), for example, usually come to the rescue of these nations, serving as a lender in exchange for the implementation of economic austerity measures, which minimize the money spent within the country and therefore maximize their ability to pay debts.

Economic austerity, however, usually causes a lot of social unrest and has a strong impact on people’s domestic economy, which often translates into impoverishment. In addition, these types of measures usually imply large cuts in educational, cultural, social, scientific and health matters. Which can bring with them important quotas of backwardness and suffering in society.

State Expenditures

The State must be undersets the entire public organization of the country. In our case the Central State, the Autonomous Communities, the Municipalities and other administrative entities.

The Welfare State has various types of expenses to attend to it must pay for public services (such as education or health). Create and maintain infrastructures (such as roads or ports). Attend to the needs of the population and, finally, pay their management and operating costs. To do all this you need money.

The only source of income for the State is the Taxes that citizens pay to it. If the tax collection is sufficient to meet public spending there is no problem. But if it does not arrive. The State will have to ask for the money that it has not borrowed, generating the public deficit.

This leverage of the State means generating a debt. That will have to be paid sooner or later and that will generate other types of expenses, such as interest.

Like Almost Everything In Economics

this is neither good nor bad, better or worse, but it can be opportune or inopportune. It depends on we it is done. Why and for what it is done and the magnitude of the debt contract. If the State go into debt at a given time. To create productive infrastructure (such as roads) it may be something that. Activates the cheap and worthwhile life but if you do it to meet your ordinary expenses. Again and again, we have a problem. This is what is happening in Spain. The public debt is at the same level as the Gross Domestic Product for a full year. Which is very serious.

If expenses  what the and income is only what they can be. The way to avoid generating so much deficit. Will be to reduce expenses (by cutting them) or increase the taxes paid by citizens.

The first of the two options, reducing expenses, is what we can call austerity; here the important thing will be where expenses reduce.

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