UNCTAD criticizes austerity measures
In its annual trade report released in September, the United Nations Conference on Trade and Development sharply criticised those developed countries that have adopted austerity measures.
In its report, UNCTAD says steep cuts in public spending and public services are misplaced, attacking the symptom rather than the root cause of the financial crisis.
Austerity measures are hard to justify, the report says, given the “almost universal recognition that the crisis was the result of financial market failure in the first place.”
This year’s report also assessed the effectiveness of austerity policies backed by the International Monetary Fund in the 1990s and 2000s, concluding that many of those measures did not produce their intended results.
“Weak domestic demand and restrictive macroeconomic policies may lead to economic stagnation, or even negative growth, in developed economies,” UNCTAD states, warning that the effects will spill over quickly into the developing world.
“Growth in developing countries has been strongly based on the expansion of domestic demand,” the report notes. “However, developing countries still face significant external risks because of the economic weakness in developed economies.”
The report recommends stricter regulation of financial markets, along with more stimulus measures to combat the high unemployment and low wages in much of Europe, the United States, and other developed countries.