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Ending the Austerity Pandemic

A wave of austerity is building as governments return to the tried-and-failed belt-tightening policies of the past, rather than exploring alternative means of creating fiscal space. Unless this policy contagion is contained, the coming years will be even more painful than the era following the 2008 financial crisis.

NEW YORK – The world is confronting multiple, compounding crises, from COVID-19, energy, inflation, debt, and climate shocks to unaffordable living costs and political instability. The need for ambitious action cannot be greater. However, the return of failed policies such as austerity, now called “fiscal restraint” or “fiscal consolidation,” and a lack of effective taxation and debt-reduction initiatives threaten to exacerbate the macroeconomic instability and daily hardships that billions of people are facing. Unless policymakers change course, an “austerity pandemic” will make global economic recovery even more difficult.