Austerity

economic-dictionary

Austerity is a concept widely used in the economic sphere when referring to the application of an economic policy based on reducing public spending and increasing taxes.

The basic scheme of economic austerity resides in the greatest possible reduction in public spending and the increase in the tax burden on citizens and companies of a given country.

That is, increase the level of public collection and minimize spending by the State in order to achieve the lowest possible public deficit.

Due to an economic recession and the response of different governments to the crisis, this concept acquires special relevance, especially when describing the new economic policies that are intended to be applied.

Positive aspects of economic austerity

It is common for a government threatened by a situation of close default on its debt commitments to act by activating restrictive political and economic measures.

In this way, austerity allows states to face extreme situations, helping to improve national accounts and avoid, to a certain extent, bankruptcy.

An increase in the level of taxes also causes a higher level of collection that, added to the decrease in the level of spending on public matters, can reduce a deficit considerably or even lead to the appearance of a public surplus.

Negative aspects of economic austerity

Although the austerity measures undertaken around the world in recent years were born with the purpose of economic improvement, not all these practices have had such a result.

On the other hand, the appearance of the so-called spending cuts has always been notoriously criticized, since in many cases they have had an effect on important bases of the public economy such as health, education or infrastructure.

In other words, although these measures usually translate into better health of the public accounts and the economy of a country, they tend to lead to a decrease in well-being for citizens.

Austerity at other levels

Alternatively, the concept of austerity is equally applicable to the more domestic economy, taking into account the management that households carry out of their resources or in their family economic planning.

This is done using the same formula for reducing spending and increasing, if possible, the income level.

Tags:  opinion Business markets 

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