In Australia we've just had a Federal Budget that sought to produce a surplus at all costs. In Europe they're reacting to pressure to agree to crippling austerity measures.
Yet it's quite possible that both initiatives will fail because they rely on narrow measures of economic wellbeing. Hard-line doctrinaire strategies that include cuts to social welfare can hurt people in the short term and the long term.
The esteemed economist Joseph Stiglitz has blamed Europe's current predicament on political pressure to yield to what might be called fundamentalist economics.
In a recent interview with The European, he talks about 'overly simplified', 'distorted', and indeed 'faulty' pre-GFC models that 'encouraged policy-makers to believe that the markets would solve all the problems'. Yet, he says, the 'narrow-minded' free-market economists responsible for the global financial crisis 'have not revised their opinions'.
The economists in question argue that demographic change, and the end of the industrial age, have made the welfare state financially unsustainable. They say that cutting debt means reducing the cost of welfare payments. Stiglitz counters that the Scandinavian countries 'all have strong social protection and they are all growing'. He is particularly critical of the economists' fixation on GDP numbers.
'I don't want to talk about GDP anymore, I want to talk about what is happening to most citizens. Even the Right is beginning to agree that GDP is not a good measure of economic progress. The notion of the welfare of most citizens is almost a no-brainer.'
Stiglitz would strongly disagree with Joe Hockey's recent landmark 'End of the Age of Entitlement' address because of his belief there is a clear and important link between human wellbeing and economic prosperity.
Stiglitz is well known for the his participation in the study commissioned by former French President Nicolas Sarkozy in 2008 to assess how well GDP is able to measure society's wellbeing. Its conclusion was that most people can be worse off even though average income is increasing.
Understandably Hockey provoked outrage with his suggestion that we should rely on families rather than the state for social welfare. History could well rank Hockey's 'there's no such thing as entitlement' alongside Thatcher's infamous 'there is no such thing as society'. Thatcher declared 'there is no such thing as an entitlement unless someone has first met an obligation'.
Hockey's premise that high social spending equals debt and decline reflects the GDP fetish that Stiglitz regrets in the fundamentalist economists. It is deaf