When you hear public finances, don’t think balancing the books.

Many people compare national economies to household budgets, arguing that governments should "balance the books" just as families must live within their means. However, this comparison is fundamentally flawed. Unlike households, national economies operate on a vastly different scale and with different tools at their disposal.

For starters, governments can create and manage their own currency, allowing them to borrow and spend in ways that households simply cannot. This ability means that national debt doesn't function like personal debt. Instead of being a burden that must be repaid quickly, it can be a strategic tool to invest in the future. Investments in infrastructure, education, and innovation generate long-term economic growth and improve the quality of life for everyone, creating a more robust economy that can easily handle the debt incurred.

Moreover, the idea that government spending must always be balanced overlooks the crucial role of public investment. Spending on sustainable infrastructure, education, and opportunities is not about immediate returns but about laying the foundation for future prosperity. These investments don't need to be "paid back" in the traditional sense because they create assets that generate economic activity and benefits for decades to come.

Balancing a national budget is not the be-all and end-all. And as a result, the fascination of governments with austerity is nonsensical. Instead, the focus should be on smart investments that enhance economic resilience, promote equality, and drive long-term growth. In other words, the most important "balance" is not in the books but in the lives of the citizens.

Austerity

Ah, austerity. The word itself evokes a certain charm, doesn’t it? It sounds so disciplined, so responsible. It’s like a stern but caring parent, here to teach us all the value of tightening our belts, skipping the dessert, and learning how to live within our means. But, let’s be honest—what austerity really means is cutting the very programs that keep society’s most vulnerable from slipping through the cracks, all while ensuring that the wealthy continue to sleep soundly on their mountains of cash.

What austerity really excels at is turning everyday struggles into survival games.

Dr. Richard Murphy, a prominent economist and critic of austerity, has expressed strong views on the dangers of such policies.

“Austerity is a choice to punish the poorest in society for the mistakes made by the richest. It’s an economic policy that creates more problems than it solves, leading to slower growth, higher unemployment, and greater inequality."

Economic Growth, But Make It Shrink

Now, you might think that gutting social services would somehow spur economic growth. After all, that’s what we’re told: less government spending equals a stronger economy. But here’s where austerity really shows its flair for irony. Turns out, when you take money out of people’s pockets—especially those who are likely to spend it on necessities like food, clothing, and housing—the economy doesn’t grow. It shrinks.

Yes, austerity is a masterclass in how to get people to spend less money. And when people spend less, businesses earn less, which means they hire less, which means more people are out of work, which means they spend even less, and so on. It’s a beautifully vicious cycle—if your goal is to slow down economic growth while pretending you’re being fiscally responsible.

Austerity: The Gift That Keeps On Taking

Here’s the thing: austerity measures are like a bad gift that no one asked for, but once unwrapped, they’re impossible to return. They widen the wealth gap, ensure the rich stay comfortable, and leave everyone else scrambling to pick up the pieces. It’s the economic equivalent of a gag gift that’s only funny to the person giving it.

Gary Stevenson, a former interest rate trader turned inequality economist, has been vocal about the dangers of rising inequality.

“Rising inequality isn’t just bad for the poor, it’s bad for everyone. When wealth concentrates at the top, it stifles economic growth, weakens democracy, and creates a society that is unstable and unsustainable."

Surely there’s a better way? Instead of slashing the programs that people rely on, what if we actually invested in them? I know, it sounds crazy—like suggesting that water might be wet—but what if providing healthcare, education, and housing actually made people more productive and, dare I say it, happier? What if, instead of cutting taxes for the ultra-rich, we asked them to contribute a bit more to the society that’s made them so wealthy?

In the end, austerity isn’t just a policy, it’s a choice. It’s a choice to prioritise the few over the many, to balance budgets on the backs of those least able to bear the burden. But maybe, just maybe, it’s time to choose something different. Because if we keep heading down the road of austerity, the only thing we’re guaranteed is a future where inequality reigns supreme and economic growth is little more than a fond memory. And who wants that? Well, other than the folks who already have more than enough to go around.