North Cyprus Free Press | Austerity Based On Faulty Data

North Cyprus Free Press | Austerity Based On Faulty Data

Without going into the complexities of constructing a Microsoft Excel Spreadsheet, it seems that an influential Harvard University publication used to justify austerity was based upon inaccurate analysis. In 2010, economists Carmen Reinhart and Kenneth Rogoff released a paper, “Growth in a Time of Debt.”  This paper seemed to imply that if a country has a debt above 90% of the Gross Domestic Product (GDP) then this would have a significant effect on growth. Put simply, if a country owes almost as much as it earns in a year, or more, then the country goes into recession. This means that austerity measures aimed at reducing debt should stop a recession.

Turns out that Carmen Reinhart and Kenneth Rogoff refused to release the data which led to these conclusions and other researchers were perplexed when they couldn’t support their conclusions. When the data was released, the errors were found. In common with some dubious medical research funded by pharmaceutical companies the research had selectively excluded data which would weaken the argument the researchers seemed intent on supporting; austerity is the way forward. There were even more damaging mistakes which would embarrass an A Level GCE student, notably missing out five significant rows of data from a calculation.

Hope you’re still with me, so here is the summary. Finance Ministers have been telling governments that if debt is over 90% of GDP then growth is minus 0.1%, i.e. recession. The truth appears that it would be plus 2.2%, i.e. growth. This is why the IMF warned UK’s Finance Minister, George Osborne, that his austerity measures were sending the country into recession and that he should reconsider them. Perhaps someone should also warn the Education Minister, Michael Gove, that his false assumptions about education are about to do the same. While they’re at it they should also have a chat with Iain Duncan Smith, the Secretary of State for Work and Pensions, and ask him to check out his assumption that living on £57 a week is possible. Nearly 500,000 people support the idea of him doing the research.

 

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