The economics of austerity, in Britain and Greece, makes no sense.

It is the most depressing morning. Not just the rain and the greyness in London, but two unconnected political events which seem to signal the triumph of neo-liberalism. 

Most important, of course, is the grinding down of the Greek Government so that they were forced into a position of either acceding to a humiliating deal or returning to a pre-industrial society where, one imagines, there may well have been people starving on the streets in a reprise of the Great Depression. 

They are being punished not for profligate spending, nor the misdemeanours of the banks, but because they dared to stand up to an ethos that has resulted in a 25 per cent reduction in GDP in five years. When I studied economics at university the conventional wisdom was Keynesian - that it was better to stimulate economies in the bad times in order to create jobs and wealth. It was what the United States eventually used to drag itself out of the Depression in the 1930s. 

Now, somehow, because financiers and bankers are ruling the world, this simple economic truism has been forgotten. Instead, Greece is being forced into a vicious downward spiral that seems to have no end. And remember, it is not the governments of the European states which lent Greece the money, but banks who have now been bailed out by those governments. 

Another rule of economics is that lenders are paid interest partly because they take a risk when lending. Yet, somehow, this basic rule has, too, been forgotten.  The lenders seem to be inviolate, but everyone else is vulnerable.

And then, just to make matters worse, Harriet Harman, seemingly on her own initiative, has said that the Parliamentary Labour Party will support the Tories’ benefit cuts.

This overlooks that the first rule of opposition is to, well, oppose. 

Harriet also seems to have failed to understand basic economics. Apart from appearing to sanction cuts that are Draconian and punitive on precisely the ‘hard-working families’ we never ceased to hear about in the election. 

Providing benefits for the poor – and most of these are indeed working poor – ensures that money is spent on the basic requirements of living, keeping large numbers of local businesses afloat, enabling them to employ staff, who in turn spend money in the economy and contribute tax to the Exchequer. 

The welfare state does not just benefit recipients of the money, but ensures the viability of thousands of businesses. This is partly why Greece has done so badly since austerity was imposed. 

There is a connection between these two events – but nothing that alleviates the mood of depression. 

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