The ecology of wealth
So the argument that fiscal restraint can be economically beneficial to indebted governments is fallacious. Fiscal restraint works for individuals because their reduction in expenditures is the only variable in their calculation for austerity. Everything else in their lives remains the same: their income, job stability, assets and personal circumstances.
“But the same logic does not apply for a government or for the economy as a whole,” Dr. Ragan writes. Government austerity affects the “circular flow of income and expenditure.” Removing spending from the economy alters many other influential factors.
Reducing salaries, firing scientists, chopping research, retiring civil servants, cutting public works spending, shrinking employment insurance benefits, and the entire economy constricts. The “multiplier” effect cascades throughout the society. Decreased employment, fewer sales, slowing growth and less economic activity shrinks the taxation which is the government's income.
A reduction in this income can increase debt and raise the unfavourable debt-to-GDP ratio when the amount of money in the economy goes down faster than the debt. Austerity at the macroeconomic level can invite a disastrous downward spiral of even more austerity.
Widening the gap
Government austerity creates other problems. As unemployment goes up, more people become poor. This increases crime rates, social problems and health costs. Thus the price of maintaining a civil society rises. Since the adverse effects of austerity on low-income people are disproportionally higher than on high-income people, this accelerates the already widening gap between the wealthy and the poor, a trend that increases social tension and civic unrest.
This widening gap between the wealthy and the poor presents more problems. Since the wealthy can't spend all their money, they have to invest it. Large amounts of available capital invites borrowers. And the more money available for borrowing, the lower the interest rates — and the greater the incentive to borrow. This is the genesis of the growing debt crisis, an economic predicament which threatens to create cycles of boom and bust, adds to economic and social instability, and creates the conditions which further increase the gap between the wealthy and the poor.
The attention of poor people is inclined to be fixed on the present. They are dealing with the reality of survival, with paycheque-to-paycheque economic concerns, and the daily domestic challenges they are barely able to meet. Don't expect them to be thinking about global warming, melting Arctic ice, ocean acidification or the future climate of the planet. Don't expect them to willingly pay a carbon tax to reduce greenhouse gas emissions. Don't expect them to support higher electricity bills for solar, wind or other renewable energies. Don't expect them to worry about conservation efforts or endangered species when their priorities are their own survival and security.
The fact that economic recessions drive down the public's support for environmental issues is no coincidence. Neither is it a coincidence that the shrinking of the middle class and the growing gap between the wealthy and the poor has the same depressing effect.
Even if a few ultra-rich were to contribute vast sums of their money to environmental causes — Prince Alwaleed probably wouldn't — their generosity would have little effect if the attention of the rising ranks of the poor is only focused on day-to-day survival. Without some semblance of balance in the ecology of wealth, everyone loses.