On the current “austerity or growth” debate

“Austerity” or “growth”. These are the alternative economic policies between which politicians must choose today. Hans-Werner Sinn and Niklas Potrafke show that such an alternative is misleading for the general public. Additional increases in government spending to stimulate the economy lead to direct growth in the national debt and have no long-term positive but only a negative effect on economic growth. An economy can grow only from its savings, since savings provide the financial resources for investments, from which growth emerges.