John Maynard Keynes often stressed the importance of investment and consumption in stimulating an economy to produce an appropriate supply of jobs. He also less frequently explained how austerity as a policy followed by governments could be very damaging to the public good. He put the argument this way in Chicago in the Halley Stewart Lecture of 1931. It should be compulsory reading for policy makers.
I have spoken of competitive economy campaigns and competitive contractions of new development. …An economy campaign, in my opinion, is a beggar-my neighbour enterprise, just as much as competitive tariffs or competitive wage reductions, which are perhaps more obviously of this description. for one man’s expenditure is another man’s income. Thus whenever we refrain from expenditure, whilst we undoubtedly increase our own margin we diminish that of someone else; and if the practice is universally followed, everyone will be worse off. An individual may be forced by his private circumstances to curtail his normal expenditures, and no one can blame him. But let no one suppose that he is performing a public duty in behaving in such a way. An individual or an institution or a public body, which voluntarily and unnecessarily curtails or postpones expenditure which is admittedly useful, is performing an anti-social act…. (pp.74-75; Halley Stewart lecture, 1931 The World’s Economic Crisis and the Way of Escape, London:George Allen & Unwin )