Engines of Growth

I read an article in the NYT today about the decline in small businesses in Greece due to the government's austerity program. Consumer demand has cratered due to the recession and has been exacerbated by the forced decline in government workers and pensions. While it's unlikely to ever be as bad in the US, it's ironic that small businesses are often held out as the engine behind economic growth and it's exactly those businesses that are hardest hit by austerity programs. The Greek government's response has been to promise to funnel cheap funds to the small business sector. One has to wonder at the sheer idiocy of these programs. If businesses are failing because they can't sell their products, why do they want to borrow any money, cheap or otherwise? The thinking of policy makers who push these opposing and harmful policies is impossible to understand. There is a body of economic theory that stretches from Malthus and Mill through Keynes to the present day that provides us with the ability to understand what is going on in the economy. Our leaders ignore it at our peril.