This is the phrase used by Paul Krugman to describe Europe's current wave of government budget cutting and austerity.
In part he is right - some of the measures taken by governments are plain stupid and seem designed to force economies into a more severe contraction.
The Romanian government is a case in point. It needs to cut spending, but the way it is making the cuts is plain dumb. The hundreds of thousands of people fraudulently claiming disability pensions are untouched. The hundreds of thousands of people fraudulently claiming government salaries are untouched. The wasteful and bloated government bureaucracy is untouched. Instead, Premier Emil Boc has come up with the wonderful idea of cutting public service pay across the board by 25%, a measure that will force some into poverty and others into deeper corruption. The smartest folks will leave the public service and seek better paid work in the private sector, leaving the intellectually challenged to run Romania.
While I agree with Mr Krugman that the way some European governments are cutting deficits is masochistic, I disagree with him about the need to cut deficits. With national deficits and debts already extremely high as percentages of GDP and no sign of economic growth, Keynesian pump-priming is now impossible, at least for the southern amd eastern Europeans. With interest rates already low, monetary policy is of no help. The only thing these countries can do is to develop credible plans to restore budget surpluses over the medium term.
That means either reducing spending or increasing taxes, both of which will be contractionary. Of the two, I prefer reducing spending, basically because government's share of the economy in Europe is currently way too high and this cramps the economic liberties of individuals and companies.
Spending should be reduced intelligently, however. Cut down on benefit fraud. Close government agencies that do nothing useful. Merge others. Flatten management structures. Rewrite laws to eliminate unnecessary bureacracy. Privatise non-core services. Introduce user-pays where appropriate. Have the private sector build, own and operate infrastructure. Sell off state assets to fund pensions.
The 2010s are going to be a long, difficult decade as we sort out all of our various issues with the credit overhang, trade imbalances, demographic change, environmental change and the decline of oil. The next couple of years will be particularly hard as government spending falls, and with it demand and economic activity.
There is light at the end of the tunnel, however. With enlightened decision making, European economies could emerge from the recession with slimmed down public bureaucracies, more flexible labour markets, more open and liberal economic structures, greener energy solutions and a class of former public servants who have entered the private sector and established small, productive businesses. These changes will lay a firm foundation for solid, productivity-based economic development in the 2020s.
PS: What Mr Krugman and many economic commentators are failing to point out is that the US is in a very similar boat, running a very high deficit (10.6% of GDP) and a very high national debt ($13 trillion). For the moment, the markets are focussed on Europe and are giving the US a longer leash. Maybe this is because they believe the Obama deficit reduction plan, maybe it's because the US is registering a degree of (stimulus-based) economic growth, maybe it's because the US has a somewhat better demographic outlook? Whatever, it's only a matter of time before the US has to start cutting just as Europe is now. Any schadenfreude will be short-lived.