With the euro zone on the brink of breaking up, it is easy to overlook events across the English Channel, but what is happening to the U.K. arguably has more important lessons for the U.S. In continental Europe, we are witnessing the crisis of a poorly designed monetary system that is very different from our own. In the U.K., we are seeing the results of monumental policy blunders that could well be repeated here if Republican budget hawks seize power next November.

During the past eighteen months, a callow and arrogant Chancellor of the Exchequer, empowered by a hands-off Prime Minister and backed by the bulk of the country’s financial and media establishment, has needlessly brought Britain to the brink of another recession by embracing draconian spending cuts that hark back to the early nineteen-thirties. Rather than changing course and taking measures to boost growth, the Conservative-Liberal coalition is doubling down on austerity. On Tuesday, it announced plans to extend its cuts for two more years, until 2016-2017. “Until now, we had been thinking of four years of cuts as unprecedented in modern times,” Paul Johnson, the director of the non-partisan Institute for Fiscal Studies, said. “Six years looks even more extraordinary.”

On Wednesday, two million public-sector workers left their jobs to protest against the cuts, which are wreaking havoc on employment, output, and living standards. The strikes came a day after George Osborne, the Conservative Chancellor, admitted that the fiscal strategy he introduced last year, which aimed to eliminate a gaping budget deficit in just four years while setting the stage for sustainable prosperity, is failing abysmally on both counts. Delivering his annual Autumn Statement to Parliament, Osborne conceded that the British economy will hardly grow at all in 2011 or 2012, and he further admitted that if the rest of Europe heads into recession, which is pretty much a foregone conclusion, “it may prove hard to avoid one here in the U.K.”

The independent Office of Budget Responsibility, which Osborne set up on taking office last year, lowered its forecast for G.D.P. growth in 2012 from 2.5 per cent to just 0.7 per cent, dryly commenting that “the probability of a much worse outcome … is greater than the probability of a much better one.” Some economists think the double-dip recession has already begun. Earlier this week, the Organisation for Economic Co-operation and Development said the British economy would shrink in the fourth quarter of this year and the first quarter of next year.

Just eighteen months ago, when the Conservative-Liberal coalition came to power, the British economy was growing at an annual rate of more than four per cent, and appeared to be recovering surprising strongly from a deep recession that followed the financial crisis of 2008. The budget deficit, which had ballooned to more than ten per cent of G.D.P. as tax receipts had plummeted, clearly needed tackling, but there was no immediate crisis. The previous Labour government had already committed to a gradual program of fiscal retrenchment, and the interest rates on British government bonds had remained low.

Britain, unlike continental countries like Spain and Italy, has its own currency and central bank, which gives it some policy flexibility. Rather than taking advantage of this enviable position and sticking with a gradualist approach, Osborne and his boss Cameron, for reasons that still haven’t been fully explained, decided to adopt the most drastic fiscal adjustment that any major country has attempted in modern times—aiming to cut the deficit from 10.1 per cent of G.D.P. in 2010-11 to 2.1 per cent in 2014-15. To this end, the Conservatives, with the backing of their Liberal coalition partners, embarked on a four-year program of swinging spending cuts—twenty per cent, or more, for some government departments—and also raised taxes.

As some economists and commentators (myself included) pointed out at the time, the inevitable result of introducing big spending cuts is (guess what?) big reductions in spending, output, and income. That is precisely what we have seen. According to the Office of Budget Responsibility, real household disposable income will fall 2.3 per cent during 2011—the biggest drop since the Second World War. And the unemployment rate, which stood at 7.7 per cent when the government took over, will rise to 8.7 per cent by the end of next year.

And all this for what? With joblessness rising, spending on unemployment benefits is rising and tax receipts are coming in lower than expected. Consequently, the budget deficit is not falling nearly as rapidly as the government had hoped. To its great embarrassment, the government said it would have to borrow an additional 111 billion pounds over the next four years. Already, it is planning to issue more debt than Gordon Brown’s supposedly profligate government was planning to issue. And if growth doesn’t magically rebound in 2013 and 2014, it will have to borrow an even greater amount.

The lesson ought to be clear: advanced countries cannot simply slash their way to prosperity and fiscal balance regardless of the overall level of demand. The myth of expansionary fiscal retrenchment, which Osborne and Columbia’s Jeffrey Sachs, who advised him before he came to office, cited in early 2010, is just that: a myth. Hundreds of thousands of ordinary Brits who were protesting from Aberdeen to Bristol don’t need telling this, but, sadly, many members of the English financial and media and establishment do. Even now, they are standing behind Osborne. Only last week, the editorial page of the Financial Times said the government “should not deviate from its sensible strategy.”

Sensible? The damage this strategy has already inflicted on the British economy is plain for all to see, and there’s more to come. In fact, about the only positive thing that has come out of Osborne’s reckless experiment in pre-Keynesian economics is that it provides ammunition for those of us warning against similar actions in the United States. So, George: thanks for that, at least.

Photograph by Oli Scarff/Getty Images.