Austerity
Don Atkinson reviews a new book on the history of austerity
Mark Blyth has written a clever, well-argued book that we should all read. Austerity: The History of a Dangerous Idea analyses the economic theory that wages and prices should be reduced, as part of budget cuts, in order to return an economy to a successful competitive state.
I heard you! No, I am not joking! Professor Blyth also thinks this a daft idea; yet we live under a regime that believes this is the only way to extract ourselves from our present economic difficulties. Whilst in the USA, the UK and Europe, profligate government spending was given as the reason for introducing austerity. In fact, our adoption of the ‘dangerous idea’ was because politicians panicked and turned a private banking crisis into a public sovereign debt crisis for which we are all, as taxpayers, apparently responsible.
The bankers involved could not even assess accurately the true cost of their greed, let alone its actual effect on the UK. It certainly threatened their existence. It also damaged not only this country’s financial status. Europe, with one exception, hid behind Greece, the only country that did fit the official explanation. The failure of our politicians to understand the idea and the fact that our economic crisis was caused by the banks’ private greed are now all apparently irrelevant. So too, ironically, is the fact that the people now paying for it (us) had no piece of the profits that banks made on their way to the disaster. It is now our problem, we are told, and so we must pay for it! The power of the financial establishment is again demonstrated. Not only have the public to pay for this piece of private greed, the perpetrators have been let off virtually scot-free, financially! So much for democracy and strong transparent government!
The book demonstrates the nonsense our leaders continue to spin us. It also shows that they had no more idea of what was actually going on than the greedy bank directors. The book also gives crystal clear evidence that the banks were not ‘too big to fail’.
Mark Blyth, who is British, is a professor of international political economy at Brown University in Providence, Rhode Island. His examination of those who cynically exploited their own deliberate misinterpretation of capitalism is exemplary. Perhaps more relevant today, Mark Blyth shows that the more a society is globalised, the more austerity will not work and that it will not work at all if everyone tries to apply it at the same time. He also, rather frighteningly, demonstrates how, at its worst, austerity creates an environment that encourages Hitlers!
Austerity: The History of a Dangerous Idea is stimulating and essential reading. Professor Blyth considers his subject by means of a meticulous analysis of its intellectual bases. He traces a line from John Locke, David Hume and Adam Smith, through the Austrian School, Joseph Schumpeter and Milton Friedman, to views expressed by economists at Milan’s Bocconi University. Perhaps his most telling point is showing how austerity nearly always leads, ultimately, to low growth, combined with greater inequalities of wealth. Since these two comprise the opposite of what we seek, and exactly what most of us are concerned to redress, his arguments require study.
Whether or not this book persuades you, you will surely be enthralled by its quality. Professor Blyth has created a thoughtful, prescient and clear development of the argument. Whether it is our intellectual inadequacy, our inability to learn from history, our deference to a powerful financial establishment or simply a poor sense of survival, I see nothing that will lead us to behave any differently next time. And make no mistake; there will be a ‘next time’. We are individually programmed for it.
Austerity: The History of a Dangerous Idea by Mark Blyth, Oxford University Press, ISBN: 9780199389445 (paperback). £10.99.
