AUSTERITY

A relevant primer on why the economic policy of the day has been proven to be wrongheaded.

Blyth (International Political Economy/Brown Univ.; Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century, 2002, etc.) recognized that austerity measures as the accepted response to the financial crisis of 2008 did not “pass the sniff test,” and thus he was prompted to fashion this toned-down, “modular” work for lay readers. The punitive measures to reign in wanton state spending as proposed by conservatives have gained ground, despite the fact that the so-called sovereign debt crisis is really a banking crisis. Austerity shifts the burden of payback on those most reliant on government-produced services—i.e., the bottom 40 percent of the income distribution, leaving “no winners, only losers.” The austerity measures that have been propounded by the Germans as the way to fix the European Union mess (save more, spend less) are clearly not working since everybody can’t be saving at the same time: Debt is someone else’s asset. Austerity may have worked for Germany, in the form of ordoliberalism (“order-based”), and select other countries in the 1930s and 1980s, but Blyth shows how conditions are respectively unique and results hardly perfect. Most fascinating is the author’s discussion of the historical underpinnings of austerity, first formulated by Enlightenment thinkers Locke, Hume and Adam Smith, around the (good) idea of parsimony and the (bad) idea of debt. Ultimately, writes Blyth, austerity is a “zombie economic idea because it has been disproven time and again, but it just keeps coming.”

A clear explanation of a complicated, and severely flawed, idea.