Governments today in both
Europe and the United States have succeeded in casting government
spending as reckless wastefulness that has made the economy worse. In
contrast, they have advanced a policy of draconian budget
cuts-austerity-to solve the financial crisis. We are told that we have
all lived beyond our means and now need to tighten our belts.
This view conveniently forgets where all that debt came from. Not from
an orgy of government spending, but as the direct result of bailing
out,recapitalizing, and adding liquidity to the broken banking system.
Through these actions private debt was rechristened as government debt
while those responsible for generating it walked away scot free, placing
the blame on the state, and the burden on the taxpayer.
That
burden now takes the form of a global turn to austerity, the policy of
reducing domestic wages and prices to restore competitiveness and
balance the budget. The problem, according to political economist Mark
Blyth, is that austerity is a very dangerous idea. First of all, it
doesn't work.
As the past four years and countless historical
examples from the last 100 years show, while it makes sense for any one
state to try and cut its way to growth, it simply cannot work when all
states try itsimultaneously: all we do is shrink the economy. In the
worst case, austerity policies worsened the Great Depression and created
the conditions for seizures of power by the forces responsible for the
Second World War: the Nazis and the Japanese military establishment. As
Blyth amply demonstrates,the arguments for austerity are tenuous and the
evidence thin.
Rather than expanding growth and opportunity,
the repeated revival of this dead economic idea has almost always led to
low growth along with increases in wealth and income inequality.
Austerity demolishes the conventional wisdom, marshaling an army of
facts to demand that we austerity for what it is, and what it costs us.
Austerity : The History of a Dangerous Idea - Mark Blyth
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