Saturday, May 4, 2013

austerity is a trap

Mathew Iglessias,
There is no greater obstacle to progressive change than the idea of
austerity. It has dominated economic policy in Europe, resulting in
continued slow growth (or outright contraction) and high unemployment.
These conditions have produced demoralized electorates that lack faith in
all politiciansa cynicism that has only deepened when leftist parties have
attained power and failed to revive growth. In such an environment,
progressive change is not possible, and the left is reduced to purely
defensive actions.

In the U.S., things are slightly better, but our economic policy
discussions are still dominated by variants of austerity. The fiscal cliff
deal at the beginning of this year slowed the economy, and the sequester is slowing it more. Yet even with unemployment at 7.6 percent, growth
projections for the year halved to 1.4 percent, and the latest jobs report
coming in at an anemic 88,000, policy discussion continues to focus on the
need to further cut the deficit. Of course, such a focus precludes any
progressive economic policies, including, critically, spending programs
that would help revive the economy and invest in our economic future.

How did we get into such a pickle? Does the current mania for austerity
make any sense whatsoever? And could the recent
Carmen Reinharts and Kenneth Rogoffs influential pro-austerity
any hope for the defusing of this mania? Mark Blyths timely new book,
The History of a Dangerous
provides answers to these questions, and they are not necessarily
comforting ones.

Start with where austerity came from. The lineage goes back to the early
liberal (in the European sense) economic thinkersJohn Locke, David Hume,
and Adam Smithall of whom played a role in creating the theory of and
legitimizing market economics. These thinkers tended to counterpose the
virtues of market economics to the problem of predatory

No comments: