For Your Summer Reading

Austerity-Cover1While it’s fashionable among the conservative and libertarian sectors of Orange County, especially when talking about the economies of foreign nations like Greece and Spain, the Austerity Measures are actually delaying any sort of economic rebound.  Not so you say?  I dare you to pick up a new book released last week by Mark Blyth called “Austerity: The History of a Dangerous Idea.”

Blyth is a political economy profession at Brown University in Providence, RI.  Of course, if you think Keynesian economics is hogwash, you’ll likely pass on the book.  But give it a whirl; I read Ann Coulter’s stuff for the sheer unintentional comedy and Rand Paul’s screeds and calls to action on RedState are always worth a chuckle or two.

I picked the book up yesterday and I’m nearly done.  It’s a fascinating tale with factual evidence that austerity measures actually hurt our economy more than help it in trouble economic times. It’s hard to put down and amazing with details with things we liberals like to call — facts.

And opposition to austerity measures are gaining considerable ground.  In Kate Kelland’s piece:

Detailing a decade of research, Oxford University political economist David Stuckler and Sanjay Basu, an assistant professor of medicine and an epidemiologist at Stanford University, said their findings show austerity is seriously bad for health.

In a book to be published this week, the researchers say more than 10,000 suicides and up to a million cases of depression have been diagnosed during what they call the «Great Recession» and its accompanying austerity across Europe and North America.

In Greece, moves like cutting HIV prevention budgets have coincided with rates of the AIDS-causing virus rising by more than 200 percent since 2011 – driven in part by increasing drug abuse in the context of a 50 percent youth unemployment rate.

Greece also experienced its first malaria outbreak in decades following budget cuts to mosquito-spraying programs.

And more than five million Americans have lost access to healthcare during the latest recession, they argue, while in Britain, some 10,000 families have been pushed into homelessness by the government’s austerity budget.

“Our politicians need to take into account the serious – and in some cases profound – health consequences of economic choices,» said David Stuckler, a senior researcher at Oxford University and co-author The Body Economic: Why Austerity Kills.

From the review in

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 it simultaneously: 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 recognize austerity for what it is, and what it costs us.

“Austerity is an economic policy strategy, but is also an ideology and an approach to economic management freighted with politics. In this book Mark Blyth uncovers these successive strata. In doing so he wields his spade in a way that shows no patience for fools and foolishness.”
–Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science University of California, Berkeley
“Of all the zombie ideas that have been reanimated in the wake of the global financial crisis, austerity is the most dangerous. Mark Blyth shows how austerity created the disasters of the 1930s, and contributed to the descent of the world into global war. He shows how European austerity policies have prevented any recovery from the crisis of 2009, while rescuing and protecting the banks and financial institutions that created the crisis. An essential guide for anyone who wants to understand the current depression.”
–John Quiggin, author of author of Zombie Economics  
“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.”
“Mark Blyth’s fascinating analysis guides the reader through ‘the historical ideology which has classified debt as problematic.’ In doing so he outlines the relevance of century-old debates between the advocates and opponents of laissez faire, and explains why, after a brief reemergence in 2008-09, and despite the lack of evidence supporting austerity, the world turned its back on Keynesian policies.”
–Robert Skidelsky, author of Keynes: The Return of the Master
“Among all the calamities spawned by the global financial crisis, none was as easily avoidable as the idea that austerity policies were the only way out. In this feisty book, noted political scientist Mark Blyth covers new territory by recounting the intellectual history of this failed idea and how it came to exert a hold on the imagination of economists and politicians. It is an indication of the sorry state of macroeconomics that it takes a political scientist to expose so thoroughly one of the economics profession’s most dangerous delusions.”
–Dani Rodrik, Rafiq Hariri Professor of International Political Economy, The John F. Kennedy School of Government, Harvard University
“Essential reading… The economy is much too important to leave to economists. We need to understand how ideas shape it, and Blyth’s new book provides an excellent starting point.”–Washington Monthly
“An important polemic… valid and compelling.”–Lawrence Summers, Financial Times “splendid new book”. Martin Wolf, Financial Times

  3 comments for “For Your Summer Reading

  1. Robert Lauten
    April 29, 2013 at 11:01 am

    Austerity or reinstate the Glass-Steagall Act 1933-1999

    Glass-Steagall: (enter HR 129)
    (None of California’s co-sponsors make mention of their co-sponsorship on their Capitol or campaign websites)
    FIRST, step for Economic Recovery is: Reinstate Glass-Steagall.
    Glass-Steagall will create a separation between Investment Banking (toxic “assets”) and Commercial Banking (your checking & savings accounts, and the loans to small businesses).
    Glass-Steagall will end the bank bailouts.

    SECOND: Reestablish the National Credit System

    THIRD: Use the Credit System for productive job creating projects like NAWAPA.

  2. MikeM128
    April 29, 2013 at 4:58 pm

    Of course the fact that we will do anything to stop business from being successful with over regulation, taxes, fees, etc. That does not cause a problem either.

    Austerity now is the best course. The payment on the debt will be so high in the future we will have 100% of the budget be paying the debt. Time to stop it now.

    We need to encourage business growth. The perfect model of failure is California. It’s time to quit making promises of unlimited free stuff to get votes. The socialistic model does not work when it comes to growing the economy.

    Democrats talk of balance. Balance does not mean Tax & Spend! Balance is creating laws the protect us while promoting growth.

    Unfortunately we have a two party system that limits our ability to make necessary changes. We can choose to tax and spend or worry about God and abortions. We just cant seem to get true balance and moderation.

    We have the best government money can buy!

  3. April 30, 2013 at 12:17 pm

    Mike — I love when conservatives throw out tax and spend which is actually a much better way than a conservative’s “borrow and spend” philosophy. You can’t get addition from subtraction. Tax cuts haven’t been the answer otherwise the Bush years would have been economic Nirvana and they are not.

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