Austerity

The History of a Dangerous Idea

Oxford UP, 2013

15 min read

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What's inside?

Is austerity the cure for the economic crisis, or is it making everything worse?

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Recommendation

If you think austerity measures will clean up the mess that stumbling banks left behind, Brown University professor Mark Blyth is out to change your mind. He presents the logic behind using austerity as a tool for lowering debt and recharging economies, and then blows that logic out of the water with effective arguments and historical facts. Though his argument is accessible to lay readers, he provides enough technical information to engage experts. But whether he sways you to his side or not, his quirky, witty writing style – which makes this intrinsically dry subject matter engaging – will draw you in. While always politically neutral, getAbstract recommends Blyth’s book to economists, investors, policy makers and those interested in global economics.

Summary

Austerity Idealized

A disturbing chain of events unfolded during the latter half of 2011, starting in August with America’s credit downgrade, followed immediately afterward by a US stock market plunge. Almost concurrently, the euro zone crisis spread to Spain and Italy, and riots in London quickly extended throughout the UK. Then the Occupy Wall Street protests began fanning out across the US. All these seemingly disparate incidents grew out of one cause: austerity, “the policy of cutting the state’s budget to promote growth.”

The loss of the US’s top credit rating followed political battles about raising the nation’s debt ceiling; those arguments led the stock market to predict slower growth prospects for the US economy. Aimed at reviving the markets with wage, price and spending cuts, austerity is intended to “inspire business confidence,” and it’s supposed to work by using cuts in government spending to encourage private sector spending. However, austerity that disproportionately affects middle- and lower-income classes feeds the growing US income inequity that spawned the Occupy protests. The fact is, austerity hasn’t worked in the past, and it won’t work now.

About the Author

Mark Blyth is a professor of international political economy at Brown University and the author of the book Great Transformations: Economic Ideas and Institutional Change in the 20th Century.

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P. F. 10 years ago

The author incorrectly asserts that austerity has been sold to the masses as a means of jump-starting economies. The premise for everything else he offers in his well-written (use of language, grammar, etc...) is therefore also false. Fact: I'm not an austerity homer who thinks it's the answer to economic ills; quite the opposite. But the spending must come from the private sector, incentivized by the government. The reason is simple: private sector spending is always more efficient than the government. And when it teeters on inefficient, except when the government bails them out, private enterprises fail, and are replaced by new different structures.

Mark Blyth