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A useful introduction,
This review is from: Austerity: The History of a Dangerous Idea (Hardcover)
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A concise and accessible run through of the economic history of austerity, and an essential primer for anyone still under the (mis)apprehension that the current `sovereign debt crisis' is the cause, rather than effect of our economic malaise.
One might think that debunking the idea of `expansionary fiscal contraction' is rather like shooting fish in a barrel, but a lot of money has been poured into shoring up the ideology that it supports, so any ammunition expended in its refutation is never wasted.
Mark Blyth comprehensively demolishes the real world examples given for the efficacy of the economic equivalent of blood-letting, while detailing the genesis of the theories underpinning the practice, from Locke, Hume and Smith, through Ricardo and on to the Austrian and Italian schools of `Austerianism'.
The big question of how such an absurd theory could have captured the discourse so comprehensively is easily answered by looking at the beneficiaries of `the project' - the mobile elite who, to coin a phrase, have `never had it so good'. When the rocket-fuelled gains of the securitisation process inevitably fell back to earth, the only way those with their hands on the policy levers could protect the positions of those they served was to impose financial repression on the masses through cuts in wages and pensions and the privatisation of health and education. It is no surprise that the last 5 years has seen some of the biggest rises in recorded income and wealth inequality in history - and that's before taking the massive expansion of tax havens into account (see: Nicholas Shaxon'sTreasure Islands: Tax Havens and the Men who Stole the World.
At root of the problem is the fact that much orthodox economic theory, from the Wealth of Nations (Wordsworth Classics of World Literature) on lays its foundations on the sand of the fallacy of composition - the idea that individual self-interest must inevitably lead to the optimum allocation of resources, that the outcomes of the choices of individuals and firms will always negate the negative externalities that fall on other individuals and firms. Without that essential building block much of the facade of liberal economics begins to crumble.
Although touching on the tenet that endures across the orthodox economic spectrum, from Krugman to Mankiw, that banks are merely intermediaries between `patient' lenders and `impatient' borrowers, Blyth could have said more about the monetary system in a fiat, post-gold, system wherein lies the capacity for private commercial banks to endogenously create credit without having to draw on deposits - thus facilitating the massive multiples of leverage that broke the banks and landed the debt on the public balance sheets.
The author also has little to say about the outright, state-sponsored fraud that became endemic to the system as it went off balance sheet (as highlighted by Robert Sherrill in his savage indictment of the `looting decade' of the 1980s, and Satyajit Das's more recent expose of the banking world in Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives (Financial Times Series)).
Sadly, Blyth's final conclusions are not that convincing - it's unlikely that, short of revolution, any real reversion to the tax policies that accompanied the growth periods of the post-war years is on the horizon - even if the alternative is a dystopian Robocop future. Never have so many been shafted so much by so few - and yet, like the frog on simmer, the apathy and inertia grows.
The message one is left with is the one the author begins with: the social mobility that he benefited from growing up in a period of social democracy is already a thing of the past, with student debt levels ensuring that places at the best universities once more become a badge of privilege, while low income graduates enter a lifetime of debt servitude. Ironically, many of those who engineered the brave new world of financial weapons of mass destruction had benefited from that era of social mobility that saw them move from blue-collar obscurity to become Masters of the Universe, and are now busily kicking away the ladder.
Also recommended: John Cassidy's excellent history of economic ideology: [How Markets Fail: The Logic of Economic Calamities] [by: John Cassidy]
Naomi Klein on the political underpinning of the Chicago School: The Shock Doctrine: The Rise of Disaster Capitalism
David Harvey: A Brief History of Neoliberalism