Austerity: the Black Hole of National Economic Recovery

Over the past 40 years our American
tax base disappeared offshore, industry followed, we made consumerism a
national goal and the rich got rich while the rest of us ended up in the
are a wreck, teachers, police, firefighters and mid-level workers across the
board are struggling, savings are non-existent, university education is out of
reach, healthcare is broken, kids can no longer expect to do better than their
parents and homelessness is taking over our cities. In the meantime, military
spending for a nation that hasn’t won a war in the memory of any but our oldest
citizens sucks all the oxygen from our economic system.
list goes on. The list elected Donald
Trump in a moment of national pain and frustration that exposed all that
pent-up discomfort that was going on outside the lives of the comfortable. 
we’re going to fix it.

The collective wisdom of
complicit Democratic and Republican legislators demand austerity in order to
achieve that fix. And they are wrong—dead wrong, but we will have it.
for infrastructure, with 54,000 bridges unsafe for travel, are delayed once
again because they probably won’t fall down before the next election. Chicago’s
sewer and water system was built shortly after the Civil War and hasn’t been
upgraded since in the face of 500 leaks each and every day. That’s simply not
on the political agenda, because it doesn’t look as pretty as Millennium Park.
record-breaking national budget has just been approved, built on cuts to
agencies that fund everything from welfare safety nets to environmental
safeguards. Unsustainable austerity marches on, dividing us further. Abraham
Lincoln’s warning that a house divided
against itself cannot stand
falls on deaf ears.
are distracted elsewhere, worrying about Facebook and Cambridge Analytica.
All of which might be
grudgingly acceptable if austerity had any track-record for bootstrapping a
nation back into prosperity. But it doesn’t. There is not a single instance in the history of the world where
austerity has saved a nation in economic pain.
Argentina agreed to an International Monetary Fund demand for
austerity in 1984 and defaulted on its debt in 2001 and again in 2014. 
Mexico. If there is one overwhelming lesson from the debt
crisis that struck Mexico and other Latin American countries so hard three
decades ago, it is that countries that
cannot grow will not pay
Great Britain suffers from an austerity program stuffed down its
throat by its Tory (conservative) Party, as its National Health Service predicts
100 deaths a day over the next five years, a finding likened to ‘economic
murder.’ Its homelessness, social safety nets and public services are in
shambles, with no end in sight.
Greece, unable to sustain a debt load created by a series of
grafting and fraudulent governments and abetted by usurious Goldman Sachs
loans, is rapidly disappearing down the rabbit-hole of insolvency. Spain, Portugal and Italy are close on its heels.
Worldwide, Ireland, Japan,
Poland, India, the United States (yes, it too), Indonesia, Brazil, Venezuela, South
Africa and Australia are all on the verge of financial emergency. Austerity will not save a single one of
Yet measures toward austerity are sure to drive them all deeper into
financial disaster.
Nobel Prize winning economist
Paul Krugman has a word or two to say about austerity.
“In May 2010, as Britain headed into its
last general election, elites all across the western world were gripped by
austerity fever, a strange malady that combined extravagant fear with blithe
optimism. Every country running significant budget deficits – as nearly all
were in the aftermath of the financial crisis – was deemed at imminent risk of
becoming another Greece unless it immediately began cutting spending and
raising taxes. Concerns that imposing such austerity in already depressed
economies would deepen their depression and delay recovery were airily
dismissed; fiscal probity, we were assured, would inspire business-boosting
confidence, and all would be well.
People holding these beliefs came to be
widely known in economic circles as ‘austerians’ – a term coined by the
economist Rob Parenteau – and for a while the austerian ideology swept all
before it…
And then the fun began.
On the other side of the ledger, the
benefits of improved confidence failed to make their promised appearance. Since
the global turn to austerity in 2010, every country that introduced significant
austerity has seen its economy suffer, with the depth of the suffering closely
related to the harshness of the austerity. In late 2012, the IMF’s chief
economist, Olivier Blanchard, went so far as to issue what amounted to a mea
culpa: although his organization never bought into the notion that austerity
would actually boost economic growth, the IMF now believes that it massively understated
the damage that spending cuts inflict on a weak economy…
The IMF came to that
realization just a few years too late for their whipping boy, Greece.
I often encounter people on both the
left and the right who imagine that austerity policies were what the textbook
said you should do – that those of us who protested against the turn to
austerity were staking out some kind of heterodox, radical position. But the
truth is that mainstream, textbook economics not only justified the initial
round of post-crisis stimulus, but said that this stimulus should continue
until economies had recovered.
And so?
What we got instead, however, was a hard
right turn in elite opinion, away from concerns about unemployment and toward a
focus on slashing deficits, mainly with spending cuts. Why?…
Why indeed?
Conservatives like to use the alleged
dangers of debt and deficits as clubs with which to beat the welfare state and
justify cuts in benefits; suggestions that higher spending might actually be
beneficial are definitely not welcome. Meanwhile, centrist politicians and
pundits often try to demonstrate how serious and statesmanlike they are by
calling for hard choices and sacrifice (by other people)…
The same call as is trumpeted
by those who would send other people’s
off to war. Those who never served are always first to eat. Hard
choices and sacrifice are always called for by the comfortable and suffered by
those less fortunate.
By about two years ago, then, the entire
edifice of austerian economics had crumbled. Events had utterly failed to play
out as the austerians predicted, while the academic research that allegedly
supported the doctrine had withered under scrutiny. Hardly anyone has admitted
being wrong – hardly anyone ever does, on any subject – but quite a few
prominent austerians now deny having said what they did, in fact, say. The
doctrine that ruled the world in 2010 has more or less vanished from the
But not before austerity
knocked many sovereign nations to their knees, without so much as a single success in the history of the world.
There is much to be learned from that for those who have an ear for history. Did austerity save Europe and Japan after WWII? Not by the hair of your chinny, chin, chin. The Marshall Plan saved those destroyed nations, but modern generations have forgotten all that.
As usual, those who suffer
the errors of history are seldom its authors.

[1] From
Mexico, Some Lessons for Europe, NYTimes, April 9, 2013

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