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19 December 2012

The lefties who love austerity

Democracy in America is one of the many excellent blogs on the Economist website. Its anonymous author is ‘M.S.’ who, in a rather anguished post, laments the attachment of so many politicians to the doctrine of ‘expansionary austerity’.

The author appears to agree with neo-Keynesian economists like Paul Krugman that austerity is anything but expansionary. The evidence is "abundant and ever-growing", he insists.

But if this is true, then why don’t rightwingers – or, at least the intelligent ones – change their minds? Is it because they have "cocooned themselves inside an insular world of all-conservative media" and thus never expose themselves to the opposing point of view?

No, it isn’t – and here’s why: 

  • "…belief in expansionary austerity is far too widely shared in circles that have nothing to do with American conservatism for the epistemic closure of American conservative discourse or media to have much to do with it. The idea that cutting the government's budget deficit is a prerequisite for economic growth is dominant in northern European politics, not just on the right, but on all but the farthest reaches of the left too. The fact that American conservatives… don't read the New York Times doesn't help explain why centre-left parties in Germany and the Netherlands believe it's imperative to slash their countries' budget deficits in the face of the worsening European recession." 

M.S. might also have mentioned our own dear Liberal Democrats, another party of the centre-left that supports austerity. 

  • "None of these people, obviously, are watching Fox News… So what accounts for the failure of northern European political parties to create room for an anti-austerity message?" 

The explanation that M.S. comes up with is that voters are too concerned with fairness to see where their interests lie: 

  • "My feeling is that what we're seeing here are inherent political weaknesses in the anti-austerity message itself. Asking voters to embrace that message means asking them to approve of the government borrowing money which will add to their repayment burden as taxpayers, and then spend that money on other people… 
  • "…you may be asking Germans and Dutch to forgive the wastrel Greek government's public debt, or asking Americans to let their wastrel neighbours write down their mortgage debt with public assistance. A neo-Keynesian will say that these are the unsentimental measures needed to restore economic health… But citizens do not ordinarily understand things this way; to most people, more debt is more debt, regardless of whether it's held by government or the private sector, and it scares them." 

Resentment and fear are politically potent emotions. If fully unleashed, they would pose a serious threat to the survival of the single currency – which is why pro-Euro parties in northern Europe are willing to embrace austerity.

And for those of us who don't see saving the Euro as good enough a justification? 

Well, there's always the small matter of whether an economic crisis that was caused by the massive misallocation of capital is likely to be solved by borrowing money in order to prop-up public sector failure either at home or abroad.


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