The Trouble With Austerity: Economics as Ideology

Great Depression: Volunteers of America soup kitchen (Wikipedia Commons)

A somewhat abridged version of this post first appeared in The Toronto Star here


Governments here and elsewhere are increasingly preoccupied with cutting even as evidence piles up of its harmful consequences on people and the economy. Austerity is not even delivering the balanced budgets its advocates promise. Even the IMF is now preaching balance rather than a single-minded focus on cuts. Yet, austerity’s adherents hold fast, deny the evidence or double down. Why is that?

Of course a few at the top benefit from austerity, at least in the short term, and though few, they exert considerable influence. And some pundits are so invested in this agenda that they would have to swallow themselves to alter course. But the imperviousness to evidence is about more than that.

What makes a theory “scientific” is that it’s falsifiable – if contrary evidence is found, the theory is modified or thrown out.  But austerity fetishism is not economics; it is simply the latest expression of free market orthodoxy, and as ideology, impervious to evidence, never wrong. The belief that less government is the solution to pretty much any problem doesn’t lose a beat when the contrary evidence comes in. Just check out the responses of the free marketeers to the evidence.

First is denial. That was how our federal government reacted to the early signs of the 2008 meltdown. And now they constantly remind us how well we are doing, grabbing any glimmer of good news and ignoring the rest, comparing us to those in deepest trouble and not the few who are prospering by taking a different course. Politically this often works. None of us likes bad news and we often punish the politicians who bring it. Those who remind us of rising inequality, stagnant incomes, increased child poverty are painted as gloomy naysayers. Why, it is asked, do they hate Canada? But sooner or later the bad news is just too bad to ignore and denial no longer sells.

Here is where adherents will often double down. If austerity isn’t working, what we need is more austerity. We are never in a situation with no government or zero taxes so ‘austerians’ can always make the case that they just haven’t cut enough. That seems to be the argument within the UK Conservative Party and from Ontario Conservatives. In Canada, austerity has been implemented in slow motion, in increments, so we are ripe for this argument: our federal government denying that previous budgets were “truly” austere, is now hinting that its next budget will cut even deeper.

There are, of course, political limits to cutting. That’s playing out dramatically in the streets of Southern Europe. But here, too, the consequences of cuts are increasingly visible, first for the most vulnerable: aboriginal communities struggling to meet basic needs, higher tuitions and student debt, refugees who cannot get needed medicine, more unemployed Canadians thrown onto inadequate welfare because they cannot access insurance, migrant workers denied their meager benefits, prisoners living in intolerable and ultimately dangerous conditions. Some consequences will play out more slowly: weaker environmental regulations, cuts to education and science, neglect of crumbling infrastructure, eroding public services will all make our economy less competitive, less fair, less sustainable. The deeper the cuts, the more public services erode, the more inequality and poverty grow, the greater the risks of social disruption and the higher the political costs. Then what?

The final refuge is to argue that all the right things have been done and now it’s up to the market. These arguments are already on the business pages of our media: When the Governor of the Bank of Canada urged business to put some of the cash they were sitting on back into the economy, the austerians reacted with force. Don’t worry about “dead money”, they said. Don’t worry about the failure of the corporate sector to turn its profits – and tax cuts – into job-creating investments. Sounding eerily like old communists clinging to the notion of inevitable revolution, their argument was pure ideology – “it’s only a matter of time”, surely market forces, as the laws of economics require, will kick in, good jobs are coming. If there are inexorable laws of economics that yield jobs and growth from cuts to taxes and government, it seems somebody forgot to tell business.

So misguided ideas persist. Critics are painted as negative purveyors of doom, tax and spenders, or worse. Lets be clear, no one is arguing for imprudence or waste. Budgets should be balanced over time and debt should come down in good times. But we need to understand how we got here and we ought to stop repeating what just doesn’t work. What got us here was a combination of recession – temporarily higher spending and lost revenue – and over a decade of unaffordable tax cuts. Before the recession and the latest tax cuts, we were running surpluses. Spending obviously wasn’t the big problem and our government debt to GDP is pretty reasonable and interest rates are low. Why then the obsession with cutting? And where are the alternatives?

About 80 years ago Antonio Gramsci, an ideologue of a different stripe, wrote in his prison notebooks of moments in history when old ways of thinking are clearly not working but new ways have not yet been born. “In this interregnum”, he wrote, “a great variety of morbid symptoms appear.” We are, it seems, in just such an interregnum. Austeria may be a morbid symptom, the last gasp of a failed ideology, but it also reflects the absence of a consensus around any alternative. Indeed. persistent austerity dulls the political imagination, makes any spending, any alternative to cutting, seem risky, as if cuts held no risks. It is easier to dismantle than to transform, easier to cut than to build.

Nonetheless, maybe we are seeing some of the first glimmers, for example, in President Obama’s recent State of the Union Address, where climate change and inequality played prominently, and maybe too in the U.K. where Labour’s Ed Milleband reopened the tax debate, focusing on helping the 50% hurt most by current policy. Here too some recent glimmers, though for the most part what we have been getting is different degrees of austerity.

This week the Ontario Federation of Labour is launching a grassroots consultation on an alternative Ontario budget, a People’s Budget. We have an opportunity here to help change the conversation.

Comments
30 Responses to “The Trouble With Austerity: Economics as Ideology”
  1. Catherine @Soplet says:

    Austerity language is driven by corporate business framework. The corporate model pre-selects inputs at the lowest cost to move through a mass-production algorithm so profit derives from economies of scale.

    Austerity language portrays a mindset which, by eliminating input differences, cannot thereby be creative, integrative, or innovative for 21st Century adaptability to change.

    Pre-selecting inputs means: closing down mines while ore deposits remain.
    Lowest cost for inputs means: clear cutting is most efficient. just One time.
    … we have learned from activists who persuaded government, and then industry, that sustainable forestry practices mean reliable supply for continued business. And avoid environmental degradation.

    Literacy is an artisan process. So is health.
    Variable inputs are subject to environmental influence and stewardship in order to attain standardized benchmarks over time: graduation rates, better public health outcomes.

    Artisan process seeks adaptation and innovation from its framework.

    The fastest way to buil integrative neuroscience for adaptation and innovation is music, arts and sports for young children. Builds the corpus collossum, and wires up the eight pillars of executive function.

    Breakfast boosts learning uptake, and is the cheapest tool for crime prevention.
    Literacy lower crime rates, reduces policing and victim costs.
    Literacy thus restores fiscal balance.

  2. Jim Taggart says:

    Your points are well taken, Alex. The U.S. economy would be a tad messier had it not been for the Keynesian inspired efforts a few years ago. Indeed, the world economy would have been hit hard. However, I’ll make two points to argue from the opposing viewe:

    First, the ongoing failure by governments to get their fiscal houses in order and to seriously address their national debts (deficits are window dressing) will eventually see the crows come home to roost. The U.S. economy will implode at some point if it doesn’t deal with its revenue-expenditure imbalance. As for Canada, we’re playing pretend.

    Second, the massive infusions of liquidity into the money supply (aka quantitative easing) has a growing number of economists squirming in their chairs. NO ONE has a clue what the ramifications will be.

    Thanks for a thought-inspiring post.

    • himelfarb says:

      I don’t know Jim, all the dire predictions re interest rates, inflation, implosion, haven’t happened as debt hawks keep eradicating but the negative impact of austerity on people and growth is indeed measurable, even according to classical economists. Of course we have to be prudent on spending but that includes collecting the revenues we need to spend on wise investments, essential services and help to those who need it.

  3. May Hen says:

    Hi Alex, I sent you an e-mail last week to your gmail and a follow up one yesterday. I realized it might have gotten re-directed to your junk mailbox so maybe a message here might be more fruitful.

  4. Mark Hammer says:

    Would I be incorrect in assuming that the piece’s title is an oblique reference to Richard Lewontin’s 1990 Massey Lectures on “Biology as Ideology”? The lecture series (available here: http://www.cbc.ca/ideas/massey-archives/1990/11/07/1990-massey-lectures-biology-as-ideology/ ) refuted the notion of modern genetics as a “pure” empirical science, directed entirely by evidence. I suspect there are meta-theories of human nature, society, history, etc., at work within the field of economics as well, sometimes in ways that the practitioners aren’t even aware of…as was the case in genetics.

  5. Reblogged this on Leadership Inspired and commented:
    Worth reading:

  6. Ryan says:

    Another great piece. Not a letter out of place. Your point about austerity dulling the political imagination gave me a jolt.
    Keep em’ comin’!

  7. Ian says:

    Idle No More takes Queen. Your move.

  8. I wonder if Harper and the harperian read this blog.

  9. Ian says:

    “There are no outdoor sports as graceful as throwing stones at a dictatorship.”

    Ai Weiwei

  10. Mark Hammer says:

    The question one seldom sees any response to is “What is austerity *for*?”. In other words, let us say that belts are tightened for seven generations, and all deficits eliminated and debts paid. What do we do with it at the end? What is all that absence of expenditure for? Is it to permit government to accomplish more with what they have, or is it simply to give ME more of what I consider to be MY money, so I can spend it on ME?

    None of that is to diminish the importance and impact of national economies on the *potential* for regular folks to live materially adequate and meaningful lives; clearly it should not be ignored. But do we serve “the economy”, does “the economy” serve us, or does the economy largely serve investors?

    Even though I personally do not invest in anything – really, not even an RRSP, GIC, or a savings account – I understand that nations invest. So, like it or not, my taxes are not where my contribution to the treasury ends. And my nation’s perceived value/risk as an invest*ment* plays into what my nation is able to do at the end of the day. But somewhere along the line, the value and meaning of nationhood gets lost when the Bay Street logic supercedes all, and social policy becomes all about investing. I, for one, have never really thought about “the public interest” as being about “interest” in the monetary sense.

    • himelfarb says:

      Good question Mark. No doubt it matters whether we are making cuts to expand the choices for future generations or simply as scorched earth that reduces those choices, whether this is about smaller and smaller government or restoring fiscal sovereignty, etc. And I have hypothesized that what is driving austerity in many places at least is the belief that less government and more markewt is always good. But there are two equally important questions – whatever your purpose at what human cost are you willing to proceed and is there any evidence that what you are doiung will work as you say – ie will endlewss cus actually balance the budgetand will people ever accept endless cuts?

  11. Ian says:

    “Our struggle does not belong only to us. It belongs to all peoples of the world. And we cannot let it fail.”

    Che Guevara

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