The Trouble With Austerity: Economics as Ideology
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.