By May 29, 2013 Read More →
The Case for “Austerity Economics”

The Case for “Austerity Economics”

Brown University political scientist Mark Blyth’s latest book, Austerity: The History of A Dangerous Idea, is making some waves. After several years of failed attempts to revive the “confidence fairy” by cutting state budgets in the Eurozone and Britain in a time of low growth (if not negative growth), it seems many are waking up to the reality that, as Keynes pointed out almost eighty years ago, the boom, not the slump, is the time to cut. In this timely work, Blyth engagingly demonstrates that the case for austerity has never been particularly strong. By placing the current political consensus on the “necessity” of austerity in historical context – the debates of the 1930s – he illustrates the absurdity of the notion of “growth friendly fiscal consolidation”. But, as Blyth remarks,

That austerity simply doesn’t work is the first reason its a dangerous idea. But it is also a dangerous idea because the way austerity is being represented by both politicians and the media – as the payback for something called the “sovereign debt crisis”, supposedly brought on by states that apparently “spent too much” – is quite a fundamental misrepresentation of the facts. These problems, including the crisis in the bond markets, started with the banks and will end with the banks. The current mess is not a sovereign debt crisis generated by excessive spending for anyone except the greeks. For everyone else, the problem is the banks that sovereigns have to take responsibility for, especially in the Eurozone. That we call it a “sovereign debt crisis” suggests a very interesting politics of bait and switch at play.


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About the Author:

William Oliver is Nabateans’ editor for international economics and Middle East current affairs. He obtained his degree in History from the School of Oriental and African Studies in London. While his studies focused on the Middle East in the 18th and 19th centuries, William has a long-standing interest in international finance and the political economy of development. William’s work is aimed at understanding how the Middle East integrates with the global economy, and into the wider geopolitical landscape.

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