Austerity: The History of a Dangerous Idea

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Overview

Conservatives today have succeeded in casting government spending as useless profligacy that has made the economy worse, centering the policy debate in the wake of the financial crisis on draconian budget cuts. We are told that we need to live in an age of austerity since we have all lived beyond our means and now need to tighten out belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding ...

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Austerity: The History of a Dangerous Idea

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Overview

Conservatives today have succeeded in casting government spending as useless profligacy that has made the economy worse, centering the policy debate in the wake of the financial crisis on draconian budget cuts. We are told that we need to live in an age of austerity since we have all lived beyond our means and now need to tighten out belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.

That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past two years of trying and countless other historical examples show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. Second, it relies upon those who didn't make the mess to clean it up, which is always bad politics. Third, it rests upon a tenuous and thin body of evidence and argumentation that acts more to prop up dead economic ideas and preserve astonishingly skewed income and wealth distributions than to restore prosperity for all. In Austerity: The History of a Dangerous Idea, Blyth demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.

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Editorial Reviews

Kirkus Reviews
A relevant primer on why the economic policy of the day has been proven to be wrongheaded. Blyth (International Political Economy/Brown Univ.; Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century, 2002, etc.) recognized that austerity measures as the accepted response to the financial crisis of 2008 did not "pass the sniff test," and thus he was prompted to fashion this toned-down, "modular" work for lay readers. The punitive measures to reign in wanton state spending as proposed by conservatives have gained ground, despite the fact that the so-called sovereign debt crisis is really a banking crisis. Austerity shifts the burden of payback on those most reliant on government-produced services--i.e., the bottom 40 percent of the income distribution, leaving "no winners, only losers." The austerity measures that have been propounded by the Germans as the way to fix the European Union mess (save more, spend less) are clearly not working since everybody can't be saving at the same time: Debt is someone else's asset. Austerity may have worked for Germany, in the form of ordoliberalism ("order-based"), and select other countries in the 1930s and 1980s, but Blyth shows how conditions are respectively unique and results hardly perfect. Most fascinating is the author's discussion of the historical underpinnings of austerity, first formulated by Enlightenment thinkers Locke, Hume and Adam Smith, around the (good) idea of parsimony and the (bad) idea of debt. Ultimately, writes Blyth, austerity is a "zombie economic idea because it has been disproven time and again, but it just keeps coming." A clear explanation of a complicated, and severely flawed, idea.
From the Publisher

"One of the especially good things in Mark Blyth's Austerity: The History of a Dangerous Idea is the way he traces the rise and fall of the idea of 'expansionary austerity', the proposition that cutting spending would actually lead to higher output. As Blyth documents, this idea 'spread like wildfire.'" --Paul Krugman, The New York Review of Books

"An important polemic... valid and compelling."--Lawrence Summers, Financial Times

"Essential reading... The economy is much too important to leave to economists. We need to understand how ideas shape it, and Blyth's new book provides an excellent starting point."--Washington Monthly

"Splendid new book." --Martin Wolf, Financial Times

"Austerity is an economic policy strategy, but is also an ideology and an approach to economic management freighted with politics. In this book Mark Blyth uncovers these successive strata. In doing so he wields his spade in a way that shows no patience for fools and foolishness." --Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science University of California, Berkeley

"Of all the zombie ideas that have been reanimated in the wake of the global financial crisis, austerity is the most dangerous. Mark Blyth shows how austerity created the disasters of the 1930s, and contributed to the descent of the world into global war. He shows how European austerity policies have prevented any recovery from the crisis of 2009, while rescuing and protecting the banks and financial institutions that created the crisis. An essential guide for anyone who wants to understand the current depression." --John Quiggin, author of Zombie Economics

"Most fascinating is the author's discussion of the historical underpinnings of austerity, first formulated by Enlightenment thinkers Locke, Hume and Adam Smith, around the (good) idea of parsimony and the (bad) idea of debt. Ultimately, writes Blyth, austerity is a 'zombie economic idea because it has been disproven time and again, but it just keeps coming.' A clear explanation of a complicated, and severely flawed, idea." --Kirkus Reviews

"Informed, passionate." --Dissent Magazine

"Mark Blyth's fascinating analysis guides the reader through 'the historical ideology which has classified debt as problematic.' In doing so he outlines the relevance of century-old debates between the advocates and opponents of laissez faire, and explains why, after a brief reemergence in 2008-09, and despite the lack of evidence supporting austerity, the world turned its back on Keynesian policies."
--Robert Skidelsky, author of Keynes: The Return of the Master

"Among all the calamities spawned by the global financial crisis, none was as easily avoidable as the idea that austerity policies were the only way out. In this feisty book, noted political scientist Mark Blyth covers new territory by recounting the intellectual history of this failed idea and how it came to exert a hold on the imagination of economists and politicians. It is an indication of the sorry state of macroeconomics that it takes a political scientist to expose so thoroughly one of the economics profession's most dangerous delusions."
--Dani Rodrik, Rafiq Hariri Professor of International Political Economy, The John F. Kennedy School of Government, Harvard University

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Product Details

  • ISBN-13: 9780199828302
  • Publisher: Oxford University Press
  • Publication date: 4/25/2013
  • Pages: 304
  • Sales rank: 163,207
  • Product dimensions: 5.90 (w) x 8.60 (h) x 1.10 (d)

Meet the Author

Mark Blyth is Professor of International Political Economy at Brown University. His books include Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century.

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Table of Contents

[to come]

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Customer Reviews

Average Rating 4.5
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Sort by: Showing all of 4 Customer Reviews
  • Posted February 14, 2014

    A must read

    This book traces the intellectual history of "expansionary austerity" from the original concerns with the size of government expressed by Adam Smith, John Locke and David Hume through the Austrian school of economics to the present day. It explains how a private banking crisis became a sovereign debt crisis and then goes on to compare the results achieved by countries that adopted austerity in times of financial crisis with those that did not. The book's subtitle (the history of a dangerous idea) suggests the outcomes. Wonderful book.

    1 out of 1 people found this review helpful.

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  • Anonymous

    Posted October 4, 2013

    Highly recommend! A reality check on Austerity theory.

    This is the best common sense explanation of global monetary policy & theory available that I have read to date. The author is right up-front about what parts of the book you may want to read or skip. I read it cover-to cover and learned a lot. I may read it again to reinforce some of the knowledge within.

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    Posted April 16, 2014

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    Posted May 10, 2013

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