"Austerity" has been on the defensive lately. Both in the American media, and in European political discourse. And yet, the idea that debt-reduction is the most pressing problem facing Western governments is remarkably resilient.
Perhaps no one knows this dynamic better than Mark Blyth, a political science professor who has been tireless in attacking what he calls "this ‘austerity as a route to growth’ nonsense" in columns, radio appearances and a clearly-distilled five-minute YouTube video:
His new book, Austerity: The History of a Dangerous Idea expands on his attacks, and also tries to explain where the idea came from. Perhaps his key insight is that it isn’t really an "idea" at all.
"It’s a kind of neuralgia or a sensibility," Blyth says. "It’s there, buried deep inside and every once in a while it comes rushing to the fore." Like a "neuralgia"—a sharp, shocking pain whose cause is often unknown—it’s a kind of chronic condition of American capitalism, with the actual policy implications arising sporadically and sometimes inexplicably.
Blyth finds the core of this condition at the very beginnings of capitalism, in the work of classical liberal philosophers John Locke, Adam Smith, and David Hume, who recognized that unfettered free markets brought about inequality that posed a problem less for the poor than for the rich. "[The rich man] must fear for himself and his safety, and if it were not for the firm hand of the public magistrate, he could never accumulate his capital," Blyth says, paraphrasing Smith.
The problem is that same "public magistrate" is necessarily powerful enough to take away the rich man’s wealth. "Hence, you fear it, but you need it," says Blyth.
Blyth’s book traces how this fear became politics in the 20th century ("when the state became large enough to cut") and gained theoretical underpinnings in the 1980s ("basically mathematics that describes certain processes that are meant to be there in the world"), but part of his history’s point is that there isn’t single, simple line to draw from Locke to Latvia. This is one of the reasons that it is so tenacious as an idea: it depends on a deeply held fear as much as any empirical assumptions that can be argued away.
Not that Blyth doesn’t try. "If you think that chipping away at the nominal debt by slashing government programs for people who earn less than 23,000 dollars is going to do a damn thing about this, then you’re delusional or ideological or both," he tells me. "The best cure for debt is growth. You grow: you’re in good shape. You cut: you end up with more debt. Ask the Greeks, ask the Baltics, ask the Portuguese. Every single one of them has more debt now than when they started [austerity policies] not less."
Blyth explains the persistence of "austerity" in the face of evidence to the contrary with a term from investment banking, when traders find themselves in a money-losing trade. "It’s called being caught in the idea," he says. "You can either liquidate your position, take a small loss and live again; or you can double down, keep going. We have a tendency as humans to double down and we’re doing this right now with austerity."
Still, Blyth is hopeful. "Ideology deflects facts for a long time. But I like to think, eventually, when the costs get high enough, people change tack."