A General Theory Of Austerity? || Paul Krugman

Paul Krugman:

Simon Wren-Lewis has an excellent new paper (PDF) trying to explain the widespread resort to austerity in the face of a liquidity trap, which is exactly the moment when such policies do the most harm. His bottom line is that

austerity was the result of right-wing opportunism, exploiting instinctive popular concern about rising government debt in order to reduce the size of the state.

I think this is right; but I would emphasize more than he does the extent to which both the general public and Very Serious People always assume that reducing deficits is the responsible thing to do.

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Britain’s Success Story || Paul Krugman

Paul Krugman:

Simon Wren-Lewis asks how good British economic recovery — which is being touted as a wonderful success story — really has been. Not very, he says.

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But surely we’re also seeing the ideological bias of many in the news media. France is supposed to be a terrible failure, because it still believes in a strong welfare state — and so it is reported as a failure, never mind the numbers. Austerity in Britain is politically approved, so it is pronounced a success on the shakiest of grounds.


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The Plutocrats And Their Economists ( aka Mercenaries Dressed As Economists )

Paul Krugman’s The Smith/Klein/Kalecki Theory of Austerity:

Noah Smith recently offered an interesting take on the real reasons austerity garners so much support from elites, no matter hw badly it fails in practice.


Elites, he argues, see economic distress as an opportunity to push through “reforms” — which basically means changes they want, which may or may not actually serve the interest of promoting economic growth — and oppose any policies that might mitigate crisis without the need for these changes:

I conjecture that “austerians” are concerned that anti-recessionary macro policy will allow a country to “muddle through” a crisis without improving its institutions. In other words, they fear that a successful stimulus would be wasting a good crisis.

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If people really do think that the danger of stimulus is not that it might fail, but that it might succeed, they need to say so. Only then, I believe, can we have an optimal public discussion about costs and benefits.

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And the lineage goes back even further. Two and a half years ago Mike Konczal reminded us of a classic 1943 (!) essay by Michal Kalecki, who suggested that business interests hate Keynesian economics because they fear that it might work — and in so doing mean that politicians would no longer have to abase themselves before businessmen in the name of preserving confidence.

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How the Case for Austerity Has Crumbled || Paul Krugman

Paul Krugman for The New York Review Of books

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Why did austerity economics get such a powerful grip on elite opinion in the first place?
Everyone loves a morality play. “For the wages of sin is death” is a much more satisfying message than “Shit happens.” We all want events to have meaning.


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And so we shouldn’t find it surprising that many popular interpretations of our current troubles return, whether the authors know it or not, to the instinctive, pre-Keynesian style of dwelling on the excesses of the boom rather than on the failures of the slump.


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Austerity ( Fiscal Consolidation, As Some Ironic Jerks Would Say ) In A Depressed Economy Is Nothing But Class Warfare

Paul Krugman’s The Story of Our Time:

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Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family.

Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.


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… And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.

Stupid As Stupid Can Be … The Austerians

With so many STUPID people around …

The Triumph Of A Bad Idea - Austerity

Paul Krugman’s The Big Fail:

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For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.


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But it all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that “the idea that austerity measures could trigger stagnation is incorrect.”

Well, someone was incorrect, all right.


… , but Mr. Blanchard, the I.M.F.’s chief economist, isn’t an ordinary researcher, and the paper has been widely taken as a sign that the fund has had a major rethinking of economic policy.

For what the paper concludes is not just that austerity has a depressing effect on weak economies, but that the adverse effect is much stronger than previously believed. The premature turn to austerity, it turns out, was a terrible mistake.

I’ve seen some reporting describing the paper as an admission from the I.M.F. that it doesn’t know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, it’s also saying that everyone else (except those skeptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.


The really bad news is how few other players are doing the same. European leaders, having created Depression-level suffering in debtor countries without restoring financial confidence, still insist that the answer is even more pain.

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The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience.

Yes, Banks Fuck Up And Get Help, While The JobLess Are Called Spoilers, That Is Current Right-Wing-Leaned Europe

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Indeed, We Are An Economy, Not A HouseHold. OH, Stupid Right Wingers And Their Stooges

Austerity In A Depression IS NOT Seriousness.