The Austere Option

Matt Taibbi, blogging for Rolling Stone, recently posted a thoughtful critique of European and American calls for “austerity” in response to the global economic crisis. His basic point is that the burden of proposed austerity measures — cuts to welfare, public services, and government spending in general — falls disproportionately on the shoulders of the lower and middle classes,  leaving wealthy bankers and financial institutions virtually untouched. “If there’s going to be austerity,” he concludes, “it has to be for everybody.” But is that the correct conclusion to draw from an otherwise astute analysis?

I’m always reluctant to comment on economic restructuring because I know so little about economics, but as an historian I think that I’m at least a keen observer of the ideologies, prejudices, and assumptions that might lie behind economic theory and practice. In what has become quite the public intra-office dispute, David Brooks and Paul Krugman have sparred in the The New York Times over how to heal the global economy. Brooks is a mostly unreformed neoconservative who agrees with European neoliberals (and perhaps also with their conservative partners, like Merkel, Sarkozy, and Cameron) that the free market is by nature volatile and that stability can only be attained through pragmatic fiscal policy. Austerity for them isn’t always inevitable, but it is inevitable now due to the nature of the crisis. Others like Krugman agree with European social democrats that the free market is a myth; that every economy or financial system depends on government intervention, if only to keep the market “free”; and that economic structures operate on equal footing with social and political structures.

It’s ironic that today’s neoliberals (or neocons minus a social agenda) commit the same fundamental error as Karl Marx of ascribing primacy to economics. The former think that austerity is the only rational option and that all will be okay afterward; Marx would agree that austerity is the only “rational” option for capitalist-run states, but would at least recognize that all will not be okay afterward. I tend to think that austerity measures are not the only rational option. So long as people believe in the value of social welfare institutions, then there will always be room in national budgets to accommodate them. People can afford to believe less — and this is where Taibbi is right — in the imperative of exponential growth in the financial sector, in the competence of bankers to invest public and private assets safely, and in the authority of economists to set national budget priorities. That’s why I think that the current crisis is every bit as much a battle of worldviews as it is one of economics.

Perhaps we should place the emphasis on the “if” of Taibbi’s concluding remark — “If there’s going to be austerity.” Because austerity is not inevitable. If it becomes the norm in American and European economic policies over the next few years, then it will be because voters or their representatives (or both) have chosen that option quite literally at the expense of others.

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