Economic debates rarely end with a T.K.O. But the great policy debate of
recent years between Keynesians, who advocate sustaining and, indeed,
increasing government spending in a depression, and austerians, who
demand immediate spending cuts, comes close — at least in the world of
ideas. At this point, the austerian position has imploded; not only have
its predictions about the real world failed completely, but the
academic research invoked to support that position has turned out to be
riddled with errors, omissions and dubious statistics.
Yet two big questions remain. First, how did austerity doctrine become
so influential in the first place? Second, will policy change at all now
that crucial austerian claims have become fodder for late-night comics?
On the first question: the dominance of austerians in influential
circles should disturb anyone who likes to believe that policy is based
on, or even strongly influenced by, actual evidence. After all, the two
main studies providing the alleged intellectual justification for
austerity — Alberto Alesina and Silvia Ardagna on “expansionary
austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt
“threshold” at 90 percent of G.D.P. — faced withering criticism
almost as soon as they came out.
Yet austerity maintained and even strengthened its grip on elite opinion. Why?
Part of the answer surely lies in the widespread desire to see economics
as a morality play, to make it a tale of excess and its consequences.
We lived beyond our means, the story goes, and now we’re paying the
Economists can explain ad nauseam that this is wrong,
that the reason we have mass unemployment isn’t that we spent too much
in the past but that we’re spending too little now, and that this
problem can and should be solved. No matter; many people have a visceral
sense that we sinned and must seek redemption through suffering — and
neither economic argument nor the observation that the people now
suffering aren’t at all the same people who sinned during the bubble
years makes much of a dent.
But it’s not just a matter of emotion versus logic. You can’t understand
the influence of austerity doctrine without talking about class and
What, after all, do people want from economic policy? The answer, it
turns out, is that it depends on which people you ask — a point
documented in a recent research paper
by the political scientists Benjamin Page, Larry Bartels and Jason
Seawright. The paper compares the policy preferences of ordinary
Americans with those of the very wealthy, and the results are
Thus, the average American is somewhat worried about budget deficits,
which is no surprise given the constant barrage of deficit scare stories
in the news media, but the wealthy, by a large majority, regard
deficits as the most important problem we face. And how should the
budget deficit be brought down? The wealthy favor cutting federal
spending on health care and Social Security — that is, “entitlements” —
while the public at large actually wants to see spending on those
You get the idea: The austerity agenda looks a lot like a simple
expression of upper-class preferences, wrapped in a facade of academic
rigor. What the top 1 percent wants becomes what economic science says
we must do.
Does a continuing depression actually serve the interests of the
wealthy? That’s doubtful, since a booming economy is generally good for
almost everyone. What is true, however, is that the years since we
turned to austerity have been dismal for workers but not at all bad for
the wealthy, who have benefited from surging profits and stock prices
even as long-term unemployment festers. The 1 percent may not actually
want a weak economy, but they’re doing well enough to indulge their
And this makes one wonder how much difference the intellectual collapse
of the austerian position will actually make. To the extent that we have
policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we
just see new justifications for the same old policies?
I hope not; I’d like to believe that ideas and evidence matter, at least
a bit. Otherwise, what am I doing with my life? But I guess we’ll see
just how much cynicism is justified.
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