The idea that austerity could help economies by ending profligacy and wastefulness has been proved wrong again. It’s been wrong based on the evidence since the 1930s. For a while, everybody knew that. Then “everybody” forgot it, it became all the rage in policy circles, and now it’s failing again as badly as fantasies do.
So why was it listened to? Gradually, I see more and more people noting the obvious answer. “Because it’s what the Powers That Be wanted to hear.” [You'll notice most of the links point to Krugman. Yes, I get large chunks of my econ news from him.]
That’s important because even the most perfect spreadsheet can’t fix it. (Background if you’d like it: Konczal’s article on Herndon’s Reinhart-Rogoff criticism.) If the problem is denial of facts and not the lack of facts, then clearer and louder facts won’t help. When people want to hear something, they hear it. If the Powers That Be want to hear that austerity is the answer, and all the economists refuse to tell them so, they’ll simply start getting their answers from physicists or CEOs. Consider the unanimity among climate scientists that humans are causing global warming, and the total lack of those scientists when politicians find “authorities” to deny anthropogenic climate change.
The first question becomes why the austerity message was so captivating. I’ve seen it explained as the desire for the neatness of a morality play. (“Spending? Bad! You must pay for your sins!”) But that idea makes no sense. If the Powers That Be were that interested in morality, I can think of many things ripe for punishment. Yet somehow the only programs in need of scourging hit people poorer than the PTB.
I also don’t think that the unwillingness to admit being wrong explains everything. It can explain a lot. But it doesn’t explain why they fell for such a thoroughly debunked fallacy in the first place. These are all intelligent people with a lot of training in reading comprehension. They don’t make such floaters unless they want to.
The simplest place to start when probing motives is to follow the methods of the experts, homicide detectives, and ask, “Who benefits?”
Money should be taken from the poor, the sick, the elderly, because … because what? There’s nowhere else to get it? I can think of two other large pots of money in the USA. One is the spending on expensive military hardware. Two is the absurdly low tax rates paid by corporations and wealthy individuals, the “one percenters.”
Could it be that by directing attention to the weakest members of society they’re hoping nobody notices that their money could solve any shortfalls better, (socially) cheaper, and faster?
Why, yes. Yes, I think it could. This is a classic example of “don’t tax him, don’t tax me, tax the fellow behind the tree.” It’s understandable. We all feel that way. But that doesn’t make it right or intelligent or likely to deliver the greatest good to the greatest number.
Diagnosis accomplished in two easy steps and the only training needed is an appropriately suspicious nature. That means it can easily be applied in real time.
That diagnosis also makes the solution painfully evident. Everybody’s seen it who isn’t hypnotized by wealth. Money from the rich has to be a factor. It’s not off the table, inconceivable, crazy talk. Because the solution is so obvious, it could even be applied before we have a problem, which is the nicest time to apply solutions.
And that’s why austerity was so cool for so long. It’s allowed the Powers That Be to say for years, “Look! Over there. Poor people getting money!” while keeping their piles of tax-sheltered wealth right out of the discussion.