Austerity

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(385)

Mark Blyth, Oxford University Press £14.99

Blyth is against austerity for the best of reasons - he's concerned about the devastation that cuts will wreak on working class people. But his arguments take it on from a different direction.

In this book he tries to prove that it is a self-defeating policy for capitalism, and that the interests of workers, governments and businesses alike would be best served by ditching it. In reality these groups have fundamentally opposing interests. The strongest sections of the book are where Blyth demolishes the myths used to justify austerity today.

He deftly navigates the jargon to show what went wrong in the US financial sector - and how it is this, and not a supposedly profligate public sector, that caused the sovereign debt crisis in southern Europe. In a useful rebuke to the defenders of the euro, Blyth shows how it, like an even more rigid resurrection of the old gold standard, brings financial chaos not stability.

Blyth eviscerates the hypocrisy of creditors who moralise against their own debtors. But all this only raises the questions of what really drove the crisis and what the alternative is. Blyth does his best to answer, and this is where he falls down.

He looks to the theories of John Maynard Keynes, who he calls "the master". His view of the crisis is one that a number of contemporary Marxists have also warmed to. It's a vision of the economy where consumers, not capitalists, are in the driving seat - and where we can spend our way out of crisis.

This doesn't really work any better than trying to cut our way out. The closest things Blyth can find to positive examples are from the drive to rearm before the Second World War - notably in Germany, Japan and the US. Hardly healthy alternatives.

Blyth sneers at the idea that capitalists could be waiting for a "confidence fairy" to tell them when to invest. But what of Keynes's own talk of "animal spirits" that tell consumers when to consume? And he can't explain why the post-war boom ran out of steam, taking the Keynesian consensus down with it.

Blyth looks at the economy through the eyes of policy makers, and believes that governments and central banks are in control. But if so much hinges on their decision to cut or spend, how did crises occur in the 19th century, long before Blyth considers austerity to have been a meaningful policy?

Blyth rejects "class politics" as a negative consequence of austerity. But without them he's left trying to fix the world with an empty toolbox.