Finally Austerity Is Being Broadly Exposed for Its Abject Failure
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If there is a lesson for the Left to draw from the book it is that it will no longer do simply to be anti-austerity. Austerity cannot go on forever, it is already failing economically, flagging politically, and Blyth’s book sounds its death knell. Of course, zombie economics and its theories can live a long afterlife, and it might seem premature to declare any kind of victory. But an anti-austerity position is increasingly becoming a mainstream position.
Bhaskar Sunkara’s recent suggestion that a reorganized Left can start with a strong anti-austerity program is an opportunity to clarify just how it differs from PIMCO and Barroso. Blyth’s book reminds us of at least a few points of entry for Left thinking. For one, the left-Keynesian argument is largely a story about a crisis in financial markets and the collapse of the Great Moderation. The appropriate response is seen to be a form of crisis-management – state spending to fill the gaps left by a balance-sheet recession, and a central bank policy of financial repression and monetary easing to inflate away all the bad debt. At some point, “things will get back to normal.”
But the singular focus on financial crisis does not adequately explain why there was so much “bubbliness” in the economy in the first place, why there was so much savings sloshing around in financial markets and could find no other sources of profit than currency, bond, and real estate speculation. In the mainstream literature, this is sometimes called the global savings glut. If there is a structural problem in capitalism as whole, which was concentrated and exacerbated by the growth of a shadow-banking system, complex interconnections of financial capital, and an intercontinental asset bubble, then crisis-management won’t bring us back to normal. It will create a new normal of very limited desirability.
Finally, it’s worth noting that the Keynesian approach is about one set of liberals saving capitalism from the pseudo-Leninist, things-must-get-worse-before-they-get-better, ordoliberals. Not only is it less well suited to deal with the underlying problem of structural reform, but it is not a fundamental challenge to control over production and investment. Here too, a left-wing anti-austerity project should have something different to say, but it hasn’t quite said it yet. Of course, these days, just arguing for full employment sounds radical, practically utopian.
But whatever mixture of reform and transformation the Left ultimately comes up with, the terrain of the ideological struggle is shifting. It is moving from pro- and anti-austerity to control over the terms of anti-austerity itself.