Austerity: The History of a Dangerous Idea. Mark Blyth.

Austerity, a renowned term in the realms of political economy- is a term used to describe government initiatives to tackle existing crises such as government debt. Austerity can come in a form of cuts in public expenditure, tax increases or both and it is usually done in very tight economic conditions.  

Blyth's book; Austerity is a guide to understanding how the global economy has found itself in crisis and he offers the following definition to the term Austerity when he says it is “a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness, which is best achieved by cutting the state’s budget, debts and deficits”. One of the world's largest economies, the UK has adapted a fiscal policy as a response to the great recession and in 2009 David Cameron declared that "the age of irresponsibility is giving way to the age of austerity" and by the 2010 Coalition government of the Conservative and Liberal democrats the first austere policies were in action which lead to less people being able to access the housing market, less people in employment, the rate of life expectancy in England nearly halved between 2010 and 2017, and more people were living off of food banks due to the George Osbourne, the Chancellor of the Exchequer's who achieved his goals by goals through substantial reductions in public expenditure and tax increases amounting to £110 billion. 

In his book, Blyth presents three reasons as to why austerity is dangerous and that is because it impacts those on the lower income bracket more than anything else (40% of the US income distribution hasn’t had a wage increase since 1979), it ignores the notions that all countries cannot be austere at the same time and that it simply doesn't work. He structures the book into three sections, the second section of the book is an examination of previous historical attempts at using austerity as a way to restore economic growth through market competition. 

 In this section the author combines the austerity with liberal economic policy that is weary of state intervention in the economy seeing as it as useless. He combines the ideas from Locke and Smith to the Austrian School, Schumpeter and Friedman, Blythe demonstrates the persistence of austerity policies. The strongest element of this section is the ‘natural history’ of austerity in which the experiences of austerity in the US and UK in the 1920s and 1930s, and Denmark and Ireland in the 1980s, are considered in the context of the countries such Lithuania, Bulgaria, etc..   

The crises of austerity

Austerity , commonly defined as the difficult economic conditions created by government measures to reduce public expenditure .This definition stands in confrontation with the Political Economist Mark Blythe who defines it as the nonsense way on how to pay for the massive increase in the public debt caused by the financial crisis.

Giving clear analysis on how the modern day world lives in an all-encompassing debt from credit cards, mortgages and government debt as a result of the 2008 financial crisis. Blythe makes the argument that austerity is really an unjust use of the working class for the repayment of the upper-class debt.

Can this really be the case found in today’s society? According to Blythe there is no doubt, and here is why:

The bottom 40% of the US income distribution hasn’t had a wage increase since 1979 so it can be understood as to why many people have been found in a place of debt. Blythe re-asserts the point that banks who took loans were really just trying to maximise their own profits over base survival which is why there is clear inequality in how the repayment is arranged.

Blythe paints the picture of the private sector that is focused on reducing and paying off their debt, ultimately decreasing spending .This causes for the Government intervention , which has so far showed itself through increasing public consumption over private consumption by  either increasing taxation or ridding of the government services.

This brings us to the point that Blythe is emphasising in his book which is that the results of government intervention in cutting of services is felt very differently on the scale of income distribution because, the bottom 40% are the ones most in need of government services such as the police, healthcare and education so really, they are experiencing the effects of the crises more dramatically than the top percent who have caused the colossal magnitude of the crisis in the first place.

Is this relevant ?

In 2014 it was found that 71 coalition MP’s who voted for NHS privatisation had financial link from companies trying to profit from this deal.Moreover a recent survey by the public services found out of nearly  11,000 employees, including paramedics, teaching assistants, hospital porters and police staff of which (43%) described their standard of living as worse than a year ago, and a quarter (26%) said they owed more money than they did 12 months ago whilst In the US, the richest 400 Americans own more assets than the bottom 150 million.