In an article on the ideological history of austerity economics, Ruy Teixiera gives Peer Steinbrück the back of his hand while misspelling his last name:
Keynes’s anti-austerity ideas had their day of course—and a very successful day it was, lasting from the mid-’30s to the mid-’70s. But austerity ideas never went away because, as outlined above, they are rooted in an entire philosophy about the state and public debt that is not subject to disproof, especially among the conservative forces and big economic interests who embrace it. As a result, when Keynesian economics appeared to falter in the 1970s, austerity-based economics came roaring back and dominated economic thinking for decades.
Now, after a brief resurgence of Keynesian economics in 2008-2010, it is back again. (See this paper by Henry Farrell and John Quiggin for a blow-by-blow description of how this happened.) Austerity dominates today’s economic discussions, this time with the chimera of “expansionary fiscal austerity”—the idea that the way out of an economic slump is to cut spending which will lead to rising business confidence, more investment and strong growth.
It is not just in conservative circles that the austerity idea remains strong. The idea also has significant purchase in progressive circles. For example, in Germany, while the social democrats offer some criticisms of austerity, their standard-bearer in the coming election, Peer Steinbruck, played a key role in undermining the brief period of Keynesian ascendancy and re-establishing the hegemony of austerity economics. Steinbruck is a particularly appalling example, but the ranks of European social democrats are full of politicians who subscribe to some variant of austerity economics or at least find it expedient not to oppose it.
The effects of proceeding down the current path could be devastating. Without more growth, millions of people will suffer and unemployment will remain high.2 Compelling evidence of this suffering is collected in the new book, The Body Economic: Why Austerity Kills, written by epidemiologists David Stuckler and Sanjay Basu. Stuckler and Basu provide a capable summary of the basic problems with austerity economics as economics, but their signal contribution in this book is to focus on the health effects of austerity. Looking at data from states during the New Deal, Asian countries in the 1990s East Asian financial crisis, and European countries in the Great Financial Crisis that started in 2008, they find that, the more austerity was practiced in a state or country, the more people got sick and the more people died.3 In short, “Austerity Kills” is more than just a slogan. Austerity doesn’t work as economics, and it kills people in the bargain. It’s time we came up with an alternative.