When the banking crisis started in 2008, a renaissance of the economic policy of austerity could be observed especially in the EU which basically meant condemning the state for profligacy on one hand while expecting it to bail out all the floundering banks and other big financial players on the other hand. It meant taking a private sector crisis and making it a public sector problem. Blyth argues that austerity is a dangerous idea for several reasons but the one that should interest anyone who cares about an economy that is required to be of benefit to everyone is this one: It relies on the poor paying for the mistakes of the rich.
After looking in detail at the banking crisis and its consequences regarding economic policy in the US and the EU, Blyth examines the idea of austerity by laying out its intellectual history, starting with John Locke and his views of the state. Then, he turns his attention to historical examples of which the most memorable for me is his exploration of the interwar period in which he demonstrates how the policy of austerity that was implemented in numerous countries during that time made the economic depression deeper and larger, and ultimately laid the foundation for WWII.
Equipped with dry wit and a gift for easily comprehensible explanations, Blyth lays out everything in an engaging and accessible way even for those not entirely familiar with economic theories and the intricate workings of today’s financial sector. His argumentation is sound and effortlessly followed while not providing any simple answers or conclusions; the book is educational as much as thought-provoking. Most importantly, however, he never forgets that, apart from mathematical models and statistical indicators, a healthy and strong economy must mean that everyone profits, not only the elites and the corporations. Asking everyone to cinch their belt by cutting into the welfare state, for instance, is the height of arrogance and impudence, especially in a world that is dominated by staggering inequality already. In that sense, the book is also an indictment of neoliberalism as a political concept and model for economic development.
In my opinion, this is an important and enlightening book on a subject whose relevance cannot be overstated because the economic policies that are implemented by our governments rule the lives of every last one of us. It is truly insane that a concept like austerity has managed to resurface again and again even if historically, as this book proves, there is ample evidence that it just doesn’t work in practice. Although it was pretty much dead and buried after WWII, like a zombie, it didn’t stay that way and now is apparently harder to kill than one would think.