The 'Austerity' Myth

Paper presented at the Green Party 'Austerity' Evening Meeting
September 2nd 2015

What suggested the topic of 'austerity' to me was my sense that the actual word 'austerity' is yet another example of the attempt to limit and distort political debate:
The word 'Austerity' is treated in the media as describing a real state of affairs, whereas my point is that if we had a good description of the real political and economic situation, we would not even feel inclined to call it 'austerity'.

We need to remember that in politics, certain key words are weapons! They are cunningly chosen to disguise a political strategy.
And sometimes we can show the falsity of a policy by showing the assumptions behind its key terms. And this is what I'd like to do, very simply and briefly.

For example, consider how, recently, in the post-election budget, the Chancellor cynically called an increase of 70 pence per week in the minimum wage (from £6.50 to £7.20) the introduction of a national living wage!

Consider, more generally, the word 'reform' .
The dictionary meaning of 'reform' = 'to improve by the removal of faults', to abandon wrong-doing'. i.e. it is a purely positive word, not even neutral or ambiguous.
So it should never be used to describe policies that many people find contentious or controversial or objectionable, such as privatising health provision, or substituting speculative saving for an annuity instead of a guaranteed occupational pension, or introducing new restrictions on the right to take industrial action.
These are not 'reforms', they are 'changes'.
By agreeing in the first place to call them 'reforms' is half-way to losing the argument about why they should be opposed.

And I think there is the same problem about the word 'Austerity'.
Its meaning is 'self-discipline', 'simplicity', 'abstinence from excess or luxury' It is a word that evokes puritan virtues, moral strength, admirable self-denial; faced with inevitable hardship we don't complain; we just, stoically, 'tighten our belts'.
The word 'austerity' smuggles in a sort of confession that we, the country, have indeed been 'living beyond our means' ; that we all (because of course 'we are all in this together') now have to show strength and character in the face of the hardship we have brought upon ourselves by
committing the serious fault of running up excessive debt.

But this version of government debt (and the need for so-called 'austerity' it implies) is no more than a comfortable moral fable. It is comfortable because it makes things sound familiar and simple. A national budget is supposed to be like a family budget: the government is just the same as you and me: if we - the government - (just like you - the individual citizens -) get into debt by spending more than we earn, we are being irresponsible.. And since we are all in this together, we all have to pay for our folly (our indebtedness) by tightening our belts, by spending less. And we can all make savings by eliminating 'wastefulness'. So that a cut in expenditure is always possible because it is a cut in what was, all along, not strictly necessary.

The effect of this moral fable is to construct a spurious unity between the government and the population.
All of us, so the fable runs, are faced by a public spending deficit, which is presented to us as a sin of excess and irresponsibility on the part of the previous government.
So, according to the fable, the government is cutting its spending on our behalf.
It is on our behalf (to save us from excess and irresponsibility) that it is closing libraries and education services, cutting housing and unemployment benefits, selling off council housing and public utilities,, etc.

However, this simple little fable about the 'need for austerity' denies the whole Keynesian tradition of economic theory and policy, which says:
when an economy is depressed it is because of lack of consumer demand, and this is rectified by government spending projects, which support the incomes and living standards of both consumers and workers by creating valuable public assets.
All this is obvious and mainstream common-sense economics, as long as your underlying model of society is a mixed economy of complementary private and public activity, (with the government having a role in safeguarding the long-term welfare of the citizens).
And so it was mainstream common-sense, from the 1930s right through to the 1970s. And Paul Krugman (a Nobel prize-winning economist) argues that it is still, quite obviously, the way things should be managed now.

But the neo-liberal model of economics which has been gradually imposed on the world since the 1980s needs to deflect attention away from this perfectly obvious line of thought because it does NOT want the creation of more public assets. It wants to privatise those that remain, so that they can be converted into profit-making enterprises. Underlying the neo-liberal model of society is the privatisation of all activity, with all decision-making 'outsourced' to the market, and government gradually deprived of any responsibility for regulation or for welfare, other than what is in the interest of corporate capital.

In other words, the moral fable concerning the sinfulness of public debt and the consequent necessity for 'austerity' on the part of citizens is nothing more nor less than a piece of political propaganda designed to expand the economic power of large corporations.

So, to sum up: There are two things that the word 'austerity' tries to prevent us from saying:

1) this hardship which we are supposed to accept as 'the need for austerity' (as a result of public debt) is unnecessary and so we object to it as a matter of rational economic policy.
This is the argument from Keynesian economics .
Quite simply: debt is the natural condition for a government: governments create money through the banking system and then invest this new money in public sector projects that serve the general interests of the whole population.
This is the proper role of governments and banks.

2) The second thing that the word 'austerity' tries to prevent us from saying is:
this hardship that we are supposed to accept (as a result of public debt) is not in any way our fault or responsibility, and so we object to it as a matter of justice.
We are not all in it together. 'Austerity' is a mythic state of affairs carefully designed to tell us, 'These are unifying and benign policies', whereas in fact they are divisive and exploitative policies. We know this because while the income of the poor remains more or less static or even declining the income and wealth of the rich and powerful are increasing massively and rapidly.
The origin of the financial crisis was the cynical carelessness and often criminal greed of financiers whose interests continue to be protected. Meanwhile a supposed crisis in public sector debt is presented as an excuse to reduce the supportive expenditure urgently needed by the vulnerable.

I'd like to end with a note on The Morality of Debt

The set of ideas surrounding the moral fable of 'austerity' rests on the assumption that where there is indebtedness the ethical problem of excess lies with those who, having borrowed more than they can repay, are now morally obliged to tighten their belts.
But the longer and wider cultural tradition lies with the ethical problem of the usurer, i.e. the creditor whose own version of excess is that he exploits his financial power to insist on repayment when this will cause undue suffering.
This is what finally brings down Shakespeare's Shylock. In the end he is dependent on mercy, whereas he thought that the institutions responsible for justice would simply follow the wording of a commercial contract.