I just got around to reading Mark Blyth’s Austerity: the History of a Dangerous Idea. It is something of a revelation because it puts the modern economic debate into historical perspective. He starts way back at John Locke and his fear of the tyrannical state. Then he moves on to Hume and Smith who built on his ideas. John Stuart Mill managed to find the problem with where these guys were going in the land of fairies and elves known as libertarianism. But no one really paid much attention to Mill as the story unfolds.
All along the course of this thinking that leads to the modern proponents of austerity, there are a lot of good ideas. And many of the fears are justified. A good example is the Freiburg liberals in Germany during the 1920s. They claimed that the economic problems were based upon the fact that the legal system was corrupted by the use of private economic power. This has long been one of the linchpins of my argument against libertarianism and other forms of free market fundamentalism.
But as much as I get the thinkers who brought us to today, I still scratch my head over how the austerians can continue to think that the economy is driven from the wealthy on down. If there are not consumers with money it absolutely doesn’t matter how much or how cheaply stuff can be produced. The economy is driven by demand. It’s also interesting that these same people talk about the power of the government, but don’t seem concerned about private economic power. They also have a kind of “control economy” philosophy where instead of the government in control (as is the case in communism), it is the “job creators” who are in control. Any reasonable observer would be concerned about public and private power.
Blyth shows in sometimes exhausting detail that austerity is not only morally wrong but that it simply doesn’t work as it claims to. Although he maintains a fairly objective tone throughout the book, he comes out swinging in the conclusion:
In the last part of the book, he predicts the way forward. He thinks we are going to get higher taxes on the rich and that the recent Fiscal Cliff deal is just the beginning:
He continues to explain why it is right to tax the rich:
That’s an argument that I’ve long been making. We have had a governing infrastructure that rewarded the rich exclusively over the past 35 years. While we’ve enacted laws that have made the rich richer, we have also asked them to pay less and less in taxes. It is time to reverse that. Raising taxes on the rich is not a question of class warfare. It is a question of class survival. And truly, the rich should understand that better than anyone.
I’m going to have to read Austerity: the History of a Dangerous Idea a second time to get clear on all the economic movements. A lot of the material was brand new to me. But even with the one go, I learned a lot. Plus it was a pleasant read. At his best, Blyth is an amusing and breezy writer. And for anyone who wants to know how we got to such dysfunctional economic policy, it is a must read.