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Books > Business & Money > Economics > Economic Policy & Development > B00BJK4Y7U
  1. Austerity: The History of a Dangerous Idea
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  2. Austerity: The History of a Dangerous Idea

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Selected as a Financial Times Best Book of 2013

Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.

That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we austerity for what it is, and what it costs us.

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Most Helpful Customer Reviews

Vine Customer Review of Free Product (What's this?) I found this to be a very interesting and thought provoking book. The author makes his viewpoint very clear with the book's subtitle "The History of a Dangerous Idea". The essence of the author's argument is that austerity is unfair because it makes workers pay for the mistakes of banks, and even more importantly, dangerous because it does not lead to prosperity, but only to decreased economic growth and increased unemployment. This thesis is backed up by an analysis of the banking crisis of 2008, how it spread from the US to the EU, why the single currency Euro has made the problem worse for the EU and why using austerity to solve the problems will not work. It also discusses the history of the idea of austerity, both in terms of the economic theory that promotes it and the economic history that does not. Conservatives, who find Keynesian economics to be not only wrong, but also the road to economic ruin, will likely be turned off by the book's subtitle and many of the arguments... Read more
Vine Customer Review of Free Product (What's this?) Blyth shows how the piling on debt in the US was not due to wasteful profligate policy, but instead associated with the bailing out of the private sector, and the banking and financial system. For another excellent coverage of this period see Mark Zandi's Paying the Price: Ending the Great Recession and Beginning a New American Century.

Mortgage borrowers were defaulting en masse, housing prices were dropping like a rock, and the banks and overall financial system were either heading towards insolvency or in a freeze. Without extension of credit and the associated brutal deleveraging of all sectors at once, an economy not only contracts... it just about dies. If the economy is left to its own devices resulting GDP contraction is very severe and unemployment rate can reach 20%+. You are in a Depression. The solution is for the... Read more
Vine Customer Review of Free Product (What's this?) The United States seems to be in a constant set of battles about budgets and spending. These battles are relatively new: they didn't exist until we got a Democratic President. Under Republican Presidents budget deficits were OK.

In addition to the existence of a Democratic President, the other factor that has induced the budget battles is current size of the US debt. Republicans constantly portray this debt as the result of government spending gone crazy. Some Republicans claim that President Obama is a socialist, so the spending, by implication must be a massive transfer of government wealth to those "takers" rather than "makers".

At the start of Mark Blyth's book Austerity, he reminds the reader of how the budget reached its current state. It was not a transfer of money to welfare mothers, but a transfer of money to too-big-to-fail banks (welfare bankers). This combined with the war of choice in Iraq, has resulted in trillions of dollars that have been lost to... Read more
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