Florian Schui’s Austerity: The Great Failure is a readable book, which has seen me through my Tube journeys this week, but an odd one. He presents thinking about austerity through the ages as seen through two prisms: the religious and moral strand of thought in western tradition about the inherent virtue of modest living and thrift; and the sensible economic perspective, reaching its pinnacle in Keynesian thought, that analyses consumer spending and fiscal expansion as the source of prosperity. Modern austerity, from Thatcherism and its Hayekian emphasis on the small state, to the post-crisis argument for austerity, is therefore described as essentially theological.
Austerity: The Great Failure
“Today, there is general agreement that growing consumption is a pre-condition for economic growth and the satisfaction of potentially unlimited material wants is accepted as one of the principal objectives of economic activity,” Schui writes. The environmental movement is portrayed as a quasi-religious movement descended from the 19th century Romantics. Yet the final chapter of the book is an assessment of the ‘good life’, in much the same vein as in How Much is Enough? by Edward and Robert Skidelsky. It’s a pretty sudden corner turn right at the end.
Another oddity is that the book hardly mentions debt (as I noted on glancing through the index). Given that today’s case for austerity – and indeed previous versions – rest heavily on debt-related arguments, this is a glaring omission. I think it makes David Graeber’s Debt: The First 5000 Years, for all that it is a flawed book, a far more credible critique of austerity measures.
A third strange bit of the argument here comes in the discussion of why Keynesianism fell out of favour because of stagflation in the 1970s, to be succeeded by Thatcherism. Schui argues that the true cure for stagflation was not the Hayek-inspired effort to shrink the state that we got (and that had great popular support, given the massively disruptive public sector strikes as unions tried to win higher pay rises), but instead more government spending and indeed an extension of central planning as practiced in the Soviet bloc. This is a boldly contrarian argument to say the least.
A final complaint is that the book claims economics can explain how to maximise growth but can not answer the question, do we need more growth? I think it’s exactly the other way round. Economics says, yes we need more growth – very few of the world’s people enjoy the good life of a distinguished western European academic; and as many economists – including for example Joel Mokyr in The Gifts of Athena (and me too in GDP: A Brief but Affectionate History) – point out, growth is the name we give to the constant process of innovation that has improved our health, life expectancy, and quality of life so massively.
What we don’t know is how to increase growth, the elusive gold of our kind of alchemy. If we did, nobody would see austerity as a dilemma. Faster growth would remove any need to worry about debt. Without it, rescheduling/default or inflation are the more troubling options. This is algebra, not theology.