Tag Archives: Austerity

Smarter Works Better Than Tougher – Stairway Postscript

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The French phrase “l’esprit de l’escalier” refers to that unpleasant moment when you realize what you should have said. According to the usual source, Denis Diderot originated the expression:

During a dinner at the home of the statesman Jacques Necker, a remark was made to Diderot which left him speechless at the time, because, he explains, “a sensitive man, such as myself, overwhelmed by the argument leveled against him, becomes confused and can only think clearly again [when he reaches] the bottom of the stairs” (“l’homme sensible, comme moi, tout entier à ce qu’on lui objecte, perd la tête et ne se retrouve qu’au bas de l’escalier“).

Hence, the wit (not the spirit) of the stairs.

The phrase doesn’t quite apply to what happened this afternoon, but it’s close enough. I was driving to the grocery store when I realized what I should have included in my previous post. I should have mentioned Greece’s ongoing financial crisis. Sensible people understand that Greece will never be able to pay back everything it owes, partly because the economic austerity demanded by its creditors has slowed the Greek economy, making Greece poorer and even less able to pay off its debts. Even the International Monetary Fund, one of Greece’s creditors, understands this. The Greeks need debt relief, like the Germans received after World War 2.

The Germans, however, believe they and the other creditors need to get tougher with Greece. More austerity and more pain will eventually convince the Greeks to get their fiscal house in order or drive Greece out of the eurozone, leading to who knows what consequences for the Greeks, Europe and the rest of the world. In this case, the Germans, like the Republicans, prefer tougher over smarter.

But how was I going to get Germany’s bad behavior into a post about the Republicans? (Believe it or not, I’ve got literary standards.) Then it hit me, probably when I was making a right turn. Remember that rabid speech given by arch-right winger, modern-day fascist Pat Buchanan at the 1992 Republican National Convention? The late Molly Ivins said “it probably sounded better in the original German”.

See, it fits together after all. It’s what I should have said.

It’s the Austerity and Lack of Trust

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The chart below shows government spending after our last four recessions (that’s total federal, state and local spending, corrected for inflation, with the numbers at the bottom representing yearly quarters after the recessions).

After three recessions, government spending went up. After the most recent recession, it’s gone down:

blog_austerity_state_local_federal_spending_0

It makes sense for families to cut spending if they run into economic difficulty, but it makes no sense for the government to do the same. In situations like we’re in now, the government has to counteract the natural tendency of families and businesses to cut back when economic times are hard. Common sense and economic theory tell us the government should spend more after a recession in order to help the economy recover, even if that means increasing government debt until things get better. Yet we’ve been following the opposite policy the past few years. The result has been a relatively weak recovery that has left too many Americans unemployed and underemployed.

Why have we acted so stupidly? The obvious answer is that there were Republicans in the White House after those earlier recessions. Now there’s a Democrat. That’s why Republicans in Congress supported government spending after the earlier recessions, but have vigorously opposed it this time. (After all, Republicans love certain kinds of government spending, despite what they claim.) Hypocrisy, foolishness, the desire to recapture the White House, combined with the failure of Democrats to make the case for more stimulus. It’s all those things and more. 

The chart is from “How Austerity Wrecked the American Economy” at Mother Jones. The author updates the story here.

Meanwhile, Paul Krugman sees a connection between the declining acceptance of evolution among Republicans and their rejection of stimulus spending: in order to be a good Republican these days, you have to deny climate change, evolution and modern economics.

Another economist who has repeatedly pointed out the stupidity of what we’ve been doing is Joseph Stiglitz. In a New York Times article called “In No One We Trust”, he explains how we’re losing trust in each other and our institutions as inequality increases. The article is especially interesting when he shows how a lack of trust and an excess of bad behavior got us into the economic mess we’re still trying to get out of:

Trust is becoming yet another casualty of our country’s staggering inequality: As the gap between Americans widens, the bonds that hold society together weaken. So, too, as more and more people lose faith in a system that seems inexorably stacked against them, and the 1 percent ascend to ever more distant heights, this vital element of our institutions and our way of life is eroding….

The banking industry is only one example of what amounts to a broad agenda, promoted by some politicians and theoreticians on the right, to undermine the role of trust in our economy. This movement promotes policies based on the view that trust should never be relied on as motivation, for any kind of behavior, in any context. Incentives, in this scheme, are all that matter.