Given the current state of global chaos, perhaps it's time to double check the math on the calculations being used to run the world. Something isn't adding up.
"despite extensive historical evidence that austerity is doomed to fail."
Fail at what though? If the intent is to bring about the collapse of democratic government and usher in a fascist order, there is good evidence from a century ago that this can be achieved through Austerity.
Yes, austerity policies happened in Germany and led to the election of the Nazis, except it wasn't fascist or even conservative parties that were doing it. It was the Social Democrats.
I quoted Mark Blyth:
"In politics, the Social Democratic Party (SPD) abandoned the governing coalition that had been in power since 1928, and in response Center Party leader Heinrich Brüning was appointed chancellor in March 1930. Lacking parliamentary support, Brüning implemented austerity policies by decree to right the financial ship, which in the main took the form of extremely large budget cuts. Despite being out of the coalition, Brüning's policies undermined support for the Social Democrats still further since they saw no alternative to austerity and continued to passively support them. The National Socialists unsurprisingly picked up support in the 1930 election on the back of this cross-party austerity policy, winning 18.3 percent of the vote and becoming the second-largest party in the process. They were, after all, the only party actively arguing against austerity. Indeed, perhaps the oddest thing about the entire German experience with austerity in the 1930s was how it was ruthlessly implemented by the left and so quickly abandoned by the right.
As Sheri Berman brilliantly illuminates, the German Social Democrats of this period (the SPD) were intellectually Marxist but programmatically Ricardian: classical liberals in socialist clothing. Marx's economics were, apart from his view of the rate of profit and the passibility of a general failure of demand, as much Ricardo's as they were his own, especially as they were interpreted by the leading "theologians" of the German Social Democrats. Upon such a view, when the economy was in a slump, there was literally nothing to be done except Let the system melt down until socialism magically appeared.
In fact, for the SPD, good economic policy meant being more orthodox than the liberals they argued against. As SPD member and one time vice president of the Reichstag Wilhelm Dittmann put it in a speech to the SPD faithful, "We want the current situation [the crisis] to develop further, and can only follow in the general direction that these tendencies show us.", In response to this structuralist fatalism, the German trade unions began to agitate for an alternative "full-fledged Keynesian type assault on the depression" in direct opposition to SPD policies. This reflationary policy took form under the aegis of the so-called WTB plan (named after the formulators' initials), which the unions pressed hard upon the SPD and the government. Brüning ignored the plan and pressed on with austerity. But the SPD hierarchy set out to destroy it since it offended their faith.
The SPD's main economic theorist Rudolph Hilferding argued that not only was the WTB plan un-Marxist, it "threatened the very foundations of our program."* As Berman put it, the SPD, as good Marxists, still saw letting the business cycle run its course as the only possible policy. Like the Austrians that they opposed in every other way, the SPD thought that intervention would simply delay the inevitable and make matters even worse. This was hard-core austerity thinking, except it came from the heart of the putatively democratic left.”
Sounds like the SPD was engaged in 'accellerationism' believing that was the path to 'full communism' but had failed to 'read the room'. It would be fair to say that it has also been liberals and centrists that have adopted austerity in the present moment, notwithstanding that the result will be fascism. Part of the problem is that they don't recognise fascism as what it is. Also, since the Overton Window has moved so far to the Right over the decades, actual Socialism is regarded as more preposterously extreme & to be avoided than any other potential outcome by all parties including centrist managerials that claim to be 'the Left'.
Nothing to disagree with there, which is hardly surprising, since I've been following Keen since the early 2000's. My only comment is that I feel the order of operations in your description of bond issuance is a bit skew-whiff, but no matter- you're the economist and I'm not, so I defer...
I had to go back and check the date of the Milton Friedman quote- 1948! It's wild how much at odds it is with the era of massive private credit expansion under Neoliberalism- itself a Friedman inspired project. I guess his 'colleagues' in the private banking sector twisted his arm! Of course that could still be achieved by allowing fiat to grow to fill the gap as credit deflates- which would further deflate credit until Friedmans 1948 position came to pass and banks were restricted to pure intermediation. And pigs might fly!
"despite extensive historical evidence that austerity is doomed to fail."
Fail at what though? If the intent is to bring about the collapse of democratic government and usher in a fascist order, there is good evidence from a century ago that this can be achieved through Austerity.
https://jacobin.com/2024/10/austerity-class-government-spending
Yes, austerity policies happened in Germany and led to the election of the Nazis, except it wasn't fascist or even conservative parties that were doing it. It was the Social Democrats.
I quoted Mark Blyth:
"In politics, the Social Democratic Party (SPD) abandoned the governing coalition that had been in power since 1928, and in response Center Party leader Heinrich Brüning was appointed chancellor in March 1930. Lacking parliamentary support, Brüning implemented austerity policies by decree to right the financial ship, which in the main took the form of extremely large budget cuts. Despite being out of the coalition, Brüning's policies undermined support for the Social Democrats still further since they saw no alternative to austerity and continued to passively support them. The National Socialists unsurprisingly picked up support in the 1930 election on the back of this cross-party austerity policy, winning 18.3 percent of the vote and becoming the second-largest party in the process. They were, after all, the only party actively arguing against austerity. Indeed, perhaps the oddest thing about the entire German experience with austerity in the 1930s was how it was ruthlessly implemented by the left and so quickly abandoned by the right.
As Sheri Berman brilliantly illuminates, the German Social Democrats of this period (the SPD) were intellectually Marxist but programmatically Ricardian: classical liberals in socialist clothing. Marx's economics were, apart from his view of the rate of profit and the passibility of a general failure of demand, as much Ricardo's as they were his own, especially as they were interpreted by the leading "theologians" of the German Social Democrats. Upon such a view, when the economy was in a slump, there was literally nothing to be done except Let the system melt down until socialism magically appeared.
In fact, for the SPD, good economic policy meant being more orthodox than the liberals they argued against. As SPD member and one time vice president of the Reichstag Wilhelm Dittmann put it in a speech to the SPD faithful, "We want the current situation [the crisis] to develop further, and can only follow in the general direction that these tendencies show us.", In response to this structuralist fatalism, the German trade unions began to agitate for an alternative "full-fledged Keynesian type assault on the depression" in direct opposition to SPD policies. This reflationary policy took form under the aegis of the so-called WTB plan (named after the formulators' initials), which the unions pressed hard upon the SPD and the government. Brüning ignored the plan and pressed on with austerity. But the SPD hierarchy set out to destroy it since it offended their faith.
The SPD's main economic theorist Rudolph Hilferding argued that not only was the WTB plan un-Marxist, it "threatened the very foundations of our program."* As Berman put it, the SPD, as good Marxists, still saw letting the business cycle run its course as the only possible policy. Like the Austrians that they opposed in every other way, the SPD thought that intervention would simply delay the inevitable and make matters even worse. This was hard-core austerity thinking, except it came from the heart of the putatively democratic left.”
https://open.substack.com/pub/dougaldlamont/p/far-right-extremism-is-rising-because?r=9gk0j&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false
Sounds like the SPD was engaged in 'accellerationism' believing that was the path to 'full communism' but had failed to 'read the room'. It would be fair to say that it has also been liberals and centrists that have adopted austerity in the present moment, notwithstanding that the result will be fascism. Part of the problem is that they don't recognise fascism as what it is. Also, since the Overton Window has moved so far to the Right over the decades, actual Socialism is regarded as more preposterously extreme & to be avoided than any other potential outcome by all parties including centrist managerials that claim to be 'the Left'.
Thx for the link, I'll go read it...
Nothing to disagree with there, which is hardly surprising, since I've been following Keen since the early 2000's. My only comment is that I feel the order of operations in your description of bond issuance is a bit skew-whiff, but no matter- you're the economist and I'm not, so I defer...
I had to go back and check the date of the Milton Friedman quote- 1948! It's wild how much at odds it is with the era of massive private credit expansion under Neoliberalism- itself a Friedman inspired project. I guess his 'colleagues' in the private banking sector twisted his arm! Of course that could still be achieved by allowing fiat to grow to fill the gap as credit deflates- which would further deflate credit until Friedmans 1948 position came to pass and banks were restricted to pure intermediation. And pigs might fly!