Not so well, eh?
Not when, as Eurostat [pdf] announced earlier today, Gross Domestic Product fell by 0.2 percent in the euro area (EA17) and by 0.1 percent in the larger EU27 during the first quarter of 2013. Even the United States, four years into the “recovery,” grew by a paltry 0.6 percent compared with the previous quarter (and, when compared with the same quarter of the previous year, GDP rose by only 1.8 percent).
Not when, as Paul Krugman explains, the two major studies invoked by economists and politicians to justify austerity measures have been thoroughly discredited.
So, the question remains, why do many members of the elite in both the United States and in Western Europe continue to impose the Draconian measures that, together, represent economic austerity?
While the “psychology answer”—that deficits represent some kind of moral question—might work in terms of selling austerity (it certainly works on my students), it doesn’t explain why those at the top continue to believe in the need for austerity.* What we need, instead, is a class analysis of the different ways capitalism is configured and reconfigured according to both neoclassical austerity and Keynesian stimulus policies.
To his credit, Krugman does take some initial steps in that direction for the specific case of austerity:
As many observers have noted, the turn away from fiscal and monetary stimulus can be interpreted, if you like, as giving creditors priority over workers. Inflation and low interest rates are bad for creditors even if they promote job creation; slashing government deficits in the face of mass unemployment may deepen a depression, but it increases the certainty of bondholders that they’ll be repaid in full. I don’t think someone like Trichet was consciously, cynically serving class interests at the expense of overall welfare; but it certainly didn’t hurt that his sense of economic morality dovetailed so perfectly with the priorities of creditors.
But that’s just the beginning. We need to do much more in terms of analyzing the class effects of the policies on both sides of the mainstream debate.
And, of course, of what a class alternative looks like—since we know that that austerity stuff is certainly not working out for most of us.
*I also don’t buy the idea that the opposite of austerity, Keynesian stimulus, is any less a morality play. The idea that “your spending is my income,” and thus we’re all in this together, is no more technical an idea than cutting deficits as a path to economic growth. Both ideas represent a combination of technique and morality, of how “technical malfunctions” emerge and can be solved and what society can and should look like.