“Integrity is the ability to stand by an idea” proclaims Kent Lansing in Ayn Rand’s Fountainhead, a book that helped make its author a darling of the right. Taken as true, the adage places Chancellor George Osborne as a model of integrity. His unwavering commitment to austerity has been a defining element of this Government.
Far from proscribing to Randian individualism or modern Austerity politics, Mark Blyth’s recent book,Austerity: the History of a Dangerous Idea is a lucid dismissal of the idea governing many of the world’s largest economies. A book as clever as it is accessible, it deftly takes its reader through the history of austerity politics via Locke, Hume, Smith, the collapse of the US housing market and the sovereign debt crisis in Europe. It paints a bleak picture, where a crisis started in the private sector has been transmuted to the public sector, and a fundamental misunderstanding of causation has led to poor public policy decision-making. Blyth argues, with wonderful dexterity, that austerity and its proponents are disingenuous, misguided and, ultimately, dangerous.
However, this blog seeks not to judge the merits of Blyth’s book, but rather to investigate the messages it carries for Britain’s political class. And, it seems to me, regardless of whether you subscribe to Hayekian or Keynesian economic theory, this book tells an important story.
Firstly, it highlights the cyclical nature of trends in economic and political theory. Much like the peaks and troughs in economies, austerity and state interventionism come in and out of fashion. There was widespread flirtation in 2009 between European leaders and Keynesianism. In 2010, German-led austerity politics came to dominate, and continues to do so. This carries a warning for both Chancellor George Osborne and his foe across the dispatch box, Ed Balls. Inflexibility can pit you against the prevailing winds. Placing dogmatism (or Randian integrity) over pragmatism can cause political harm.
Secondly, the book highlights, as all accounts of the current economic crisis do, the complexity and maturity of interdependencies within the world’s economies. It’s striking for the layman to see, in such vivid colours, how something as niche as US mortgage-backed securities and collateralised debt obligations in the repurchase market can ultimately impact Greek sovereign debt. British policymakers are already broadly aware of these interdependencies, and how vital they are to ensuring the sustainability of the financial services sector.
Finally, Blyth’s book makes clear the risks inherent in a ‘one-size fits all’ approach to restructuring European economies. Thrusting German liberalism onto all European states could be as self-defeating as it is harmful. Germany’s success is, for Blyth, unique to Germany. It is a result of the time in which German economic reconstruction took place, and Germany’s favourable monetary conditions in post-war Europe. It would therefore be dangerous to assume replicating Germany in Ireland or Spain will equate to economic recovery. Indeed it misses the point that one man’s debt is another man’s income, and collective austerity could stifle the investment it intends to create. For Britain, fostering nuance in European policymaking could encourage growth, ultimately contributing to economic recovery on both the national and international level.
Whether austerity politics will pay off for the Conservative Party and George Osborne remains to be seen. However, whoever prevails, Keynes or Hayek, Blyth or Rand, British politicians would do well to listen to both sides of the argument.