Mark Blyth: “Austerity Cures Nothing”

This is a bracing, no-nonsense talk from economist Mark Blyth of Brown University, who is the author of Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century and Austerity: The History of a Dangerous Idea. Unlike many on the left, he harbors few illusions about how and why the public at large has not done much to contest a clear deterioration in their standard of living (stagnant wage levels, less job stability, cuts in benefits, longer hours and more employer incursions onto what used to be private time). And not to suffer from confirmation bias, but as reader Gabriel U, who flagged this video, pointed out:

Much that’s good in interview, but one bit I think the NC team will like is he agrees virtually to the letter with view that, without having a Plan B from the outset, the original Tsipiras-Varoufakis government was “criminally irresponsible” in its negotiation strategy (this is a little after the 22:00 mark).

This interview was conducted by Andrew Mazzone on his show Smart Talk.

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  1. JLCG

    If the ecology of the world is important and we have to change our profligate consumption habits for something new and less destructive we have to call that change for what it is: austerity. Austerity is necessary but it must be tempered by equity or justice. What is immoral is that the rich or powerful will continue living like Sardanapalus and the humble will have to bear all the burden of virtuous living.

      1. Schofield

        @ nigelk “Some animals are more equal than other.”

        Or the Divine Right Of Kings aided and abetted by The Church. These days known as Neoliberal dogma.

    1. Ian Ollmann

      That is the very definition of being rich. The ability to just pay for stuff that is important to you means that in scarcity, you do not have to cut back while the less well off don’t have a choice. Witness: To put it another way, the rich have the luxury of deciding whether to be moral or not.

      It is certainly not fair. We gave up being fair when we decided to pay some people more than others. At issue is how much inequality do we tolerate? On the one hand, limiting the wealth of the rich would be more fair, and they would have to cut back whether they wanted to or not, like the rest. (Is this a moral decision?) The rest could spend more. On the other hand, if we can make only 0.0001% of the people rich, convince them to bury most of their money rather than spend it, then the other 99.9999% would have to cut back, which is good for the planet.

      Decision, decisions….

    2. Just Ice

      “and the humble will have to bear all the burden of virtuous living.”

      What’s your spiritual source for austerity = virtue? One can easily be mean and austere, for example, at the same time when it’s kindness that’s required of people.

      Of course, if you want to make up your own religion and resurrect yourself too …

      1. JLCG

        I am sorry I used the word humble and that it was misunderstood. I used from its Latin root humilis from the locative humi that means to be on the ground.
        Also the meaning of virtue seems to have been misunderstood. I suppose that when an ecological beneficial effect is obtained it will be attributed not only to knowledge but to moral strength. That moral strength I chose to call virtue.
        Next time I will use plainer language. Sorry.

        1. Just Ice

          How about we aim for justice as just about every religion commands? Don’t you think justice will be necessarily easier on the environment if, for no other reason, that it avoids wars and other such waste?

          Or will justice result in even more waste when the poor can afford more junk? Or is it their poverty that makes them susceptible to junk in the first place – to cheaply ameliorate their misery? I’d argue the later is the true situation since I refuse to believe that justice and the environment are incompatible.

    3. jrs

      The thing about seeing what is called “austerity” as what is desirable ecologically is of course that the word has another meaning which does lack all equality and justice, but also it lacks all consideration of the power dynamics.

      In the existing system the power dynamics of making most people poorer and poorer while the rich get richer, is that people become near slaves to the rich – all those people at urban outfitters working unpaid overtime, or lower down the food chain your amazon warehouse or walmart worker, those whose jobs physically endanger them make them sick or even just break them mentally because they are so extreme, everyone who takes a job that they think is immoral (or joins the military and kills and comes home with PTSD) to pay the bills because unemployment is through the roof etc.. So the current austerity is not just poverty but is leading to a power dynamic imbalance that is destroying people. Only an economists sees only goods and services and never power.

  2. Jamie

    We have a perfectly good word to describe the change we need to make, viz., ‘sustainability’. There is no reason on Earth why we “have to call that change” ‘austerity’. Austerity is an ideological cloak for increasing inequality. Sustainability has no inherent implications for either a just or an unjust distribution of resources. These two things are not at all the same.

    Under sustainability, we optimize our use of resources over the long haul, instead of maximizing them over the short haul. In the long run that gives us more resources to distribute, not less. Under austerity, we maximize the power of the wealthy by impoverishing the masses. Not at all the same.

  3. JohnnyGL

    This was easily the best interview I’ve seen in months, if not years. I’ve seen Blythe before in interviews and thought he was impressive, but the man clearly had a good night’s sleep and a healthy breakfast because he was razor sharp in this one. He was rescuing the interview from some bland, sophomoric questions from the interviewer at points by brushing off the question and going on a much better tangent. Also, the interviewer was really struggling with his pace and seemed off-balance at times. Like he wasn’t sure how to manage him or couldn’t think of a good follow up to his points.

    Perhaps most importantly, Blythe seems to really get the politics involved of what’s happening in the world. And he gets it far better than most pundits who follow politics.

    I’ll crown him the best left-leaning economist I’ve seen interviewed. Can we get him doing a weekly show or something? The world needs more Blythe content!

    1. cnchal

      . . . Also, the interviewer was really struggling with his pace . . .

      I had to laugh when he claimed to be part of the elite, and then seconds later we’re screwed.

      According to him there are two Amercas. America 1, Bosnywash. America 2, the rest of the world, and his touching concern about the dangers of elite inbreeding and the creation of a new “super race”.

      1. sd

        I was under the impression he was playing devils advocate and arguing a hypothetical. He starts with, “I am a German elite, an American elite…” clearly setting up a hypothetical situation.

    2. Norb

      Check out Richard D. Wolff at economic update.

      He is a Marxist economist advocating the democratization of the workplace for many years. His solutions to our economic troubles focus on worker self directed enterprises. Democracy in the workplace.

      Until we have a government that enforces fair treatment of workers in relation to owners of capital, I don’t see how we can move forward as a society.

      We will all be unemployed, struggling along as independent contractors, or somehow surviving running our own businesses. Elite management class excepted.

  4. Norb

    I think Blyth’s observation that we all have been bungling along is probably the most accurate. The difficultly is trying to deal with the dual nature that structures have to be planned and designed on one hand and also that,”things just happen.”

    Randomness and luck. Two powerful forces in the universe. Its disconcerting to realize that the elite, who demand and expect such deference from the majority of the population because they are so much “Better”, and more “exceptional”, really have no clue on where they are going. It’s all make it up as you go along. Extend and pretend.

    It is also true that the human tolerance for pain and suffering is both a strength and a weakness. A weakness in the sense that evil in the world can be perpetuated by tolerance for suffering. Blyth is correct when he compares the poverty level in the US compared to the rest of the world. We have a long way to go to reach world standards for poverty and this explanation goes a long way to make sense of the gross inaction we see all around us. People are getting by and that’s ok for them.

    I think we are approaching a time when we can begin the conversation with ways to change the world for the better instead of always ending up with a -what are we to do about it- I need to take my kids to school shrug.

    I’m thinking the Amish were on to something when they choose their lifestyle. Abandoning the religion of the marketplace and embrace the sanctity of life.

    1. Norb

      Sorry- the elite have no clue in the sense of having a vision for the future. The only thing they know for certain is how to carry out the looting. Other than that- not so much.

      1. neo-realist

        The elite also have Corporate MSM to mislead the intellectually lazy, the consumer toys and social networks of xbox, iphones, and twitter to distract the youth, and the para-military police state apparatus to crush the resistant.

  5. Synoia

    Austerity Cures Nothing

    It certainly cures much. It just depends on what it cures for whom.

    It enables money creation only through debt, which further enables rent extraction form the poor, and removes the guilt from further starving the poor, because TINA.

    This conventional wisdom and set of beliefs must originate and be perpetuated from some set of meetings and conventions. Who can illuminate from where it promulgates, unchallenged, apparently away from parliamentary discussion?

    1. Norb

      World resources must be managed. If we can’t get a grip on this problem, prepare for a brutal future world.

  6. cnchal

    At the 31 minute mark.

    Here is how it works, it’s very simple

    We have factories of consumption called shopping malls. The Chinese have factory production called factories. The Europeans do the high end, the tourism, and the UNESCO heritage sites.

    Everybody else is kind of surplus to requirements, unless you are a raw materials producer.
    That whole thing gets intermediated in a very simple trade whereby the Chinese sell us stuff and we give them bits of paper bearing 2%.

    They then hold onto more and more of that until they get so annoyed with the process that they are going to try and buid a piece of infratructure all the way from Beijing to the Middle East and back to Indonesia in their new plan called One Road One Belt,.

    The only problem with that is that everybody involved in buiding this stuff is beginning to get more wigged out by the Chinese than they ever did about the Americans, to the point where the Vietnamese are considering asking the US Navy to come and visit Cam Ranh Bay.

    Whoever though that would happen?

    At the end of the day there is one global reserve asset, it’s the dollar, why, simply because everybody believes it’s going to last, the Euro might not and who knows what China is actually worth.

  7. Lambert Strether

    Identity politics, 12:00: “Why is there no sense of collective identity among the 70%?* They’re caught by generation, they’re caught by class, they’re caught by ethnicity, they’re caught by every ideational and identity variable you can possibly think of. They’re all schismed.”

    NOTE * I’d say 80% but I bet he has a good reason for 70%.

  8. Left in Wisconsin

    Really interesting. (But I wish he wouldn’t say “it’s really simple” so much.)

    One sense of how entrenched conventional “wisdom” is: Blythe is not actually on the economics faculty at Brown. My guess is they want no part of him. He’s in political science.

  9. Steven

    Just from the comments, there seems to be some confusion about what is meant by ‘austerity’. My understanding is that it refers to cutbacks in GOVERNMENT as opposed to individual spending. ‘Spending’ of course implies consumption. But it can also be for purposes of investment, not in Wall Street’s paper wealth but genuine wealth creation like (needed) infrastructure, education, scientific research etc. Under the New Deal the U.S. invested in a variety of areas like TVA because the private sector didn’t believe it would be sufficiently profitable.

    Making money is the bottom line for Western business. Providing profitability is indeed a measure of doing things more efficiently, there is nothing wrong with this. But that has not been the case for at least American business for almost a century. In “The Engineers and the Price System” the economist Thorstein Veblen explained why. In the increasingly financialized US economy, profitability came not from genuine wealth creation but from what Veblen termed economic “sabotage”.

    Veblen listed strikes and lockouts as examples of that sabotage but I don’t remember him including our species propensity for ‘conspicuous consumption’ and waste. Increasingly that economic sabotage has become the source of the income stream that provides the raw material for what Michael Hudson describes as Wall Street’s product – debt. The biggest recipients of the ‘free lunch’ much despised by so-called conservatives are also the staunchest opponents of genuine “creative destruction” in which the obsolescent and increasingly unsustainable technologies that provide the monetary foundations of their wealth (the 99%’s debt) are undermined by advances in scientific and technological knowledge. Take a look, for example, at the utilities’ and fossil fuels industries’ opposition to solar energy.

    Those ‘parasites’, as Hudson calls them, are increasingly dependent not just on their ‘free lunch’ but on sabotaging progress in the struggle for subsistence on a planet we are going to have to share with other species for our own survival. They pass laws and plan the economy to insure the continued viability of their ‘free lunch’ and the monetary foundation on which it is based not in the interest of sustainability of the 99% or for that matter life on earth.

    I am still not convinced that austerity = sustainability = genuine sacrifice. We have spent the better part of a century shoring up the rotting foundations of the 1%’s ‘free lunch’ with automobile-based urban sprawl, planned obsolescence, military Keynsianism, etc. It is definitely time for something different. But I am not convinced we need to wear hair shirts to get there. I live in a 50s vintage suburban home designed with no thought for tomorrow when it comes to energy consumption. But with now obsolete solar panels I’ve been able to produce more power than needed to run a heat pump year around with a temperature set to 74 degrees – and to power a GM Volt (the American VW?) for essentially all of my transportation needs.

  10. Lambert Strether

    I have one quarrel. Blythe points out that the US poverty level for a family of four is IIRC $22K, which is absurdly prosperous by the standards of the few billion living on $3 a day worldwide. But elsewhere he says that only people’s immediate surroundings lead them to take action (for some definition of “immediate”). Paraphrasing, “If you hear about polar bears dying, that’s sad, but if there’s a polar bear in your neighbor’s yard, you call the animal control officer.”

    But these are not commensurate. Given immediate surroundings, $22K is poor, exactly like the polar bear in the yard.

    So, using Blythe’s logic, relative deprivation is not intrinsically unconducive to action. (Whether that’s the right “narrow front” to attack is another issue.)

  11. susan the other

    I enjoyed and agreed with Blyth. But. The point about survival of the fittest, aka richest, was mentioned without any analysis. Made me think of the opposite – Nova w. Edward Wilson who advocates for survival of the entire group and preservation of the environment – a much more dedicated approach. It is hard to understand why we are merely blunderers as hapless as lemmings who are lucky enough to have not found the cliff – because when you look at all our mistakes it’s hard to make excuses. We basically know what Blyth is saying about austerity is true. We’ve been messing around with austerity since Reagan – we proved it doesn’t work. It’s almost not the question anymore. The question we have now is what will work. Blyth seems to be saying, Just keep your cool. Don’t impose any more austerity; do price floors and perpetual bonds, and things will work out. He didn’t seem to think our 40-year binge of procreating and neoliberal capitalism was a particular problem; nor was he too concerned about perpetuating abundance in a time of death by fossil fuels.

    1. sd

      In some ways, Blythe was advocating an attitude of laissez faire without actually calling it that. I found the conversation fascinating but my take away is that the only thing you can really do is that which is in your immediate life, like take your kid swimming.

  12. Schofield

    I’m sure Mark Blyth’s ancestor would be saying the same kind of stuff he’s now saying at the height of Feudalism!

    So he’s not really addressing the key issues for human beings insecurity and ignorance which make us buy into the nonsense of such ideas as the Divine Right Of Kings or Neoliberalism including with the latter the farce of an Austerianism that in application mainly afflicts the forelock tugging peasants not their masters or mistresses.

    As Christopher Boehm says in his magisterial book “Hierarchy in the Forest” the problem for human beings is two-fold. Firstly, human beings like to dominate but hate being dominated. Second, how can a majority take advantage of the above average or unusual skills of a minority of individuals without allowing those individuals to abuse the power those skills give them. This leads us onto to the key human need to recognize there can be “bad” and “good” Individualism and Mutualism and consequently how can our societies collectively set up mechanisms to make balanced judgements to constrain the “bad” and promote the “good.” Taking care, of course, to recognize what are truly useful narratives for explaining how things actually work and what are fairy stories!

  13. Retired

    I found this interview very frustrating. I’m not an economist, so I don’t have the expertise to understand a lot of details. But I want to learn. Since the 2007/2008 crash and its consequent mis-handling, I have been learning a lot from Naked Capitalism and the links NC gives to such experts as are on this interview. But, depending upon who you think the audience is, this was not a good interview because Mark Blythe was too impatient to explain what any solutions there might be. He is not a good Public Intellectual because he seems in this interview to be incapable of being pinned down to some concrete answers. The very beginning of the interview when he (humorously?) complains about being asked questions about one of his “old” books starts the “I know something you SHOULD know” attitude. Ultimately he says something like “Do I have to discuss this?” It seems so obvious to him. But not to the newbies who are educated in other fields and want to know what’s going on. When he blames people for not voting in ways that could help them, he’s not considering that the media are mostly bought out by the wealthy and are just a means of propaganda to confuse and/or mislead people (e.g., NYT and WaPo). Who’s going to help up out of this financial mess (which will implode someday) if it’s not the experts like Blythe?
    I was confused since the point of the interview was to explain the problems with Austerity. And yet Blythe didn’t really explain why or what to do.
    There are so many problems, even in the criticism of Syriza. Tsipras is naive because he didn’t have a plan B. Varoufakas is reported to have tried to get Tsipras to have a Plan B. As readers of NC know, the plans to re-establish an alternate currency are difficult and take a long time to get into place. The lesson of Greece for the rest of us is that the elites with money are bullies and will force their way as long as they can. Everyone agrees (even the IMF) that the Greek situation is unsustainable. The ordinary Greek citizen will suffer no matter what happens. But now we know that the European elites aren’t interested in helping the Greeks state survive. For them, Greece is just another failed economic phenomenon (that they created with the elite Greek ruling class) that needs to be privatised so that the wealthy can get wealthier. To hell with ordinary Greeks, they clearly say. Debt, even debt the ordinary Greek citizen is not responsible for, has to be paid. But at what cost? The Chaos of the EU.

  14. animalogic

    austerity is not merely an economic policy, seeking to deliver economic outcomes; it is a political policy seeking to transfer wealth (therefore, also power) from the 99% to the 1% ( strictly speaking the 0.01%) . Austerity legitimises these transfers on the basis of economics as a science, which therefore renders austerity as TINA; which equally removes any moral responsibility from the 1% for any public suffering.
    Of course, austerity is fiscal in nature. There is NO government money for vital infrastructure or other public investment. Monetary austerity is another matter entirely: centrsl banks are at liberty to “print” trillions as QE, transfusing it directly into the veins of the FIRE sector. ASSET inflation is an unreserved GOOD. Price etc inflations ?
    Well central banks constantly maunder on about reaching this inflstion target or another. The truth is they live in mortal horror of anything but marginal inflation increases: good god ! real increases in inflation ( or worse, real decreases in unemployment) could force central banks to actually raise interest rates….with unpleasant consequences for our Potomkin economy.
    The best thing about austerity is it puts working people IN THEIR PLACE. Any sense of entitlement by the public is delegitimised. Really, if we had not been so greedy, lazy and dependant we wouldnt be in this spot. Our suffering is
    DESERVED; in fact, it will give us all moral character, and much needed lessons in respecting our betters….. In short, austerity is class warfare.

  15. pdehaan

    The one question that always comes back.. why hasn’t the elite learned from history? i.e. the post WWII war thinking that you need to throw the 70% or 80% a bone in order to prevent unrest from both the extreme right and left, like Germany in the 30s. The interviewer referred to the unforeseen consequences of marginalizing America ‘B’ or World ‘B’ on various occasions. My own take on this is that the domestic security apparatus never had to the tools available as it has today in order to control the masses. Much has been learned in this area since a century ago. The technology to screen one’s every movement in this digital age and the power of concentrated media to control the narrative are only a few examples. The confidence in its effectivity allows for pushing the envelope a lot further.

  16. Mark J. Lovas

    Things are bad –from the standpoint of most people–but there is no real reason why that should change.–That’s the take-away I got from this; with the addition that Mark B. can live with that. And he’s intellectually superior (one is supposed to think) to those who find the prospect of continuing and worsening inequality and injustice intolerable because they’ve got no argument that things will change soon.

    I am not sure whether the take-away for me isn’t that MB is quite content with himself. It rather reminds me of the Marxist at Oxford who couldn’t see why he shouldn’t enjoy the privileges of that institution. I mean fine, you’ve got more than most of us, but isn’t it a bit smug to flaunt one’s contentment in a time when so many are struggling?

    I know Yves will be pleased to hear a voice agreeing with her about Greece. But, I cannot see that as the central part of this discussion….

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