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Austerity: The Great Failure

Copyright Date: 2014
Published by: Yale University Press
Pages: 232
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  • Book Info
    Book Description:

    Austerity is at the center of political debates today. Its defenders praise it as a panacea that will prepare the ground for future growth and stability. Critics insist it will precipitate a vicious cycle of economic decline, possibly leading to political collapse. But the notion that abstinence from consumption brings benefits to states, societies, or individuals is hardly new. This book puts the debates of our own day in perspective by exploring the long history of austerity-a popular idea that lives on despite a track record of dismal failure.Florian Schui shows that arguments in favor of austerity were-and are today-mainly based on moral and political considerations, rather than on economic analysis. Unexpectedly, it is the critics of austerity who have framed their arguments in the language of economics. Schui finds that austerity has failed intellectually and in economic termsevery timeit has been attempted. He examines thinkers who have influenced our ideas about abstinence from Aristotle through such modern economic thinkers as Smith, Marx, Veblen, Weber, Hayek, and Keynes, as well as the motives behind specific twentieth-century austerity efforts. The persistence of the concept cannot be explained from an economic perspective, Schui concludes, but only from the persuasive appeal of the moral and political ideas linked to it.

    eISBN: 978-0-300-20624-1
    Subjects: History, Economics, Political Science, Philosophy

Table of Contents

  1. Front Matter
    (pp. [i]-[vi])
  2. Table of Contents
    (pp. [vii]-[viii])
  3. Introduction
    (pp. 1-10)

    The austerity policies that have been rolled out in many Western countries have brought all the pain of economic stagnation but hardly any of the promised benefits of debt reduction, renewed growth and prosperity. Nonetheless, support for such measures has remained strong among economists, politicians and substantial parts of the public. How can we explain this steadfastness in the face of economic failure? A way to make sense of this paradox is to place the current debates in historical perspective and look at the deep and ancient roots of arguments for austerity.

    For all their topicality, today’s controversies over austerity...

  4. CHAPTER 1 Austere ideas for austere societies: from Aristotle to Aquinas
    (pp. 11-30)

    Although the word ‘austerity’ derives from the ancient Greek αύστηρóς (‘austēros’), Aristotle (348–322 BCE) probably had little use for it. Originally, the term had meant ‘dryness of tongue’, but in Aristotle’s lifetime it was already used to refer to harsh or rough conditions. However, like many of his fellow philosophers, Aristotle led a privileged life. His independent means allowed him to keep his tongue moist with the best that Greece had to offer, including the famed wines of his native Chalcidice in northern Greece. Also in other respects Aristotle was no stranger to the finer things in life: the...

  5. CHAPTER 2 Austerity v. reason: from Mandeville to Voltaire
    (pp. 31-47)

    In the end, the lure of material pleasures proved to be stronger than the warnings of pagan philosophers and Christian preachers. From the late Middle Ages, traditional feudal societies declined in Europe and most historians agree that a widespread fascination with a rapidly expanding material culture played an important role in this transformation. In different ways, contemporaries tried to become part of the new world of commerce and consumption and leave behind them the austere lifestyles of their ancestors.

    In this period the first intellectuals broke with the centuries-old tradition of condemning excessive consumption – called ‘luxury’ by contemporaries – as a...

  6. CHAPTER 3 Austerity for capitalism: from Smith to Weber
    (pp. 48-65)

    ‘Frugality fatigue’ became a major cultural and economic phenomenon in eighteenth-century Europe. But the notion that abstaining from consumption had its merits did not disappear completely. It soon made a comeback in a different guise. As economic thinkers further dissected the newly emerging market economy they noticed that there was another vital ingredient for its expansion. Besides a strong appetite from consumers, the system also needed significant amounts of capital. Most of the dramatic increase in production that could be witnessed since the late eighteenth century was made possible by more efficient ways of organising production and by the use...

  7. CHAPTER 4 Austerity for stability: from the Great War to the next
    (pp. 66-86)

    By the first half of the twentieth century abstinence was no longer mainly a question of individual behaviour. Instead, whole societies collectively adopted austerity as a means to restore monetary and financial stability. After the First World War, many European governments cut their expenditure to return to balanced budgets and deployed deflationary policies to control inflation and restart economic growth. Reduced government expenditure, unemployment and falling wages led to often painful reductions in collective and individual consumption. Timing and circumstances differed, but ultimately the austerity policies of the interwar period were motivated by a common desire to leave behind the...

  8. CHAPTER 5 Austerity can wait: Keynes
    (pp. 87-112)

    Economics was not the same after the Great Depression. A new perspective on abstinence was central to this paradigm shift. Previously economists had described saving as morally virtuous and economically necessary. But doubts emerged as a result of the economic experience of the 1920s and 1930s. A new, unorthodox analysis of the crisis put forward by Keynes and others suggested that excessive saving rather than unrestrained consumption was the root cause of economic stagnation. In this view, the Great Depression was not punishment for the vices of the Roaring Twenties but for excesses in the virtue of parsimony.

    This analysis...

  9. CHAPTER 6 Austerity for the state: Hayek
    (pp. 113-144)

    In the 1930s, the greatest crisis in the history of capitalism was overcome by consuming more rather than less. As if that was not enough to discredit traditional views about the benefits of abstinence, the decades after the Second World War became a golden era which combined high economic growth and rapidly increasing individual consumption. Europeans began to be able to afford cars, television sets and holiday trips, and Americans started to buy second cars, colour TVs and air travel. Even the socialist countries experienced substantial growth – sometimes outperforming the West – and saw a consumer revolution of a kind. In...

  10. CHAPTER 7 Austerity for the planet: green ideas of consumption
    (pp. 145-166)

    In the same decade as Hayek’s ideas gained popularity, an entirely different type of consumption critique was also gaining prominence. While neoliberals warned that liberty would be lost if states did not tighten their belts, ecologists claimed that the survival of the entire planet depended on everyone — individuals, companies and states – cutting down on consumption. Ideas about the protection of the environment have a long tradition in Western culture and elsewhere, but the publication of a small book entitledThe Limits to Growthin 1972 marked a watershed in public debates about the topic.

    Since the 1970s, green thought has...

  11. CHAPTER 8 Is greed good?
    (pp. 167-189)

    For the past 2,500 years proponents of austerity have mostly failed to make a convincing economic case for their cause. Perhaps the only instance in which the tools of economic analysis have successfully been used to show a connection between abstinence and growth has been in the context of industrialisation. But even there abstinence from consumption as a precondition for capital accumulation was only half of the economic story: the other half was about expanding markets and a new consumer culture.

    Does this mean that we can safely ignore the voices that have called for restraint in consumption because they...

  12. Notes
    (pp. 190-194)
  13. Bibliography
    (pp. 195-201)
  14. Acknowledgements
    (pp. 202-203)
  15. Index
    (pp. 204-220)