“The day of the austerians has come and gone,” as Krugman explains how today’s austerity concern remains ‘A distinctly British delusion’.
In light of the above chart, Krugman states that there has been a stark difference in consensus between economists in the UK and the US, such that when asked on whether they believed whether government policies promoted growth and employment, those in the UK disagreed 4:1, while only 2% in the US disagreed. This, as Krugman puts it, is a case of Keynesian logic that says that “a one-time tightening of fiscal policy will produce a one-time hit to the economy, not a permanent reduction in the growth rate. [Therefore,] A return to growth after austerity has been put on hold is not at all surprising.”
It was in 2013, after Mark Carney took up the reins at the Bank of England, that media outlets in the UK declared that “Osborne wins the battle on austerity“, reported the FT, depicting a forward outlook, “In a replay of Margaret Thatcher’s first-term battle in the early 1980s, an alliance of Keynesian economists and the Labour opposition has accused the government of choking off growth. The prophets of doom predicted years of stagnation with soaring unemployment and falling living standards.” Furthermore, it points out the position of anti-austerians as, “the chancellor’s critics overstated the obstacles standing in the way of a recovery. Their position was too extreme and they have found themselves snookered.” So is Krugman right in stating that “Britain zigged just as the rest of us were zagging?” Furthermore, have the more sophisticated news outlets in the UK carefully worded their austerity criticism?
Krugman concludes the Long Read by discussing the role of [special] interests in distorting the economic debate, as he states that, “One might have expected the press to seek to remedy such confusions, rather than amplify them. But apparently not.”
Firstly, Krugman points to corporate interests, since after all, “you might expect corporate leaders to want policies that produce strong sales and hence strong profits.” His answer to this is that they wish to shrink the overall government spending, as that has happened in the US, especially on social security measures. This has stemmed from “sharp cuts in tax rates on corporations and the wealthy even as they take away healthcare and nutritional aid for the poor.” While some may be skeptical about how Krugman could imply such a deplorable act of corporate social responsibility, the Telegraph supported his stance in saying “In the end, you are either a big-state person, or a small-state person, and what big-state person people hate about austerity is that its primary purpose is to shrink the size of government spending.”
Secondly, and in addition to the first, Krugman points out the role that corporate interest plays in skewing American politics, as Mike Konczal of the Roosevel Institute states, “business interests dislike Keynesian economics because it threatens their political bargaining power.” This all goes back to confidence, the word Krugman repeats over and over again in his previous chapters. Krugman explains that, “Business leaders love the idea that the health of the economy depends on confidence, which in turn – or so they argue, requires making them happy.”
To conclude his point about [special] interests involved in politics, Krugman identifies that “this kind of argument loses its force if one acknowledges that job creation can be achieved through deliberate policy, that deficit spending, not buttering up business leaders, is the way to revive a depressed economy.” And further to this, the only way to boost confidence should not stem from keeping them [corporations] happy, and it remains not the only way to go.
Krugman concludes the piece by stating that harsh austerity measures were simply a one trick pony, such that “Harsh austerity in depressed economies isn’t necessary, and does major damage when it is imposed.” Although Krugman accuses the political nature in which we “witness[ed] the limpness of Labour’s response to the austerity push… [This] may reflect the fact that the crisis occurred on Labour’s watch; American liberals should count themselves fortunate that Lehman Brothers didn’t fall a year later, with Democrats holding the White House.” And thus, a better educated society in the UK will be needed to understand and prevent media outlets from twisting the truth, which so many citizens have relied upon.