Political science 3230
Instructor: Dr .Lucian AshwortStudent: George Chakhunashvili
“The History of a Dangerous Idea by Mark Blyth”
A summary of the argument
Author is suggesting a refreshing view on austerity by offering his definition of austerity at the beginning book; authors suggest that it is “a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness, which is best achieved by cutting the state’s budget, debts and deficits” . Blyth suggest that austerity is dangerous idea because of 3 main reasons: Austerity is simply not working in practice, it is unfair since most of the costs of such policies are met by the poorer sector of society which have no relationship towards crises and lastly austerity cannot be achieved simultaneously by all.
In the first section, Blyth begins the book by correcting the views on some previous failures of economics in Europe. Author suggests that Euro Crisis did not originate by pointless government spending, but in private irresponsibility. Excessive private sector provoked by cheap borrowing costs associated with the adoption of the Euro sank the banks in Ireland and Spain their respective economies; the states became indebted in attempting to clean up the mess. It is important to mention that the author considers himself as Keynesian and as many neo-Keynesians Blyth supports the end of austerity. Setting history right is important for author as he wants to prove that austerity has failed. Blyth also points out, that there was little else Spain or Ireland could have done. Their banks were not only too big to fail but they were “too big to bail” this made, their liabilities beyond the state’s capacities to absorb.
Second part of book is mainly focused on understanding from where austerity arrived. In this section the author conflates the austere approach with liberal economic policies that distrust the state. He shows how early thinkers such as John Locke, David Hume and Adam Smith created an intellectual system which suggest that governments should do no more than protect private property and it needs to have limits so that they cannot run large public debts. On this foundation the austerity argument proper emerged in the 1920s in the form of American “liquidationism” and the “treasury view” in Britain. These early austerity arguments were almost totally discredited by the Great Depression, but as author suggests that some of their surviving remnants are still a live such as order-liberalism in Germany and Austrian and economics in the US entered the intellectual mainstream again in the 1980s, with the rise of neoliberalism. According to Blyth, the current version of the austerity argument was created by a group of Italian economists, originating from Bocconi University, in Milan. Blyth examines a series of economic models that these economists have developed, he argues that government debts are inevitable products of democracy and that the best way to fix those debts is to cut spending rather than to raise taxes. The strongest element of this section is the ‘natural history’ of austerity, Blyth considers several examples and demonstrates that the role played by contractionary fiscal policies is overstated. Author than examines the disasters of the interwar period, with austerity in the US, Britain, Sweden, Germany, Japan and France, all of which resulted in economic destruction and political failure, Then he moves the focus to a success stories of the austerity today. Finally, Blyth demolishes what he names the Rebll alliance, Blyth shows that these countries (Romania, Estonia, Bulgaria, Latvia and Lithuania) have coped with the austerity programme only by increasing their national debts . The third and final section author considers what would have happened if governments had not embraced the austerity agenda and transformed a banking crisis into a sovereign debt crisis. Iceland’s is brought as example of experience which can be named as a “positive lesson”.
Analysis and critique of argument
The author has presented well-structured thought about austerity. By diving book on 3 main argument frames each argument feel contacted to another, each argument is easy to understand and to follow. Description of path crisis by author are really interesting as author manages connected to what happen in past to today’s situation. At some point in this book author bring in thoughts of famous political theorist such as John Locke, David Hume and Adam Smith to support his argument, this makes his ideas and thought more diverse and informative. This helps to see how previous thought of philosopher has influenced his way of thinking and it also help to understand why author thinks in such manner and what are main reasons behinds his points. As a reader you can see that Blyth really believes in what he say and it is truly fascinating how one statement growth to another. Language sometime get little bit complicated as a lot of terminology is used but overall book present refreshing and clear views on austerity. It is also important that author suggest solution towards today problem of austerity, this underlines that book is trying to navigate people towards not only understanding what the problem is but also solving it. .
Relevance to the assigned class
The History of a Dangerous Idea by Mark Blyth has relevance to the assigned class which is Health of our political economy as book directly touches topic of health of today’s political economy. Strong Economy today is key stone for any developing or developed country; austerity on other hand can be called as a disease for growth of economy. It is important to maintain stable growth without spreading a disease, because without healthy economy it is hard to maintain necessarity of population on stable level and at the same type create strong country. Today’s world is world of complex society money and interconnections we all to pay for complexity one way or another, because at the end of the day our complexity is the thing which is protected us from collapse. Blyth shows that we have a problem but he suggests solution for this economic problem by introducing higher taxes. Author suggests that his solution is not the most well accepted but this could be beginning. It is important to underline that, because we have such interconnected and complex society we need to maintain a stable inflow of support for such complexity. There is heavy burden on our shoulders , this burned becomes heavier and heavier and only way to hold it from collapsing and destroying everything is creating healthy economic development which will not be so focused on debt and making rich richer.
“Austerity: The History of a Dangerous Idea by Mark Blyth.” Goodreads. April 25, 2013. https://www.goodreads.com/book/show/13484866-austerityGoogle, Talks At. “Mark Blyth: “Austerity – The History of a Dangerous Idea” | Talks at Google.” YouTube. June 02, 2013. https://www.youtube.com/watch?v=JQuHSQXxsjM
Chang, Ha-Joon. “Austerity: The History of a Dangerous Idea, by Mark Blyth.” The Irish Times. October 17, 2013. https://www.irishtimes.com/culture/books/austerity-the-history-of-a-dangerous-idea-by-mark-blyth-1.1425966