Academia remains incredulous as evidence accumulates that the Reinhart-Rogoff paper that underwrote much of the intellectual justification for austerity economics omitted important data and contained severe Excel errors. Some are calling it a technical knockout of austerity economics, handing victory to the anti-austerity faction of economists.
Economic debates rarely end with a T.K.O. But the great policy debate of recent years between Keynesians, who advocate sustaining and, indeed, increasing government spending in a depression, and austerians, who demand immediate spending cuts, comes close — at least in the world of ideas.
At this point, the austerian position has imploded; not only have its predictions about the real world failed completely, but the academic research invoked to support that position has turned out to be riddled with errors, omissions and dubious statistics.
Reality had already done serious damage to austerity economics. Everywhere austerity has been tried it has failed leading to even the IMF – previously the leading austerity champion – to reverse itself. The only examples given of austerity somewhat working in Europe, Estonia and Latvia, also proved to be problematic.
Then again, maybe this is not really about what is best for everybody.
The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor. What the top 1 percent wants becomes what economic science says we must do.
Does a continuing depression actually serve the interests of the wealthy? That’s doubtful, since a booming economy is generally good for almost everyone. What is true, however, is that the years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers. The 1 percent may not actually want a weak economy, but they’re doing well enough to indulge their prejudices.
Crass opportunists like Pete Peterson and Eli Broad see this as a great time to push their 1% agenda – cutting social insurance and privatizing public education. It’s easier to step on someone’s throat when they are already on the ground. And lest we forget, this economic downturn was caused by the 1% and their henchmen on Wall Street. The fleecing class gets to win three times – they enrich themselves gambling, they get bailed out, and now that they weakened the middle class with their malevolent behavior they can more easily continue their class war by cutting social programs.
At least now the 1% have lost two commissars from their having been discredited due to incompetence, academic fraud, or some combination of the two. Throw in the towel.
Image by George Bellows under the Public Domain.