Mark Blyth (9) : On the Dead End of Austerity


The Great Gatsby is out as a film again. Go see it! Think about it. Basically you have this tiny elite. How many yachts can they buy, right? They have all the goddam cash. And they don’t need to invest in a recession because they can live off the interest on their investments, so they’re fine. Everybody else is screwed if they don’t have investments. They can’t consume enough because of the wage skew. We’re back to where we were in the Twenties and Thirties.

Political economist Mark Blyth, with Chris Lydon. June, 2013.

Mark Blyth, the butcher’s son from Dundee, is sounding off again in the Scottish pub where we all belong — if you want the news of wealth in our time deciphered, and if you can listen as fast as Mark Blyth talks. The authority of his brash gab is reinforced by the reviews hither and yon of his pithy new treatise from Oxford on the false doctrine of the day: Austerity: The History of a Dangerous Idea. That idea he’s been bashing in our conversations for almost three years now is the doctrine (rampant in official Europe, fashionable in the US) that governments can shrink their way out of debt by slashing their public budgets. Professor Blyth’s counter here is that it’s government’s job to grow the economy and the taxes that will service the debt.

Not the least of what’s new in Mark Blyth’s book is the argument that austerity (not inflation) was the proximate cause of Naziism in Germany in the Thirties — also of Japanese expansionism in the same period that led to World War 2. So there may be a grim warning in his evocation of Scott Fitzgerald’s Gatsby and the Jazz Age.

In the class-divided skies of British Airways nowadays he sees another flash of where we’re going:

I fly a lot on British Airways, which now has four classes in its planes when you go trans-Atlantic. It’s the medieval class structure brought back to life. At the very front of the plane where you turn left instead of right as you come in the nose — first class! — that’s the Aristocrats. They’re the ones you never get to see. Literally, the Lords and Ladies. Then, when you turn right, you go through all these flat lie-down beds. These are the trans-Atlantic Knights of the Financial Nobility. Then you get past that to Premium Economy, which is like the Serfs with Money — you notice that’s a very small section of the plane. And then: one third of the air frame has two thirds of the passengers. Cattle. Cargo. Self-loading. Everybody else. It’s a bit like the societies we’ve built for ourselves. And until the people — not at the bottom but the ones in the middle, the ones whose voices matter the most in politics — say: you know what? I just can’t afford $50,000 a year for whatever Ivy League or non-Ivy League university my kids gets into. How am I going to do this? Let’s say you earned $150,000 a year… That’s a lot of money — it’s three times the median income. You’ve got a chunk of change, but you still have to eat. Let’s say you save $40,000 of that. That’s still not enough for one year of college. And you won’t get financial aid because you’re making $150,000. I know professors who can’t send their kids to these schools. And that’s if they have one. What if they have two? So when that constituency starts to say: hang on a minute; there’s something seriously wrong here. That’s when you’ll begin to see change.

austerityMark Blyth’s argument here is drawn from life — that is, from his own:

Let’s go back to my experience. My mother died when I was very young, and I was raised by my paternal grand-mother. Basically all we had was her state retirement pension and occasional handouts from my manual-worker father, who was a butcher; and that was usually in the form of in-kind: bits of dead things were dropped off at the house on a Friday. And we made our way through. I went to school with holes in my shoes. So then I got to university and all the rest of it. I did this with all these state-funded ladders of achievement. Schools worked. If you were smart enough you got in. There were grants available. You didn’t have to have complete financial records. You did not have to go miles into debt to do this, and that was that. People say to me: good for you, but someone had to pay for that; basically you’re taking from others and enjoying yourself. Well, my answer is: you gotta be kidding me. Do you know the taxes I pay now? Suppose I hadn’t exactly advantaged myself through the education system. Suppose I’d stayed in Dundee. Well, I probably would have been in the military which is a huge tax loss. Or I’d have been in jail, which is very expensive. Or I’d have been a marginal worker, and I’d have paid very little taxes into the public purse. Instead of which I come over here and as somebody who’s done pretty well I pay a lot more taxes over my lifetime than I ever took out of the welfare expense.

This stuff pays for itself. It creates an equal society. It creates the possibility of mobility. It creates the idea, the ideal and also the belief that it’s possible to succeed. And we are dangerously close to creating a world where those ladders of mobility and that belief — that all-important belief that’s critical to the germination of capitalism — is going away. We have a winner-takes-all society where those who can opt out and those who are left behind do what they must. That is what worries me. That is where the scary politics start.

Mark Blyth in conversation with Chris Lydon. June, 2013.

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  • The Parrot

    “Growth cures debt.” Should be a bumper sticker. Love the cover of the professor’s new book. Really superb conversation. Austerity hawks are cynics lacking conviction in civil living arrangements, or perhaps, preferring barbarism to civil living arrangements. To quote Kenneth Clark: “It is lack of confidence, more than anything else, that kills a civilisation. We can destroy ourselves by cynicism and disillusion, just as effectively as by bombs.”

    Thanks Chris and of course, big thanks to Professor Blyth.

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  • Robert Zucchi


    It’s hard to know what to make of capitalism when our species is today a pullulating “outbreak” (David Quammen), now some seven billion strong. How can you prosper such a crush of people, let alone expect them to obtain the necessities of life in a competitive market economy? Can you imagine the billion people of India enjoying a Helvetic standard of living? Or a majority of the Chinese, despite all their industrial dynamism? To (more or less) quote Professor Blyth in one of his earlier interviews with CL: What are they going to do, export to Mars? This is not just a pedantic exercise, as the rising discontent in “booming” Brazil this very day illustrates.

    There’s too much uncritical and mindless flapdoodle about the supposed genius of American-style capitalism. Our industrialists turned to low-wage countries because inflation, the incurable disease of a laissez-faire economy, threatened to price their products out of reach. But the loss or downsizing of remunerative American jobs that this entailed meant price relief for consumers was short-lived, since average wages stagnated or fell during the outsourcing frenzy. Moreover, inflation is growing in countries like China as well, and Chinese exports are no longer uniformly the bargain they were.

    All thanks to Mark Blyth for enlarging our knowledge about the financial crises of the late 1920s and 1930s with his description of how fiscal austerity at a time of economic contraction actually worsened the slump. (In the header it took today, Wall St. signaled it agrees with him.)

    It should be mentioned too that the economic recklessness that eventuated in the 1929 Crash was the devil’s own gift to European fascism in the decade that followed. (Although the situation was never simple, Professor Blyth reminds us that the National Socialists were but a fringe party in the year before Black Tuesday). And thanks also to Chris Lydon for facilitating the discussion. The holy mother church of free enterprise could do with fewer credulous myrmidons and many more forensical agnostics.

  • Potter

    I can’t miss my cue to say I went to a public university ( Hunter College of the City University of NY) for nothing. Nothing. Well I paid for my books and it was a $24 Bursar receipt.

    Our son went to UMass Amherst. We afforded it. He is doing well. So maybe I helped delay the trend a generation.

    Paul Solomon on the Newhour just did a piece about some research done in Berkeley on inequality.
    Finding the Connection Between Prosperity, Compassion and Happiness
    Basically their research showed that the richer a person gets, the less compassion they are likely to have. This sounded a lot like the work of Dan Ariely by the way. In fact there is plenty of research out here and folks talking about inequality and how it drags us down. Include of course and most notably Joseph Stiglitz and Paul Krugman.

    Gatsby was a terrific movie, the acting pretty good, and too of course Baz Luhrmann’s artistry. Gatsby came from a poor family. He was obsessed to prove himself worthy. With all his wealth he seemed such a sad character, lonely and unfulfilled.

    A couple of days ago the NYTimes had a column “Our Broken Social Contract”. Thomas Edsall outlines three arguments as to why there is basic agreement that we are broken. He gives the most weight/space to Alan Krueger, the chairman of Obama’s council of economic advisors. Edsall starts with implausible theories from David Brooks and Charles Murray, but from Krueger something more substantial. I recommend the impressive comments too (“reader’s picks” ). People know.

    Our Broken Social Contract

    With all the evidence about the harm austerity does, it’s amazing how little sinks in on the leadership level, how hard to let go of it is.

    Mark, good luck with the book! And thank you for the series.

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  • It’s the philosophy behind the economic system that is not working. The time is ripe to brush up the New Principles of Political Economy (1819) of Jean Charles Léonard de Sismondi (1773 -1842), the only economist Marx refers to in the Communist Manifesto — and in bad faith at that. A remarkable source of inspiration for our chequered times and an antidote against both Ricardian and Marxian prescriptions.

  • The Parrot

    I wanted to add an article to the discussion: The Money-Empathy Gap (nice doggy picts)

    “While having money doesn’t necessarily make anybody anything,” Piff says, “the rich are way more likely to prioritize their own self-interests above the interests of other people. It makes them more likely to exhibit characteristics that we would stereotypically associate with, say, assholes.”

    I will point out anecdotally, I’ve seen this behavior across all social strata, regardless of economic power. However, there is no question for me that the wealthy wield disproportion effect due to their worldview and mood swings. My father called it the “sh#t rolls down hill” theory. At the bottom of the hill, it don’t roll, thus, all wallow.

    Also, it should be noted that there have been 3 jobless recoveries in a generation (going back to the recessions of 1990, 2001, and the great recession of 2008 (2007?). All preceded by deregulation, fox-in-the-henhouse oversight, and/or huge increases in the amount of capital sloshing around in the trough. This generational outlook has been baked into the citizenry-cum-consumer-mass-culture. We live in the moment of the Leo Durocher wet dream.

  • Carl

    I respect the work and class consciousness Of Mr. Blyth, but cannot accept the pass he gives the Central Bank and the idea that recapitalizing the banks so they can lend again has happened. There was massive criminality in those mega banks which was utterly unpunished. The Attorney General said no prosecution of HSBC will happen for massive money laundering for Mexican drug cartels and assisting Iran with nuclear projects. Too big to fail and too big to prosecute and bigger than ever with hundreds of Trillions of derivatives still
    off balance sheet and growing. Not only do I not see anything to congratulate
    the Central Bank or regulators for, I was waiting in vain for you, Chris, to challenge some of that ” Its OK here ” rhetoric.
    I fear we are much more trouble than the Professor indicates.

  • hans

    Austerity is more of a way for the banks to recover, than for governments to recover. This is because the monetary system is arranged in such a way that the creation of the money supply is a profit making venture. It does not have to be this way. And if it wasn’t, we would not be talking about austerity. Attached is a report from the bowels of the IMF itself, that proposes to do away with all public debt by changing the way the money supply is created.


  • Mary Fonseca

    “Austeridade” is about the dirtiest word in the Portuguese vocabulary at the moment. No point detailing the hundreds of thousands of businesses that have gone to the wall so far, nor the cuts that have eviscerated social programs, education etc. and led to real suffering. National politics have become a Ruritanian spectacle of in-fighting, rumor, Mexican stand-offs, so much so that many people have simply turned off that the parties are utterly irrelevant: they realize that it´s the Troika (IMF,ECB squad that intervened to save us ) that calls ALL the shots. Our big bankersters are still pulling down enormous salaries… Mark Blyth has said repeatedly that bank debt was transformed into sovereign debt. It´s the banks that need to be scrutinized and then controlled…so why do people think that Elizabeth Warren is just wasting her time?

  • Could be fun to have Blyth hash it out with Bruce Bartlett on debt default.

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