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Making the poor pay

Economist claims austerity measures widely adopted by the West only work for the rich

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Spaniards demonstrate against government-imposed austerity plans in Madrid last spring.

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Spaniards demonstrate against government-imposed austerity plans in Madrid last spring.

The emperor has no clothes. That's the stark, colloquial truth about the value of the economic idea of austerity, according to Brown University economist Mark Blyth.

Forget the cautious "on the one hand, but then on the other hand" approach to political polemics. Blyth gets down to brass tacks on page 10.

"(Austerity) doesn't work in practice," he writes. "It relies on the poor paying for the mistakes of the rich, and it rests upon the absence of a rather large fallacy of composition that is all too present in the modern world."

The fallacy of composition, for those who have forgotten their first-year philosophy course, means that what's true for part of a group may not hold true for all. Standing up at a Goldeyes baseball game allows one person to see better, but that's not true if everyone stands up.

Indeed, Blyth goes further, admonishing commentators and fellow economists, past and present, that austerity won't work, never has worked and doesn't do "what it says on the tin."

In keeping with his personal approach to the issue, Blyth opens with a bit of biography in the preface. Seems he grew up poor in Dundee, Scotland, and he suggests that if it weren't for various government supports (interfering with market forces, libertarians would say) he wouldn't have moved, Horatio Alger-like (or the Scottish equivalent), from being a scruffy lad with holes in his shoes to a professor at an American Ivy League university.

His current concern is that a full, continuing adoption of austerity programs by all Western governments at the same time may prevent his modern equivalent from such mobility.

As you can see, Blyth is not your standard policy-wonk economist. He does flesh out his views and defend them by offering a decent potted history of the idea, starting with John Locke, David Hume and Adam Smith, the trio who came down on the side of private property, government by consent and capitalism.

He then takes us through the centuries with stops for the Great Depression and the Austrian school of Joseph Schumpeter, Ludwig von Mises and Friedrich Hayek, with a nod to Milton Friedman. He also explains why an idea he believes has been discredited continues to have such emotional power.

Blyth uses the old high school approach to essay writing. First he tells us what he's going to say, then he tells us and then he sums up what he has told us. This is not a bad idea if you get most of your ideas from television.

Indeed, before he wrote Austerity, Blyth shot a video on "austerity as a route to growth nonsense." For those in a hurry, you can get his drift in five minutes on YouTube.

It is more entertaining than the book, it should be said, and it offers, without the rancour or volume, what you might find on TV's The McLaughlin Group.

Blyth's solution and suggestion for the U.S.? America should have let the banks fail. Also, it's time to tax the rich, and that means getting at the $32 trillion hidden offshore by those not paying any taxes.

Ron Robinson is a Winnipeg broadcaster who was disappointed by Ayn Rand but is not ready to throw out his Friedman, Hayek and Smith volumes.

Republished from the Winnipeg Free Press print edition June 29, 2013 A1

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