On Topic: Austerity thinking too close for comfort?

Michael Chevy Castranova, business editor
Michael Chevy Castranova, business editor

Several lifetimes ago, when I was attempting to impress upon attention-deficit high school students the wonders of American literature, we would start with the Puritans. And I always opened with Jonathan Edwards.

Edwards is best known for a podium-pounding sermon that’s come to be called “Sinners in the Hands of an Angry God,” the original hell-fire-and-brimstone bone-rattler:

“The God that holds you over the pit of hell, much as one holds a spider, or some loathsome insect over the fire, abhors you, and is dreadfully provoked!” Edwards must have roared at his trembling flock. “His wrath toward you burns like fire! He looks upon you as worthy of nothing else but to be cast into the fire!”

The 18th century Connecticut preacher’s tongue-lashings spring to mind while reading “Austerity: The History of a Dangerous Idea,” by Mark Blyth. Look at this quote Blyth includes from Andrew Mellon, President Herbert Hoover’s treasury secretary, in arguing why bankruptcies can be a good thing:

“(They will) purge the rottenness out of the system … . People will … live a more moral life. … And enterprising people will pick up the wrecks from less competent people.” (Italics are mine.)

In other words — and to echo the excess-eschewing Puritans — less surely is better.

Blyth, a Brown University professor of international political economy, admits austerity is “a seductive idea because of the simplicity of its core claim — that you can’t cure debt with more debt.”

That philosophy, though, adds the author, is not just wrong but, well, dangerous.

In the eurozone today, if every country tries to save, there’s no one left to spend money — that is, buy each other’s stuff.

“Everybody cannot cut their way to growth at the same time,” Blyth points out, using that rare skill known as common sense.

In America — where lately we seem to be set upon by threats of fiscal cliffs and sequestration brought about by leaders in Washington, D.C., born with that strange disability of having no backbone — the same idea holds true: If every company and all the states — and the federal government — stop spending and buying at the same time, who’s left?

Oh, right. Us.

Blyth suggests that expecting consumers to be exuberant during a massive recession, while so many of their family, friends and neighbors have seen their jobs axed — and for them to keep spending — is “heroic at best and foolish at worst.”

And, he adds, these employees/would-be buyers are getting paid less, too, as part of the this austerity drive.

Yes, I agree, it’s all a heck of a lot more complicated than spending good, austerity bad. The U.S. market economy alone is valued at something like $16 trillion, so a single philosophy is not going to address all the moving parts that can go kerflooey.But Blyth’s caution to policy makers — and, as I see it, to business — is clear: too much paring can get us powerfully close to Jonathan Edwards’s all-consuming fire. And that’s going to burn.

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