What is austerity?
Extracted from a Facebook posting on December 19, 2021
Firstly I’ll explain what austerity is, and then I’ll briefly discuss how to determine if a condition of austerity exists.
According to the UK member of parliament Catherine West: “Austerity is thought of by economists as an attempt to reduce the budget deficit through raising taxes or reducing spending. In the UK austerity is more commonly understood as simply cuts to spending on public services or social security.”
Austerity is not an attempt to reduce the budget deficit through raising taxes or reducing spending in and of itself. True, politicians, the media, and ideologues which Catherine wrongly calls “economists” might like the public to think that it’s government getting its finances in order, but it’s nothing to do with such nonsense. So, austerity, whether in the UK, Australia, or the US, has nothing to do with deficit reduction per se. It has everything to do with political choices involving the public’s well-being. The second half of Catherine’s statement is incomplete.
Austerity is a deliberate, politically- calculated redirection of fiscal policy away from the public purpose, and that shift does not require the government’s overall spending to decrease.
The budget deficit can rise, even quite significantly, in an environment of austerity. That is because whilst the government might have cut spending dramatically for the public’s well-being, it also might have increased spending for the military, corporate welfare, tax cuts for the rich, etc. Thus, the budget deficit increases though the government’s official fiscal position is one of austerity.
Now and then, on occasion, incorrect interpretations of austerity are bandied about, which has a tendency to misinform others and, in the case of wilful misuse, promote fear-mongering for whatever purposes. As I’ve mention- ed, deficit reduction is not, in and of itself, austerity. Furthermore, the word is wrongly applied when a cut to a single public purpose programme is proposed.
Determining whether or not a situation of austerity is present is a similar process to that of declaring an inflation episode to be present. As to inflation, one simply cannot see the price of eggs, bread, or houses rise one day and declare that an inflation episode is underway. A price rise in one thing is not inflation in and of itself. So, if you see the price of bread rise but the price of everything else remains relatively constant, you cannot stand up and shout, “inflation!”, because it’s not. The same pretty much goes for austerity as well.
For example, a twenty pounds cut to Universal Credit, in and of itself, is not austerity. It might very well be a part of the austerity campaign, but in and of itself, it is not austerity. For austerity to be present, the privatisation of, and large, sustained cuts to all that ensures the public’s well-being must be observed.
In short, the public’s well-being on the whole is deliberately and unnecessarily disregarded. That is to say, a fiscal shift away from the public purpose takes place and it is deliberately sustained. Thus the National Health Service, rail transport, communications, and electricity delivery are privatised, vital infrastructure is allowed to crumble, Social Security is slashed, the severely handicapped and the terminally ill are declared “fit for work”, etc. Essentially, all spending on anything that ensures the public’s well-being is severely restricted and/or eliminated. Generally, all of it is done based on the lie that the “government must get its finances in order”.
To be clear, as to the UK, Australian, and US governments, the statement that “the government must get its finances in order” is never a financial must; it is always a political excuse.
Ellis Winningham is an economist who has worked with the Federal Reserve in the US and has a first-hand understanding of the subject of money and currency creation for sovereign currency issuing nations such as the US, Australia, New Zealand, Japan, the UK, and Canada … and he has the ability to explain it in a way that is easy to grasp.
This article first appeared in the Facebook page of Australian Welfare News on 28 June 2017.Know someone interested? Please share