The Meaning of Austerity

by Liam Stanley

Austerity is a moral, not an economic, concept.

First published: 12 December, 2013 | Category: Economy, Philosophy and Theory, Politics, The Right, The State

'There’s no money left’. This was the somewhat flippant message left by Liam Byrne, the former British Chief Secretary to the Treasury, for his successor in 2010. Since then, the highly politicised British fiscal deficit and related debt have been used as the central symbol behind the ‘age of austerity’. While the economic fallacies inherent in fiscal consolidation have been well revealed, the ‘morality plays’ of austerity – particularly visible through the problematic comparison of a state to a household – have been comparatively neglected as mere rhetoric.

Crises, it must be remembered, are not natural phenomena. Things go wrong and disasters happen. Recessions occur and debts are accumulated. But such events don’t naturally translate into a crisis. You need people for that to happen. Debts and deficits may seem like they possess their own logic: if you’re in debt, then cut back and pay what you owe. But such a view misses important power relations at the heart of the issue. In this case, a debt crisis has been narrated to legitimise otherwise unprecedented spending cuts in the name of fiscal deficit reduction. These are the largest spending cuts seen in recent British history, and everyone – in one way or another – will be affected.

But here’s a puzzle: what is fiscal consolidation? More specifically, how can we define the ideas that lie behind the politics of deficit reduction? This may sound both trivial and easy to answer, but I think there’s a good case for taking this issue seriously: if you’re going to disagree with something, you should make sure you know what you’re up against. And as Mark Blyth[1], the author of a brilliant recent critical book on the subject, has found, defining austerity isn’t that easy after all. As Chris Bickerton points out, at various points in the book Blyth uses 12 different definitions of exactly what austerity is (‘internal deflation’, ‘a mere sensibility’, and so on), both reflecting and exacerbating a genuine ambiguity at the heart of the debate.

Blyth spends much time carefully tracing and brilliantly debunking the economic (yes, Alberto Alesina, we’re looking at you here) and political philosophical (think John Locke) roots behind the idea. He spends much less time, however, on what he terms as ‘morality plays’ – the public justifications used to support spending cuts. This neglect is, on the one hand, understandable. By cutting through the crap of political ideology and rhetoric, we can use our expertise to demonstrate how austerity is both ‘unbelievably silly’ and dangerous. On the other hand, however, this neglect reflects both an intellectual and public ambivalence towards political speech and justifications, which are often treated as essentially obscuring and as mere rhetoric utilised to dupe the masses. My argument here is that we can begin to pose a more complete answer to the puzzle about what ideas underpin the move towards fiscal consolidation by taking such ‘morality plays’ more seriously.

The ‘household analogy’ is one common morality play. When making the case for austerity, politicians and others often draw on this analogy – in which the finances and capacity of the state are reduced to that of a family household. David Cameron and George Osborne have been particularly fond of talking about the need for the UK to live ‘like a responsible household’ because Labour ‘didn’t fix the roof while the sun was shining’. The usage must, on some level, be quite cynical (sometimes it can even effectively extend to trolling), and so we should be very critical of this – and generally we are. Deputy Prime Minister Nick Clegg’s 2010 Liberal Democrat conference speech was, for instance, scrutinised by both commentators and bloggers for containing the ‘simplistic nonsense of comparing a governmental deficit with household debt’. Paul Krugman, meanwhile, argues that the use of the household analogy shows how ‘the austerity drive in Britain isn’t really about debt and deficits at all; it’s about using deficit panic as an excuse to dismantle social programs’.

The reasons the household analogy has received such vitriol is because of how it limits the imagination. To put it lightly, the financial capacity of a family household is somewhat limited compared to a sovereign state with its own currency. The British state can in principle borrow much cheaper (the UK currently pays less than 3% interest on 10-year bonds), raise taxes, and – theoretically – just get rid of the currency and related debts and start again. A family household is not the same as an economy. It doesn’t need to worry about economic growth, aggregate demand, industrial policy, inflation, or tax havens. So while it is of course true that, yes, both states and family households get into debt, the household is extremely limited in how it can deal with debt. When the state is reduced analogously to a household, Keynesian counter-cyclical deficit-fuelled fiscal stimulus appears not only as non-sensical and counter-intuitive, but also as unimaginable and impossible. Who on earth would think it is sensible to rack up more debt when your income is drying up and you are already drowning in IOUs? Anyone sensible would cut back, right?

The household analogy is central to the public justification of austerity. But it barely gets discussed, other than criticised as being essentially invalid and economically fallacious. This neglect of both moral issues and the household analogy is linked to the way in which public justifications are sometimes disregarded as playing a role of trickery and deception, as phenomena to be primarily unveiled as factually incorrect and only secondarily understood in their own right[2]. But by exploring the household analogy with a slightly different lens, we can begin to unravel what the idea behind austerity and the politics of fiscal consolidation really means.

The main way in which the household is invoked in justifying austerity is through direct comparisons. According to David Cameron,

We're in this mess because of too much debt –too much government debt; too much corporate debt; too much personal debt. This is Labour's Debt Crisis, and it becomes clearer all the time that the scale of Britain'’s debts puts us in a much weaker position than other countries.

This Debt Crisis is pinned on Gordon Brown’s failure to ‘fix the roof when the sun was shining’; making reference to the former Prime Minister’s insistence that the era of ‘boom or bust’ was over. But with fiscal stimulus presented as ‘merely extending an overdraft’, the only answer to this Debt Crisis is to ensure that the government is ‘living within our means, [because] that’s what households do’. Austerity is thus the mature and responsible response to a boom-time debt-fuelled indulgence that left the entire country exposed come the inevitable bust. This continued invocation of the household clearly works, in part, in a cognitive fashion. As already discussed, the household analogy is essentially fallacious because it misrepresents the functions and capacities of the state to make alternatives to austerity seem both unfeasible and undesirable. Ultimately, however, this invocation is rooted in a sense of what ‘good’ households do, suggesting that morality must be at the heart of the issue.

However, to fully unpack this we need to understand debt itself, a task that is achieved by David Graeber’s Debt: The First 5000 Years[3]. While the inherent morality of debt has long been known – for instance, the German word Schuld means both “debt” and “guilt” – Graeber’s achievement is to demonstrate the historical unfolding of this essentially social relation. Debt overturns that myth that there was first barter followed by money and credit by demonstrating that debt actually came first, and then coinage. The story of debt is how the sense of ‘I owe you one’ became quantified, impersonal and consequently constituted in an unequal relationship in which the creditor can make and justify demands due to the self-indulgence of the debtor. Although the modern incarnations of these relations are increasingly abstract and mundane, this inherent morality remains. This is particularly apparent in well-ingrained rules of thumb that urge us to ‘pay back what one owes’ or ‘live within ones means’. There’s nothing particularly economic about these statements, for they are, more than anything, moral imperatives. The power of debt, as Graeber explains, comes from its flexibility. It is the ultimate leveller. When state debt is compared to household debt, these are the relations that are invoked, meaning that entire nations and their populations can be rendered as guilty sinners.

The household is also invoked in a different, albeit more ‘back to the future’ manner. The future is at stake in many ways, whether in terms of ensuring that the UK doesn’t end up with a ravaged reputation and depleted credibility like Greece. Or whether ensuring that the intergenerational inequality of passing government debt on to ‘our children’ is minimized – the irony being, of course, that with household debt rising and benefits cut, families with children will be some of the hardest hit by austerity measures. The morality of debt is still apparent here, but the age of austerity is also placed within a sort of informal storyline.

As Tracey Jensen[4] argues, the politics of austerity is increasingly intertwined with the recent cultural (re)turn to thrift. ‘Austerity chic’, as Jensen crowns it, looks to replicate the common-sense values and kitsch-factor of historical periods, particularly those times surrounding war. Except that instead of a matter of survival and hardship, austerity chic is primarily the romanticised preserve of middle-class distinction with ‘conspicuous non-consumption emerging as a new marker of cultural value’. Jensen cites the rise of programmes such as Superscrimpers as particularly exemplary of this trend. These trends must be understood in yet another move in the continuing individualisation and stigmatisation of poverty, in which personality flaws and behavioural traits are increasingly considered the sources of hardship. The reasons for returning to the values of a relatively distant past to fix the future are to be found in more recent history, and from this a storyline or narrative of austerity begins to emerge.

This story seemingly conflates both households and the state in the context of the credit crunch and global financial crisis: we all racked up too much debt targeting the high-life in the boom years, but since the crisis we must now start living within means; this has befallen everyone in society and we must now reap what we sowed. The actual differences between state and household are eked out through the primacy of debt. Since debt is experienced as a primarily moral imperative and is thus an incredibly flexible concept that attributes moral judgements, the economic distinctions can easily be ignored. Debt really is the ultimate leveller. This is why the comparison between the state and household ultimately makes sense, because they’ve both been bad and now require a fresh dose of austerity. 

The idea that lies behind austerity has really very little to do with, say, reverse Ricardian equivalence. The idea of austerity is the moral imperative to live within your means. There’s nothing really else that fundamentally matters to it. There is no coherent economic strategy or policy of fiscal consolidation, or any consensus on evidence that supports it. Just cut back, be responsible, the line goes. Just like the ideal household. That austerity is as much moral as economic may sound obvious. But if it is so self-evident, then why is so much mainstream debate around spending cuts spent discussing the economic basis for fiscal consolidation? And why did the Reinhart and Rogoff scandal make little difference? One reason is because the economic theory behind fiscal consolidation is ‘made up’ – not in a socially constructed sense, but in a ‘policy-based evidence making’ way – to justify and obfuscate what is essentially a moral imperative.

This has implications for how austerity is resisted. One needs to be able to cogently define what one is resisting. The deeply embedded morality surrounding the whole issue needs to be dealt with head on, rather than assuming the justifications used are mere rhetoric. If anything, the logic here is reversed: economic theory is used to both rationalise and obscure an essentially moral issue. The economic foundations behind fiscal consolidation may be ‘unbelievably silly’, but this doesn’t mean that the morality plays should not be taken seriously in their own right. These morality plays, with debt foregrounded as the ultimate leveller and with the state rendered as a household, may indeed be one of the more dangerous aspects of an already dangerous idea.

 

Liam Stanley is a doctoral researcher at the University of Birmingham, working on the politics of austerity in the UK.

 



[1] Blyth, M. (2013) Austerity: The History of a Dangerous Idea (Oxford: Oxford University Press).

[2] Finlayson, A. (2004) 'Political science, political ideas and rhetoric', Economy and Society, 33(4), 528-49.

[3] Graeber, D. (2011) Debt: The First 5,000 Years (New York: Melville House).

[4] Jensen, T. (2012) 'Tough Love in Tough Times', Studies in the Maternal, 4(2), 1-26.

 

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