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Austerity: The History of a Dangerous Idea

4.10  ·  Rating details ·  1,234 ratings  ·  145 reviews
Selected as a Financial Times Best Book of 2013
Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now
Hardcover, 288 pages
Published April 25th 2013 by Oxford University Press (first published March 27th 2013)
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4.10  · 
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 ·  1,234 ratings  ·  145 reviews

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The policies undertaken by governments in response to the economic downturn and the debt follow the Einsteinian definition of lunacy. It is a case of repeating the same action under the same circumstances, yet expecting different results. More rounds of 'reform' lead to a sluggish recovery and the collapse of social safety nets leads to the 'hollowing-out' of the middle class. It is this false belief that 'austerity', or the belief that budget cuts would be the only course to restore prosperity. ...more
Simon Wood
Sep 02, 2013 rated it it was amazing

Mark Blyth's "Austerity: The History of a Dangerous Idea" is an invaluable contribution to the debate on what direction policy should take post Credit-Crunch. In a civilised society, where ideas were debated on their merits and not on how useful they are to those with power and influence, it would minimally be a large part of the debate and in my opinion form the backdrop to a set of policies aimed at maintaining the welfare state, and bringing growth back to the economy.
May 06, 2013 rated it really liked it
Mark Blyth has written this terrific book as a history of a policy choice, The choice is austerity, which involves financial belt-tightening during times of recession or depression, including raising taxes, cutting social transfer payments, raising interest rates, and other related actions.

The choice of austerity has always struck me as an odd one. Why cut welfare payments just at the time when people are more likely to be out of work and in need of them? Why raise taxes when times are bad and b
Peter Mcloughlin
Instead of a long review of the book, I am going to post a seven-minute sports recap video by Mark Blyth of the postwar economic order starting out as Keynesian and reset to neoliberalism in the 1970s and housing blow up in 2008. It will give a flavor of the content of the book which is much more detailed but the gist of which is covered in the video.

If you like that and want to go deeper try this.
Jan 07, 2019 rated it it was amazing
Why are bad ideas so popular? This book does a really good job at explaining how the bad ideas of austerity proliferated and also it does a wonderful job at explaining why austerity and an obsessive focus on public debt is foolish (though on the latter count, I wish he had gotten more into MMT or other money theories that really talk about that). His solutions were taxes, which is a good start I think but not nearly enough to counter the austerity dogma worldwide. Still, this is an essential mus ...more
Athene Wherrett
Feb 08, 2015 rated it it was amazing
10 pages in and I'm already pissed off. Imagine the richest people in your town had a party and it cost a huge amount of money, now imagine these partying people got a bit carried away and caused some damage costing another few million. Who would you expect to have to pay for the party and the damage? The people who hosted the party, and those who attended and who caused the damage - that is what you'd expect. No, it's you and the rest of the people in your town, everyone except those who were a ...more
The most important things I learned from "Austerity" were: (1) the case for austerity policies rest on very weak theoretical and empirical foundations; (2) economics is a BS discipline; and (3) only Greece was already chronically ill before the economic crisis hit Europe. The first point is the most original, but is unfortunately presented in an very long-winded, pedantic, repetitive and (unnecessarily?) complex manner. Consequently, I found this book extremely hard to get through, despite the f ...more
Jan 03, 2019 rated it really liked it
Very useful book, among other reasons because of the discussion of how ordoliberalism, neoliberalism, monetarism and Keynesianism relate to one another, and how a mixture of the former ended up dominating the thinking of policymakers everywhere, but especially in the EU. The most shocking, and in some ways most important, contribution of the book is that he shows that the hyperinflation of the Deutschmark happened because of a deliberate policy choice made by the Germans (they wanted to shaft th ...more
Apr 17, 2013 rated it it was amazing
I found this book the same as many other people did - first I happened upon a video of the author talking against Austerity (quite compellingly) and then looked him up and found there was a book. I think along with Debt: The First 5,000 Years by David Graeber, it is the most important recent book on economics that I've read.

While I started reading this book back in May (5 months ago), shortly after I was impressed by the video, I struggled to make progress in reading it. It wasn't until I girded
Mbogo J
Apr 05, 2018 rated it really liked it
Austerity is an idea that has few believers these days. IMF tacitly acknowledged its shortcomings while World Bank released a report showing that austerity is mostly ineffective ( i would say downright harmful) in helping countries stave off a debt crisis and still achieve growth. Bretton Woods guys are the last to join the party. Developing countries have argued for years that austerity is harmful and usually makes the crisis worse. We saw it in Argentina, the Asian Financial Crisis, Mexico cri ...more
Perhaps a dry read for some, this book offers a compelling and detailed argument for why austerity is not a wise economical measure to take. Even for those not necessarily knowledgeable in economic theory, I would assume this book would be useful, because the questions it raises force you to attempt to widen your knowledge on the subject.
Kyle Minton
Dec 24, 2014 rated it really liked it
In Austerity, Mark Blyth dives into what is now a very entrenched belief in American politics. Explained simply, austerity is just scaling back government spending in the form of budget cuts, privatization, and making way for private sector investments. If this sounds familiar it's because this has been the American Republican economic policy for some time now. In his book, Mark Blyth explores both the ideological history and practical applications of Austerity, as well as some brief notes about ...more
Austerity: The History of a Bad Idea, by Mark Blyth, is an (obviously) anti-austerity text. It recounts the history of austerity as an economic idea, touching on the work of classical economists like Locke, Smith and Hayek, to name a few. Blythe touches on austerity mentality in past economic crises such as the Great Depression, and examines modern data on austerity measures implemented during the recession of 2008 to get his point across. Blythe also recounts the fascinating history behind some ...more
John Maguire
Jul 29, 2013 rated it really liked it
This was not an easy read both in terms of content which was at times a little bit technical and the fact that I'm Irish living through an austerity-supporting government. Before reading this I would have, largely influenced by my upbringing, been in favour of austerity by default. First save, then shop, as Angela would say if she spoke English rather than German.

By the end of this book, I'm somewhat convinced that we might be going down a very very bad road in Ireland. It seems that the eviden
Jan 05, 2017 rated it liked it
This book was way too technical for me, it seemed like it was written for people who had a deep understanding of economics and policy. I picked it up thinking it would be a lay-man's introduction to the 2008 financial crisis, but half the time I didn't even know what I was reading. I would have rated it higher, it's pretty well written, but definitely not for someone who's just getting started in learning about world finance. I'll probably re-read the book in a few years when I have a better und ...more
Jul 19, 2013 rated it really liked it
I had to read this book and I dreaded doing it. Me and economics just don't get along so I was looking forward to reading it like I was looking forward to going in for a mammogram.

But surprisingly, it was really good. Scary because you learn how messed up the economy is but good because I learned not just about 'austerity' but about economics in general. Blyth really takes time to explain in a very clear manner of the economy and how we ended up going to austerity policies and why it doesn't wor
Roman Žňava
Sep 09, 2018 rated it liked it
3,5/5. Blythe explains quite well the historical roots of austerity and its negative effects today. However, at times he seems to be trying to persuade the reader way too much, repeating the same talking points and occasionally willing to spin some facts a bit just to prove his point. Given his strong criticism of institutions being too ideological I would expect him to be much more sober and objective in his analysis.
Well presented history and ideas on Austerity and why it doesn't work.
Feb 09, 2019 rated it liked it
I "read" is as an audio book and sometimes it was difficult to follow. Otherwise it was OK; maybe a little to muck encyclopedic.
Jeff Hunt
Jan 02, 2014 rated it really liked it

So are we all Keynesians now? Blyth makes a convincing case that austerity as a policy is doomed to failure and he backs up his claims with a walkthrough of the major historical episodes where austerity was previously pursued as a solution – as a preview: the Nazi party’s rise in Germany and Japan’s imperialism were preceded by bouts of austerity induced deflation. In addition, Blyth methodically picks apart the academic papers, which the ECB has cited as the support for its current policies in
Mar 13, 2013 rated it really liked it
Shelves: amazon-vine
This is very much a book of the moment, though this is partly a matter of luck. While Mark Blyth’s book was written in response to the emergence of austerity policies in 2010, its publication was nicely timed with the contemporaneous undermining of the key study by Carmen Reinhart and Kenneth Rogoff which was used to make the case for the necessity of austerity. Though Blyth’s book was written before the revelation of the study’s flaws, his more broader focus on the origins and development of au ...more
Austerity is not simply morally indefensible, it is thoroughly and utterly incapable of delivering on any of its promised benefits — except in fluke marginal cases.

Mark Blyth cunningly — and humorously — explains the workings of orthodox economic theory and gives some relevant background history. But most importantly, he doesn't commit the huge mistake of explaining the complicated workings of a capitalist economy by using economics. Rather, he is a prime example of a much needed revival of the
Constantinos (Gus) Kalogeropoulos
Professor Blyth guides us through a whirlwind examination on the intellectual and practical origins of Austerity. Presented with clarity, humour and impeccably researched, he shows how this dangerous idea came to dominate the minds of many economists and political figures again and again, especially in the last hundred years, despite the fact that it never - aside from some very specific instances - delivered on its promises of growth through painful contraction. This work is particularly import ...more
Mar 30, 2013 rated it liked it
Ok as far as it goes given that it does ignore, for the most part, the activist liberal democratic state. I feel that the author, on an anti-Austrian economics kick, ignores the state at his peril. One does not need to be an anarcho-capitalist to realize that the state and the financial system are in a symbiotic relationship and they cannot be separated. Economics is about choices, but in macro terms, the state is a major player and theorists from all shades of the political spectrum accept this ...more
Parker Douglas
Aug 15, 2013 rated it really liked it
Great book on the history of an idea that should have been DOA according to sound economic principles. If those who fancy themselves traditionally liberal (after whom today's neocons supposedly model themselves) and classically economic in sensibility really want to take their purported principles seriously, they should consider the social investment arguments of this book and be suspicious of the austerity measures they mouth without much sound economic analysis. This book is an important read ...more
Julian Haigh
Aug 01, 2013 rated it liked it
Great general history of European and US economies in the 20th Century, viewed from the perspective of austerity. The general premise is that it has not worked, save for rare occurrences, and that placing such independent single-mindedness to banks to control inflation above all other attributes is to favour the creditors over the debtors. What results is a financial system that circumvents democratic organization of the nation, and is patently unable to respond to slumps leading to their deepen ...more
Danielnylinnilsson Nylin Nilsson
I think this book is enormously important for anyone interested in what is happening in Europe at the moment. Blyth builds a very strong argument against authority showing how it throughout its short history has never worked and only produced economic misery and political turmoil. So far this seems to be true in countries like Greece, Spain and others.

There are probably other ways to look at these issues, but maybe Blyth's biggest achievement is not his argument per se, but that he brings up a
Tara Brabazon
Apr 27, 2014 rated it really liked it
Oh what a ripper. This is a resonant and relevant book. It answers all those politicians and policy makers who assume that the answer to economic 'crisis' is austerity.

This book offers a remarkable critique of the global financial crisis and shadow banking, but also demonstrates why it is ridiculous to assume that a cut in services can address the injustices of finance capitalism.

If you have ever asked, "what caused the Global Financial Crisis?" this book provides your answer. Read it. It is b
I found this to be harder to read in terms of writing than expected, but the ideas in here are solid. There have been a number of books on the subject written recently, but this one is really thorough.
Feb 15, 2014 rated it it was amazing
Easily best thing I've read this year. Immediately started a re-read.
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“In general, the deployment of austerity as economic policy has been as effective in bringing us peace, prosperity, and crucially, a sustained reduction of debt, as the Mongol Golden Horde was in furthering the development of Olympic dressage.” 8 likes
“The “German problem” after 1970 became how to keep up with the Germans in terms of efficiency and productivity. One way, as above, was to serially devalue, but that was beginning to hurt. The other way was to tie your currency to the deutsche mark and thereby make your price and inflation rate the same as the Germans, which it turned out would also hurt, but in a different way.

The problem with keeping up with the Germans is that German industrial exports have the lowest price elasticities in the world. In plain English, Germany makes really great stuff that everyone wants and will pay more for in comparison to all the alternatives. So when you tie your currency to the deutsche mark, you are making a one-way bet that your industry can be as competitive as the Germans in terms of quality and price. That would be difficult enough if the deutsche mark hadn’t been undervalued for most of the postwar period and both German labor costs and inflation rates were lower than average, but unfortunately for everyone else, they were. That gave the German economy the advantage in producing less-than-great stuff too, thereby undercutting competitors in products lower down, as well as higher up the value-added chain. Add to this contemporary German wages, which have seen real declines over the 2000s, and you have an economy that is extremely hard to keep up with. On the other side of this one-way bet were the financial markets. They looked at less dynamic economies, such as the United Kingdom and Italy, that were tying themselves to the deutsche mark and saw a way to make money.

The only way to maintain a currency peg is to either defend it with foreign exchange reserves or deflate your wages and prices to accommodate it. To defend a peg you need lots of foreign currency so that when your currency loses value (as it will if you are trying to keep up with the Germans), you can sell your foreign currency reserves and buy back your own currency to maintain the desired rate. But if the markets can figure out how much foreign currency you have in reserve, they can bet against you, force a devaluation of your currency, and pocket the difference between the peg and the new market value in a short sale.

George Soros (and a lot of other hedge funds) famously did this to the European Exchange Rate Mechanism in 1992, blowing the United Kingdom and Italy out of the system. Soros could do this because he knew that there was no way the United Kingdom or Italy could be as competitive as Germany without serious price deflation to increase cost competitiveness, and that there would be only so much deflation and unemployment these countries could take before they either ran out of foreign exchange reserves or lost the next election. Indeed, the European Exchange Rate Mechanism was sometimes referred to as the European “Eternal Recession Mechanism,” such was its deflationary impact. In short, attempts to maintain an anti-inflationary currency peg fail because they are not credible on the following point: you cannot run a gold standard (where the only way to adjust is through internal deflation) in a democracy.”
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