Architects of Austerity: International Finance and the Politics of Growth

Architects of Austerity: International Finance and the Politics of Growth

Architects of Austerity: International Finance and the Politics of Growth

Architects of Austerity: International Finance and the Politics of Growth

Synopsis

Architects of Austerity argues that the seeds of neoliberal politics were sown in the 1950s and 1960s. Suggesting that the postwar era was less socially democratic than we think, Aaron Major presents a comparative-historical analysis of economic policy in the United States, the United Kingdom, and Italy during the early 1960s. In each of these cases, domestic politics shifted to the left and national governments repudiated the conservative economic policies of the past, promising a new way forward. Yet, these social democratic experiments were short-lived and deeply compromised. Why did the parties of change become the parties of austerity?

Studies of social welfare policy in these countries have emphasized domestic factors. However, Major reveals that international social forces profoundly shaped national decisions in these cases. The turn toward more conservative economic policies resulted from two critical shifts on the international stage. International monetary organizations converged around an orthodox set of ideas, and a set of institutional transformations within the Bretton Woods system made the monetary community more central to financial management. These changes gave central banks and treasuries the capacity to impose their ideas on national governments.

Architects of Austerity encourages us to critically consider the power that we vest in public financial authorities, which have taken on an ever larger role in international economic regulation.

Excerpt

Politics in the post-financial crisis world is defined by the struggle over austerity. Like a tidal wave that follows an earthquake, financial collapse in U.S. credit markets in the fall of 2008 quickly spread to Western Europe, toppling economies that, once the dust settled, were revealed to also have been built on their own shaky financial footings. Even as the causes of the crisis are still being sorted out, government officials have faced a clear and distinct choice about how to move forward. On the one hand, they could walk the path carved by historical experience by trying to jump-start the stalled economic engine through the kind of strong fiscal measures that their predecessors had taken when faced with the Great Depression nearly a century ago. On the other hand, they could continue to walk the path of neoliberalism by restoring order and balance in credit markets and government finances in the hopes that market forces would work their magic. With few exceptions they chose the second path, simultaneously backstopping credit markets with emergency credit to the banking system and, even more dramatically, forcing state ledgers back into balance through harsh austerity measures.

First to stride down the path of austerity was the Papandreou government in Greece, which, despite having been elected on a left-wing and antineoliberal platform in 2009, called for €500 million in cuts to public spending, reduced holiday pay for pensioners and civil servants, and increased taxes on consumption in the spring of 2010. Later that year Prime Minister Brian . . .

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