Ending the Creditor’s Paradise

Brown University's Eastman professor of political economy, Mark Blyth, author of 'Austerity: The History of a Dangerous Idea', asks:

What would you tell six hundred leading German social democrats about their party’s handling of the Eurocrisis?

for jacobinmag.com (via 3quarksdaily.com):

Austerity as economic policy simply doesn’t work. In the cases where it looked like it worked, something else was really doing the work, usually the devaluation of a sovereign currency at the same time as the expansion of a much larger trading partner gave exports a short-term boost. Budgets were cut as exports expanded, but it wasn’t the cuts that mattered, it was the expansion.

But I have stood here before and spoken about Austerity, so let’s take the few minutes we have here today to look forward rather than backwards.

All eyes are on Greece and the possibility of default or “Grexit.” Indeed, it’s an impossible position for all sides. The Greeks cannot pay back what they owe, given that the policies enacted to help them grow have resulted in the collapse of nearly a third of their economy. The young and the talented have left, leaving pensioners and the public sector behind.

But to recognize that fact and accommodate policy opens up issues in debtor countries such as Ireland and Portugal and Spain that creditor countries such as Germany do not want to deal with.

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