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January 01, 2018


Matthew Moore

In my (Keynesian) understanding, austerity implies a budget surplus, and stimulus implies a budget deficit.

Can you tell me the definition of austerity you are using here? Is it reducing the proportion of GDP that is spent by government? If so, the conservative incentive should be clear.

Kallan Greybe

It's worth saying that the same conservative spirit animates a lot of how we understand taxation: talking about government services as "things paid for by taxes", as opposed to understanding that they are wealth generating goods and services in their own right, is straightforwardly a way of imposing a kind of private sector control on collective action and is deeply anti-democratic.

This is one of the big reasons I *loathe* the abominable Taxpayers' Alliance for the bunch of disingenuous private sector shills that they are.


@ Matthew. I don't think the raw budget deficit is a good measure here. If the economy grows strongly enough, this can decline even if policy is loose. I gauge austerity by cyclically-adjusted net borrowing (subject to the caveat that the adjustment is subject to uncertainty). According to the OBR, this fell from 7.9% of GDP in 2009-10 to 2.2% of GDP in 2016-17. They project another 1pp decline by 2021-22.

Ralph Musgrave

It is nonsense to suggest Conservatives support austerity any more than the political left: the left supports the “balanced budget” idea which in turn leads to inadequate demand and austerity just as much as Conservatives. For a lot more on that, see articles by Bill Mitchell (Australian economics prof) here:


Matthew Moore:

Congratulations on realizing there are two quite distinct meanings of the word “austerity”: 1, inadequate demand, and 2, “less public spending than I would like”. Unfortunately much of the political left is simply into chanting fashionable words, like austerity, progressive, inclusive, sustainable, racism etc etc. Careful definition of those words is far too much like hard work for the “chanters”.


Our blogger uses clever oxonian wording by starting with "fiscal austerity" so that it be understood that "austerity" thereafter is thus narrowly defined, and then narrows that down again to "gauge austerity by cyclically-adjusted net borrowing".

Also he cleverly words that "people’s incomes depend upon fiscal policy" (the cleverness is that "depend" does not not mean "depend only" or "depend mainly", and that he could have equally written "depend upon the solar spot cycle" as likely there is some dependency on that too).

This for me is the usual deeply misleading propaganda: properly defined "austerity" is not just "fiscal austerity" defined as "cyclically-adjusted net borrowing", but it is whether overall government policy is contractionary or not.

I reckon that government policy is overall quite expansionary, as obvious from booming asset prices, high-end incomes, imports, at least in the south.

And that's because "people's income", at least for many people, obviously depends as much if not more from credit/monetary policy than fiscal policy.

My impression is that our author is fully aware of "privatised keynesianism" (a term by C Crouch) being the main policy stance of neoliberal governments of the past 35 years, so I ask myself why he consistently argues from a different point of view which seems to me utterly misleading, both economically and politically.


«there are two quite distinct meanings of the word “austerity”: 1, inadequate demand, and 2, “less public spending than I would like”»

Or rather neither:

* Properly defined, "austerity" used to mean "a contractionary overall (regulatory, fiscal, monetary) policy aimed to achieve adequate rather than excessive demand, where excessive demand manifests as excess trade imports and capital exports".

* As defined by our blogger, "austerity" does not mean "less public spending than I would like" but lower "cyclically-adjusted net borrowing" than he would like, which can mean that spending should be higher or also that taxes should be lower.


Liberals believe in right and wrong, so people can do good things or bad things. Conservatives believe in good and evil, so people are either good or evil, and a good person can do no evil, no matter how bad the deed would seem to a liberal, while an evil person can do no good, no matter how right the deed would seem to a liberal. Liberals have morality. Conservatives have hierarchy. There's been a lot of work, philosophical and scientific, done on this.


Secular stagnation implies the need for austerity.

When there is sufficient potential for growth from an economy then that economy can supplement its standard of living by borrowing and servicing its debt through the return from its future economic growth, in such an economy the level of demand exceeds the level of output and that economy is predisposed to inflation. This is the basis of social and economic progress which favours the affluent classes because of their higher market value leading to the expansion of that demographic group as the population adapts to those changing social and economic conditions, the dominant values of progressive societies are therefore those of the expanded affluent classes.

When there is insufficient potential for growth from an economy to service its existing deficit then that economy must reduce its rate of borrowing and standard of living in order to redress the shortfall in the returns from growth in order to service its debt (austerity), in such an economy the level of output exceeds the level of demand and that economy is predisposed to deflation. This is the basis of the reversal of social and economic progress which favours the lower social classes because of their lower market value leading to the expansion of that demographic group, the dominant values of more traditional societies are therefore those of the expanded lower social classes as the population reverts to its more traditional, surviving and historically typical character.

If inflationary economic conditions reflects the progressive changes which are a product of economic growth and development then the new deflationary economic conditions reflects the reversal of that change.

Austerity is the name for the process of change by which a society reverts to its more traditional surviving character favoured by conservatives.

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