The Political Economics of Austerity

Cambridge Journal of Economics doi:10.1093/cje/bet076

39 Pages Posted: 15 Apr 2014  

Suzanne J. Konzelmann

University of London - Birkbeck College - Faculty of Social Sciences, School of Management and Organizational Psychology; University of Cambridge - Faculty of Social and Political Sciences

Date Written: January 1, 2014

Abstract

The 2007/8 financial crisis has reignited the debate about economic austerity. With the aim of understanding why a government would pursue such a policy in the current context of persistent economic recession, this article traces the social, political and economic developments that have together shaped the evolution of ideas about austerity, from the earliest theorizing by the Classical political economists some three hundred years ago. Throughout the historical narrative, important analytical themes revolve around the arguments used to justify austerity – notably appeals to ethics and morality (reinforced by misleading analogies drawn between government budgets and the accounts of firms and households). These include: concerns about inflation and the observed relationship between inflation and unemployment; ‘Ricardian equivalence’ and ‘non-Keynesian’ effects of austerity; and the correlation between public debt levels and economic growth. The class analytics of austerity – who bears the burden of austerity and who benefits – and the process by which alternative ideas penetrate the mainstream and reconstitute the conventional wisdom are also important analytical themes.

Keywords: Austerity, Macroeconomic Policy, Financial Crises, Business Cycles

JEL Classification: B22, E32, E44, N10

Suggested Citation

Konzelmann, Suzanne J., The Political Economics of Austerity (January 1, 2014). Cambridge Journal of Economics doi:10.1093/cje/bet076. Available at SSRN: https://ssrn.com/abstract=2424697

Suzanne J. Konzelmann (Contact Author)

University of London - Birkbeck College - Faculty of Social Sciences, School of Management and Organizational Psychology ( email )

Malet Street
Bloomsbury
London, WC1E 7HX
United Kingdom
+44 (0) 207 631 6799 (Phone)

HOME PAGE: http://www.bbk.ac.uk/management/our-staff/academics/konzelmann

University of Cambridge - Faculty of Social and Political Sciences ( email )

ESRC Centre for Business Research
Cambridge, CB2 1TN
United Kingdom
+44 1223 337733 (Phone)

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