The Economist: austerity in 2010 "threatened recovery"

The coalition against austerity is overwhelming.

It feels as though a rubicon has been somewhat crossed: it is now, undoubtedly, mainstream opinion that fiscal consolidation – austerity, to you or me – in the immediate aftermath of the greatest financial crisis in 80 years was a terrible idea.

The Economist's Free Exchange column was never particularly supportive of austerity, occasionally going against the grain of the magazine's main editorial line to do so. But this week is a particularly strong attack on the idea.

In the print column, Ryan Avent focuses on the IMF's declaration that, in times of crisis, the fiscal multiplier could be several times higher than previously thought, and takes a look at wider research in the area:

What that means is that austerity may hurt much more at some times than others. In a 2010 paper Alan Auerbach and Yuriy Gorodnichenko of the University of California, Berkeley argued that the fiscal multiplier may be negative during booms, meaning that spending cuts actually raise growth. In recessions, by contrast, it could be as high as 2.5. A study by Lawrence Christiano, Martin Eichenbaum and Sergio Rebelo of Northwestern University suggested that although the multiplier may hover at around 1 normally, it could rise to more than 3 when interest rates fall to near zero, leaving the central bank with less room to act.

We called the IMF's realisation that it had severely underestimated the multiplier the most important 68 words in its world economic outlook, and it appears Avent agrees.

In the blog which accompanies the column, he doubles down on the claimtwitter):

Policymakers suffered from a striking lack of perspective in opting to pursue broad austerity beginning in 2010. It was clear at the time that some economies needed to begin cutting debts immediately and that lots of economies would need to bring debt down eventually. But a look at global conditions should have indicated that the normal cushions against fiscal cuts were weaker than normal or absent. And so the decision by countries not facing immediate market pressure to start cutting alongside those that were seriously undermined the consolidation efforts of economies in truly dire straits and threatened recovery.

Avent has much more to say, particularly on the failure of central banks to play their role correctly, and both columns are well worth reading in full.

It's always hard to argue about what ought to have happened. Politically, everyone will point out that it holds little weight: no party can win an election based on the claim that they would have been better if they had won the last one; instead, they have to present forward-looking visions, and explain why the country will be better in five years time under them.

And economically, whether or not austerity was right is now meaningless; it happened, and failed, but the circumstances are changing daily. We are (far too slowly) climbing out of depression, and at some point the arguments for fiscal consolidation will get stronger, and a new discussion will need to be had.

Nonetheless, it is worth repeating: George Osborne was wrong, emphatically, obviously and inarguably. His decisions hurt the economy and the nation entirely unnecessarily, and he refused every possible opportunity to ameliorate that damage. Plan A isn't just failing, it has failed. Yet there has been no contrition, no apology, and not even a hint of understanding. All there is is a lesson for future Chancellors: Don't Do This.

Sad Osborne is sad, but not about austerity. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The most terrifying thing about Donald Trump's speech? What he didn't say

No politician uses official speeches to put across their most controversial ideas. But Donald Trump's are not hard to find. 

As Donald Trump took the podium on a cold Washington day to deliver his inauguration speech, the world held its breath. Viewers hunched over televisions or internet streaming services watched Trump mouth “thank you” to the camera, no doubt wondering how he could possibly live up to his deranged late-night Twitter persona. In newsrooms across America, reporters unsure when they might next get access to a president who seems to delight in denying them the right to ask questions got ready to parse his words for any clue as to what was to come. Some, deciding they couldn’t bear to watch, studiously busied themselves with other things.

But when the moment came, Trump’s speech was uncharacteristically professional – at least compared to his previous performances. The fractured, repetitive grammar that marks many of his off-the-cuff statements was missing, and so, too, were most of his most controversial policy ideas.

Trump told the crowd that his presidency would “determine the course of America, and the world, for many, many years to come” before expressing his gratefulness to President Barack Obama and Michelle Obama for their “gracious aid” during the transition. “They have been magnificent," Trump said, before leading applause of thanks from the crowd.

If this opening was innocent enough, however, it all changed in the next breath. The new president moved quickly to the “historic movement”, “the likes of which the world has never seen before”, that elected him President. Following the small-state rhetoric of his campaign, Trump promised to take power from the “establishment” and restore it to the American people. “This moment," he told them, “Is your moment. It belongs to you.”

A good deal of the speech was given over to re-iterating his nationalist positions while also making repeated references to the key issues – “Islamic terrorism” and families – that remain points of commonality within the fractured Republican GOP.

The loss of business to overseas producers was blamed for “destroying our jobs”. “Protection," Trump said, “Will lead to great strength." He promised to end what he called the “American carnage” caused by drugs and crime.

“From this day forward," Trump said, “It’s going to be only America first."

There was plenty in the speech, then, that should worry viewers, particularly if you read Trump’s promises to make America “unstoppable” so it can “win” again in light of his recent tweets about China

But it was the things Trump didn't mention that should worry us most. Trump, we know, doesn’t use official channels to communicate his most troubling ideas. From bizarre television interviews to his upsetting and offensive rallies and, of course, the infamous tweets, the new President is inclined to fling his thoughts into the world as and when he sees fit, not on the occasions when he’s required to address the nation (see, also, his anodyne acceptance speech).

It’s important to remember that Trump’s administration wins when it makes itself seem as innocent as possible. During the speech, I was reminded of my colleague Helen Lewis’ recent thoughts on the “gaslighter-in-chief”, reflecting on Trump’s lying claim that he never mocked a disabled reporter. “Now we can see," she wrote, “A false narrative being built in real time, tweet by tweet."

Saying things that are untrue isn’t the only way of lying – it is also possible to lie by omission.

There has been much discussion as to whether Trump will soften after he becomes president. All the things this speech did not mention were designed to keep us guessing about many of the President’s most controversial promises.

Trump did not mention his proposed ban on Muslims entering the US, nor the wall he insists he will erect between America and Mexico (which he maintains the latter will pay for). He maintained a polite coolness towards the former President and avoiding any discussion of alleged cuts to anti-domestic violence programs and abortion regulations. Why? Trump wanted to leave viewers unsure as to whether he actually intends to carry through on his election rhetoric.

To understand what Trump is capable of, therefore, it is best not to look to his speeches on a global stage, but to the promises he makes to his allies. So when the President’s personal website still insists he will build a wall, end catch-and-release, suspend immigration from “terror-prone regions” “where adequate screening cannot occur”; when, despite saying he understands only 3 per cent of Planned Parenthood services relate to abortion and that “millions” of women are helped by their cancer screening, he plans to defund Planned Parenthood; when the president says he will remove gun-free zones around schools “on his first day” - believe him.  

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland