Monthly Archives: March 2019

Democracy and injustice

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This week’s train journeys involved two books which looked competely different on the face of it and ended up being about the same thing: race. They were both random bookstore, I-need-a-treat, purchases: How Democracies Die by Steven Levitsky and Daniel Ziblatt and Exterminate All the Brutes by Sven Lindqvist. (Yes, I am weird.)

The former is an analysis of the way democracies turn into authoritarian regimes, from Hitler’s Germany to Fujimori’s Peru – and, the book argues, Donald Trump’s United States. It does not paint an authoritarian US as inevitable, but it’s hard to emerge from reading it feeling confident about the health of American democracy. And the reason is race. US democracy has functioned well, with civility, healthy checks and balances, and strong norms averting damaging partisanship only when it is democracy among white citizens. This is the same message as Ta-Nehisi Coates’s We Were Eight Years in Power. The politics of the US, both books, suggest, are fundamentally determined by the legacy of slavery.

Lindqvist’s book is an extraordinary reflection through the course of the author’s journey across the Sahara into Congo, and intellectual journey through 19th century authors including Conrad and Darwin, on imperialism. It vibrates with anger at the injustice of what Mike Davis described as Late Victorian Holocausts. Lindqvist also draws the line from imperialist to 20th century holocaust. I would say this is a must-read book for anybody concerned with global justice. For it points forward to the conflict to be expected in a world where – as in the era of Victorian imperialism – technological changes create a superfluous labour force looking for domains to exploit.

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Austerity revisited

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I’ve been reading Austerity: When It Works and When it Doesn’t by Alberto Alesina, Carlo Favero and Francesco Giavazzi. It’s a book that won’t be popular with some people.

While accepting that fiscal austerity reduces aggregate demand, the authors argue, strongly, that the negative output costs are smaller in the case of expenditure reductions than tax increases, and so that expenditure reductions are also more effective in reducing debt to GDP ratios. They also suggest that austerity can in some circumstances be expansionary. They dismiss claims that fiscal multipliers are larger during economic downturns. And also the claim that voters do not always punish austerity when it comes to election time. The authors dismiss some other often-heard arguments for restraining austerity programmes. For example, they suggest that some European countries had over-invested in unnecessary infrastructure so low interest rates post-2008 were not a good reason to invest more public money in long-term projects. They argue for means testing areas of public expenditure such as free or subsidised higher education.

The book is based on data for 16 advanced economies from 1970, with a chapter focusing on post-2008 and 2012 Europe. Its findings conflict with those of other macroeconomists, including Olivier Blanchard for instance. There are two big gaps – clearly acknowledged. One is contemporaneous income distribution, the other the intergenerational equity issues. This is about aggregate macroeconomics, output growth and debt-GDP ratios.

As the conclusion notes, the questions addressed by the book are intertwined with another: did European countries overdo austerity after the financial crisis? The argument here is that austerity measures were insurance against sovereign debt and further banking crises, and even with hindsight it is impossible to know whether the degree of austerity was just right or too much to avert this potentially disastrous outcome. However, it is clear that the output cost of austerity was lower in the cases of expenditure cuts than tax increases.

This is very much not my area of expertise and – as I so often seem to say – history is over-determined so it is never going to be possible to resolve the causality questions posed by macroeconomic events. The evidence presented here that if you have to do fiscal austerity for cyclical reasons, do it through spending cuts seems persuasive in terms of the aggregate GDP effect. The book doesn’t address, and so doesn’t begin to answer, the question about the effect of actual austerity measures on the social fabric and political events. It seems fair to include these in the assessment.

Nevertheless, the authors appeal to the counterfactual question to justify their argument: “We find it remarkable that those who opposed any form of austerity seem to be so sure that everything would have worked out, with more government spending and more debt in countries such as Italy, Ireland, Spain and Portugal.” Less certainty, more humility, in this area would be welcome – but unlikely. I suspect this book will reignite the controversy it claims to seek to defuse.

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Delicate morsels for the brain when unwell

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This week I had a horrible cold, the kind that turns the brain to cotton wool. It turned out that what I needed to read was not detective fiction but rather short essays. I polished off three rather good collections with just enough intellectual content in each column/essay to make me feel that I did still have some ability to reason. They were Between Eternities by Javier Marias, Umberto Eco’s Chronicles of a Liquid Society, and Colm Toibin’s Homage to Barcelona.

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