Ideas and ideologies are rarely if ever free from class interests. If there ever were a controversy that validated the truth of that, the continuing “debate” over austerity fills the bill.
A few weeks ago, the most prestigious apologists for austerity in the economics profession, Ken Rogoff and Carmen Reinhart of Harvard University – now known as R & R – were brought up short when a blatant spreadsheet error in their published work showed their vaunted rule “proving” that slowdowns occur when debt-to-GDP ratios exceed 80-90% was not a rule at all.
This was and is not just an academic debate. The GOP (Paul Ryan, erstwhile VP candidate) and blue-dog Democrats (Erskine Bowles of the Simpson-Bowles catfood commission) explicitly and repeatedly cited R & R research in their attacks on any additional job stimulus, and in efforts to cut Social Security, Medicare, Medicaid, Obamacare, food stamps, unemployment insurance extensions, and education.
The so-called “rule” was already a canard before the R & R spreadsheet flap. It was never clear in many of the countries R & R studied whether it was debt that caused low growth, or low growth that caused debt. Nonetheless it was a comfort to the country club “wisdom” of millionaires and billionaires, and their paid flunkeys, ergo, that “the hungry dog hunts harder,” as if poverty were actually a gift to the poor and a necessary virtue for society.
Oblivious not only to well-founded economic knowledge demonstrating the complete failure of this ideology during the last Depression, they also appear to ignore the plain news of Europe’s never-ending and deepening depression from austerity policies. Nonetheless, this bourbon wisdom has possessed the entire Republican Party, and about ¼ of the Democratic Party leadership. R & R did not disdain the affectionate but tainted embrace of these forces – an error greater than the spreadsheet mistake.
The latest to join the country club party is the Bank for International Settlements, the central bank of central bankers with, as economist Paul Krugman quips, all the prejudices of that tribe concentrated by an order of magnitude. “In its latest report.” Krugman writes, “The BIS really transcends itself. Part of what makes the report so awesome is the way that it trots out every discredited argument for austerity, with not a hint of acknowledgement that these arguments have been researched and refuted at length.” For example it repeats the R & R “80% debt/GDP rule” as if that mouse had not already roared its irrelevance.
Interest is the mother’s milk of ideology. One may ask: How is it that intellectually refuted austerity ideas – predicting catastrophic inflation and high interest rates from public stimulus in a depression – became the stitching in the “sequester” blanket now smothering U.S. recovery in employment?
Well, for example, if you are Mitt Romney, or the Koch brothers, owners of considerable wealth in both global finance and energy, you have two major political concerns:
One, control the state institutions that regulate your business, property and employer rights, that subsidize your infrastructure and security needs, and set your taxes – oh, if you can’t control it, nullify it, make it dysfunctional.
Two, maximize the amount of private wealth and resources available for investment, by cutting and grabbing public wealth and resources.
Every question is subordinated to these concerns. In addition, you became successful in part because of skill at sales – frankly, an occupation, though necessary in a market economy, with scant prohibition against lying.
Photo: Members of the “Save Our News” coalition, including: Courage Campaign, SEIU, Forecast the Facts, Greenpeace and the Los Angeles Federation of Labor, rally before delivering a 500,000-signature petition urging the Tribune Co. management to reject any offers by the Koch Brothers to buy The Los Angeles Times newspaper outside the newspaper headquarters in Los Angeles, May 29, 2013. Damian Dovarganes/AP