Monday, April 7, 2014

Impossible Conversations: Review of Mark Blyth's Austerity: The History of a Dangerous Idea

by Kent Aitken RSS / cpsrenewalFacebook / cpsrenewalLinkedIn / Kent Aitkentwitter / kentdaitkengovloop / KentAitken

John Kenney wrote to me this morning, having read these reviews, saying that in retrospect it seems strange that our discussion barely lead back to our day-to-day reality in public service. In retrospect, I agree. It seems that there would have been a really interesting discussion about the role of institutions in massive policy debates like this, but Blyth kept it high-level, and so did we. The question John and I hit on that may be ripe for future exploration, though, is the impact of austerity on public administration. And it's a question that came up during another book club as well: is it pressure or slack that enables innovation? At the austerity scale of policy, it may be that budget pressures ensure effective controls on spending, which may work well for a largely transactional government. But if the move to a relational state and cross-sectoral collaboration is the future, that lever could have the opposite effect. But that's a question for a future book club - perhaps for when we read The Entrepreneurial State: Debunking Public vs. Private Sector Myths.

When we first sat down to discuss the book I admitted I hated it. By the end of our discussion I gave it a 7 out of 10 stars. The sheer act of discussing the book stirred a couple of lessons from its dog eared pages that I had forgotten. The most important of which was never give up your printing press, the upside of fiscal unions will never outweigh the flexibility of being in control of your own currency. If you are interested in the nuts and bolts of the idea and application of austerity this book is a tough slog, but ultimately worth the read.

Like many others, I found this book a tough go - it accomplishes what it sets out to do and provides a wide-ranging history of austerity measures across the globe, showing how the idea is politically motivated but not economically viable. Unfortunately, the book doesn't delve into Canada as an example in any way - I expected to see some discussion of Paul Martin and the 1990s cuts to appear, but they did not. Also challenging was the lack of a suggested alternative. The book made clear that austerity measures don’t work to build up an economy, particularly if multiple countries are pursuing the same strategy at the same time. It did not make any compelling arguments for an alternative economic strategy.

Austerity wasn’t what I was expecting, but as an Economics student it was a useful walk back through the history of economic schools of thought, and provided more level-headed insight than any short-form article could. From a public administration perspective, it illuminated the difficulty in regulating and governing incredibly complex systems. And the exploration of how ill-suited risk models are to rare/high-impact events was fascinating to me - I actually thought this book contained the best explanation of the Black Swan idea I’ve read.

From a book club perspective? Probably the least animated discussion we've had, as it was much harder to connect to our day-to-day experiences. I’m looking forward to another Ethics of Dissent raucous debate.

What I liked about the book:

  • Exactly what the title and tagline suggest: a history review of recent economic theory and application.
  • The author looked for an easier way to communicate some fundamentally complex economic theories, and stayed away from the use of jargon.
  • There were several moments of wit and humour that lightened the read for me.
  • The author didn't shy away from dispelling some of the widely-held notions about the originality or importance of some earlier economic theories (Smith and Schumpeter in particular).
  • I really liked the easy breakdown of the collapse of the U.S. economy in 2008. I think that chapter could be extremely easy to read and understand by anyone without an economics background to answer the “why” of the recent financial problems that took place specifically in the U.S. and some parts of Europe.
  • I enjoy the personal tone and anecdotes the author shared in the book. It made the read a lot more interesting given the dry subject matter.

What I disliked about the book:

  • It heightened the promise of some vast explanation of what we could do that would replace the practice of defaulting to austerity when budgets are in deficit. The book provided one line, in the last two pages, about the proposed way to deal with deficits. The way the book was written made me think there was going to be a counter-theory or at least practical next steps. Even though it did deliver on the “history” part, I still think the author had more to say but refrained from doing so.
  • The book didn't take into account more examples of different economic structures (China, Latin America, Former Soviet Union), which could’ve been interesting as a comparison against the Western method of dealing with deficits.

Overall, I found the book rather easy to read, especially the parts with historic references and arguments about the validity of theories. I did give the book a 6/10, mainly because I felt like the author could have really gone one extra chapter and provided current workable ideas on how to deal with the deficit. I’m not asking for solutions, but I wanted to see easy counter-arguments to austerity that could be tested or at least discussed. 

Disclaimer: I have a small background in economics, and this book was by far one of the easiest reads on the topic I've come across. 


The book will be more useful to some readers than others. Those who have little or no economics background will find the content easy to follow and informative; those who took econ in university may not find much new material. There is some content that should be on the ‘must know’ list of public servants who work in policy (note: I say ‘must know’ and not ‘must enjoy reading’) - namely the earlier chapters explaining what exactly happened leading up to and during the financial crisis and how the US and the EU differed. 

Overall, though, I enjoyed the book but found it unbalanced. Most of the content was devoted to explaining the pitfalls of austerity, and almost no time was given to presenting a workable alternative. Until the author presents (in depth) a policy alternative proven to work better, he will fail to convince policymakers not to go the austerity route.

Blyth dives deep into the economic and political origins of austerity as an idea, explores a number of economic booms and busts over time, and resurfaces with a cogent case of a policy often executed based on philosophical leanings and selective readings rather than its actual effectiveness to stimulate economic growth.
Like George, I was left wondering how Blyth would view the Canadian case in the 1990s. Was it an example of prudent restraint in the name of sound fiscal management or dangerous austerity of dubious effect? 

Economic liberalism’s age-old preoccupation with what Blyth refers to as the “can’t live with it, can’t live without it, don’t want to pay for it” problem of the state persists. Where we land in that debate will very likely shape our outlook on open government and the entrepreneurial state.

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