Home > The Economics Profession > Beyond “antibiotic and rat poison”

Beyond “antibiotic and rat poison”

from David Ruccio

There is something fundamentally unstable—and ultimately dangerous—about the liberal critique of austerity.

Consider the recent essay on “The Economic Consequences of Austerity” by Amartya Sen. On one hand, he correctly criticizes the austerity effects associated with the deficit-cutting measures that have been imposed in Western Europe in the years following the crash of 2007-08 (and reminds readers of Keynes’s critique of the austerity measures the Allied Powers were threatening to impose on Germany in the Treaty of Versailles).

But then Sen accepts, without any further argument, the need for “real institutional reform” in Europe: “from the avoidance of tax evasion and the fixing of more reasonable retiring ages to sensible working hours and the elimination of institutional rigidities, including those in the labour markets.”

In other words, Sen is attempting to distinguish between the “antibiotic” of institutional reform and the “rat poison” of austerity.

The instability of Sen’s formulation stems from the fact that he wants to reject one part of the conservative austerity agenda (dismantling some state programs) while accepting the other (making markets, especially labor markets, more “flexible”). The danger arises because Sen takes as a common sense, without need for any kind of extended argument, that one group of workers should be protected (in the form of pensions of those who have retired) while further costs should be imposed on the other part of the working-class (by raising the age of retirement and creating more “flexible” labor markets for those still working).

Ultimately, it’s Sen’s nostalgia for a time that, in his view, was characterized by “good public services and a flourishing market economy” that leads him to such an unstable and, in my view, dangerous set of propositions. Better, it seems to me, to recognize that that period of public-private exceptionalism has come and gone, undone by the common sense that capitalist growth needs to be preserved at all costs—and to reject not only the rat poison of austerity, but also what Sen and other liberals consider to be the antibiotic of imposing further costs on European workers.

  1. June 12, 2015 at 3:14 am

    Though I totally respect his Idea of Justice, perhaps Amartya Sen has not yet linked the idea of false famine to spiritual starvation from insecurities associated with complete labor flexibility.

    We live at a time when full employment globally would instantly cause total climate collapse. There is the need for a secure living balanced with a healing planet, these are two of Sen’s three pillars of justice. I would be happy to read his response here.

  2. June 12, 2015 at 3:35 am

    #3 justice for the future

  3. merijnknibbe
    June 12, 2015 at 9:02 am

    Imo, we do have to make a distinction between the pension age and ‘flexibility’. Raising the pension age is of course, in austerity ideology, supposed to diminish the amount of pensions paid, which leaves more money to pay back debt. It’s just a grab for money.

    But it also can (to use the language of Sen) empower people. Pensions have been cut (a lot!) in Greece, older people do need a chance to top up their income, raising the mandatory pension age is one way to do this.

    And there is a real demographic problem. In Germany, the number of 0-5 year olds is less than 50% of the number of 50 to 55 year olds. Read that again. Southern European countries are, unlike France, the UK and the USA, travelling down the same path, while eastern European countries are taking a short cut. Mind that in Latvia, recently, employment declined – but the employment rate went up… Long ago, Paul Samuelson characterized the pension system als the largest Ponzi game of them all, as an ever increasing number of young people had to pay for a relatively small number of old people. Nowadays, it’s a topsy turvy Ponzi scheme, in Europe.

    (Aside – no other country in Europe raised the (long term) pension age as much as Greece did. Read this Karl Wheelan piece, https://medium.com/bull-market/the-ft-lets-itself-down-again-francesco-giavazzi-on-greece-92988bc675eb based upon official Troika studies (!) which shows that Greece did reform – a lot. To no avail, but that’s another question).

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