Austerity: Failed Economics but Persistent Policy Table of Contents I. The Source and Power of Austerity’s Vision Anwar Shaikh: "Crisis, Austerity and the Role of Economic Theory in Policy" Crisis is an unavoidable attribute of capitalism and austerity serves only to deepen inequality. Gary Dymski: "The Logic and Impossibility of Austerity" Insisting on an intellectual consensus among macroeconomists has led to methods that favor austerity policies, despite how inaccurately the theoretical consensus reflects the actual economy. Will Milberg: "A Note on Economic Austerity in Science, Morality and Political Economy" The continuing debate over austerity goes beyond analytic disagreements and can be attributed to fundamental differences in opinion surrounding morality rather than economic methodology. II. US Political Economy Rick McGahey: "The Political Economy of Austerity in the United States" Despite the intellectual and policy failures of austerity, the idea still holds sway. This paper explains how the thinking behind austerity became so powerful. Bob Pollin: "Austerity Economics and the Struggle for the Soul of US Capitalism" Austerity economics plagues US politics and economic policy, hurting the economy while continually asserting its necessity. Austerity economics is based on false analysis while several viable, more effective alternatives can be described. Alan Aja, Daniel Bustillo, William Darity, Jr., and Darrick Hamilton: "The Uneven Racial Effects of Austerity" The disproportionate impact of the economic crisis on Latinos and African Americans will only be exacerbated by austerity-driven cuts to essential public services. To combat this effect, these authors propose a National Investment Employment Corps program to provide full-employment and enhance national well-being. David Howell: "The Austerity of Low Pay: US Exceptionalism in the Age of Inequality" The free market experiment in the US has resulted in exceptional levels of inequality, characterized by institutions and policies that promote austerity throughout the economy, not just in the realm of government spending. III. Escaping Austerity Economics: Alternative Analyses Stephen A. Marglin and Peter Spiegler: "Unpacking the Multiplier: Making Sense of Recent Assessments of Fiscal Stimulus Policy" Austerity economics downplays the importance of government spending and its multiplier effect on economic growth. However, more accurate assessments show that multipliers can vary significantly, and successful economic policies can target situations and populations where the multiplier is largest.

Christian Proano: "On the Potential Pitfalls of the EU Fiscal Pact: A Simulation Study of the International Dimension of Fiscal Austerity" By modeling the effects of forcibly contracting government spending, this analysis reveals the stagnant and potentially recession-inducing effects that constraints on government debt will have on growth. Willi Semmler: "The Macroeconomics of Austerity in the European Union" In periods of high financial stress and recession, fiscal consolidation intended to stabilize debt are too costly. Understanding the real macroeconomics of European austerity shows its weaknesses for recommending policy. IV Moving Forward and Away from Austerity Terra Lawson-Remer "Democracy and Austerity" Austerity measures can adversely impact the success of nascent democratic regimes. Providing economic opportunity and fostering a strong middle class are important to the stability of democracy. Autocratic regimes that fail to do this can expect dissent and revolution. Mike Cohen "The North Can Learn from the South: Latin America's Rejection of Austerity" Unprecedented growth in some Latin American countries has been in spite of, not a result of, Washington Consensus and austerity policies. The Latin American experience argues against austerity policies, and instead validates policies that support minimal levels of social well-being while generating growth through maintaining aggregate demand. Teresa Ghilarducci: "Austerity Distorts the Common Economic Interests Between Generations A key element of austerity policies is limiting spending on the elderly, justified in part by falsely arguing that such spending hurts young people. Austerity advocates use their arguments to divide the interests and political strength of working families.