Implications of Austerity

A couple of days ago economist Amartya Sen - the Nobel Prize winner who theorized that famines may not be the result of supply not meeting demand but of unequal access to resources - wrote an opinion piece in the New York Times addressing his concerns with the European economic crisis and the proposed austerity measures. I'm a fan of Amartya Sen's work, some of which I used in research at New York University where I argued that free market economics is a set of socio-cultural expectations rather than an empirical science that can be applied indiscriminately to any population, like an experiment, with predictably similar results.

In the article, Sen makes two major points. In solving the economic crisis, Sen argues, expediency is not the correct way to solve the problem, even if the hastily found solutions are well-intended, writing, " Reform on a well-thought-out timetable must be distinguished from reform done in extreme haste."

This argument reminds me of Naomi Klein's depressing analysis of what she terms "disaster capitalism" in her book The Shock Doctrine: The Rise of Disaster Capitalism. She finds that free market economic theory thrives in the wake of a disaster - be it unexpected as was the case for Hurricane Katrina or the September 11th attacks, or state-manufactured as was the case in Margaret Thatcher's England - when the population is in shock and less willing to resist radical economic reform. Klein argues persuasively that the goal of "disaster capitalists" is to pounce on these disasters in order to enact economic reform that is drastic, wide-reaching, and permanent before the population can recover its will to exercise its democratically-endowed voice.

Sen's discomfort with the feeling of hasty urgency in Europe combined with Klein's conclusions regarding drastic free-market economic reforms leads me to worry that the austerity possibilities in Europe are the work of opportunist neo-liberal economists aiming to further the lasting impact of a damaging economic philosophy.

How damaging is the potential? In his second point, Sen argues that "sudden and savage cuts in public services" is not in Europe's best interests, no matter how urgent the economic crisis may be, because it will go against some of Europe's core values. The most important of these values is the democratic voice of the population. Sen writes,

Both democracy and the chance of creating good policy are undermined when ineffective and blatantly unjust policies are dictated by leaders... This is a surely a far cry from the “united democratic Europe” that the pioneers of European unity sought.

The austerity measures are not only drastic, but they will damage democracy itself (jump back to Naomi Klein, who argues that disaster economics is not compatible with democracy and the only way a democracy would permit such policy is in the event of a disaster - such as what's going on in Europe right now). Indeed, Sen worries that a quick solution might "conflict with a more urgent priority — in this case, the preservation of a democratic Europe that is concerned about societal well-being." Sen all but spells out the notion that these economic reforms are not only opposed to democracy but also a government concerned with its population.

Here we see, as I wrote back at NYU, that free-market capitalism is a set of cultural values and should be thought of as such before blindly applying it to populations as if it were a universally empirical science.