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Contradictions of austerity

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  • Alex Callinicos

Abstract

The global economic and financial crisis has been marked by the following paradox. A much more severe depression than the global slump of 2008--09 was prevented by determined state intervention in the form of bank bailouts and fiscal stimuli. Yet this bout of apparently successful Keynesianism has been followed by a turn to fiscal austerity justified in terms reminiscent of the Treasury View against which Keynes relentlessly polemicised in the 1930s. This article explores the sources of this policy shift. Among the factors considered are the ideology of neoliberalism, the economic and political power of the banks, and the relative weight of finance in individual economies. The broader context of financialisation is also considered. The conclusion is reached that an oscillation between bouts of austerity and laxer policies encouraging the development of asset bubbles may be built into neoliberalism as an economic policy regime. The implication is that alternatives to austerity must embrace broad institutional transformation. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Suggested Citation

  • Alex Callinicos, 2012. "Contradictions of austerity," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 36(1), pages 65-77.
    • Handle: RePEc:oup:cambje:v:36:y:2012:i:1:p:65-77
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    File URL: http://hdl.handle.net/10.1093/cje/ber026
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    References listed on IDEAS

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    Cited by:

    1. Sheila C Dow, 2015. "The role of belief in the case for austerity policies," The Economic and Labour Relations Review, , vol. 26(1), pages 29-42, March.
    2. Charlotte Hoole & Stephen Hincks, 2020. "Performing the city-region: Imagineering, devolution and the search for legitimacy," Environment and Planning A, , vol. 52(8), pages 1583-1601, November.
    3. Ismail, Nasrul, 2020. "Deterioration, drift, distraction, and denial: How the politics of austerity challenges the resilience of prison health governance and delivery in England," Health Policy, Elsevier, vol. 124(12), pages 1368-1378.
    4. David A Spencer & Mark Stuart & Chris Forde & Christopher J McLachlan, 2023. "Furloughing and COVID-19: assessing regulatory reform of the state," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 16(1), pages 81-91.
    5. Sheila C. Dow, 2014. "The role of belief in the debate over austerity policies," Working Papers PKWP1409, Post Keynesian Economics Society (PKES).
    6. Pompeo Della Posta & Enrico Marelli & Marcello Signorelli, 2020. "A market‐financed and growth‐enhancing investment plan for the euro area," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 604-632, July.
    7. Crispian Fuller & Karen West, 2017. "The possibilities and limits of political contestation in times of ‘urban austerity’," Urban Studies, Urban Studies Journal Limited, vol. 54(9), pages 2087-2106, July.
    8. David Etherington & Martin Jones & Luke Telford, 2022. "COVID crisis, austerity and the ‘Left Behind’ city: Exploring poverty and destitution in Stoke-on-Trent," Local Economy, London South Bank University, vol. 37(8), pages 692-707, December.

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