Introduction

Most of these posts come from 2012. Austerity was in its third year, and the green shoots of economic recovery that had appeared in 2010 had died as a result. However, the policy continued. My research was all about the impact of changes in government spending and taxes (fiscal policy) on the economy. I knew that cutting government spending just at the point at which the recovery should have started, when interest rates were still stuck at their lower bound, was the opposite of the policy recommended in textbooks and state-of-the-art macroeconomics. Post 1.1, and one of the first I wrote, removed the only sensible argument I could see for austerity. Any irrational behaviour by the financial market over buying government debt would be neutralised by the Bank of England’s monetary policy.

Alas, the media preferred the vision of a powerful, dangerous and fickle financial market that I satirise in Post 1.3. There are of course other justifications put forward for austerity, and I try and deal with them all in Post 1.7. In hindsight the one with most durability is the ‘burden on future generations’ idea, which is discussed in Post 1.6. Post 1.9 is a takedown of part of a Cameron speech trying to justify austerity.

In 2013 Paul Krugman wrote of austerity: ‘Its predictions have proved utterly wrong; its founding academic documents haven’t just lost their canonized status, they’ve become the objects of much ridicule.’

I shared that sentiment. But the cost of this policy mistake had been massive (see postscript to Post 1.9 for the overall cost), and despite the views of most economists the politics of austerity remained strong. When the UK economy started growing at last in 2013, even the Financial Times declared that ‘Osborne had won the battle on austerity’, much to my annoyance (Post 1.11). In the absence of any sensible economic arguments for the policy, my focus turned to why such a damaging policy had been enacted.

Some simple explanations could be easily disposed of. It was not just a forecast error (Post 1.2), or the fault of Gordon Brown (Post 1.4). Although many of austerity’s supporters saw it as a means of getting a smaller state (Post 1.10) this was not the wish of a large majority of voters.