One of our foremost economic thinkers challenges a cherished
tenet of today’s financial orthodoxy: that spending less,
refusing to forgive debt, and shrinking
government—“austerity”—is the solution to a persisting
economic crisis like ours or Europe’s, now in its fifth
year.
Since the collapse of September 2008, the
conversation about economic recovery has centered on the
question of debt: whether we have too much of it, whose debt
to forgive, and how to cut the deficit. These questions
dominated the sound bites of the 2012 U.S. presidential
election, the fiscal-cliff debates, and the perverse
policies of the European Union.
Robert Kuttner
makes the most powerful argument to date that these are the
wrong questions and that austerity is the wrong answer.
Blending economics with historical contrasts of effective
debt relief and punitive debt enforcement, he makes clear
that universal belt-tightening, as a prescription for
recession, defies economic logic. And while the public debt
gets most of the attention, it is private debts that crashed
the economy and are sandbagging the recovery—mortgages,
student loans, consumer borrowing to make up for lagging
wages, speculative shortfalls incurred by banks. As Kuttner
observes, corporations get to use bankruptcy to walk away
from debts. Homeowners and small nations don’t. Thus, we
need more public borrowing and investment to revive a
depressed economy, and more forgiveness and reform of the
overhang of past debts.
In making his case, Kuttner
uncovers the double standards in the politics of debt, from
Robinson Crusoe author Daniel Defoe’s campaign for
debt forgiveness in the seventeenth century to the two world
wars and Bretton Woods. Just as debtors’ prisons once
prevented individuals from surmounting their debts and
resuming productive life, austerity measures shackle, rather
than restore, economic growth—as the weight of past debt
crushes the economy’s future potential. Above all, Kuttner
shows how austerity serves only the interest of
creditors—the very bankers and financial elites whose
actions precipitated the collapse. Lucid, authoritative,
provocative—a book that will shape the economic conversation
and the search for new solutions
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