Cartoon: Doctor Austerity


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Austerity – the policy of cutting government social spending in order to appease fiscal hawks (and investors and creditors) – is arguably the most harmful economic policy in the world. The economist Paul Krugman describes what was going on in 2010:

…elites all across the western world were gripped by austerity fever, a strange malady that combined extravagant fear with blithe optimism. Every country running significant budget deficits – as nearly all were in the aftermath of the financial crisis – was deemed at imminent risk of becoming another Greece unless it immediately began cutting spending and raising taxes. Concerns that imposing such austerity in already depressed economies would deepen their depression and delay recovery were airily dismissed; fiscal probity, we were assured, would inspire business-boosting confidence, and all would be well. …

Since the global turn to austerity in 2010, every country that introduced significant austerity has seen its economy suffer, with the depth of the suffering closely related to the harshness of the austerity.

And it’s important to understand that even countries that wouldn’t choose austerity policies for themselves, can have those policies forced on them. (This thought is what inspired my cartoon). Creditors from larger, more powerful economies can insist on austerity policies. Nobel-prize winning economist Joseph Stiglitz, regarding the economic disaster in Greece, wrote:

Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25 percent decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60 percent.

It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5 percent of GDP by 2018.

I think the reason austerity policies have such a hold on certain economic elites (turns and glares at Germany), as well as on many ordinary citizens, is that it tells a story which makes intuitive sense to us. Austerity is a morality play: If a country’s economy is bad, it’s because that country has been spending too much. So the solution is to starve for a while. Tighten your belt, Greece!

But at a country level, belt-tightening is the very worst thing a country can do in a recession. When governments slash spending, that means less people have work; when less people have work, they spend less, and recessions become worse. And if the recession getting worse leads to creditors demanding further cuts, a country can get caught in a vicious cycle.

In the Krugman article I linked to, written in 2015, Krugman wrote that no one believes in austerity anymore. But the idea – or, rather, the ideology – hasn’t gone away, and is currently causing great suffering in the UK.

In the U.S., any time the economy takes a downturn, the austerity ideologues emerge and call for cuts, cuts and more cuts. The more influence they have the next time we’re in a recession, the longer it’ll take us to recover.

In his article “How Austerity Ripped The World Apart,” Umair Haque takes a big-picture view, arguing that austerity is ultimately derived from economic thinking developed in slave-owning America. I don’t agree with everything Haque says, but his definition of austerity really struck me.

Austerity simply means a lack of investment by societies in themselves, in people, in public goods. Things like healthcare, education, transport, energy, retirement, decent jobs, incomes, savings. The problem is that all those things are what underpin the stability of societies, by ensuring that prosperity is something that is realized by all — not just something greedily seized by a tiny few.

 


TRANSCRIPT OF CARTOON

This cartoon has four panels. All four panels are set in a doctor’s office. There are three people in each panel. The first is an extremely wealthy looking man – he looks like a stereotypical banker – in a three-piece suit, smoking a pipe. The second man is the patient, a disheveled and emaciated man in boxer shorts and a sleeveless shirt. The third man is Doctor Austerity. Doctor Austerity wears a white doctor’s coat, a stethoscope, and a head mirror. (That’s what they’re called, honest!). Doctor Austerity is a huge, hulking, powerful looking man, with large hands and deep-set eyes.

A caption at the bottom of the cartoon says “DOCTOR AUSTERITY.”

PANEL 1

The Banker and Doctor Austerity talk. Both are patting the Patient on the shoulder. The Patient is sitting on the examination table.

BANKER: Doctor Austerity, my friend’s economy is weak. Could you give him your treatment?

DOCTOR AUSTERITY: Of course! My treatment never fails!

PANEL 2

Doctor Austerity has his hands around the patients neck, squeezing hard, and has lifted the patient right off the examination table. The patient has wide eyes and his tongue is sticking out of his mouth.

PATIENT: Choke! Ack!

DOCTOR AUSTERITY: Soon he’ll be completely better!

PANEL 3

Doctor Austerity has let go of the patient; the patient is bent over, panting and gasping for air. The Banker peers at the patient; Doctor Austerity thinks hard, with one hand on his chin.

BANKER: That’s odd… He’s getting worse.

DOCTOR AUSTERITY: Hmnn!

PANEL 4

Doctor Austerity and the Banker smile at each other, chatting, while the doctor resumes choking the patient to death.

BANKER: Better apply more treatment.

DOCTOR AUSTERITY: Good plan!

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16 Responses to Cartoon: Doctor Austerity

  1. 1
    Kate says:

    I get the sense, from the use of strangulation (there is no plausible benefit) and the facial expressions (the doctor’s in particular) that you see the harm to the patient as intentional. I tend to agree that it often is.
    If one wanted to suggest that the treatment was actually being applied in good faith (which I think it is in some cases), it seems like the old practice of bleeding (with the intent of balancing the humors, or clearing out toxins) would be an apt metaphor.

  2. 2
    Ampersand says:

    Yeah, that would definitely work, too.

  3. 3
    LimitsOfLanguage says:

    It’s a lot more complicated than ‘austerity bad, spending good.’ In the long term, countries do have to spend within their means.

    What spending actually is, is consuming something that was produced by someone else. You can only consume a good if it is actually made. A complication is that people tend to want to consume more than they want to produce.

    The solution to this, capitalism, encourages production by requiring a quid-pro-quo: you only get things produced by others if you produce things that others want. Under this model, spending within your means consists of consuming as much value produced by others, as the value that you can produce for others.

    Of course, a complication is that some people are really bad at producing value and we feel bad about having these people consume very little or no goods. So we have welfare and such. However, the higher we make welfare, the lower the incentives to produce and thus the fewer goods produced.

    So social-democrats tend to seek a balance, where we are willing to pay enough welfare so people can eat and have a home, but not so much that they can afford a Ferrari.

    Another complication is that the ability to produce is not constant. Someone can lose their job and temporarily produce very little value for others, until they find a new job. They can get temporarily sick, etc. It’s very disadvantageous if that person then has to sell off their goods and radically cut their spending when they lose their income, only to reacquire them or increase their spending when they regain it. For example, it’s very costly to sell and then reacquire a house. One way to prevent this inefficiency is for the individual to loan money. Another is for the government to (temporarily) supplement their income until they regain their ability to produce that much value.

    The same basics are true for countries. Countries don’t lose their job, but they experience temporary recessions. Keynes argued for anti-cyclic policies, where the government spends more during a recession and less during a boom. The ideal is that the spending of the country reflects their long term means, not the means they have in the short term.

    Nations may also decide that they want to (temporarily or permanently) provide welfare to other countries, which increases their means. However, that is always going to be limited and is going to act as austerity for the donating country.

    Countries do have to spend within their means in the long term, if you remove the effects of booms & recessions and temporary welfare.

    Keynesian policies are not a solution to chronic overspending, which is/was a problem with Greece and Venezuela.

    It’s a big problem when a recession and a chronic overspending coincide, because then you’d want a stimulus to combat a recession, but austerity to create a sustainable economy. So it’s best to never get into that situation in the first place.

    Such a situation is indicative of an irresponsible government, which logically makes others wary of donating lots of money, out of fear that the government that gets the money will not reform their economy to live within their means, but to keep being irresponsible.

  4. 4
    RonF says:

    Perhaps if the role of the government was more limited and left more of the economy to private enterprise the state of the economy would not be so dependent on government spending. I would be interested to see a comparison of the state of a given country’s economy vs. the percent of government spending in the role of said economy.

  5. 5
    Jeffrey Gandee says:

    RonF, I’m not sure it’s possible to compare different countries economies in this way, especially since it appears that the strength of a country’s economy is correlated with a willingness to increase government spending. It’s also true that optimal government spending as a percentage of GDP will not be the same for countries with different sized economies. The US and Venezuelan governments both spend about 40% of their respect GDP’s, but we can afford to do this, while Venezuela cannot. So if you do sort countries by their spending as a percentage of GDP, you’ll end up with a many impoverished countries on the bottom of the list, with the always weird outlier that is Singapore.

  6. 6
    desipis says:

    Perhaps if the role of the government was more limited and left more of the economy to private enterprise the state of the economy would not be so dependent on government spending.

    That’s quite the truism. As an analogy, if we stop providing medical treatment to sick people, then obviously spending on healthcare will decrease, but there’s also a significant consequential cost (both ethical and economic).

    Also, given the plummeting economic value of unskilled and low skilled labour, there will need to be increased government involvement if we don’t want a significant portion of the population to be little more than a beggar underclass. A strict libertarian style no-welfare system would result in the free-market judging large portions of the population as valueless and not worthy of life, resulting in large scale death that rivals the death toll from communism.

  7. 7
    RonF says:

    desipis @6:

    As an analogy, if we stop providing medical treatment to sick people, then obviously spending on healthcare will decrease, but there’s also a significant consequential cost (both ethical and economic).

    False analogy. Limiting the role of government in general (certainly at least the Federal government) != stop providing medical treatment to sick people.

    Also, given the plummeting economic value of unskilled and low skilled labour, there will need to be increased government involvement if we don’t want a significant portion of the population to be little more than a beggar underclass.

    Then perhaps we need to take an honest look at why a significant portion of the population is unskilled and low skilled labor and do something about that. And, again, by “do something” I don’t necessarily mean something involving Federal government program. Despite the pronouncement by various leftist politicians, government is not just another name for the things we do together. There are a LOT of things that Americans do together that have nothing to do with government and that define and support American society.

    Jeffrey @5:

    So if you do sort countries by their spending as a percentage of GDP, you’ll end up with a many impoverished countries on the bottom of the list, with the always weird outlier that is Singapore.

    Interesting assertion. Let’s see the data (not that I expect that you have it, I sure don’t). And it would be additionally interesting to see the expenditures broken out by Federal vs. State/Provincial vs. municipal, too, so that the effects of centralization of government could be analyzed. Of course, there might be issues as to how reliable the data are from the various countries.

  8. 8
    Jeffrey Gandee says:

    Interesting assertion. Let’s see the data (not that I expect that you have it, I sure don’t). And it would be additionally interesting to see the expenditures broken out by Federal vs. State/Provincial vs. municipal, too, so that the effects of centralization of government could be analyzed. Of course, there might be issues as to how reliable the data are from the various countries.

    Spending as a % of GDP isn’t too hard to find for any given country. Here’s a wiki link that includes a table with the relevant data (the source is Heritage, so skepticism may be warranted):

    https://en.wikipedia.org/wiki/Government_spending

    Heritage Foundation has a database that is easy explore. It’ll also allow you to create custom graphs if you have some time to kill.

  9. 9
    desipis says:

    Then perhaps we need to take an honest look at why a significant portion of the population is unskilled and low skilled labor and do something about that.

    A significant portion of the population aren’t capable of learning the skills needed to take on the new jobs that come from increasing technology. Machines will be capable of performing any economic task such people are capable of performing at a cost lower than that of sustaining a human life.

    There are a LOT of things that Americans do together that have nothing to do with government and that define and support American society.

    If society can spontaneously solve these problems without government that’d be great. However, the current trend is that these problems will continue to get worse and the current patterns of behaviour indicate that society at large will simply focus on looking after themselves at the expense of those unable to do so. These are large scale coordination challenges involving prisoner dilemma style problems that aren’t particularly amenable to self-driving organic solutions.

  10. 10
    Kate says:

    Of course, a complication is that some people are really bad at producing value and we feel bad about having these people consume very little or no goods. So we have welfare and such. However, the higher we make welfare, the lower the incentives to produce and thus the fewer goods produced.

    When you say “some people are really bad at producing value” that sounds quite reasonable. When you ennumerate who those people are, it starts to sound…different. Most of those people who are “bad at producing value” are children, elderly people, people with disabilities, people (still usually women) who devote themselves to caring for children, the elderly and people with disabilities, either in their personal lives or in some of our lowest paid professions. They are the people who pick our crops (how much more essential to life can you get than that?). They are the people who clean public spaces. They are the people who serve us in restraunts and stores. What we attach value to is not a force of nature. We choose that. What our society values is totally f**ked up.

    Also, given the plummeting economic value of unskilled and low skilled labour, there will need to be increased government involvement if we don’t want a significant portion of the population to be little more than a beggar underclass.

    Then perhaps we need to take an honest look at why a significant portion of the population is unskilled and low skilled labor and do something about that.

    As long as these jobs are there and need to be done, the people who do them are entitled to a living wage. What to do as these jobs increasingly disappear is a separate issue.

    False analogy. Limiting the role of government in general (certainly at least the Federal government) != stop providing medical treatment to sick people.

    And, again, by “do something” I don’t necessarily mean something involving Federal government program. Despite the pronouncement by various leftist politicians, government is not just another name for the things we do together. There are a LOT of things that Americans do together that have nothing to do with government and that define and support American society.

    What do you have in mind? Can you give some examples?

  11. 11
    RonF says:

    What we attach value to is not a force of nature.

    What we attach moral value to is not the same as what we attach economic value to. The economic value attached to labor is a function of the supply of that labor vs. the demand for it. Much of that unskilled labor has a high moral value – but that’s not what the marketplace pays for.

    They are the people who pick our crops (how much more essential to life can you get than that?).

    Keeping illegal aliens out of the country would lower the supply of the labor to pick our crops; the amount we would pay for that labor would thus go up (as would the cost of food …). The additional enforcement effort would employ more people, both as on-the-ground agents and through increased use of technology. If we forced employers to make proper use of H-2A visas through better enforcement and higher penalties for employing ineligible workers, then aliens would come into our country legally to pick our crops but would be much less easy to exploit, keeping wages higher.

  12. 12
    J. Squid says:

    Keeping illegal aliens out of the country would lower the supply of the labor to pick our crops; the amount we would pay for that labor would thus go up (as would the cost of food …).

    Yes!!!! See how well it worked for farmers in California? What’s that you say? It didn’t work out and there were no workers for them to hire so crops went unpicked? (Obligatory link from unabashed far left liberal rag in support)

    The devil, you say!

  13. 13
    Kate says:

    What we attach moral value to is not the same as what we attach economic value to. The economic value attached to labor is a function of the supply of that labor vs. the demand for it. Much of that unskilled labor has a high moral value – but that’s not what the marketplace pays for.

    That is true in unregulated markets. But, as I said, we have choices. We can and do regulate markets in ways that bring our moral and economic values more in line. I have never seen the problems of unregulated markets substantially addressed by, as Desipis put it so well, “…self-driving organic solutions.” That’s why I believe we need rules made and enforced by democratically elected representatives. If you can point to any non-govermental solutions in action, I’m willing to consider them.

  14. 14
    Kate says:

    Thanks J. Squid, I didn’t want to get into that argument again. I thought this article really gave a good glimpse at some of the complexities.

  15. 15
    nobody.really says:

    Keeping illegal aliens out of the country would lower the supply of the labor to pick our crops; the amount we would pay for that labor would thus go up (as would the cost of food …).

    Yes!!!! See how well it worked for farmers in California? What’s that you say? It didn’t work out and there were no workers for them to hire so crops went unpicked? (Obligatory link from unabashed far left liberal rag in support)

    The devil, you say!

    I see no contradiction between these two statements.

    If we constrict the labor supply, I would expect to see less labor performed—and that those who perform the labor might get paid more. In the case of farmworkers, that might mean that there could be some substitution of automation, some efforts to attract new labor from elsewhere, some substitution of imported goods in lieu of domestic production, and some reduction in production (a/k/a fields going unplanted, or crops going unharvested).

    Thanks J. Squid, I didn’t want to get into that argument again. I thought this article really gave a good glimpse at some of the complexities.

    According to this article, “Wages for crop production in California increased by 13% from 2010 to 2015, twice as fast as average pay in the state,” and increased nearly 50% in real terms since 1996. “Some farmers are even giving laborers benefits normally reserved for white-collar professionals, like 401(k) plans, health insurance, subsidized housing and profit-sharing bonuses. Full-timers at Silverado Farming, for example, get most of those sweeteners, plus 10 paid vacation days, eight paid holidays, and can earn their hourly rate to take English classes. But the raises and new perks have not tempted native-born Americans to leave their day jobs for the fields. Nine in 10 agriculture workers in California are still foreign born, and more than half are undocumented….”

    In other words, pay has soared EVEN THOUGH there is still a supply of undocumented labor performing the work. The fact that native-born US citizens are still not attracted to work in the fields does not imply that they would never do so; only that compensation has still not reach a level that the marginal worker would find sufficiently attractive to cause her to leave her other job/activities.

    If you watch It’s a Wonderful Life, you’ll observe that the simple Bailey household, sustained by a single income, still had enough resources to hire a (black) housekeeper. Over time, this practice became less common as labor prices rose and many people substituted automation (dishwashers, clothes washers/dryers, refrigerators and prepared foods). People also began having smaller families—the equivalent of leaving fields unplowed or crops unharvested. All these shifts are consistent with changes in the supply and demand for labor.

  16. 16
    J. Squid says:

    You are, of course, correct nobody. I was referring to the implication of Ron’s comment rather than the facts that you point out.

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