The Politics of Austerity.

1st July, 2009

Read some excellent articles on this broad theme over the last number of days. The first was in the available in the Economist:

This was in their weekly Buttonwood column. These articles normally look at money market issues but it strays this week into how democracies will cope with the strain of this economic recession. The other was in Newsweek by Fareed Zakaria, called a Capitalist Manifesto, available here:

Zakaria is one of the rising media superstars in the US, where his columns in Newsweek and his book The Post American World appear to be propelling him to the role of commentator in chief.

I drew a few stark conclusions from these articles.

Firstly, our way of life and expectations of a standard of living are predicated on a rates of economic growth and an availability of credit that were historical anomalies. The reversion of these factors make to ‘normality’ will fundamentally challenge our daily lives and our democracy.

Secondly, this challenge will be particularly acute in Ireland as we are a small open economy embedded in the European Monetary Union.

Thirdly, it is by no means given that the economic sovereignty of countries will emerge intact from this.

Finally, capitalism represents our best hope of emerging from this. However it will be a very different kind of capitalism that enabled the development of this crisis.

I plan to return again and again to what I think the solutions are to these challenges but these articles were excellent in summing up where we stand now.