Blyth applied the “Page 99 Test” to his new book, Austerity: The History of a Dangerous Idea, and reported the following:
Ford Madox Ford’s claim that on page 99 “the quality of the whole will be revealed to you” is uncannily accurate when applied to Austerity: The History of a Dangerous Idea. The book is composed of three stories that (I hope) build upon each other. The first story details how the financial crisis that started in the US of 2008 is still on going in Europe today. That crisis is commonly portrayed as a sovereign debt crisis brought about by runaway state spending. I disagree and show that it is in fact a part of ‘the greatest bait and switch in human history’ where the private debt of the US and European banking systems has been dumped on the public sector balance sheet and blamed on the state. It’s a bit like burning down your own house, calling the fire brigade, and then suing them for water damage.Learn more about Austerity at the Oxford University Press website.
The next part of the book is the intellectual history of austerity as an idea, and the final part covers its ‘natural history’ where cases of austerity as policy have been applied. Spoiler alert – it never works.
The transition between the first and second part of the book needed a bridge. Page 99 is the second page of that six page bridge, and it lays out in two and a half paragraphs the core of the book: the actual (rather than the mythical) relationship between states and markets. In that way Ford was absolutely correct. Here are the relevant paragraphs:
There is no well worked out “theory of austerity” in economic thought that extends back in time to some foundational statements that became more systematized and rigorous over time as there is, for example, with trade theory. We have instead what David Colander has called a “sensibility” concerning the state, embedded in liberal economics from its inception, that produces “austerity” as the default answer to the question, what should we do when markets fail?
Liberal economics grew up in reaction to the state. Not the state as we know it today—(usually) a representative democracy with large-scale spending ambitions—but the state personified by sovereigns: vicious, capricious, untrustworthy monarchs who would as soon steal your wealth as look at you. The state was therefore something to be avoided, minimized, bypassed, curtailed, and above all, not trusted. The market, in contrast, emerged in liberal thought as the intellectual and institutional antidote to the confiscatory politics of the king. In such a world, if prices and merchants were set free, the wealth of nations (note, not “kingdoms”) would multiply.
But from the start this liberal view of “the state versus the market” rested upon a misunderstanding: markets naturally appear when you remove the state from the equation. However, as Karl Polanyi noted at the end of World War II, there is nothing natural about markets. Turning people into wage laborers, securing the private ownership of land, even inventing capital and preserving its monetary form are all deeply political projects that involve courts, regulation, enforcement, bureaucracy, and all the rest. Indeed, gaining control of the state by the merchant class was a defining feature of early capitalism. With the partial exceptions of the United Kingdom and the United States (the former because it was first to make the transition to capitalism and the latter because it was geographically isolated), from Germany in the 1870s to China today, states make markets as much as markets determine the fate of states. Yet liberal economic thought remains largely oblivious to these facts. As a result, contemporary neoliberals who argue for austerity come at the issue with an anti-statist neuralgia that produces “cut the state” as the default answer, regardless of the question asked or its appropriateness.