Believe it or not, there are at least a handful of individuals that actually consider austerity measures at this point in time ‘good medicine’. Almost none of these people are reputable economists, or business leaders. Most, in fact, are politicians with less than savory motives. Or Paul Ryan, but I repeat myself.
For the handful of individuals who honestly want to help the economy with austerity cuts, their basic thinking goes something like this:
‘In the short-term, austerity cuts will be painful, but it’s necessary to prevent the collapse of Western society as we know it.’
In fact, words to this effect can be found in a recent article by Joshua Green in Bloomberg Business Week, bemoaning the fact that no one takes the suggestions of the Simpson Bowles commission (i.e., Cat Food Commission) seriously. There’s just a little desperation to the evident failure of their grand plan:
“The outside strategy to persuade the public has also fallen short. It depended on scaring people into believing that a crisis is imminent. For all their resources and the attention they garnered…” they have managed to fail.
“They” of course, are Simpson and Bowles, and, more relevantly, the folks at “Fix The Debt”, under the steely guidance of Pete Peterson, the billionaire who is aghast that poor people can still manage to get money from the government, somehow.
Alas, “Millions of Americans are more anxious about jobs, stagnant wages, slow growth, and a host of other domestic problems…” than they are about ‘fixing the debt…’
Priorities, people! Priorities!
What comes to mind, on hearing these words, is the pale patient from some 19th century novel, broken by unrequited love or some other trauma, staring blankly at the ceiling while the meddling surgeon stops by to help. With leeches, naturally. Why? Well, because in the medieval theory of medicine, any sickness that caused the subject’s skin to become red (e.g. fever and inflammation), must have arisen from too much blood in the body. Similarly, any person whose behavior was strident and “sanguine” was thought to be suffering from an excess of blood. Thus leeches were used to draw off the excess blood and cure the illness. Viola! Similarly, we have our current crop of doctors holding onto a zombie economic cure that just won’t go away. ‘Cutting’ the national budget in a time of deep recession will somehow be good for our economic body; when there is zero empirical evidence to support this view.
Am I saying the current House Budget plan put forward by Paul Ryan that stoically embraces slashing programs that will eviscerate the middle and lower class is the equivalent of medieval blood-letting?
Why, yes, I am. And it is just as deadly in its unintended consequences, (killing the patient) and just as useful in producing a cure.
You would think, in retrospect, that doctors of early 19th century would have looked at the available empirical evidence (dead and dying patients) and concluded that their remedy wasn’t working–but they didn’t. They assumed it was an insufficient dose of blood-letting and just went on all the more savagely until said patient kicked or somehow managed to survive the cure. Even after William Harvey (who famously described the circulatory system for the first time) disproved the practice as far back as 1628 and went on to decry the use of blood-letting, the practice never lost favor. Bloodletting was used to treat almost every disease. One British medical text recommended bloodletting for acne, asthma, cancer, cholera, coma, convulsions, diabetes, epilepsy, gangrene, gout, herpes, indigestion, insanity, jaundice, leprosy, ophthalmia, plague, pneumonia, scurvy, smallpox, stroke, tetanus, tuberculosis, and for some one hundred other diseases. Bloodletting was even used to treat most forms of hemorrhaging such as nosebleed, excessive menstruation, or hemorrhoidal bleeding. Before surgery or at the onset of childbirth, blood was removed to prevent inflammation. Before amputation, it was customary to remove a quantity of blood equal to the amount believed to circulate in the limb that was to be removed.
This progressed well into the 19th century. In the 1830s, the French imported about forty million leeches a year for medical purposes, and in the next decade, England imported six million leeches a year from France alone. Through the early decades of the century, hundreds of millions of leeches were used by physicians throughout Europe.
Applying austerity measures to a depressed economy is the same kind of perverse bloodletting. You take what minor liquidity remains in the economy and suck it off to no good purpose. You are killing the patient, which, in this extended metaphor, just happens to be a large portion of the American public–and ultimately, much of the national economy. The bloodletting has left a landscape riddled with political violence, instability and massive unemployment –in short dying patients. Greece. Portugal. Spain. Ireland.
There’s one exception in this bleak economic landscape of blood spattered doctors. Iceland.
Iceland kicked out the leech mongers. They sensibly held bankers to the same rules of law that applied to the average citizen…Instead of bailing out the banks and cutting social programs, Iceland paid off loans for consumers and threw bankers in jail for corruption. They let homeowners wipe out debt up to 110 percent of the property value. They declared loans indexed in foreign currency illegal and said debtors could pay them back in krona, their local currency. According to Bloomberg:
“These policies helped consumers erase debt equal to 13 percent of Iceland’s $14 billion economy. Now, consumers have money to spend on other things. It is no accident that the IMF, which granted Iceland loans without imposing its usual austerity strictures, says the recovery is driven by domestic demand.
In addition to easing consumer debt, Iceland reduced government spending and increased revenue by raising taxes and cutting deductions that mainly benefited the well-off, a path the U.S. might profitably emulate. In fact, relief for overburdened U.S. consumers is a cause promoted by former U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair. Bair would have done more to aid sinking homeowners and done less for banks, but she said her efforts were blocked by Treasury Secretary Timothy Geithner and others.
It worked in Iceland. A deficit that reached 13.5 percent of gross domestic product in 2009 fell to 2.3 percent last year. The IMF predicts Iceland will have a primary surplus (excluding interest on debt) of 1.5 percent this year.”
Iceland isn’t a miracle. They just acted rationally on available evidence. They rejected the austerity measures, threw out the blood-letters, and jailed their bankers. Conversely, much of Europe where austerity is being applied vis-a-vis the ‘Washington Consensus’ is rioting. Unemployment is spiking, the young are unschooled and the old are starving as social programs are slashed.
One thing I should add. Modern science has found that there are a few instances when bleeding someone with leeches has some benefit, especially in instances of hemochromatosis, or an overload of iron in the blood supply. Sadly, the same thing can’t be said for severe austerity measures—the economic equivalent– on the brink of a great recession. The only result is a patient growing weaker with each progressive treatment, while leeches on the body politic swell.
Once again, APV thanks our friend, writer and activist Jack Johnson for contributing to our blog!