Brad DeLong wonders how it’s possible that the universal response to the economic crisis has devolved into cut government spending and bring down the deficit, when it’s so clear that this is exactly the wrong thing to do. Since the private sector isn’t investing or creating jobs, government should step in, but most governments seem to think that after having bailed out the banks in 2008-2009 and having provided a bit of a cushion for the side effects of the collapse of the financial markets they’ve done enough and now that it seems these markets are getting back on track it’s time to let the voters pay for this rescue. Now that the open anger at the banks has dimmed a bit, it seems safe to do so, yet it’s still clear to economics like DeLong (or just anybody with open eyes) that doing so will only worsen the crisis; so why didn’t they win the argument:
Somehow we seem to have lost the argument–within the ECB, within the French and the European governments, within the British Liberal Party, within the Bank of England, within the Federal Reserve, with U.S. Senator number 60, and even within the White House.
And I do not understand how, or why we have lost the argument.
DeLong is either genuinely clueless or willfully ignorant, because any fool could see that this was going to be the only likely outcome. We’ve had thirty years of an ideologically driven consensus on how the economy should be run, why would he think that just because the largest economic crisis since the Great Depression happened the people who actively promoting and supporting this consensus would suddenly see the light? For those who grew up with this consensus, is it even possible to imagine any governmental response that doesn’t involve subsidies for the rich and cuts for the poor and middleclass? DeLong may now be somewhat of a rebel, but he himself has been an supporter of this orthodoxy for years if not decades.
Even if you don’t want to ascribe evil motivations to people like George Osborne helping out their bank chums by making sure school children can’t get free meals anymore, they’re caught up in an ideological framework that’s been proven wrong and which they cannot break out of. Meanwhile any opposition to this consensus has long been broken, with all major parties agreeing on this point. Therefore, when governments say that there is no alternative to these cuts, they’re right, but only because they cannot imagine any alternative and there’s nobody left now who can force them to consider the alternatives.