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What is Austerity, and Why Should We Care?

Research & Commentary
May 21, 2012

by Salvatore Babones

Historically, austerity has always hit hardest on those who have the most to lose: the rich and powerful. Today’s austerity has reversed that historic pattern — and widened the gap between society’s most financially fortunate and everyone else.

By Salvatore Babones

If all the recent news from Europe can be summed up in one word, it’s “austerity.” The British government is imposing austerity on an unwilling population. Greeks and Spaniard are rioting in the streets over austerity. The Dutch government recently collapsed over disagreements about austerity and French voters replaced a pro-austerity president with an anti-austerity one. Germany’s chancellor Angela Merkel reigns over Europe as a menacing Dark Queen of Austerity.

But just what is austerity, and why should Americans care?[pullquote]Americans last experienced serious austerity during the World War II years.[/pullquote]

Austerity is the noun form of the adjective “austere”: harsh, strict, lacking comforts. Where ancient Athenian leaders were spoiled with luxuries, ancient Spartans were austere, sleeping on stone beds. Grant Wood’s famously stern, pitchfork-wielding farmers in the painting American Gothic were austere. Austerity is the practice of living in an austere manner.

Americans last experienced serious austerity in World War II. Goods of all kinds were rationed. Want to go for a drive in the country? Too bad — gas was rationed. Meat every day? Forget it. Butter, sugar coffee: rationed, rationed, rationed. Want to buy a new car? They didn’t even make new cars.

Austerity usually implies shared sacrifice. It’s a sort of “we’re all in it together” thing. Historically, austerity has always been hardest on those who have most to lose: the rich and powerful. Gasoline rationing wasn’t much of a concern for poor Americans in World War II because poor Americans didn’t own cars. The national speed limit of 35 miles per hour was much harder on people who drove Cadillacs than on people who took the train.

Today’s European “austerity” programs are different. They’re not based on shared sacrifice. They’re not focused on making people give up luxuries so that everyone can share the necessities of life. They’re exactly the opposite. Austerity programs in Europe today are based on the idea that ordinary and poor people should make sacrifices so that the rich and powerful can continue to make gains despite the economic downturn.

In the name of austerity, the Greek government has cut government worker salaries by 40 percent. The Spanish government has raised fees for necessities like water and medicines while cutting government pensions and wages. The British government is privatizing schools and hospitals and moving poor people out of London to “lower-cost” areas of the country with double-digit unemployment rates. The UK government also proposes to cut the top tax rate on very high incomes from 50 percent to 45 percent and then to 40 percent.[pullquote]In the name of austerity, the Greek government has cut government worker salaries by 40 percent.[/pullquote]

All three countries continue to post negative economic growth figures: Austerity is dragging their economies down, not boosting growth.

Unemployment is running at 8 percent in the UK, 18 percent in Greece, and 22 percent in Spain. In the UK, government cutbacks have focused on schools, training programs, and family social services. Not surprisingly, the negative effects of austerity have been concentrated among the young, with youth unemployment over 21 percent. Greece and Spain have youth unemployment rates of 44 percent and 46 percent, respectively.

Austerity is one European import that America can do without. President Obama has taken to lecturing Europeans on austerity, demanding that European governments enact policies to stimulate their economies and (ultimately) demand for American exports. For good or for bad, the complete legislative deadlock in Congress has prevented serious European-style austerity programs from being implemented at the federal level in the United States.

But that hasn’t stopped individual U.S. states from pursuing austerity policies of their own. Many states have imposed major cuts in government services, raised sales taxes that are mainly paid by the poor, or — in states like Wisconsin and New Jersey — declared outright war on government employees. And then there’s California.

With a state budget deficit of $16 billion, California is America’s Greece, with the difference that California has three times the population and six times the economic output of Greece. California has the economic resources to easily meet its obligations. Its state budget deficit represents less than 1 percent of the state’s total output. The question isn’t can California pay; the question is who in California will pay. [pullquote]Legislative gridlock has prevented serious European-style austerity from being implemented at the federal level in the United States.[/pullquote]

A real austerity plan for California would see Hollywood movie stars and Silicon Valley entrepreneurs foot the bill for California’s schools and family services. According to blogger Christopher Chantrill’s, California ranks about middle of the pack in terms of state government spending as a proportion of state economic output. California doesn’t need austerity for its poor; California needs austerity for its rich.

America experienced austerity at a time of national emergency seventy years ago, and faced it as a country. Everyone pulled their weight, and the weightiest pulled hardest. Europe’s idea of austerity seems to be to focus the weight of the world on those who are least able to bear it. That’s one European import we can live without.

Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney and an associate fellow at the Institute for Policy Studies.

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