Austerity doesn’t work and yet people keep applying it, saying the bitter medicine that killed the last fifteen patients is somehow good for you. I often think of Leo Tolstoy at these times. He said:

This wonderful blindness which befalls people of our circle can only be explained by the fact that when people behave badly they always invent a philosophy of life which represents their bad actions to be not bad actions at all, but merely results of unalterable laws beyond their control.

In former times such a view of life was found in the theory that an inscrutable and unalterable will of God existed which foreordained to some men a humble position and hard work and to others an exalted position and the enjoyment of the good things of life.

Austerity is a zombie form of economics, known to be destructive since the Great Depression, having cut a swathe of misery across South America, having devastated Russia, and yet economists keep trotting it out like it makes most imminent sense.

As Leo said, this zombie economics is a modern religion, obscure incantations chanted by priests while the ruling class takes your grain. Same shit, different day.

Shock Therapy

For a sense of what venal god I’m trying to dethrone here, I’ll use Isabella Weber’s definition of shock therapy (or the Washington Consensus).

Since the Great Depression, white people have known that you need to spend your way of capitalist crises or the engine completely stalls. Anytime they create a crisis they stimulus themselves hard. But they always recommend bitter austerity for the ‘developing’ world. This is the logic of shock therapy:

For a sense of how these thunderbolts are still being thrown at the poor, look at the ‘usual’ IMF program for Sri Lanka (we have been 16 times before).

As you can see, it’s the same fucking human sacrifice to a dead god. Why am I so mad about this? Well, look at what shock therapy did to Russia. As Weber said:

“As a result of shock therapy, Russia experienced a rise in mortality beyond that of any previous peacetime experiences of an industrialized country (Notzon et al., 1998)… The average real income of 99 percent of people in Russia was lower in 2015 than it had been in 1991”

Shock therapy sure seems to have killed this patient, and patients everywhere.“Almost all of the post-socialist countries that applied some version of shock therapy experienced a deep and prolonged recession… most measures of human well-being collapsed.”

As Weber cites, almost all of the countries that were supposed to be magically zapped into free-market capitalism just went into free-fall. Not only did human well-being decline (which capitalists give a fuck about), even the vaunted ‘the economy’ also collapsed. Unless you’re trying to kill the patient it’s not clear why we keep doing this, but there’s one figure in the Russian experience that gives you a clue. Incomes for the 99% were lower for decades, but incomes for the 1%? Those did just fine.

And thus you get to the actual logic for austerity. That’s what we’ll explore.

Austerity For Whom?

I am in the 1% in Sri Lanka and my country is going through a disorganized austerity while negotiating with the IMF. People from abroad call to check on me, and I’m honestly doing fine. It’s the 99% that are fucked.

When prices go up, I have enough money, and I’m not spending all my income on basic survival anyways. Because our family owns means of production and I’m on a corporate board, they can raise prices. Some people even take the opportunity to gouge. Prices raised on a consumer are pocketed by someone. It really depends on what side of the transaction you’re on.

When interest rates go up, I again have money, so I get higher interest on my deposits. I’m not taking out loans, I’m effectively giving them, so again I’m on the positive side of the balance sheet.

When the currency depreciates I get a big raise, since I earn in dollars. For me, this is the biggest thing. My income is effectively immune from inflation and when things go wrong in the country, my earnings actually go up.

As you can see, all of the ‘liberalization’ that hurts the poor often benefits the rich.

If subsidies for fuel and energy are cut I again don’t care, it’s not a significant part of my income. If government spending is cut and civil servants are fired, that’s not me either. If stuff is privatized it’s not my stuff, in fact, it’s cheap assets for people like me to buy up.

The only thing that really affects me would be taxes going up. That’s bad for me, and thus good. But that’s pretty far in the future and collection sucks. Also the rich are exceedingly good at obscuring taxable income.

Cui Bono?

The question I always try to ask about any policy is not the abstract details but cui bono? Who benefits? This doesn’t tell you everything, but it’s something you cannot ignore. I learned this from The Departed.

As you can see with shock therapy or IMF-anticipating ‘structural adjustments’, the rich make out like bandits while the poor get robbed. The logic is that this is for the long-term benefit of the country, as Deng Xiaoping said, ‘let some people get rich first’. But China adjusted prices gradually, always maintained government control of the ‘commanding heights’, and allowed markets within socialism, not social program within markets. And you can see how that worked out compared to Russia.

As Weber writes:

Nobel Memorial Prize laureate Joseph Stiglitz (2014) attests “a causal link between Russia’s policies and its poor performance.” Russia’s and China’s positions in the world economy have been reversed since they implemented different modes of marketization.

Russia’s share of world GDP almost halved, from 3.7 percent in 1990 to about 2 percent in 2017, while China’s share increased close to sixfold, from a mere 2.2 percent to about one-eighth of global output (see Figure 0.1). Russia underwent dramatic deindustrialization, while China became the proverbial workshop of world capitalism.

Capital Colonialism

Hence what you have under austerity is not a blanket bad that happens to a country. It’s actually a lot like colonialism. Under colonialism, local elites actually administered the colonies. For their white masters' benefit, of course, but the local comprador class got relatively rich and powerful in the process.

The IMF is always headed by a European by ‘gentlemen’s agreement’, and they’re still pulling the same tricks. And it still fucking works. Substitute Christendom for Capitalism and you get the same shit done to us—supposedly for our own benefit—just with different explanations.

In the past the exploitation was obscured by priests, now it’s just economics. As Tolstoy said:

Though the majority of people in our world do not know the details of these tranquilizing scientific explanations any more than they formerly knew the details of the theological explanations which justified their position, yet they all know that an explanation exists; that scientific men, wise men, have proved convincingly, and continue to prove, that the existing order of things is what it ought to be, and that, therefore, we may live quietly in this order of things without ourselves’ trying to alter it.

And yet at some point, the white smoke and white papers fade away and you’re left just with men covering their nakedness in either bedsheets or spreadsheets. It’s the same explanation, just with different obfuscation. It’s right for some to have, and some to have not. For the rich to get richer while the poor get poorer.

Austerity was once a word reserved for monks, but now it’s applied to the poor at large. Not because it works, but because the great god Capital demands human sacrifice. And the priests and proselytizers offering up the 99% don’t care or just don’t know. Like every faith before in history, many capitalists sincerely believe they’re doing the right thing, even though we’ve seen it go wrong so many times before.

I haven’t seen Shrek, but it’s like that meme up top. “Some of you may die, but that is a sacrifice I am willing to make.” The truth is that austerity often means prosperity to the rich. It’s only austerity for the poor. The whole term is a misnomer, covering up the most rank and bitter class war.