3 ms·

Who does austerity benefit? Why did they drive governments towards austerity?

Findeton 3y ago
It benefits those who don't have to pay higher taxes (ie everybody) because of austerity.
atq2119 3y ago
De facto, austerity tends to be used to argue for cuts to social programs and reduced investment in common goods or to argue for privatization of common goods. This tends to benefit the top 0.1%: The living situation of the the majority is worsened and their bargaining position for employment is weakened. Privatization leads to private profits that overwhelmingly go to the top 0.1%, and of course there's a direct power aspect to it as well. If you literally own the regional electricity provider, for example, that gives you direct political power that goes beyond the mere profit you can make from this ownership. Technically, it doesn't have to be that way. For example, austerity could theoretically be used to argue for much higher top-end marginal income taxes and capital gains taxes as well as wealth taxes. But political constellations being what they are, that's usually not how it plays out.
- qwytw 3y ago
  When productivity is low and not growing much, disproportionally high public spending can possibly lead into a death spiral. Case in point Britain in the 70s. Or Venezuela nowadays. There is no need to swing into extremes, though austerity policies during a global crisis is probably one the worst things you can do if there are other options available.
  - hnbad 3y ago
    Death spirals are fine if you can make sure you're not personally impacted by them. In fact it makes it much cheaper to buy out large swathes of the dying/dead economy, privatize failing public services and drive down labor costs. You don't even have to both reviving the economy afterwards if you can get a quick exit by selling to a greater fool.
    - qwytw 3y ago
      > Death spirals are fine if you can make sure you're not personally impacted by them Can also be prevented with hard to necessary reforms accompanied by significant spending cuts. Public spending alone can prop-up the economy and outside of raw resources and infrastructure government owned companies tend to be very in-competitive. Just look at what happened with https://en.wikipedia.org/wiki/British_Leyland https://en.wikipedia.org/wiki/British_Leyland. British workers were half as productive as their German or even French counterparts...
      - hnbad 3y ago
        I'm sorry, are you genuinely trying to argue for austerity ("hard but necessary reforms accompanied by significant spending cuts") in a thread that literally started with someone posting information debunking the scientific basis for claims that austerity works? https://news.ycombinator.com/item?id=36199042 https://news.ycombinator.com/item?id=36199042 Also I'm not sure what your link seeks to demonstrate. The article says British Leyland was nationalised in 1975 but its history section starts out stating that it was formed in 1968 by the merger of BMH and LMC and that BMH was "periously close to collapse". The article shifts a lot of the blame for its failure on strikes and the company being too poorly organized to withstand them but the continuous failure of BMH following the merger is a running theme. The reason it was nationalised is also suggested to be that it was facing bankruptcy while representing almost the entirety of the UK automobile market. Honestly, if anything BL's history reads like an example of aggressive mergers/buy-outs ruining an industry through monopolization and the tax payer ending up having to foot the bill to bail out the company so half the economy doesn't collapse with it. If the LMC-BMH merger hadn't gone through, BMH would have failed on its own instead of growing into an integral part of BL and taking the entire company with it to the point that the government had to step in and keep it on life support long enough to start selling parts off for scrap.
        qwytw 3y ago
        > I'm sorry, are you genuinely trying to argue for austerity ("hard but necessary reforms accompanied by significant spending cuts") in a thread that literally started with someone posting information I'm sorry, are you genuinely implying that there one-size-fits-all approaches in economics that universally work regardless of the circumstances? And I'm pretty sure your misinterpreting the article or fundamentally misunderstand how statistical models work. > scientific basis for claims that austerity works It does work to a degree in certain cases. Or at least in certain situations is the least bad option. > The article shifts a lot of the blame for its failure on strikes and the company being too poorly organized to withstand them but the continuous failure of BMH following the merger is a running theme Yes British business weren't competitive because of continuous government interference and dysfunctional yet to influential trade unions. The merger in 1968 was an outcome of government and trade union meddling Leyland was doing fine on it's own and there were no good reason for it to merge with BMH (which was on the brink of bankruptcy) as a result of that both went under eventually.. > Honestly, if anything BL's history reads like an example of aggressive mergers/buy-outs ruining an industry Yes but these mergers/buy-outs were imposed by the government...
  - atq2119 3y ago
    Your points are entirely orthogonal to mine. There may well be cases where net government spending must be reduced -- but that is identical to increasing net government income.
    - qwytw 3y ago
      Well some make might argue that 'cuts to social programs' might achieve just that in certain cases.

It benefits those who don't have to pay higher taxes (ie everybody) because of austerity.

De facto, austerity tends to be used to argue for cuts to social programs and reduced investment in common goods or to argue for privatization of common goods. This tends to benefit the top 0.1%: The living situation of the the majority is worsened and their bargaining position for employment is weakened. Privatization leads to private profits that overwhelmingly go to the top 0.1%, and of course there's a direct power aspect to it as well. If you literally own the regional electricity provider, for example, that gives you direct political power that goes beyond the mere profit you can make from this ownership. Technically, it doesn't have to be that way. For example, austerity could theoretically be used to argue for much higher top-end marginal income taxes and capital gains taxes as well as wealth taxes. But political constellations being what they are, that's usually not how it plays out.

qwytw 3y ago
When productivity is low and not growing much, disproportionally high public spending can possibly lead into a death spiral. Case in point Britain in the 70s. Or Venezuela nowadays. There is no need to swing into extremes, though austerity policies during a global crisis is probably one the worst things you can do if there are other options available.
- hnbad 3y ago
  Death spirals are fine if you can make sure you're not personally impacted by them. In fact it makes it much cheaper to buy out large swathes of the dying/dead economy, privatize failing public services and drive down labor costs. You don't even have to both reviving the economy afterwards if you can get a quick exit by selling to a greater fool.
  - qwytw 3y ago
    > Death spirals are fine if you can make sure you're not personally impacted by them Can also be prevented with hard to necessary reforms accompanied by significant spending cuts. Public spending alone can prop-up the economy and outside of raw resources and infrastructure government owned companies tend to be very in-competitive. Just look at what happened with https://en.wikipedia.org/wiki/British_Leyland https://en.wikipedia.org/wiki/British_Leyland. British workers were half as productive as their German or even French counterparts...
    - hnbad 3y ago
      I'm sorry, are you genuinely trying to argue for austerity ("hard but necessary reforms accompanied by significant spending cuts") in a thread that literally started with someone posting information debunking the scientific basis for claims that austerity works? https://news.ycombinator.com/item?id=36199042 https://news.ycombinator.com/item?id=36199042 Also I'm not sure what your link seeks to demonstrate. The article says British Leyland was nationalised in 1975 but its history section starts out stating that it was formed in 1968 by the merger of BMH and LMC and that BMH was "periously close to collapse". The article shifts a lot of the blame for its failure on strikes and the company being too poorly organized to withstand them but the continuous failure of BMH following the merger is a running theme. The reason it was nationalised is also suggested to be that it was facing bankruptcy while representing almost the entirety of the UK automobile market. Honestly, if anything BL's history reads like an example of aggressive mergers/buy-outs ruining an industry through monopolization and the tax payer ending up having to foot the bill to bail out the company so half the economy doesn't collapse with it. If the LMC-BMH merger hadn't gone through, BMH would have failed on its own instead of growing into an integral part of BL and taking the entire company with it to the point that the government had to step in and keep it on life support long enough to start selling parts off for scrap.
      - qwytw 3y ago
        > I'm sorry, are you genuinely trying to argue for austerity ("hard but necessary reforms accompanied by significant spending cuts") in a thread that literally started with someone posting information I'm sorry, are you genuinely implying that there one-size-fits-all approaches in economics that universally work regardless of the circumstances? And I'm pretty sure your misinterpreting the article or fundamentally misunderstand how statistical models work. > scientific basis for claims that austerity works It does work to a degree in certain cases. Or at least in certain situations is the least bad option. > The article shifts a lot of the blame for its failure on strikes and the company being too poorly organized to withstand them but the continuous failure of BMH following the merger is a running theme Yes British business weren't competitive because of continuous government interference and dysfunctional yet to influential trade unions. The merger in 1968 was an outcome of government and trade union meddling Leyland was doing fine on it's own and there were no good reason for it to merge with BMH (which was on the brink of bankruptcy) as a result of that both went under eventually.. > Honestly, if anything BL's history reads like an example of aggressive mergers/buy-outs ruining an industry Yes but these mergers/buy-outs were imposed by the government...
- atq2119 3y ago
  Your points are entirely orthogonal to mine. There may well be cases where net government spending must be reduced -- but that is identical to increasing net government income.
  - qwytw 3y ago
    Well some make might argue that 'cuts to social programs' might achieve just that in certain cases.