Austerity Then and Now

Paul Krugman writes:

Alan Cowell has an interesting piece contrasting public attitudes toward austerity now with attitudes toward the austerity that was the norm in postwar Britain — and beautifully described by the late Tony Judt. As he notes, one major difference is that back then the sacrifice was shared.

But there are some other differences, arguably even more crucial.

First, here’s a little chart from a useful summary of British historical statistics (pdf).

Postwar Britain had rationing; material consumption was depressed; but it had full employment. This is enormously important. All the evidence I’ve seen says that the psychological cost of unemployment is much greater than the loss of income. (And I know people who are comfortably fixed for money, but deeply depressed over their inability to find a job.) That’s why it’s so dumb to say, as some do, that things aren’t so bad in America right now because per capita consumption is still high by historical standards.

Second, postwar austerity in Britain was driven by real, obvious limits on resources. In particular, foreign exchange was in short supply. At a basic level, people knew why things were rationed — Britain had spent heavily on the war, it had to scrimp to pay its bills.

Today, by contrast, austerity is being imposed because men in suits say that it’s necessary to satisfy the invisible gods of the financial market. It’s understandable that the public is beginning to have its doubts, and not just because those invisible gods somehow demand sacrifices only from workers, never from the wealthy. For the fact is that those men in suits have no idea what they’re doing — a fact that was apparent to some of us early on, but it now becoming common knowledge.

And so if you want to contrast the stoicism of the postwar populace with the anger and confusion of today’s voters, don’t blame consumerism; blame our leaders, who have imposed gratuitous, unfair pain on their constituents, who are finally starting to figure it out.