Just to be clear, 'austerity' is a lie. The idea that governments caused our current woes by reckless overspending is a lie. The idea that the last Labour government 'crashed the economy' is a lie. And the idea that you can take a patient who is already lying flat on their back in the gutter and somehow throttle them back to life is a lie. The diagnosis flies in the face of the evidence, not to mention common sense, and, bizarrely, the treatment prescribed makes the supposed problem worse.
As was widely reported at the time, it was the banks that crashed the economy. They took advantage of the fashion for deregulation to build a global bubble of debt that was always going to burst, taking out our economic infrastructure and bringing down the real economy with it.
So why do the coalition partners, the Conservatives and the Liberal Democrats, persist with this lie so doggedly?
Well it appeals to different players in diverse and subtle ways:
In the first place it's a convenient and effective stick with which to beat the Labour party who were in power when the house cards fell over. It doesn't matter that it's not true, the Labour party themselves seem to accept this blatant rewriting of history so they might as well use it.
Secondly its a logical extension of the current economic myth that government spending is somehow different from other spending, that it does not contribute to the economy but drains the life out of it - that government spending is parasitic. If you pay for your health care through insurance, for example, you are a good economic citizen and contributing to the GDP whereas if you pay for it through taxes you are dragging the country down. It's obvious nonsense but myths take root in a way that defies logic and evidence and eventually they become unchallengeable orthodoxies.
Thirdly it appeals to voters on a kind of moral level. For some reason we like to think that we had it too good for too long and it appeals to a kind of masochistic impulse to have to pay for our over-indulgences now. Conveniently this means that the policy doesn't have to work; in fact the longer the pain goes on, the more true it seems.
But most importantly it provides an opportunity to attack the poor, the people who depend most on the state. The health and prosperity of the nation, for which we have to thank the rich, is apparently being undermined by feckless scroungers who can only be helped into productive citizenship by reducing them to complete destitution.
So we can feel economically prudent, we can confess our past sins and then in practice we can inflict all the pain on those who are least able to resist. What's not to like?
But liking it doesn't make it true. And it certainly doesn't make it work.
The idea of 'austerity' is a kind of reinvention of 'monetarism', the economic fashion embraced so enthusiastically by Margaret Thatcher when the main problem we faced was inflation. We don't have an inflation problem now but myths have a life of their own. The project really began in 2010 with an influential economic paper "Growth in a Time of Debt" by Carmen Reinhart and Kenneth Rogoff published in a non peer-reviewed issue of the American Economic Review which claimed that a country cannot have healthy economic growth if its debts are too high compared with its GDP. It turned out that this wasn't true - as was spotted by a young student doing a homework project. The data contained many examples of countries with high debts that had perfectly good growth rates but the spreadsheet had somehow excluded them. So an Excel error became a flawed economic theory and then a lie - a story that still gets told even when it's known to be untrue.
The cure also made things worse. Naive and economically illiterate politicians constantly compare the national finances to household spending. If a household is running into debt obviously they have to cut their coat according to their cloth. But cutting government spending, especially during an economic downturn, puts people out of work, increases the welfare budget and reduces the size of the economy. We end up with a higher deficit and a lower GDP - exactly the opposite of what is supposedly required.
So what is the alternative?
Well in short the opposite in every way. As has been demonstrated through the 20th century, the way to cure a lack of confidence and economic activity is for the government to borrow and spend - because it is the only player that can. It needs to spend on infrastructure projects that will be useful in the coming years and which will bring less skilled workers back into work. Then the welfare bill goes down, the tax take goes up and the government finances come back into balance.
In the current climate this is a very shocking thing to say. It's a kind of heresy which makes the proponent seem not merely mad but positively evil. Which only goes to show how far we have come from rational and evidence-based debate.
And spending more money through the poor is a vital part of the recipe. Money doesn't trickle down, it trickles up. Money spent on the poor circulates in the real economy, making its way upwards until eventually it arrives at the rich who put it in offshore accounts. It is not the rich who create jobs but the poor who spend their money on food, housing and other essentials. The money the Bank of England invented through quantitative easing and which went directly into the hands of the rich might as well have evaporated. An increase in unemployment benefit ironically would have created many times more jobs.
Eventually the myth of austerity will be allowed to fade and everyone will deny they ever believed in it but in the meantime it is wreaking havoc in the economy and in the lives of the very people who could bring about the recovery - if they only had the money.
