Synopses & Reviews
The Great American Recession resulted in the loss of eight million jobs between 2007 and 2009. More than four million homes were lost to foreclosures. Is it a coincidence that the United States witnessed a dramatic rise in household debt in the years before the recessionand#151;that the total amount of debt for American households doubled
between 2000 and 2007 to $14 trillion? Definitely not. Armed with clear and powerful evidence, Atif Mian and Amir Sufi reveal in House of Debt
how the Great Recession and Great Depression, as well as the current economic malaise in Europe, were caused by a large run-up in household debt followed by a significantly large drop in household spending.
Though the banking crisis captured the publicand#8217;s attention, Mian and Sufi argue strongly with actual data that current policy is too heavily biased toward protecting banks and creditors. Increasing the flow of credit, they show, is disastrously counterproductive when the fundamental problem is too much debt. As their research shows, excessive household debt leads to foreclosures, causing individuals to spend less and save more. Less spending means less demand for goods, followed by declines in production and huge job losses. How do we end such a cycle? With a direct attack on debt, say Mian and Sufi. and#160;More aggressive debt forgiveness after the crash helps, but as they illustrate, we can be rid of painful bubble-and-bust episodes only if the financial system moves away from its reliance on inflexible debt contracts. As an example, they propose new mortgage contracts that are built on the principle of risk-sharing, a concept that would have prevented the housing bubble from emerging in the first place.
Thoroughly grounded in compelling economic evidence, House of Debt offers convincing answers to some of the most important questions facing the modern economy today: Why do severe recessions happen? Could we have prevented the Great Recession and its consequences? And what actions are needed to prevent such crises going forward?
"Austerity is an economic policy strategy, but is also an ideology and an approach to economic management freighted with politics. In this book Mark Blyth uncovers these successive strata. In doing so he wields his spade in a way that shows no patience for fools and foolishness." Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science University of California, Berkeley
"Of all the zombie ideas that have been reanimated in the wake of the global financial crisis, austerity is the most dangerous. Mark Blyth shows how austerity created the disasters of the 1930s, and contributed to the descent of the world into global war. He shows how European austerity policies have prevented any recovery from the crisis of 2009, while rescuing and protecting the banks and financial institutions that created the crisis. An essential guide for anyone who wants to understand the current depression." John Quiggin, Australian Research Council Federation Fellow, University of Queensland
Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts — austerity — to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.
That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.
With clear and powerful evidence, House of Debt
shows how societyand#8217;s reliance on debt is dangerous and leads to economic disaster. Atif Mian and Amir Sufi compellingly illustrate how debt too easily destroys common borrowersand#8217; net worth, how these borrowers stop spending, and how people lose jobs as a result. Thoroughly grounded in compelling economic evidence, House of Debt
offers convincing answers to some of the most important questions facing the modern economy today.
Since taking power in 2010, the Coalition Government in the United Kingdom has pushed through a drastic program of cuts to public spending, all in the name of austerity. The effects on large segments of the population, dependent on programs whose funding was slashed, have been devastating and will continue to be felt for generations.
This timely book by journalist Mary O’Hara chronicles the real-world effects of austerity, removing it from the bland, technocratic language of politics and showing just what austerity means to ordinary lives. Drawing on hundreds of hours of first-person interviews with a wide range of people and, in the paperback edition, featuring an updated afterword by the author, the book explores the grim reality of living amid the biggest reduction of the welfare state in the postwar era and offers a compelling corrective to narratives of shared sacrifice.
The effects of the 2008 financial crisis were ameliorated by large-scale social policy interventions, which both helped limit the depth and duration of the crisis and softened its worst effects on citizens. Yet in the wake of the crisis, those very same social policies and the welfare state they support have come under attack.
There is, however, reason to be optimistic, argue the contributors to Social Policy in Times of Austerity. Bringing together leading scholars engaged in the debate over austerity and the future of the welfare state, the book traces the strong currents of resistance to austerity that continue to thrive within organizations, governments, and the citizenry at large.
About the Author
is the Theodore A. Wells '29 Professor of Economics at Princeton University and director of the Julis-Rabinowitz Center for Public Policy and Finance.Amir Sufi
is the Chicago Board of Trade Professor of Finance at the University of Chicago Booth School of Business.
Table of Contents
Austerity, a Personal History
1 A Primer on Austerity, Debt, and Morality Plays
Part One Why We All Need to Be Austere
2 America: Too Big to Fail?
Bankers, Bailouts, and Blaming the State
3 Europe-Too Big to Bail
The Politics of Permanent Austerity
Part Two Austerity's Twin Histories
Introduction to Chapters 4, 5, and 6
Austerity's Intellectual and Natural Histories
4 The Intellectual History of a Dangerous Idea, 1692-1942
5 The Intellectual History of a Dangerous Idea, 1942-2012
6 Austerity's Natural History, 1914-2012
Part Three Conclusion
7 The End of Banking, New Tales, and a Taxing