Austerity is Dead, Long Live Austerity

The Toys Are Flying Out of the Cot

The latest chapter in the European melodrama represents a somnambulistic pageturner.  We are watching the animated gyrations of the living dead.  Let's see if we can make some sense of the slow moving tragedy.

The first evident lesson is that voters are like capitalists--indeed like all human beings.  They are acutely self-interested.  Voters in both Greece and France have caught the rest of the world napping.  Who would have thought that they would vote to reject government-inflicted hardship.  Qu'elle surprise.   Ah, yes but the problem lies here: self-interest may lead one to submit to an operation, acutely painful in the immediate, but lifesaving in the longer term.  Or not.
  It all depends upon what one perceives as one's interests. It all depends on whether instant gratification is the driver of  perceived self-interest.


One thing is clear.  Socialist electorates believe their interests are best satisfied now.  Immediate gratification is the hallmark of all socialist voters (and we grant the truth of the maxim that we in the West are all socialists now; our only argument is over the degree of socialism we find congenial).  Why do we know this? Because socialism offers immediate gratification through redistributive extortion.  Suddenly, overnight, by stroke of legislative pen, or by signature on the national loan, and/or by  taxation's loving embrace, money shows up in our bank accounts.  Unworked for.  Unsaved.  Not inherited.  It's just there.  We can all eat, drink, and be merry today.  In the end we all die. Who cares. 

Socialism spawns an Epicurean view of self-interest.  Immediate gratification.  Consequently, when austerity bites because the money has run out, a socialist electorate quickly calculates that its interests are not being served any longer.  The austerity-inflicting government of the day is punished at the polls. 

When this entirely predictable chapter comes to an end, what then?  A few chapters along in this most racy novella the country becomes ungovernable.  Why?  The new government--of whatever stripe or ilk--ends up repeating the exact same austerity programmes.  The voter believes himself betrayed.  The country descends into ungovernable anarchy.

The Guardian carried a column telling us what the French socialist electorate can expect from Mr Normal.

François Hollande expects to inherit a worse public finances predicament than that declared by the Sarkozy administration and will promptly spell out several unpleasant truths to the French electorate, according to senior German officials.

Despite fears that he will pursue a "dangerous" economic policy featuring a return to Keynesian tax-and-spend practices, Hollande and his campaign team have told the Germans that this has been ruled out. "We can't do Keynesianism twice in 10 years," Michel Sapin, the former finance minister who wrote Hollande's economic programme, told senior German diplomats, according to a confidential note obtained by the Guardian.

So, the rumours of austerity's demise might be greatly exaggerated.  That's the way it has played out in Europe so far.  This from Patterico:

So what is the effect of the Greek and French elections? Maybe not much.  As Rick Ackerman reminds us, “even the socialists in Greece’s parliament were forced to support austerity measures a few months ago, because without such measures the country would have been unable to borrow enough cash to meet payroll.”  As for France, even Jukebox Mafioso Matt Yglesias acknowledges:

[O]ne very plausible story of what happens next is simply that the European Central Bank will decide it needs to bring the continent’s newest leader to heel. If the ECB signals that it will only support the French banking system and the French economy if Hollande sticks with the status quo program, then Hollande may well have no choice. Elections in Europe aren’t necessarily what they used to be.

When the self-gratifying socialist electorates work out that they have been deceived and misled and that austerity has not ended at all, Greece and France (and probably Spain and Italy) are likely to become ungovernable.  In the meantime, Hollande's kabuki theatre of  over the next few months will be diverting.  Watch him explain to his hopeful supporters how the new Normal is the same as the old. 

The Scriptures tell us that hope disappointed makes the heart sick.  National grief, a sense of betrayal, and an outpouring of spontaneous rage are likely.  We think we can see where the plot is going.  

Meanwhile, the Left in the UK, New Zealand, and the US is braying that elections in Greece and France represent the "end of austerity".  More government spending and higher taxation is the ticket.  More taxes, more spending, more borrowing.  It got the West into the economic morass in which it currently wallows.  The answer of the Left--more, much more of the same.  When you are in a hole, dig deeper and harder.

Paul Krugman, apostle of neo-Keynsianism gives us his infallible take on the events in Europe:

. . . it’s an argument for much more expansionary policies elsewhere, and in particular for the European Central Bank to drop its obsession with inflation and focus on growth. 

Right.  More fiat money, more government spending, more subsidies, more borrowing.  Let  socialist self-gratification roll down like a river.  It's what the people want.