Guest Editors’ Introduction

Teresa Ghilarducci and Richard McGahey Guest Editors’ Introduction FIVE YEARS AFTER THE 2 0 0 8 WORLDWIDE FINANCIAL CRISIS AND the resulting Great Recession, m ost of the global economy is still stagnating. In response to the economic downturn, many nations experimented with austerity, which constricted public spending and investment in the name of boosting business confidence. Economists supporting these policies claimed their research found a tipping point where too much debt caused economic stagnation and decline. Some economists even claimed their research showed positive growth effects from austerity. Economists associated with these views criticized, and sometimes derided, calls for deficit spending and economic stimulus as a way to restore economic growth. We now know that, far from restoring economic growth, slashing government spending on education, social welfare, retire­ ment, health, infrastructure, and many other programs has fostered economic decline and slow, inadequate recovery. But austerity, driven by controversial economic theory and specific politics, remains at the center of economic policy, resulting in inadequate economic growth and millions of lost jobs, despite citizens appealing to governments for help and many economists arguing for public spending and investment to boost growth. This volume features 13 essays by economists, many of whom are directly involved with or closely affiliated to The New School— current faculty, PhD graduates, and others who share The New School’s critical spirit. The initial idea for the volume came from meetings of The New School’s “faculty of economics,” including scholars from the Department of Economics at the New School for Social Research and the Milano School of International Affairs and Urban Policy at the New Guest Editors’ Introduction xxv School for Public Engagement. We then reached out to other scholars, both those directly affiliated with The New School and those who share a critical perspective on economic analysis. Many of the authors in this volume were privileged to work with Robert Heilbroner at The New School, either as colleagues or students (and sometimes as both). In 1995 he was pondering the future o f capi­ talism , noting its disjunction between the economic and political realms as well as the frequent inability to devise policies to control the economic crises it generates. Resolving those problems, he said, would require not just new public policies but “the political will to address the problem” (1995, 109, 111). The authors in this volume all strive to address austerity by combining economic inquiry, policy creativity, and accessible analysis for all readers in a way that honors the critical and creative spirit embodied by Heilbroner and others in the long history of The New School. All of the authors discuss the limits and failures of economic analyses supporting austerity policies, showing how these policies hold back economic growth and analyzing why they persist in spite of their poor track record. By presenting critical alternatives in analysis, policy, and economic frameworks, the authors provide tools to escape auster­ ity’s bankrupt vision and advance arguments for economic growth that creates prosperity for all people, not just a wealthy few. In the first section, The Source and Power of Austerity’s Vision, Anwar Shaikh’s “Crisis, Austerity and the Role of Economic Theoiy in Policy” describes economic crisis as an unavoidable attribute of capital­ ism. Rather than seeing austerity policy as a corrective to economic problems, Shaikh argues that austerity serves only to deepen inequal­ ity and heighten the tensions and contradictions inherent in capital­ ist economies. Gary Dymski, in his essay “The Logic and Impossibility of Austerity,” contends that the insistence of mainstream economists on an intellectual consensus in macroeconomics has led to economic measurement and research methods that favor austerity policies. This false and forced consensus has been imposed despite how inaccurately it reflects the actual economy, and has led to a stunted and one-sided xxvi social research debate in the economics profession. William Milberg, in “A Note on Economic Austerity in Science, Morality, and Political Economy,” describes the continuing debate over austerity and argues that the policy and economic debate goes beyond analytic disagreements and is more than a matter of differing economic theories or analytic meth­ odologies. Instead, the deep divisions among economists on austerity are linked to fundamental...