Once upon a time, there was a government official with a plan. He had become convinced that the way to fix the economy was to send out teams of saboteurs who would systematically disrupt production around the country.
Why did he believe this?
Never mind; for some reason it was what all the Very Serious People were saying.
So the plan went into action, gradually ramping up over time. Eventually the saboteurs were doing a significant amount of damage — the best guess is that they were destroying about 3 percent of the country’s output. But after three years, two things began to happen.
First, the Right Honorable Saboteur stopped ramping up his efforts, and even began slacking off a bit. Second, the private sector got a little better at coping with the teams of saboteurs, thereby reducing the damage they were doing.
As a result, the economy began growing again — in fact, somewhat faster than usual, as sabotaged factories managed to get back on line. And the Right Honorable Saboteur took a victory lap. “See,” he said, “my policies have been a triumph and my critics proved wrong.”
It’s a silly story, isn’t it?
But as the Financial Times columnist Martin Wolf recently explained, it’s exactly the story of George Osborne, Britain’s chancellor of the Exchequer.
What’s It All About Then?
The Oxford economics professor Simon Wren-Lewis recently posted some remarks about “austerity deception” online. What set him off was an article in The Telegraph by Jeremy Warner, a British business and economics commentator, that characterizes the whole austerity debate as being about “big-state” versus “small-state” proponents.
Mr. Wren-Lewis’s point is that only one side of the debate saw it that way. Opponents of austerity in a depressed economy took their stance because they believed that this policy would worsen the depression — and they were right.
Proponents of austerity, however, were lying about their motives. Strong words, but if you look at their recent reactions, it becomes clear that all their claims about expansionary austerity — 90 percent cliffs and all — that were just excuses that served their agenda: dismantling the welfare state.
That in turn helps explain why the intellectual collapse of their supposed arguments has made no difference to their policy position.
One interesting point, which Mr. Wren-Lewis gets at and I’ve mentioned on other occasions, is that people on the austerity side of this debate aren’t just disingenuous; they don’t seem to comprehend the notion that others might actually argue in good faith.
Back when we were discussing stimulus, many people on the right — economists like Robert Lucas included — simply assumed that people like Christy Romer, the former head of the Obama administration’s Council of Economic Advisers, were making stuff up to serve a political agenda. And now I think we can see why they made this assumption — after all, that’s how they work.
So this hasn’t been a symmetric debate, and that’s why my side has won completely on the facts, but continues to lose in the political sphere.