The global austerity response, made in full knowledge that it will worsen the problem, still strikes me as ideological and political rather than just bumbling economic incompetence. From Reagan to Bush to the present, bankrupting the state has been the goal (“starve the beast”).
If you can destroy your competitors and gain firm control, the fact that you’re controlling a smaller economy won’t bother you much. 60% of $80 is more than 40% of $100, even absolutely, but in addition 60% means control whereas 40% doesn’t quite, and the winner will control the recovery. That’s a very crude analogy but you can see my point. Someone’s waiting to pick up the pieces.
Chicago schoolers and wingers all claim that Keynesianism has been scientifically refuted, but I don’t think that they all believe that. Some of them are just playing a sabotage game and do not want a Keynesian rescue. Of course, not all of the players are in on the game. Some are just clueless, perhaps because they’re being manipulated by smarter people.
Economic rationality cannot be assumed, especially at the highest levels. Some of the biggest players (especially in international resource extraction, above all in oil) are high-stakes adventurers whose game is economic, ideological, political, and military all at once. Michael Lind thinks the oil billionaires are the heirs of the slave-state filibusterers in 19th century Latin America.
If someone’s worth a billion and wants to increase it to two billion, he’ll do one thing. If he wants to convert his wealth into power and ideological triumph, he’ll behave entirely differently. And extraction billionaires have always been gamblers in the high-stakes political-military power zone, rather than shrewd investors in the incremental production and sales zone.
Why Europeans are doing this is unknown to me, but they have their extraction industries too — look at the history of the Congo — and for all I know some of them have decided that the wrong side won WWII. After all, the Europeans only became nice little boys and girls in 1956, and it wasn’t voluntary.
The book to read is The Road from Mont Pelerin, by the fully accredited academic economist Philip Mirowski. Mirowski is not a conspiracy theorist, but I am. Mirowski shows that primary goals of the neoliberals and the Chicago school economists were political and ideological rather than scientific, and that their central idea was that democracy and civil liberties must often be suppressed if the free market and “freedom” (TM) can thrive.
Look up Nelson Bunker Hunt, a member of the John Birch society and, in his day, a big political player. Starting out as a billionaire, he bankrupted himself with an illegal, improbable scheme to corner the silver market. (The poor man even had to sell his $46,000,000 worth of race horses). It was a long shot and his behavior wasn’t economically rational, but maybe his game was different.
He also might have had the commonsense awareness that no one needs a billion dollars. It’s not like he starved after he went bankrupt. He enjoyed high-stakes gambling, including high-stakes political gambling, and for him that’s what the billions were for.