Fashionable Austerity

Economic justice is so last season.

The late Venezuelan president Hugo Chavez called the International Monetary Fund ("IMF") a tool of US imperialism. Tanzania's president John Magufuli, accused the World Bank of interfering in his country's affairs.

That's a novel way to treat one's creditors. Applicants for home loans don't call their banks neo-colonial oppressors as a matter of course.

Cultural Corruption

Yet it became trendy in academic circles after the Asian Financial Crisis to criticise Structural Adjustment Programs for unsuitable borrowing conditions setting up debtor nations to fail. Calling modernising reforms part of a 'Washington Consensus' makes it easy to cast international debt funding as an indigenous-colonial struggle, when really, transparency, liberalisation, and prudence are relevant to all cultures.

Magic Money Tree

Following the Great Financial Crisis in 2009, European governments tried to freeze public spending, while the U.S. did not. Since then, the U.S. economy and stock market have outstripped those in Europe.

During the COVID-19 pandemic, governments worldwide increased debt loads to support locked-down businesses and citizens. 

Inflation remained muted in 2020 and 2021, refuting the idea that neoliberal austerity was necessary to contain borrowing-led inflation, and lending support to 'Modern Monetary Theory' which argued that governments could print unlimited money to cover unlimited debt.

Neoliberalism, while not yet a dirty word, became as naff as the '80s, big shoulder pads, baby boomers, and CRT TVs. Bungled attempts to enforce controls on welfare spending, like Australia's 'Robodebt', amplified calls to abandon controls altogether. 

But then inflation roared to life. Its unsophisticated explanation rang true; too many stimulus cheques chasing too few supply-constrained goods. No one talks about MMT or pandemic support anymore.

And what of the argument against the Washington Consensus; that money to developing countries should be given, not loaned?

Turning debt into donations has, according to The Economist, diluted America's ability to compel good behaviour by Middle Eastern countries. Debt forgiveness is no incentive when there is no debt. Meanwhile, Greece, long pitied as a hostage of iniquitous reforms, was The Economist's economy of 2023. 

Re-attaching Strings

Conditionality may be cyclical. We went from imposing conditions on international and personal aid, to decrying mutuality as an affront to national and individual autonomy. 

Now, even China is learning that doling out anti-imperialist money with few strings attached means that you lose a lot of money. U.S. inflation is softening as consumers exhaust pandemic savings.

It seems that after seeing the consequences of indulgence, we may be shifting back to austerity.

Back in black

Other recently-established ideologies are being challenged. The notions that inequality has worsened, that fentanyl kills via socio-economic 'despair', and that social mobility has declined, have attracted critical study. Modern free-market capitalism may no longer be passé. Instead, denouncements of its unfairness may now be old hat.

Along with those changing tastes, tight purse strings are once again in fashion.