Don’t be fooled: policymakers are quietly invoking austerity by other names

Clara Mattei

Austerity, like trickle-down economics, has been relegated to the list of things economists don’t talk about anymore. Austerity’s core policies – hikes in interest rates, downward pressure of fiscal spending and wages – had their last stand with the European sovereign-debt crisis a decade ago, and the resulting public outcry made the “a-word” unmentionable, even in times of economic crisis.

So, on 21 September, when Federal Reserve Chair Jerome Powell announced his fifth interest-rate hike of the last nine months, this dirtiest word in economic policy was conspicuously absent from his remarks. Instead, Powell described the process of resetting the economy – through the introduction of increased unemployment and possible recession –as a necessary form of “economic pain.” Powell’s comments echoed those of his British counterpart, former chancellor of the Exchequer Rishi Sunak, in a letter to Boris Johnson: “[the public] need to know that whilst there is a path to a better future, it is not an easy one.”

his framing of monetary policy as some sort of war effort – hard work and individual sacrifice for the greater good –has been part of the playbook for instituting austerity policies for more than a century. In 1920, at the first international financial conference in Brussels, British civil servant Robert H Brand evangelized economic narratives focused on this “hard truth”: in order for the economy to get back on its feet after World War I, “the answer is a very painful one and yet a very simple one. We must all work hard, live hard, and save hard.” As Powell, Sunak and Brand demonstrate, the road to austerity is paved with vague euphemisms….