ABSTRACT
‘Austerity has no political colour anymore’, a remark widely attributed to a European Socialist leader during the 1970s, certainly fitted the mood of those Reunion evenings. Sunlit parties on the banks of the river and the generous socialism of youth were both far in the past; nostalgia and conservatism were served with cigars. Austerity, it was agreed, simply made sense; economic science, of course, could be dragged in to support it, but surely it is obvious, just plain common sense. We have been on a binge—that’s why we have deficits—and we’ve got to come off it now that 1980s are over, tighten our belts. Which we certainly have done, or rather, our leaders have done it for us. The slow growth and weak recovery of the late 1980s gave way first to recession, then to depression—by many measures the worst slump of the post-War era, not only in the US but also for the UK and other European countries. In the US policies that might have reversed the downhill slide were never put into play—apart from an anaemic reliance on lowering interest rates, ‘trying to push on a string’. When recovery finally came it was the weakest boom of the entire post-War era—and it was given the least help by policy. Austerity ruled.
