This European opinion piece on the need for austerity politics has the usual stuff:
That's fine as far as it goes. But how should full employment be defined? Should we be aiming for a return to conditions as they were before the crisis unfolded in 2007 and 2008? Or should we accept that the boom which preceded the bust was, itself, undesirable and that no policymaker with a reasonable grip on reality should be hoping to see its return?
If so, we need to adjust our expectations of what can be achieved by Keynesian policies. The economic world isn't composed of simple binary choices along the lines of full employment versus unemployment or recovery versus recession. If we're coming out of recession, but we don't want a return to the conditions that preceded the recession, we have to accept that, pre-recession, we were probably living beyond our means.
To that extent, Keynesian policies have limitations. They have certainly helped to prevent a Great Depression Mark II. But they cannot take us back to where we were before the crisis because, at some point, we need to get a grip on the excessive debts which led to the crisis in the first place.
Keynesian policies may prevent the worst from happening, but they cannot take us back to a world of leverage where creditors are forever dipping into their pockets to provide money for the profligate to spend on all sorts of madcap ventures. Eventually, debtor nations need to adjust their spending habits. The US, the UK and others have been living beyond their means for many years and will probably have to accept that the level of output and its growth rate are now permanently lower than they appeared to be before the crisis began.
The case for austerity rests on accepting this new reality. Austerity is hardly pleasant, but it might just prevent a repeat of the problems which, two years ago, culminated in the worst Western recession since the 1930s. That, in itself, would be some achievement.
What the author discusses are various economic theories, and that is fine. But do try to find the Man Behind The Curtain because he is there. Notice how "we were living beyond our means" where the "we" is left undefined but intended to cover everybody. Notice also "a world of leverage where creditors are forever dipping into their pockets to provide money for the profligate to spend on all sorts of madcap ventures." Finally, notice how "austerity" is introduced as the proper response to the profligate spending on madcap ventures and to, yes, full employment!
But I very much doubt that the author of this piece is going to now live an austere life. Most likely not a singly yacht needs to be sold nor a caviar dinner canceled. Austerity is intended for the Little People, because it always means cutting back on government spending and unraveling the safety nets on which the less affluent rely in all daily market acrobatics.
And who benefits from that? The rich, because they will then not have to pay higher taxes! They don't need safety nets and they don't want to pay higher taxes. Indeed, austerity for us means a comfy lifestyle for them.
Neither are we going to focus on the true profligate who caused the problems! Those tend to belong to the rich and will not suffer from the cutbacks in public spending. Indeed, austerity will be mostly enforced on those who probably never were big spenders at all and who didn't cause the problems to begin with. Little People. This applies whether a particular Little Person bought too much house or saved carefully and never splurged on anything.
This class aspect or fairness aspect of economic policies is almost always buried underground and its grave made pretty. But you must dig it up, because these policies are not just dry economic theories which we can safely skip.
For instance, the author of this opinion piece tells us that inflation is worse than unemployment and that we must curb inflation, even if that means higher rates of unemployment. What he is really saying is that the wealthy suffer more from inflation (which reduces the value of money) than from unemployment (which doesn't affect the rich).
Inflation has other negative consequences, of course, such as the problems it causes for people living on fixed incomes, and writing about the question how to control it is perfectly fine. But never take your off the Man Behind The Curtain when reading these stories. He has his hand in your pocket.