The politics of fiscal policies: the lessons of history

Schäuble german finance ministerThroughout the recent years of the crisis, the EU bodies and the German leaders have constantly oppressed Greece. They have pushed Greek people towards the abyss of austerity in the name of “fiscal responsibility” and “self-evident economic truths”. But essentially, it is not about economics; it is a highly ideological unequal power play, while harsh fiscal squeeze enforced on Greece is actually a political squeeze imposed on values of democracy and solidarity.
The policy practices such as cutting public spending or raising taxes (or both) were implemented in many countries, especially from the beginning of the Neoliberal age. Following these policies, a new era of conflict has developed, with old political alignments being tested and new battles emerging over whose expectations are to be disappointed and who should be blamed for fiscal squeeze. Issues related to “fiscal consolidation” have mainly been analysed by economists. Not any more. New Fiscal Sociology is taking command during the recent years, offering enlightening empirical and theoretical pictures of the state-economy-society mutual embeddedness. The presented important book belongs indeed to this stimulating filed of research.
Do political parties who cut spending always go down to defeat in elections? Are there ‘best practice’ cases that every government should follow when it has to cut spending or raise taxes to balance its public finances? Were spending cuts and tax increases reversed and, if so, over what time period?The Politics of Fiscal Squeeze in Perspective  When the Party’s Over: The Politics of Fiscal Squeeze in Perspective, edited by Christopher Hood, David Heald and Rozana Himazfocuses on the politics of austerity and political economy of fiscal squeeze, taking a comparative view, across space and time, and rightly distancing itself from a narrow economistic angle. For example this volume tackles also questions such: Is it possible to identify social consequences of fiscal squeeze, such as changes in the power of elites, threats to civil peace or even threats to democratic government? Could it be that fiscal squeeze only produces long-term consequences if the ‘austerity’ agenda somehow connects with other pressures for major changes in political direction?
The book combines quantitative and qualitative analysis to examine cases ranging from the fiscal squeeze in the United States in the 1830s/40s (when half of the states then in the Union defaulted); the UK Geddes Axe of the 1920s (when huge budget cuts were conducted in the army, education and public health); fiscal squeeze in Dutch Municipalities in the 1980s; fiscal squeezes of Sweden, Canada New Zealand, Ireland in the 1990s; to the squeeze following the 2001 Argentinian default. Through these rich and engaging cases, the contributors proficiently assess who were the winners and losers, who got the blame and what were the longer-term effects on politics and government.
In summary, the book argues that ‘how to do it’ approaches to fiscal squeeze in democracies, based on apparently successful cases, often fail to take into account profound differences in circumstances, local context and cultural and national varieties. This lesson is very important to learn, since it is not about amorphic economics or “economy”, it is about people’s life.
(Open access to the first chapter)

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