Austerity and the rise of the Nazi party [pdf]
anderson.ucla.edu
anderson.ucla.edu
There are reasons to perform austerity but it's rarely a good idea to do it on both of these sides at the same time. When governments are trying to get out of a debt hole, monetary policy should be expansionary enough to allow for the private sector to grow and replace the economic activity that the government is halting.
The alternative double austerity leads to, on an economy wide scale, investors' attempts at building wealth, being transformed into hoarding of intrinsically valueless pieces of paper or electrons instead of being tied to something real, instead of being tied to factories, businesses projects and tools that allow people to work. It leads to people not working and not being able to subsist because the investment market is put into a gridlock.
The detrimental effects are not evenly distributed. It disproportionately and very nonlinearly affects groups that are economically vulnerable, the less educated, people working in commoditized industries where margins are thin, the inexperienced. The potential for livelihood for these people simply disappears when hoarding paper becomes more alluring than investing in these types of job creating projects.
The resulting desperation pushes people to extremes.
The ECB has been doing a mild version of this for the past decade, putting western civilization at risk. The US central bank is finally doing a better job but only after reasonable leaders were pushed aside and fanatics gained power. There is now a risk that the fanatics will get the credit for the better economy which might help them maintain power.
I was struck by the parallels between what is described in this paper and the very recent (week old) national elections, the first to be held in five years. There was an overwhelming swing towards extremist parties (one in two voted either for the xenophobic nationalistic formerly openly racist Northern League or the wildly populist Five Star Movement). The disposition along the north/south axis correlates sharply with unemployment and other forms of economic/social duress and I cannot help fearing that this is the fate that will befall us.
If they want to get a better deal on their loans, they should negotiate the loans better. Running a disastrous monetary policy to indirectly improve their loan terms is an insanely destructive thing to do both to the indebted countries and to the weaker parts of their own economy.
Also, the loans they make are mostly with the countries' governments but as you probably know, euros are used by non government entities too. Germany shouldn't strangulate all of the eurozone's private markets just to manipulate terms of government loans.
On top of this, not allowing people to work and destroying their countries' economies greatly increases the chance these countries are going to default or restructure parts of their debt, again, not to Germany advantage.
Finally, having neighbors with poor economies is bad for your exports and your own businesses.
In the long run Germany has much to gain if people of Europe have functioning investment markets and the tools are available for people to work and produce.
I don’t really see a way out of this. It seems that all the citizens are passengers in a crashing aeroplane, and that the pilots themselves are sitting up front but have been severed from the controls and stripped of all agency. The aviation the outcome would be obvious, and that’s why you’re essentially correct in saying that gravity needs to be switched off, at least temporarily, for the benefit of everybody. Again, I don’t see this happening.
- The US didn't actually embark on anything resembling austerity in 2008-2016.
- The narrative that the current US Oresident was swept into office by economic complaints has not held up well. Among other things, it's become quite clear that Trump voters were not primarily those under economic threat. Race, education, and gender were far more meaningful predictors of voting (R)[0].
- Any such causality also fails if you compare economic conditions in 2016 to, for example 2012. Or, if you want to focus on economic anxiety and not headline numbers such as unemployment, 2008.
- Economic factors also fail to explain the decidedly different situations with similar outcomes we've seen in Britain, or Austria.
- Even the poster child for austerity in modern politics, Greece, has somehow managed to keep it together, somehow.
[0]: http://fivethirtyeight.com/features/education-not-income-pre...
I'm thinking the raise of extreme nationalism and populism (i.e., nazis) seems to caused more by pace of changes (rate of it) in the society and economy than by economical problems or even immigration.
It seems like that Nazis are more a reaction on the pace of the changes. For example, science was rapidly changing (weird quantum mechanic and even weirder general relativity are both from Germany), society was becoming very liberal (religious tolerance, etc.), economy (fiat currencies, etc.) and so on.
In short, "change" anxiety causes this.
Nazism and similar ideologies are clearly attractive. They hook into some fundamental part of the human psyche. They are also repellant. Their success depends on which of these factors is stronger.
A big part of what makes them repellant is seeing what the real world consequences are. It’s hard to find Nazism attractive when you’ve seen it produce genocide and the near total destruction of its country in war.
But that was a long time ago. There aren’t many people left alive who remember that time. The horrors are going from concrete to abstract. I hope it’s not true, but maybe we can’t shift away from it until we have another example of how bad it is.
The spending cut was dramatic in the paper - 25% drop in government spending. In the UK our austerity program at the height of 2010-15 was a reduction in the growth of spending (not a nominal cut). AFAIK only greece has seen such a dramatic reduction in GDP (and I am not sure the government spending cuts have been so deep).
Additionally it's worth noting David Runciman's comments on Greece and Nazi party (#) here - he posits the major difference is one of age - Germany and Europe were young (25 years on average) then but now greece is a muchnolder population- old guys riot less it seems.
This looks like a decent paper on an area of interest but Runcimans presentation above reflects my thoughts - if we do screw up the world again, the threat this time will look different, come from a different angle. We should not just avoid the mistakes of history - we are really good at coming up with whole new mistakes as well.
(#) Talking politics podcast cannot find the right episode.
In the UK the cuts were directed - largely at public sector jobs and wages and benefits, foodbanks, etc. You can take £1,000 of money spent on foodbanks or soldier wages and just give it to a military contractor or Carillion and technically public sector spending hasn't been cut by £1000, but the effect is as if it had.
Nonetheless, the effect of austerity in the UK was a lot milder than it was in Greece and, as a consequence, we don't have people waving swastika flags around like they do.
.. yet. We did have an MP shot by a member of a far-right organisation, and we do have an ongoing problem with fascist newspapers. "Crush the saboteurs" and all that. It has now become alarmingly routine to refer to the leader of Her Majesty's Loyal Opposition as a traitor.
The KPD was annihilated though, while Corbyn held on. If anything he makes the rise of the far right much less likely by presenting a viable anti-austerian alternative. I don't imagine UKIP will be around much longer.
It was only ever a shell for Farage. The rest of the party was a set of cranks who'd been ejected from mainstream politics and who couldn't get on with each other. Their only ever MP, Douglas Carswell, quit the party. They had no real "ground game" and a very limited council presence. It's a mystery why Farage was and continues to be invited onto BBC Question Time week after week.
That would probably not have happened if all mainstream parties had not looked like weimaresque mirror images of each other at the time.
Corbyn, like May, was a lukewarm campaigner for Remain, but unlike her Corbyn has a 40-year track record of voting against everything EU every chance he got. Had he nailed his colours to the mast at the time of the Referendum there is no doubt in my mind he would be PM now.
It's also become alarmingly routine for revelations about him being associated with this or that enemy of the country, tho'. He even had a codename given to him by the Czech secret police at the height of the Cold War, Agent Cob, they called him. He's not and never was called a traitor simply for his position as head of the Loyal Opposition, so you are being disingenuous there.
That's as close as you're going to get to an official declaration that it's fake news. (Best check your source for the Czech claim, what else are they lying about?)
Establishment politicians (especially those with strong links to corporate elites) and media representing the 0.1% almost never try to take him down on the basis of his policies. There's a good reason for that.
Polls have been done that ask about policies and ask voters to choose 'faceless' parties solely on the basis of those policies and people overwhelmingly choose him without realizing it.
Those policies are simultaneously a highly understated threat to the wealth and power of the 0.1%. Attacking those policies directly would likely just draw more attention to them (Streisand effect). So, they attack his character instead.
The Czech stuff you fell for was badly formulated propaganda that attempted to do exactly that. It backfired spectacularly.
Latvia for example had a 26% drop in GDP and a 55% drop in housing prices at the peak of the crisis. On many levels, 20-33% of public servants were fired, with the remainers' already low wages reduced by 20-33%.
>How Seriously Should We Take Economics?
>Economics is a science—it proceeds via hypothesis and empirical testing—but it’s a soft and squishy one, and any argument to the contrary should be treated with great suspicion. Especially in macroeconomics, hard-and-fast laws are hard to find. So are stable parameters and reliable empirical studies. Often, about the best we can do is isolate general tendencies, and then look carefully to see whether they apply in the case under consideration.[0]
[0]https://www.newyorker.com/news/john-cassidy/the-reinhart-and...
I encourage anyone interested in austerity to read this article. It's relatively short and insightful.
Wikipedia defines the term as either or both of these things. Investopedia defines it as only the latter, and modern political discourse seems to do the same. At any rate the definition seems contentious, and the headline potentially misleading (increase spending to avoid the rise of a catastrophically evil regime).
As of the moment we only have the political appetite for the spending cuts and tax cuts. The tax raises will come later when we realize how far we've bankrupted the social safety net programs, perhaps 10, 20 years from now.
if you're about US then it is spending increase and tax cuts. "Spending cuts" in US is just a rhetoric in order to redirect money from some political opponents' programs into political allies' program while overall increasing the spending.
Admittedly, I did not read past the abstract, but the paper seems already to fail to differentiate between causation and correlation.
With dashed hopes and a loss of faith in the Weimar Republic, fury and despair were channelled into the ranks of populists and demagogues, with the Nazi party campaigning against austerity and offering promises for a new era of prosperity.
So, it's not nationalism rather people getting angry against the government which failed them. Any party can then shape the agenda and turn it towards nationalism or a particular community while promising prosperity.
Consider old school New deal socialists or paleoconservatives. If you told those guys that honest married black men were out of work and couldn't support their families, they would be concerned. Seeing it as their duty to do something.
Compare that with Ayn Randian Libertarians who generally think that the destitute should just up and die already. And Hayekian neoliberals that think that's simply not their problem.
It's the above attitude that leads to fascism and communism. They become dominant when the social leaders abandon any sense of duty. It's very scary because that's the exact situation in the US currently.
* Cuts in benefits make people more reliant upon income from their jobs and give them less leverage.
* Cuts to the public sector workforce increases the supply of labor. When the supply of available labor goes up, wages come down.
* Cuts to public sector wages reduces competition from the public sector, so wages in the private sector come down too.
The strongest effect of this can be seen today in Greece where wages fell ~20%.
In Weimar, Bruning actually also issued a direct order to suppress wages (which I'm surprised the authors didn't mention). This did not go down well.
People who have suffered from wage repression tend to look for somebody to blame. Extreme nationalism provides targets for that blame. And, the Nazis did end austerity and wages went up again, and of course they provided a scapegoat.
Weimar also violently crushed the left wing opposition (the KPD), so people were left with "centrists" vs. "the (Nazi) alternative" and of course a lot of the people who wanted "an alternative" supported the alternative that was available to them, just because it was there.
And "survival" can be an abstract term. Most people in Western Europe have a warm place to sleep and enough to eat to survive. But maybe they worry about rising prices and worry if they'll have enough (if their government will have enough for them) to retire in 20-30 years. They see their neighbor who got laid off and is still looking for a job months later. Their government says they need to cut some social safety nets because of austerity, and then they hear about the government saying refugees are welcome, with money from... where?
My belief is, Angela Merkel basically became the leader of Europe and her (and her finance minister's) disastrous austerity policies lead to so much unhappiness all over Europe, even in Germany itself. As for refugees, someone who says they have no right to be in Europe should -- in my opinion -- stop calling him- or herself a human being.
Germany isn't an economic hero, it's exploiting the effects of the single currency while other countries around it are suffering economically. And this has also lead to the rise of populism all over Europe.
This kind of moralistic stance is part of what people drives towards populist parties: being denied even the right to hold an opinion makes people angry. We totally have the right to chose who can come in our country and under which conditions. And that applies to refugees as well. This is not a problem of begin "human" or not, it is about making decisions that will have impact for decades on the European societies.
So far the most reasonable approach to the refugee issue was proposed by Hungarian Prime Minister, who wants EU to help them right there, in the Middle East, instead of letting them in.
Also, nobody's saying you don't have the right to hold that opinion, it's just that if you do we're going to have an extremely negative opinion of you.
I do agree about the impact, and at least for Germany, the half-assed way the government is handling the crisis will lead to a lot of pain and grief, on both sides (the refugees and the native population)
As the mods say, let's just stay out of the politics.
I'm a friendly man who tries to make foreigners lives in my home country better, regardless of where they come from.
A lot of what you say makes sense.
But at the end I think you get very harsh while also being partly wrong (If I read you correctly.)
You say: "As for refugees, someone who says they have no right to be in Europe should -- in my opinion -- stop calling him- or herself a human being."
As far as I'm aware nobody has the right to be in another country than those that they belong to, except when it is agreed otherwise (visas, visa free zones, international rules about refugees etc).
By no means is it a coincidence that the flamebait bit of your comment is precisely the one other users respond to. Flames start fires. Please don't start them on HN.
Briefly, the political situation can be fixed quickly if-and-only-if the actual needs of the working classes are actually addressed. That means e.g. some type of single payer healthcare and paying off the student loan burden.
[1] http://markblyth.com/books/austerity-the-history-of-a-danger...
I strongly recommend listening to Blyth's actual explanation (in this or his other talks & publications), not my poor-quality summary.
(There's nothing wrong with making higher education cost less for people that want to do it, but plenty of people are just seeking a credential they see as necessary for access to certain jobs, jobs which often don't need much of the higher education they purport to require)
Who's to say social democratic policies (i.e. Sanders, FDR) don't usually arise in response to the toxic populism that austerity creates because they (anti-austerity) are the natural cure? Isn't that the story behind the new deal?
Is it so hard to believe that creating an entire generation of people who will have negative net worth until they are 40 fosters resentment?
I don't doubt that people who believe in single payer and subsidized tuition do so because they think it's the best way to keep generations out of debt. It would be weird for them to think otherwise.
What I'm doubting is that they can evoke public policy outcomes from the 1930s as a natural experiment proving that those are the best policy interventions. I think that argument assumes a whole variety of facts not really in evidence.
I feel there is more disagreement about the outcome itself.
Maybe no one could wish upon others financial debt, but a lot of people question why they'd need to help others achieve financial stability.
The idea that we need to actively find ways to raise the minimum standards of living and create a financial baseline seem to me like leaning on socialist ideas.
The other side can claim that there are winners and there are losers, and that's exactly how things should be. Reward the winners, and motivate the losers to work harder, simply make sure they are allowed to compete.
I agree, but I don't agree that even a majority of participants in public policy debates are acting in good faith. I think it's possible, but given the results and empirical evidence we have to the contrary you should provide some evidence or argument to back up this extremely controversial claim.
I don't think they actively wish to push generations into debt like mustache-twirling cartoon villains, but I do think they are not particularly concerned with this side effect of their other policy goals which are essentially a massive transfer of wealth and power to the private sector, like, e.g. privatization of the loan industry and education.
>I think that argument assumes a whole variety of facts not really in evidence.
The original argument was made by Blyth, who is a serious academic, not me, and you haven't made any attempt to engage with him at all. The crux of the argument is that "anti-austerity is the cure to the ills of austerity" which is honestly nearly tautological because of its obvious correctness, not because of a flaw in its reasoning. It's natural to look back at similar historical situations, like a gilded age of massive inequality and the destruction of working class power preceding a depression. The only real difference between then and now is that we've chosen to call our depression a recession, and pretended there was a recovery from it instead of creating one.
I certainly don't think it _helps_. Take the Keynes quote from the paper, that given an uncertain financial future people wanted "A Change", and a population that took out substantial debt and didn't leverage this effectively may be looking at a very uncertain financial future of their own.
There's also a certain similarity I can see in the psychological impact of inflation, high taxes, and high debt loads without high earning potential, in that they by their nature are difficult to overcome (and in some cases impossible to), and here I'd cite the many prior HN discussions on "the cost of being poor" to throw more wood on that fire.
Finally, they observed in the paper that much of the nazi voting came from those who had the most to loose from austerity, so the fact that student debt is tied to upper middle class doesn't seem to necessarily contradict that possibility either, even if it's within the self-selecting group of those who imposed that debt on themselves in the first place.
Of the ~35% of Americans who get college degrees and the debt that goes with it, the ones who end up in the most debt will overwhelmingly be those whose parents didn't save up a college fund for them - i.e. kids who came from working and lower middle classes.
We need single payer healthcare to avoid another Nazi party and Holocaust.
This is the logic of what you're saying, right? Will single payer be enough or is it just the start of the policy requirements to avoid another Nazi party?
Edit: people are voting me down but his last paragraph almost says this straight out. It is such a wild idea that without socialist policies were headed for nazis again is crazy.
Of course people will be looking for some change. And if none of the established parties comes out with that real change, or no other "rational" party comes out promising that change, then that leaves the extremists/authoritarians, so they'll go for those.
Sometimes I'm amazed at just how blind some people can be at this, and think that people should (or will) always vote for the lesser evil (in the downward spiral). No, eventually people will get fed up with that, whether you like it or not. So it's important to have a real, but also rational, alternative to the slow-moving political establishment.
It would be best if the main political parties would pre-empt this by actually addressing people's latest concerns and being in tune with what those concerns are, but often they get too comfortable with the power and the relationships they have at the top, so it almost comes natural to them not to do that.
Those are not the only ways.
Greece could not do this because they were in the Euro area, and had not control over their own money. It seems Iceland which controlled their own currency handled the economic problems much better. Although it is hard to compare as Iceland is a pretty well run country, while Greece struggles with basic stuff like simply collecting taxes.
The best is of course to have the discipline to save a lot of money in good years to spend in bad years. For my native Norway this was the situation which is why we basically didn't feel the 2008 downturn at all. We had save a lot of oil money over many years and just spent more of it.
The US too weathered the storm not too badly through the expansionary policies of Obama. While the austerity measures in Europe totally screwed up several economies.
It was a brutal country for all month long that it existed. Guns were seized along with money, food, and most other necessities of the times. People's houses were stolen and given to vagrants. Factories, farms, and other production facilities were stolen from their owners and given to the workers. And the country rapidly began to face food and supply shortages, similar to what would happen to China during its "great leap forward."
And these shortages were met with comments from the government such as, "What does it matter [if we do not have milk]? ... Most of it goes to the children of the bourgeoisie anyway. We are not interested in keeping them alive. No harm if they die – they’d only grow into enemies of the proletariat." And on top of all of this, two of three of the leaders of the groups that overthrew the government were Jewish, at a time when many were already blaming Jews for Germany's defeat in WW1.
I'm certain there are many causes for the rise of the Nazis, but not even giving this event mention seems unreasonable. This is certainly one of the most important events in setting the stage for the political changes of the times.
[1] - https://en.wikipedia.org/wiki/Bavarian_Soviet_Republic
As you state yourself, it lasted for less than a month. I will add that this month in semi-power occurred before Hitler had even joined the Nazi party.
Can you imagine how that would change this country? How would you respond? I expect we would almost certainly end up going hard in the opposite ideological direction of whomever did it. This a crucial point in understanding how and why it was so [relatively] 'easy' for quite absurd views to start to take hold.
1918/19 was a time of turmoil not easily compared to anything you may know. Very little of the events of the time fit neatly into any cause-and-effect timeline. One dominant symptom, but not necessarily cause, was open fighting in the streets between extremist groups of all stripes. You local communist pseudo-revolution doesn't even figure prominently among local communist pseudo-revolutions of the time.
It's much easier to clearly identify the (rather few) Germans who didn't succumb to the temptation of fascism. Social democrats would figure very prominently in such an analysis. Every other group of society, from old elites in politics, the military, or business, from academia to the clergy, became essential to the rise of Hitler, each in their own specific way.
[0]: seriously: read the Wikipedia article. Their Foreign Secretary complained to the Swiss that the key to the loo was missing!
And while this played a critical role in 'setting the stage' that enabled the rise of the Nazis, it certainly was not the sole cause. But in either case, simply ignoring this event is likely to lead to flawed logic.
I don't think a month of political chaos and severed economic ties is really a long enough time to live up to any stereotype. It would be like judging the effectiveness of the German economic machine on the basis that Berlin was still a total mess 1 month after the war ended.
I googled for "USA 1860s" and followed some links but I can't get further than stuff like the "Dakota War of 1862" which I doubt is what you're referring to.
Secondly, there was no appetite for continuing the war longer than 1865, or for extending Reconstruction much past Grant's term of office. A prolonged occupation of the south, such that white people there could be taught that white-supermacy-is-wrong-m'kay at gunpoint until they finally understood...that doesn't happen in this timeline or any proximate one.
> Our analysis shows that chancellor Brüning’s austerity measures were positively associated with increasing vote shares for the Nazi party.
I worry you may be asking for a bit much in a thread discussing austerity and the rise of Nazism.
It is high quality... For another site.
From the guidelines of what off topic: "Most stories about politics". If this is allowed, the guidelines don't mean much.
Emphasis mine.
Like i said, if this fits under that restriction then almost anything fits. You might just as well remove that line and start allowing all politics since that what it is in practice.
From my perspective the mix of stories here hasn't changed much in 10 years.
The site guidelines say most and probably for a reason. This article obviously clears that bar. The vast majority of political stories don't, so what you say downthread is far from true.
You might hope that a story like this is one we can all find intellectually interesting and discuss without falling into a political vortex. But it's a political topic that reacts with almost every other political issue on HN, from US politics to Greece and the EU.
I think he's right and you're wrong, for whatever that's worth.
I'm not sure your point is borne out by the thread. Most comments are civil and substantive. It isn't the highest quality discussion but graded on a curve it's good.
My inclination was to penalize the article because of the triggery title. But I took a look and had to change my mind. The article is substantive and gratifies intellectual curiosity; that's the site mandate (https://news.ycombinator.com/newsguidelines.html), so I'd say it's clearly germane.
The topic itself is troll city, of course, which is why I posted the sticky comment at the top. We have to judge this by the article, not overall topic. Even if nearly everything on a topic is crap or flamebait, occasionally something isn't, and it's important to how HN works to treat those exceptions differently—even though having blanket rules would be easier, and a lot of people mistakenly think we do have them.
Not that I'm surprised, very little of their pseudo-scientific mumbo-jumbo (complete with equations) surprises me anymore.
What I don't understand is they claim austerity is the cause of Trump's rise to power when Clinton was pretty much the poster-child of the anti-austerity movement, I don't think anyone seriously considered she wouldn't continue following Obama's economic roadmap as opposed to Trump's claims of reigning in government deficit spending and waste.
Trump also promised a huge infrastructure spending plan and a border wall. I wouldn't say Clinton was especially anti-austerity either, that was Sanders' thing.
Having gone down the rabbit hole I came up with an article about the Occupation of the Ruhr[0] (with no mention in tfa) after Germany defaulted on their reparation payments which claims:
> In German politics, the French occupation of the Rhineland accelerated the formation of right-wing parties.
If I were to look for the causes of the rise of the Nazis that would be pretty high on my list.