Comparative European Politics has a symposium on Mark Blyth's Austerity: The History of a Dangerous Idea, with comments from Nicolas Jabko, Jamie Peck, Wolfgang Streeck, Helen Thompson and Mark Blyth. Wolfgang Streeck:
Why write a comment on a book that must command as much respect and indeed admiration as Blyth’s? Fortunately one can always ask questions, extend one or the other line of argument to see where it may lead and probe for underlying assumptions that might usefully be uncovered. Having convincingly demonstrated that ‘austerity doesn’t work’, Blyth in my view remains conspicuously silent on what would work and for whom. This is, of course, entirely legitimate in principle; he or she who undertakes to explain a problem cannot be obliged to deliver a solution as well. However, although Blyth refrains from explicitly telling us what might replace austerity, it seems to me that implicitly he suggests that the alternative is just around the corner, too obvious to be in need of discussion, in the form of monetary and fiscal expansion. It is here that I have my doubts.
Before I get to them, let me reassure the reader that I have not overlooked the last chapter of the book where Blyth does turn policy advocate, if only with respect to public debt, for the reduction of which he recommends a combination of fiscal repression and higher taxes. In recent months that combination seems to have become popular even among governments and their economists, and Blyth is to be commended for having seen this coming. Whether there are good reasons to be as enthusiastic about it as he is, however, a different matter. Fiscal repression is predicated on high growth, real or nominal or a combination of the two, plus low interest rates secured by, presumably, monetary expansion. As to real growth, the problem, nowhere mentioned by Blyth, is that is has been and continues to be on a long-term decline. Up to now nobody can convincingly say how that trend may be reversed; while opinions differ, however, few if any have suggested that the thing to do would be raising taxes. To the contrary, the mantra has been and still is that growth is stimulated, not by raising but by cutting taxes, promoting investment at the high end of the income distribution or consumption at the lower end. (There is also the minor problem of tax flight, although governments are about to take care of this, or so they say.) Hence, the growth trick must almost entirely be done by monetary expansion, and indeed against the odds of the growth-impeding effects of a tax increase.
Fortunately, if the real growth trick refused to work, monetary expansion could also do with the nominal growth trick. Inflation, however, seems hard to engineer in the absence of strong trade unions, that is, by easy money alone. This at least could be the lesson of recent years, when central banks were expanding as though there was no tomorrow but inflation remained miraculously absent. Maybe this would at some point change. However, what would be supposed to cure public indebtedness could have serious side-effects. If easy money eventually did cause inflation, this would disproportionately punish people on fixed incomes. Of these, because of a changed demography, there are many more today than in the 1970s.
More here.