There's a new scarlet letter in town. Actually, it's the same letter -- "A" -- but it stands for a different word that's increasingly regarded as shameful: Austerity. The darling idea of 2010 and 2011 has become the pariah concept of 2012. One of the defining features of conventional wisdom is the way it perpetuates itself. Once a certain narrative or idea takes hold in the political and media establishments, it becomes almost impossible to shake. So when the conventional wisdom does change, it's worth noting.
And the evidence of profound change is all around. In May, anti-austerity sentiment helped François Hollande topple French president Nicolas Sarkozy, one of the architects of the austerity measures that have caused waves of protest across Europe, especially in Greece.
One day after the French election, according to the AP, "the conversation in Europe was already different Monday: Austerity had become a dirty word." And incoming President Hollande proclaimed that "austerity can no longer be inevitable."
More evidence of the change in conventional wisdom was seen in the language the AP chose to report the reasons for the outcome in France: "Austerity was intended to address these jitters by reducing their government's borrowing needs, but there has been a negative side effect: As economic output shrinks, the debt burden actually looks worse."
The same week as the French election, a number of local Italian politicians running against the austerity policies of Prime Minister Mario Monti were also victorious. But the even bigger news was in Greece, where the two main parties, the center-left PASOK and the center-right New Democracy, were dealt big defeats at the hands of anti-austerity forces pushing back against the EU austerity deal signed by Greek leaders in February.
"A rising chorus of opposition to Berlin's austerity policies" is how Reuters reported the elections in Greece and France, while the New York Times wrote that "as growth has slowed, an anti-austerity backlash has swept Europe."
In Greece, after New Democracy failed to form a coalition government, the job fell to the upstart second place finisher and austerity critic Alexis Tsipras, leader of SYRIZA, the Coalition of the Radical Left. Though he, too, failed to form a coalition -- forcing another round of elections on June 17 -- Tsipras increasingly represents the voice of the people.
The conventional wisdom is even changing in Germany. A week after the Greek election, austerity champion Angela Merkel's party performed poorly in Germany's most populous state, North Rhine-Westphalia.
A few days after the German elections, a G8 summit was held at Camp David in which the language of growth took precedence over the language of austerity. "Our imperative is to promote growth and jobs," began the statement the leaders issued, while President Obama proclaimed: "There's now an emerging consensus that more must be done to promote growth and job creation right now."
Her one-size-fits-all austerity program has been a failure, pushing heavily indebted countries deeper into recession, making it even harder for them to pay off their debts. It is putting the already-weak recovery in the United States at risk and is fueling instability and extremism in Europe.
Just days later, and perhaps most shockingly, the change in the conventional wisdom about austerity even seemed to have penetrated -- gasp -- the Republican Party. In an interview with Time's Mark Halperin, Mitt Romney was asked whether, if elected, he'd make big budget cuts right away. His reply:
Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5 percent. That is by definition throwing us into recession or depression. So I'm not going to do that, of course... I don't want to have us go into a recession in order to balance the budget.
This echoed his comments back in February, when he made the common sense observation that "if you just cut, if all you're thinking about doing is cutting spending, as you cut spending you'll slow down the economy."
And even if Republicans don't come around on actual policy shifts, they seem to be getting the message that the public is turning against austerity. This can be seen, to great comic effect, in new rhetoric from the GOP's demigod architect of austerity, Paul Ryan. Appearing on Meet the Press, he hilariously declared that "the whole premise of our budget is to pre-empt austerity." That's right, the new line the GOP is running up the flagpole is that we can "pre-empt austerity" with... austerity. In the same way we can "pre-empt" osteoporosis by jumping in front of a bus.
The anti-austerity backlash even made it to the Cannes Film Festival, where bronze-medal winner Ken Loach used his speech to fuel the course-correction. "The characters in the film have no work, and the world tells them they have no worth," he said. "We are reminded of the situation in Europe where people are told they have to stay out of work, and stay of no value. So we are in solidarity with those against austerity -- another world is possible."
So how did this change come about? How does conventional wisdom change? While there are no hard and fast rules, two factors are most often responsible: public pressure and leadership. The change, when it comes to the thinking on austerity, has come from a combination of both: one pushing up from below, the other pressing down from above. Alexis Tsipras, who might be the next prime minister of Greece, has definitely been pressing down from above. "Our goal," he said of the architects of the EU austerity agreement, "isn't to blackmail or to terrorize, our goal is to shake them." And because conventional wisdom get so ingrained, that's often what's required -- to shake the system into a new way of thinking.
Of course, the most powerful weapon against wrong-headed conventional wisdom is the truth. After revisions to April's economic numbers in Britain showed a decline, the headline in the Financial Times was "Data deal blow to austerity plans." Data -- in other words, facts -- which are steadily showing that the idea of cutting our way to economic growth is a destructive fantasy.
Another factor in the austerity turnaround is the new media environment, in which there are fewer conventional-wisdom-bound gatekeepers. Social media allow the truth to be amplified. They connect and fortify the truth-tellers and provide them with an arsenal of tools with which they can slowly but relentlessly chip, chip, chip away at the wall of conventional wisdom. The Occupy movement, which has been fueled by social media, has also forced a wider debate on the issue into the national -- actually, international -- conversation.
None of this means that we should break out the Keynesian champagne any time soon. But it's clear the forces of austerity are in retreat. And that's a very good thing.
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