Does the bourgeoisie have a choice?



Commentary on the book “Austerity: The Story of a Dangerous Idea”, by Mark Blyth

This note has a thankless task, whatever it may be, to criticize a highly successful book in the field of the left, which supports a relevant thesis in the sphere of critical thinking: Austerity: the story of a dangerous idea, by Mark Blyth. In addition, it is endorsed by economists such as Luiz GM Beluzzo, Laura Carvalho, Pedro Rossi, among others, consecrated combatants in the fight for civilization in the current stage of regressive development of capitalism. However, it is necessary – it is believed here – to deepen the criticism contained in Blyth's own book.

In the Preface of the Brazilian edition, Pedro Rossi summarizes a central argument of the advocates of austerity that – he mentions – “dialogues with common sense”: the government, like people and families, has to pay its bills. Now, he warns, “the appeal to common sense is a falsification of reality: there is no bill to be paid; public debt does not need to be reduced. Papers are paid, others will be issued. (…) public debt is not paid, it rolls over”.

In order to comment on this statement, it is necessary to separate analytically the individual debts and the debt as a whole. It is evident, as Rossi himself says, that the State's private debts, expressed in securities held by agents in the private sector, are paid in the same way as the private debts of individuals and families – and even with stricter respect for deadlines. and more fidelity to the letter of the contracts.

Now, to say that the debt doesn't have to be paid in full, that it can be rolled over, is saying something true, but it's not saying much either. For, the debt as a whole is financial capital that exists precisely to extract income from the “rest” of society, to puncture – now being more precise – part of the surplus value generated within the ambit of industrial capital. Behold, it can indeed be rolled over, but not always and completely – and this is an undeniable consequence of capitalist sociability.

Public debt is a form of fictitious capital, that is, capital that is not value in itself and that does not command the production of value, an exclusive function of industrial capital. However, as it is still capital in the society founded on the capital relation, it implies a legitimate right to appropriate part of the socially produced value. Austerity, ultimately, is the name of the economic policy that forces the collection of this “tribute” in the current phase of neoliberal and financialized capitalism. The right to capture value, as is well known, is intrinsic to the current mode of production and, therefore, tends to be justified based on moral precepts. Austerity, precisely because it guarantees a “sacred” right to participate in the result of exploitation, is publicly presented as an imperative rule of morality. It thus becomes, supposedly, a duty of the upright ruler who does not waste resources.

Now, Mark Blyth's book is very helpful in showing how this iniquitous right is never frankly defended; on the contrary, it is protected in a disguised way through arguments that present themselves as scientific. Thus, it is usually shielded by “serious and competent” economists who belong to the field of economic theory mainstream.

For example, Blyth accuses the following specious argument by John Cochrane of the University of Chicago as dishonest: “Each dollar of increased government spending must correspond to one less dollar of private investment. Jobs created by investment in incentives are offset by jobs lost due to declining private investment. We can build roads instead of factories, but the tax break cannot help us build more of both.”

Now, any graduate student in Economics knows that this technocrat reasons assuming that the economic system is at full employment, a situation that in fact never occurs in the capitalist economy, but that the economists of the mainstream like to assume as possible. And that, far from this imaginary equilibrium, when there is idle capacity, public spending not only increases effective demand, directly and indirectly, but also, by doing so, can raise the rate of profit and, thus, capitalist investment. That is, in short, it is possible to get “more of both things”.

Of course, Cochrane does not do science, but only uses his professorship at the University of Chicago to cynically defend the interests of financialized capital. To this end, he speaks in the name of a supposed “business confidence” that would be established whenever the government remains austere. Austerity as a policy of cutting the budget to promote growth – Blyth demonstrates with many arguments – is false. As he says, it is counterproductive: “it is exactly what you should not do because it produces precisely the results you want to avoid”.

Note, however, that growth, as a possible and desirable feature of capitalism, is a presupposition of this criticism. But this premise is not justified because growth is not the primary goal of capitalism. This mode of production is guided by the pursuit of valuing value, or rather, by its incessant valuation, always greater, whenever possible – not, however, in a well-coordinated way, that is, ex-ante. Capital movement, as we know, is not exempt from contradictions and they work to make it conflictual. Such contradictions, however, are usually repressed in terms of knowledge by an economic discourse that is guided by the search for macroeconomic coherence.

Growth presents itself as a requirement for the expansion of industrial capital because this expansion is based on increasing the productivity of labor, reducing the amount of labor employed for a given level of production and, at the same time, increasing production capacity. But the rise in production is by no means a necessary consequence of the expansion of finance capital.

This seeks to increase the extraction of interest (roughly speaking) even if this eventually hinders the expansion of industrial capital. It is necessary here not to confuse financial capital as a whole with that part of it that finances companies in the productive sector. If industrial capital is a vampire that still needs to let its victims live, financial capital does not even have this limitation.

According to Blyth, austerity as a theoretical proposal goes against what Keynes called the “savings paradox”, that is, it is in conflict with the proposition according to which “if everyone saves at the same time, there is no consumption that stimulates investment”. Now, he says, if everyone is austere at the same time, as a result of a lack of investment, there will be not an increase, but a decrease in total savings. Now, such a “fallacy of composition” does not consist of a mere theoretical problem, as it reflects a situation that can occur in really existing capitalism. And this possibility, when it happens, stems from a structural breakdown of capitalism itself. For, its possible coherence only occurs through a constant inconsistency. It is well known that this system evolves in a turbulent way, through recurrent crises and large crashes.

For Blyth, however, the expansion of the social product is not only possible, but also a moral duty. Thus, in addition to demolishing its scientific pretensions, it wants to oppose another morality to the supposedly ethical character of the austerity policy. The book was written under the assumption that not only growth must happen, but that it must come with an increase in well-being for broad sections of the population: “the objective of this book” – according to him – “is to (…) help to ensure that the future does not belong only to the already privileged few”. Now, if this type of rise occurred in the short Keynesian period, after World War II and until almost the end of the 1970s, it does not mean that the production of well-being is an intrinsic and always possible virtuality of capitalism.

In any case, Blyth presents the social consequences of the austerity policy well in his book. In other words, it reduces the rate of increase in the production of goods and amplifies the poor distribution of income. Here is how Rossi summarizes the book's argument in his preface: “By generating recession and unemployment, austerity reduces wage pressures and increases profit margins; (…) tends to increase income inequality. Spending cuts and the reduction of social obligations make room for future tax cuts by companies and economic elites. And, finally, the reduction in the quantity and quality of public services increases the population's demand for private services in sectors such as education and health, which expands the spaces for profit accumulation by big capital”.

Having said that, the time has now come to justify the provocative title of this short article: does the bourgeoisie have a choice? And here it is necessary to analytically distinguish between people socially posited as capitalists and the capitalist class itself. It is evident that the former have the option of opposing austerity – and many do so even to their own detriment. However, as members of the class, as personifications and supporters of capital, they are obliged to defend – even by appealing to hypocrisy and the utmost cynicism – their share of the capitalist booty. And, as you know, they don't stop doing it.

However, by stating that austerity is imposed on the bourgeoisie in financialized capitalism, one is not falling into economism. The economic policy that is established at each moment is conditioned by the encounter and conflict of different political forces. It depends on social struggles, on the ways in which classes engage in political struggle, classes that are guided by current cultures, traditions and historical circumstances. In any case, the moral condemnation of austerity does not seem to go very far as a critique of the course of contemporary capitalism. It is its functionality that needs to be eliminated.

Austerity is not there for nothing. It must be seen that it consists of a central feature of the economic policy adopted in the second phase of neoliberalism, which began in 1997 and which still does not seem to have ended, even if the globalized system of capital went through the great crisis of 2007-08 and reached the crisis of 2020. If in the first phase, which runs from 1980 to 1997, the rate of profit rose in the vast majority of capitalist countries, in the second, it tended to fall again.

With this inversion, there was a reinforcement in the financialization process.[1] If in the first phase, the accumulation of fictitious capital provided an outlet for surplus industrial capital, in the second phase, it began to function as its last and necessary refuge. The level of interest rates, kept high in the first period, had to fall in the second. Austerity, then, emerged as a way to guarantee the continuity of income appropriation by financial capital in a phase of historical exasperation. Both in the first and in the second neoliberal period, there was a persistent erosion of working class power, a progressive destruction of the social protection of the workforce, that is, a constant weakening of the “welfare” claimed by Blyth.

If capitalist development in general always oscillates between generating more civilization and/or generating more barbarism, austerity undoubtedly privileges the second possibility. It is a mode of governance inherent to the hegemony of financial capital. But this protagonism does not result from a “seizure of power” by the financiers to the detriment of the industrialists – and much less from mere wrong choices of economic policy. In fact, it arises as a consequence of the process of overaccumulation of capital, of a structural imbalance in which both these forms of capital are intimately intertwined. In any case, this excess is and has always been inherent in capital itself. It has happened other times in history. It manifested itself once again in the 1970s, now as a wave of great proportions – and, from then on, it began to shape capitalist development in the last five decades.

During this period, his supremacy grew stronger and more dangerous. Here, it took on unprecedented proportions because the classic mechanism for overcoming overaccumulation crises, the massive destruction of industrial and financial capital, has been contained by saving intervention by the State. And this occurs because a major collapse of the system is feared, which could jeopardize the supremacy of the West or even the very existence of capitalism. As a counterpart to the blockage of the reversal of accumulation – this, when it occurs, annihilates part of the previously accumulated capital, creating, at the same time, the conditions for recovery – capitalism has entered a process of stagnation that becomes insurmountable and which tends, therefore, to last indefinitely.

Under these conditions, there is no justification for holding out meaningful hope that it will be possible to bring capitalism back to the civilizing path. This hope must therefore focus on the possibility of transforming it. Either through strong financial repression, still within the framework of capitalism, or through changing the mode of production itself – a necessity in the face of the ongoing ecological collapse.

This note could not end without a methodological consideration. The inadequacy of Blyth's critique stems from the fact that it is conjunctural, content to examine the causes and effects of economic policies, of macroeconomic interactions between social classes, which take place on the surface of society. What is required, however, is not the simple abandonment of this kind of analytic concern.

What is needed – it is believed here – is to base this conjunctural critique on a structural critique that examines the evolution of the mode of production in historical time. Adding the latter to the former, one can see that it is not enough to abandon a “dangerous idea”, that it is not enough to change economic policy, but a change in the mode of production itself, in the relations of production and in the metabolism is necessary. of man with nature, a change that is capable of guaranteeing the survival of humanity. Even if this change is not yet clearly outlined on the horizon, it is known that it has to be based on substantive democracy, and therefore cannot reproduce the socialisms that really did not exist.

* Eleutério FS Prado is a full and senior professor at the Department of Economics at USP. Author, among other books, of Complexity and praxis (Pleiad).


Mark Blyth. Austerity: the story of a dangerous idea. São Paulo, Literary Autonomy, 2020 (


[1] This is a summary of the thesis Tristan Auvray, Cédric Durand, Joel Rabinovich and Cecilia Rikap in Financialization's conservation and transformation: from Mark I to Mark II, text easily found on the internet.

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