Austerity, poverty and inequality: a political economy perspective

Konzelmann, Sue (2023) Austerity, poverty and inequality: a political economy perspective. In: Moraes, C. and McEachern, M.G. and O'Loughlin, D. (eds.) Researching Poverty and Austerity: Theoretical Approaches, Methodologies and Policy-Relevant Research. London, UK: Routledge. ISBN 9781032127774. (In Press)

Abstract

Austerity, as an economic policy for reducing government deficits and public debt through cuts in government spending, tax increases or a combination of the two, made a degree of sense prior the early 20th century. There were few public services, no income tax, and very little in the way of unemployment and health support. As a result, national finances could be more convincingly compared to those of a household or business; and the poor remained largely unaffected. However, during the industrial revolution, the exponential growth of the urban poor, themselves in dire need of public support, ultimately led to the emergence and growth of the welfare state. This completely changed the dynamics of the political economy – and with it, austerity. Since modern welfare states were largely evolved to support the poor and most vulnerable in society, the costs of austerity are disproportionately borne by these groups. It can therefore be expected to deepen both poverty and inequality, in a self-reinforcing, politically driven cycle. This chapter explores these dynamics, lays bare the political drivers and socio-economic effects of austerity, and demonstrates that events of the past century and a quarter have overtaken it as an economic policy for reducing government deficits and debt.

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