A new opera based on, of all things, an argument between two different economic philosophies, will premiere this spring. Meanwhile, the argument that inspired the musical work continues to simmer: Does economic austerity work? As Michael Maloney might say of a similar arguments over the efficacy of free markets: “We’ve never tried it.”
Last year financial columnist and sometime comedian Paul Krugman, evidently miffed at the good press the tiny Balkan nation of Estonia was getting for its apparent economic turnaround, posted a blog article denying that Estonia’s austerity program was a success. Estonian President Toomas Hendrik Ilves responded in a huff, via Twitter, to defend his nation’s honor, with a frankness of language rarely exhibited by a chief executive. The global media, of course, delighted in the conflict, and for a day or three the snit dominated international headlines.
It was one of those purely verbal altercations that amount to a hill of beans and typically blow over as quickly as they erupt, the public’s attention soon lured off to other diversions. But this particular online back-and-forth piqued the imagination of another sort of communicator, the composer Eugene Birman.
In the January 21 All Things Considered segment featured here, NPR host Peter Siegel interviews Birman about his new opera, Nostra Culpa – Our Fault.
Based on the vitriolic debate that erupted this past summer between Krugman, who writes a Keynesian-flavored New York Times column, and Ilves, the opera follows the story of two opposing economic viewpoints on financial recovery.
Like all operas, Nostra Culpa is filled with tension, animosity and contradicting opinions. Unlike most operas, Nostra Culpa follows the economic travails of a modern economy, an economy that Estonian officials and the International press has hailed as a great success and evidence that austerity works. In his own inimitable manner Krugman takes exception to the characterization of Estonia as a success story. In his June 6, 2012, blog post, Estonian Rhapsody, Krugman said this:
Ilves’ response was quick and acerbic, and delivered via Twitter. Makes one wonder if this will be the last social-media enabled opera, doesn’t it? In what many viewed as his way of defending his country’s honor, Ilves’ replied with this tweet:
In this last salvo Ilves’ is referencing his own Columbia education and Krugman’s Princeton schooling. In these backgrounds and opposing viewpoints was the sowing of the seeds that will become Birman’s opera, scheduled to premier April 7 by the Tallinn Chamber Orchestra at the Estonian Music Days festival.
Although the opera makes no attempt to answer the question that drives the tension in the opera, Anders Åslund, senior fellow at the Peterson Institute for International Economics, Washington, D.C., is willing to step into the fray. His recent analysis, complete with Krugman-style charts, makes it clear that not only is Estonia a clear case for the success of an austerity program but also that the entire Balkan peninsula has been similarly successful, for equally similar reasons. Åslund sheds light on Krugman’s perspective:
Whether Åslund’s claim that it is personal with Krugman is correct or not, he makes a good case for how the austerity programs implemented by Estonia, Latvia and Lithuania have successfully helped the Balkan states out of the economic doldrums the major economies of the world continue to endure. The three Balkan nations have not devalued their currencies, as Krugman claimed was necessary, and continue to sustain a recovery in which “The fixed exchange rates did not impede adjustment but on the contrary facilitated radical adjustment and Estonia's successful adoption of the euro in January 2011.”
The unique story of the making of an opera from the clash of economic schools of thought has unfolded in an environment in which mainstream media continues to broadcast the message that European “austerity” programs have been a failure. “Europe’s Failed ‘Austerity,’” National Review trumpeted last May. “How Austerity Plans Failed the European Union,” Inter Press Service wrote in November. “Austerity Has Failed in Europe, But What’s Next?” asked Rajan Menon in Huffington Post in September. As far as MSM is concerned, “austerity” has earned itself a great big F, a message that helps support political forces that would opt for a course other than austerity in the United States. Well, folks, here’s what Michael Maloney would say about that premise: “Don’t blame ‘austerity.’ We’ve never had ‘austerity.’” The proof is that debt is rising everywhere in the EU, almost every single country is spending more, not less. Here is just one example:
Mike mounts a similar defense against those who claim capitalism and free markets have failed, using of all things the financial collapse as evidence.
The same can be said of Europe’s so-called “austerity” programs. “Austerity” to the European Union means spending more, and at the same time raising tax rates on their citizens, while devoting taxpayer funds to preventing the collapse—in other words, subsidizing—their insolvent banks—the same banks who made really, really bad business decisions. True austerity would be to rein in government spending, to stop pulling wealth from the private sector; hold tax rates steady or, much better, reduce them; and let the mega-banks and bondholders who bet big on bad paper fail—as bad businesses and unwise investors should fail. Under that kind of austerity plan, a painful correction would ensue, but quickly the market would begin to work its healing magic, rewarding smart investors and innovative, well-run banks. Under true austerity, the end result would be the appearance of those mythical green shoots, healthy economic growth, and a citizenry empowered to direct their wealth based on true market needs rather on government needs.
So don’t blame Europe’s continuing economic floundering on failed “austerity.” European-style austerity as currently practiced is aimed at one thing alone—keeping the beleaguered fiat currency and banking systems going as long as possible, hanging on to the status quo while those who have profited from it squeeze every last nickel before, finally, the fat lady sings.