Austerity has failed to do what it was supposed to do; tame debt and end the crisis in the economy. It has succeeded in doing what it was expected to do; move more wealth to a tiny minority of the already hyper-rich.
Keynes was correct in the context of a closed economy. Open and small economies tend to export much of the stimulus.
Austerity is implemented in ways that add to the problem. In Ireland there are efforts to increase productivity in the public service. Late and desperately needed it is the wrong policy for the time. A better approach would be to cut hours and increase numbers. The previous French suggestion of shortening the working week is ultimately the best option for cutting unemployment.
A core systemic cause of the crisis is widening inequality. The gulf between the rich micro-minority and the rest can only be addressed by huge redistribution. There has already been redistribution over the past thirty years but in the wrong direction. Without redistribution the question will degenerate to one of the continued existence of the micro-minority. The question will be asked; can the world afford to lavish so much wealth on so few? Austerity will press the great majority into answering no. The "New Deal" averted this in the US.
A recession is the only place for expansionary policy. A global and co-ordinated action is called for. There is need for recycling of the resources held in the oil monarchies, financial markets, corporations, derivative and bond markets, sovereign wealth, and other concentrations of wealth. Work, wealth, leisure, responsibility and power must be better distributed.
When the boom returns to the whole population rather than to a minority it will then be time for a contraction in the policy. At the moment expansion is bestowed on the rich and stoked by low taxation on extreme wealth.
As for Ferguson, Reinhart and Rogoff? Perhaps Galbraith was prescient; "If all else fails, immortality can always be assured by spectacular error".
Professor Eichengreen is quite clear when he says:
"It was possible because economists are not obliged to make their data and programs publicly available when publishing scientific research."
It is why economics is not a Science. By and large the area has been captured by ideology. Many practitioners are -unknowingly- in the grip of ideologues of whom they are unaware. Peer review in economics it more informative of the uniformity of the peers than anything it says about the material reviewed.
Milton Friedman’s views are well known. Even better known is the evidence of history. Free markets are inherently unstable. They are of benefit only to the powerful and do great social, environmental and economic harm to the rest of the world.
Milton Friedman’s views have many supporters. The great dissent comes from the evidence. Repeated experiments with this worshiped theory have all ended with the same result; collapse, chaos and rescue by a society that must squander scarce resources to repair what should not have been destroyed. This is repeated every few decades.
We have passed 400ppm Carbon Dioxide in the atmosphere. Our world is being changed beyond what it can handle in the short term. We and our way of life may be the major casualty.
It is late to try to get a grip on this runaway system. We must begin by getting off carbon. We have the technologies at least in part. The research to be done to gain the remainder is the stimulus needed for global economic recovery.
We have a planet to save and our economic woes might vanish on the way.
A much more guarded Soros than we are used to. He is still the most important voice from the sector that has reaped most from the chaos and destruction of the past years. It is important that he clarifies his view of the roots of the crisis. It is inequality.