Austerity and Adjustment from the Great Recession to the Pandemic—and Beyond

Abstract

Abstract In 2010–2015 almost all democratic countries pursued austerity. Then countries exited austerity, although following different paths. The onset of the pandemic brought about a hike in public spending to cope with its social and economic consequences that does, however, plant the seeds of future economic adjustments. In this chapter we study the political strategies and options of governments during austerity periods using a new dataset for 30 democratic nations, from 2010 to 2019. We ask where and when democratic politics mattered for austerity policies from the Great Recession to the Covid-19 pandemic. Our main finding is that austerity policies were mostly driven by economic forces. Focusing on the process of exiting austerity, we show that such policies cannot be sufficiently explained by changed economic fundamentals. Rather, the longer governments pursue austerity the more likely they are to exit it, even if the economic fundamentals do not support it.