Austerity from the Left.

Social
Democratic Parties in the Shadow of
the Great Recession Björn Bremer
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Austerity from the Left
Austerity from the Left
Social Democratic Parties in the Shadow
of the Great Recession

Björn Bremer
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To my parents, Iren and Klaus
Acknowledgements

Writing this book was a journey that I could not have completed on my own.
The book originally began as a PhD thesis and my utmost gratitude goes to
my supervisor Hanspeter Kriesi. Hanspeter gave me the freedom to choose a
topic that I care deeply about and encouraged me to explore it in many dif-
ferent ways. The final product benefited tremendously from his feedback and
the many discussions about the economic crisis and social democracy that we
have had over the past few years. Most importantly, Hanspeter’s remarkable
desire to understand the social world around us was a constant motivation
throughout this endeavour. He has become my academic role model, and I
will remain forever grateful that I had the chance to work with and learn from
him.
Innumerable thanks also go to the other members of my thesis
committee—Dorothee Bohle, Herbert Kitschelt, and Jonas Pontusson—
whose academic work was an inspiration for this book. Their exceptional
feedback on the original thesis allowed me to rethink some of the basic
assumptions behind my research, and this book would not exist without their
encouragement to keep improving. Of course, none of them bear any respon-
sibility for errors in the book, as I inevitably failed to address all of their
comments.
I am indebted to Reto Bürgisser and Sean McDaniel, who guided my
research as reliable and inspiring collaborators. Their contributions to indi-
vidual parts of this book were critical, and I am very grateful that they
generously allowed me to re-use this material from our collaborations. This
book would not be the same without them, and I look forward to continuing
to work with them in the future.
The thesis upon which this book is based was originally written at the Euro-
pean University Institute (EUI), where I was part of a research project study-
ing the political consequences of the Great Recession, the POLCON project. I
gratefully acknowledge financial support from the European Research Coun-
cil (Project ID 338875) and the German Academic Exchange Service that
funded my position as a researcher in this project. The POLCON project,
and the EUI more generally, was the best possible environment to write my
PhD thesis and I am indebted to many Florentine colleagues for all their feed-
back and help: Argyrios Altiparmakis, Abel Bojar, Endre Borbáth, Pepper
 Acknowledgements vii

Culpepper, Koen Damhuis, Philipp Genschell, Theresa Gessler, Lukas Haf-

fert, Anton Hemerijck, Sophia Hunger, Swen Hutter, Ellen Immergut, Jas-
mine Lorenzini, Giorgio Malet, Julia Schulte-Cloos, Daniel Schulz, Guillem
Vidal, and Chendi Wang.
The WZB Social Science Centre Berlin and the European Institute at the
LSE hosted me during my fieldwork in Berlin and London, while the Hertie
School of Governance offered me a refuge to finish my thesis. My thanks go
to each institution for their extraordinary hospitality and Wolfgang Merkel,
Waltraud Schelkle, Hanna Schwander, and Markus Jachtenfuchs for their
kind invitations to spend time in these outstanding research environments.
I could not have imagined a better place than the Max Planck Institute for
the Study of Societies (MPIfG) to turn the thesis into a book. My colleagues’
unrivalled desire to explain the political economy of contemporary capital-
ism was the best incentive to keep working on this project. They created an
exceptionally stimulating research environment, even when the COVID-19
pandemic forced us to work from home. I am particularly grateful to Lucio
Baccaro for giving me the time and space to turn the thesis into a book
manuscript and to many other colleagues for reading parts of the revised
manuscript: Fabio Bulfone, Donato di Carlo, Erik Neimanns, Martin Höp-
ner, Sidney Rothstein, Mischa Stratenwerth, Arianna Tassinari, and Leon
Wansleben.
Beyond the institutions where I had the privilege to work, numerous other
people contributed to this book. A large number of politicians and poli-
cymakers generously agreed to speak with me, providing unique insights
into the inner workings of the British Labour Party and the German SPD.
Over the years, I was also fortunate to receive insightful feedback on parts
of the manuscript from many stellar academics, including Tarik Abou-
Chadi, Despina Alexiadou, Klaus Armingeon, Lucy Barnes, Bob Hancké,
Charlotte Cavaille, Marius Busemeyer, Silja Häusermann, Tim Hicks, Josef
Hien, Evelyne Hübscher, Erik Jones, Dan Kelemen, Achim Kemmerling,
Thomas Kurer, Matthias Matthijs, Line Rennwald, Armin Schäfer, Tobias
Schulze-Cleven, and Tim Vlandas.
I also thank Dominic Byatt and three anonymous reviewers from Oxford
University Press who provided extremely detailed feedback on my first draft.
Frances Tye and Sharon Adams helped to make the manuscript readable,
while Maureen Lechleitner provided invaluable administrative support dur-
ing my time in Florence. In the final stages of the project, Robin Hetzel
provided the best possible research assistance.
viii Acknowledgements

Despite all of this outstanding academic support, writing first a PhD thesis
and then a book can be a lonely endeavour, especially during a global pan-
demic. Countless friends in Florence, Berlin, Hamburg, the Rhineland, and
around the entire world provided much-needed distraction, and I am grateful
to all of them. Special thanks go to Andreas Winkler, Jens van Straalen, and
Lene Korseberg, who were brave enough to live with me in Florence. They
were wonderful company, ensuring that I truly felt at home in Italy.
Finally, the greatest thanks go to my family. My partner My had to endure
endless ramblings about my work and witness periods of doubts and stress.
Nonetheless, My still put up with all my quirks and bad habits, lifted my spirits
when it was most needed, and showed me that there are many things that are
more important than writing this book. Her love has been my greatest source
of strength in the past decade.
The support from the rest of my family goes back even further. My par-
ents, Iren and Klaus, and my siblings, Torben and Svea, have been my rock
throughout my entire life. Their unwavering faith that my work matters
was the best possible encouragement to complete it. Especially my parents’
unconditional love and support helped me in good and in bad times, and I
could not have written this book without them. It is dedicated to them.
Contents

List of Figures xiii

List of Tables xv
1. Introduction 1
Introduction 1
The puzzle and research question 3
Existing explanations for social democratic austerity and their
shortcomings 6
Outline of the argument 9
The electoral pressures for social democratic austerity 10
The ideational pressures for social democratic austerity 12
Paradigm change, social democrats, and the Great Recession 14
Research design and methods 18
Outline of the book 21
Extended literature review and theoretical framework 21
The response of social democratic parties to the Great
Recession 22
The popular politics of austerity: studying the demand side of
politics 23
The elite politics of austerity: studying the supply side
of politics 24
The electoral consequences of social democratic austerity 25

2. Social Democratic Austerity: A Theoretical Framework 26

Introduction 26
Social democratic parties and macroeconomic policies before
and during the Great Recession 27
Existing explanations for social democratic austerity 34
A new explanation for social democratic austerity 41
The electoral foundations of social democratic austerity 41
The ideational foundations of social democratic austerity 47
Social democratic parties, paradigm change, and the Great Recession 53
Conclusion 58

3. The Programmatic Response of Social Democratic

Parties to the Great Recession 60
Introduction 60
Party positions, issue salience, and the economy 61
x Contents

The response of social democratic parties to the Great

Recession: some expectations 63
Data and methods 66
Social democratic parties and the crisis: changes in issue emphasis 68
Social democratic parties and the crisis: changes in issue positions 72
Conclusion 78

4. Attitudes towards Austerity: Analysing the Public’s Debt

Aversion during the Eurozone Crisis 80
Introduction 80
Public preferences towards fiscal consolidation 81
Differences in debt aversion across individuals and countries 83
Individual-level factors 84
Country-level factors 86
Data and methods 88
Empirical results 89
Differences in debt aversion across time and space 89
Individual-level correlates 92
Individual- and country-level correlates 96
Conclusion 99

5. Public Opinion Regarding Fiscal Consolidation in the

Face of Trade-offs: Evidence from survey experiments 102
Introduction 102
Public opinion on fiscal policies: do citizens have inconsistent preferences? 104
Taking trade-offs seriously: from policy positions towards priorities 107
Research design 110
Part 1: experiment with split-sample questions 111
Part 2: conjoint survey experiment 112
Measuring attitudes towards fiscal consolidation with trade-offs 115
Attitudes towards two-dimensional fiscal policy trade-offs 115
Attitudes towards multidimensional fiscal policy trade-offs 120
Conclusion 126

6. The Fiscal Policies of the British Labour Party in Times

of Crisis: Where Have All the Keynesians Gone? 128
Introduction 128
Labour’s economic policies before the Great Recession 130
The reign of Keynesianism: 1945–79 130
In the shadow of monetarism: 1979–97 132
New Labour’s symbiosis: 1997–2008 133
Economic crisis and the response of the Labour Party 136
Explaining austerity from the left in the UK 140
The crisis years—Labour’s response to the financial crisis,
2008–10 141
The austere years—Labour in opposition, 2010–15 148
 Contents xi

Discussion: electoral and ideational pressures for austerity in the UK 156

The politics of austerity 156
The economics of austerity 160
Labour trapped and divided 163
Conclusion 165
Appendix: list of all British interviews 168

7. The Fiscal Policies of the German SPD in Times of Crisis:

The Swabian Housewife of the Left? 170
Introduction 170
The SPD’s fiscal policies before the Great Recession 172
From Marxism to Keynesianism: 1945–74 172
From Schmidt to Schröder: 1974–99 173
Germany’s Third Way: 1999–2008 174
Economic crisis and the response of the SPD 176
Explaining austerity from the left in Germany 180
The crisis years—the SPD’s response to the financial crisis,
2008–10 181
The austere years—torn between opposition and government,
2009–15 187
Discussion: electoral and ideational pressures for austerity in Germany 197
The politics of austerity 197
The economics of austerity 201
The SPD trapped and divided 204
Conclusion 206
Appendix: list of all German interviews 208

8. The Electoral Effects of Social Democratic Austerity 210

Introduction 210
The contested electoral payoffs of centrist strategies 211
The effect of austerity packages on support for social
democratic parties across Europe 214
Data and methods 214
Results 217
Support for austerity and propensity to vote for the Labour
Party on the individual level in the UK 219
Data and methods 219
Results 222
Conclusion 226

9. Conclusion 228
Introduction 228
The argument in summary 229
The electoral foundations of social democratic austerity 229
The ideational foundations of social democratic
austerity 231
xii Contents

Social democracy trapped and divided 232

Social democratic austerity and its political consequences 235
Social democratic austerity and its economic consequences 238
Looking ahead: social democracy after the COVID-19 pandemic 241

Bibliography 248
Supplementary material for Chapters 3, 4, 5, and 8 is available on a
companion site at www.oup.co.uk/companion/Austerity.
Index 271
List of Figures

1.1 Average vote share of left-wing parties in Western Europe, 1945–2020 6

3.1 Issue salience of all economic issues by party family, country, and period 69
3.2 Average marginal effect of the crisis on the salience of economic issues 70
3.3 Salience of different economic issues for social democratic parties by country 71
3.4 Average party positions on economic issues by party family and country 73
3.5 Average marginal effect of the crisis on economic positions 74
3.6 Average positions of social democratic parties on different economic issues
by country 75
3.7 Average positions of social democratic parties on different economic issues
by election type 77
4.1 Share of respondents by debt aversion 90
4.2 Share of respondents by debt aversion in different countries 91
4.3 Predicted probabilities of debt aversion by financial situation 93
4.4 Predicted probabilities of debt aversion by home ownership 94
4.5 Predicted probabilities of debt aversion by left–right ideology 95
4.6 Interaction effect of the budget balance and financial situation on the
predicted probabilities of debt aversion 97
4.7 Interaction effect of economic growth and the subjective evaluation of the
economy on the predicted probabilities of debt aversion 98
5.1 Distribution of support for higher government spending, lower taxes, and
lower government debt 106
5.2 Distribution of support for fiscal consolidation by treatment 115
5.3 Average support for fiscal consolidation by treatment 116
5.4 Support for fiscal consolidation by trade-off and income/partisanship 117
5.5 Support for fiscal consolidation by trade-off and country 118
5.6 AMCEs from conjoint survey experiment 120
5.7 Distribution of the ratings of all fiscal packages by the change in
government debt 122
5.8 Estimated marginal means from conjoint survey experiment by income
group and partisanship 123
5.9 Estimated marginal means from conjoint survey experiment by country 125
6.1 UK real GDP growth and unemployment rate, 1970–2015 137
xiv List of Figures

6.2 Left–right position of Labour and the Conservatives over time 138
6.3 Left–right position of the Labour Party for different economic categories
over time 139
6.4 UK government spending and revenues, 1970–2015 143
6.5 UK polls, 2005–15 146
6.6 Attitudes towards government debt in the UK, 2010–15 151
6.7 UK interest rates on government bonds, 1960–2015 160
7.1 German real GDP growth and unemployment rate, 1991–2015 177
7.2 Left–right position of the SPD and CDU/CSU over time 178
7.3 Left–right position of the SPD on different economic categories over time 179
7.4 German government spending and revenues, 1991–2015 183
7.5 Attitudes towards government debt in Germany, 2010–15 193
7.6 German polls, 2005–15 198
7.7 Interest rates on German government bonds, 1991–2015 204
8.1 Support for social democratic parties in twelve Western European
countries, 2005–17 215
8.2 Average marginal effect of austerity on support for social democratic
parties by incumbency 218
8.3 Distribution of attitudes towards spending cuts and the budget deficit by
the propensity to vote for the Labour Party 221
8.4 Estimated effect of attitudes towards the budget deficit on the propensity
to vote for the Labour Party 223
8.5 Estimated effect of attitudes towards spending cuts on the propensity to
vote for the Labour Party 225
List of Tables

1.1 Research design 18

1.2 Logic of case selection 21
2.1 Paradigm change and the interplay of ideas and electoral constraints 53
3.1 List of economic issue categories (adopted from Kriesi et al., 2008) 65
4.1 Debt aversion by ideology 96
5.1 Design of the split experiment 111
5.2 Attributes and levels of the conjoint experiment 113
6.1 List of elections by time period 138
7.1 List of elections by time period 178
1
Introduction

Introduction

Before the COVID-19 pandemic ravaged the world, the Great Recession
ranked as the greatest economic crisis in Europe since the Great Depres-
sion.1 The crisis was triggered by the collapse of the American investment
bank Lehman Brothers in September 2008, which sent shock waves through
the international financial system and created a deep deflationary spiral. The
German Finance Minister, Peer Steinbrück, later summarized the feeling that
prevailed among the governing elite at that time, saying, ‘we were all looking
into the abyss’ (Der Spiegel, 2008).
In response to this situation, almost all governments in the advanced
economies responded resolutely: they developed far-reaching government
programmes in order to save tumbling financial institutions and to main-
tain output (Armingeon, 2012; Pontusson and Raess, 2012; Skidelsky, 2010).
Three decades after the Keynesian consensus had fallen apart in the economic
turmoil of the 1970s, policymakers used ‘emergency Keynesianism’ (Hall,
2013) to prevent a depression on the scale of the 1930s. The G20 (‘Group
of Twenty’) collectively vowed to ‘use fiscal measures to stimulate demand
to rapid effect’, and neoclassical economist Robert Lucas even complained
that ‘everyone [was] a Keynesian in a foxhole’ (Fox, 2008).2 However, only
a few months after the beginning of the financial crisis, the economic winds
changed once more, and austerity came back with a vengeance.
The end of the Keynesian era began with the bailout of Greece in May 2010,
which was made conditional on the country’s adherence to strict austerity
measures. Shortly afterwards, world leaders agreed on ‘growth-friendly fiscal
consolidation’ at the G20 meeting in June 2010. According to conventional
wisdom, the Greek crisis illustrated the perils of government debt. It under-
mined arguments for further fiscal stimulus and contributed to a premature

1 The Great Recession is used here as a term that refers to both the 2007–8 financial crisis and the
eurozone crisis; i.e. it conceptualizes both crises as one larger economic crisis.
2 Five years earlier, Robert Lucas (2003) had declared in his presidential address to the American Eco-
nomic Association that such stimulus programmes were no longer necessary because the ‘central problem
of depression-prevention [had] been solved’.

Austerity from the Left. Björn Bremer, Oxford University Press. © Björn Bremer (2023).
DOI: 10.1093/oso/9780192872210.003.0001
2 Introduction

rush to austerity, especially in Europe. As the ‘American’ financial crisis was

reimagined as a ‘European’ sovereign debt crisis, governments of all stripes
and colours implemented austerity by slashing government spending and/or
increasing taxes. This transformation of a financial crisis into a fiscal one
confused cause with effect (Tooze, 2018), but it was the perfect outcome for
financial market actors: it diverted attention from the failures of the financial
system, as ‘excessive’ levels of government debt came to be perceived as the
greatest danger to the international economic system.
Subsequently, the pressure was on monetary policy to support demand in
Europe. Fiscal austerity was combined with unconventional monetary poli-
cies, as central banks devised tools for an unprecedented level of monetary
expansion. This protected most economies in Europe from a depression on
the scale of the 1930s, but the economic and political consequences of the new
macroeconomic regime, which combined austerity with ultra-loose mone-
tary policies, were still dramatic. The eurozone remained in a perpetual state
of crisis for several years as Greece, Ireland, Portugal, Cyprus, and Spain had
to be bailed out by the International Monetary Fund (IMF) and the European
Union (EU) (Walter et al., 2020). Other countries, like Italy and France, also
continued to fight deflationary pressures. Output dropped substantially and
unemployment reached levels that had never been seen in post-war Europe.
For a long time, the European economy operated below its full capacity as the
Continent experienced a ‘lost decade’ (Chinn and Frieden, 2011) and a great
deal of economic hardship.
The crisis created a division between the prosperous North and the strug-
gling South, but popular discontent was widespread across both regions: the
debtor countries opposed the northern Spardiktat, while the creditors were
unwilling to pay for the perceived lavishness of the South. The economic cri-
sis and the austerity policies that were adopted in response to it, therefore,
also created a political crisis: it increased electoral volatility, contributed to
a decline of mainstream parties (Bojar et al., 2022; Bremer et al., 2020; Hüb-
scher et al., 2021), and unleashed populist forces across Europe (Eichengreen,
2018; Hopkin, 2020; Kriesi and Pappas, 2015). This dramatic decline in the
support for mainstream parties even threatened the stability of party systems
(Hutter and Kriesi, 2019) and undermined satisfaction with democracy in
Europe (Kriesi, 2018).
Despite the economic and political ramifications of austerity, Europe’s
political mainstream remained committed to it for a long time. In 2010,
austerity became the only game in town and the ‘austerity settlement’, i.e.
its dominance across the political spectrum, saw governments through-
out Europe, albeit in different contexts and to varying degrees, implement
 The puzzle and research question 3

austerity measures for nearly a decade. Austerity, however, shifted the burden
of the crisis onto the shoulders of the weakest citizens, and the most surpris-
ing element of this settlement is the way in which social democratic parties,
both in and out of power, have acquiesced to it.3
At first, the financial crisis presented social democratic parties with a
unique opportunity to renew their raison d’être. It highlighted the vulnerabil-
ities of unfettered capitalism and undermined the legitimacy of the existing
economic paradigm. Still, social democrats were unable to formulate a coher-
ent intellectual response and largely accepted the shift towards austerity that
began in 2009. In ‘debtor countries’, the centre-left bowed to external pressure
and accepted austerity as a necessary evil (e.g. Greece, Spain, and Ireland);
in ‘creditor countries’, social democratic parties helped to impose austerity
on debtor countries and pursued fiscal consolidation at home. For example,
in Germany, the Social Democratic Party (SPD) supported the introduc-
tion of a constitutional debt brake in 2009 and the balanced-budget policy
(Schwarze Null) after 2013. Similarly, the French government increased taxes
and reduced public spending after adopting the ‘Pact for Competitiveness’
under socialist President François Hollande. Outside the eurozone, before
the 2010 election, the British Labour Party promised cuts that would be
‘deeper and tougher’ than Margaret Thatcher’s (Elliott, 2010), and included a
‘budget responsibility lock’ on the first page of its manifesto in 2015. Accord-
ing to some analyses, social democratic parties became even more likely
to implement austerity and retrench the welfare state than the centre-right
(Armingeon et al., 2016; Raess, 2021).

The puzzle and research question

Social democratic parties’ accommodation of austerity is puzzling for several

reasons. First, historically, social democratic parties had built the welfare state
in most European countries (Esping-Andersen, 1985; Korpi, 1983; Stephens,
1979), with the aim of protecting the most vulnerable people in society
from unfettered market capitalism. The dominant modus operandi of these
parties in the post-war period, at least until the late 1970s, was based on Key-
nesian policies of demand management (Hall, 1989; Przeworski, 1985). By
minimizing unemployment (Hibbs, 1977), this strategy allowed the left to
limit the adverse effects of free markets on their citizens. Although social

3 Following Kitschelt (1994, p. 1), social democracy is employed as a generic concept that covers ‘a
cohort of parties that run under socialist, labour and, social democratic labels’. I will use the terms ‘social
democratic’, ‘centre-left’, and ‘moderate left’ interchangeably to refer to these parties.
4 Introduction

democratic parties moved towards the centre at the end of the twentieth
century and adopted more liberal economic policies as part of the ‘Third
Way’(Giddens, 1998), the ‘essential and enduring’ goal of social democracy
was still to minimize the ‘cost of capitalism’ for the working classes (Hirst,
1999, p. 87).⁴ Despite the numerous historical and geographical incarna-
tions of social democracy, its adherents always attempted to decrease social
inequality by creating the conditions for (full) employment and a strong wel-
fare state. However, during the Great Recession, austerity challenged both. It
contributed to the deflationary spiral in Europe and undermined the fiscal
basis of the welfare state that social democratic parties had vigorously fought
for in the twentieth century.
Second, the Great Recession presented a unique opportunity for social
democracy to push for paradigm change after thirty years of economic lib-
eralization. Voters had already punished some social democratic parties for
their Third Way policies before 2008, and the crisis would have been an oppor-
tune moment for the left to facilitate a countermovement in the spirit of Karl
Polanyi (2001). In the past, social democrats were able to do this: in response
to economic crises, they developed and implemented new economic ideas
(e.g. Berman, 1998; Blyth, 2002). The Great Recession provided a similar
opportunity for the centre-left to experiment with new policies and reform
the dominant economic order.⁵ Seeking new alliances with actors in poli-
tics, social movements, and academia, social democrats could have rallied the
left by opposing austerity. Their failure to do so contributed to the ‘strange
non-death’ (Crouch, 2011) or ‘resilience’ (Schmidt and Thatcher, 2013) of
neoliberalism.
Third, a Polanyian-style countermovement became even more likely over
time because austerity, arguably, did not work. From a Keynesian point of
view, austerity made little sense in the post-crisis context (Blyth, 2013; Blyth
and Matthijs, 2017; Sandbu, 2015) and there is growing evidence that it made
the crisis worse by contributing to a deflationary spiral (e.g. Blanchard and
Leigh, 2013; Heimberger, 2017). It contributed to a low-growth environment,
worsening ‘secular stagnation’ (Summers, 2018) tendencies in Europe, which
in turn aggravated the fiscal crisis there. It pushed the eurozone towards the

⁴ I use the term ‘Third Way’, coined by Anthony Giddens, to describe a general turn towards centrist
policies by social democratic parties at the end of the twentieth century, which is well documented (e.g.
Callaghan, 2000; Glyn, 2001; Lavelle, 2008; Pierson, 2001a).
⁵ There was a fleeting moment at the beginning of the crisis when it seemed that social democrats were
capable of doing this again. In countries like the United Kingdom (UK), Germany, and Spain, they played
a key role in the initial response to the financial crisis, while the election of Barack Obama as US President
in November 2008 invigorated progressive forces across the world with hope. They developed a range of
demands for new financial regulation and future-oriented investment programmes and were concerned
with protecting citizens from the effects of the financial crisis.
 The puzzle and research question 5

brink of disintegration (Mody, 2018; Walter et al., 2020) and overburdened

monetary policy as the main instrument with which to stabilize demand in
Europe. In an era of extremely low interest rates, which made borrowing
cheap, governments failed to seize the moment to update crumbling infras-
tructures, invest in human and physical capital to raise productivity, and
embark on the transition to a green economy. Rather, they opted to cut public
spending and hike taxes, which choked off the recovery. This created eco-
nomic grievances, which undermined Europe’s social contract. At least in
hindsight, the economic case for a fiscal policy other than austerity seems
obvious for the left in such a low-growth environment, in which borrowing
is cheap.
Finally, the Great Recession also contributed to significant electoral tur-
moil on the left (Roberts, 2017). While the economic crisis pushed voters
into the arms of radical right- and left-wing parties (Hopkin, 2020), social
democratic parties were unable to capitalize on the economic crisis. In some
European countries, like Greece, France, and the Netherlands, social demo-
cratic parties experienced electoral annihilation, but they also lost support
dramatically in many other countries, including those as diverse as Germany,
Italy, and Finland (Benedetto et al., 2020). Overall, the vote share of social
democratic parties in Western Europe dropped significantly in the wake of
the global financial crisis, as shown in Figure 1.1. This situation was remark-
ably similar to that of the 1930s, when many social democratic parties had
supported austerity during the Great Depression, also with disastrous conse-
quences.⁶ By prolonging the recession and allowing unemployment to reach
record levels, austerity had then divided the labour movement and pushed
voters into the arms of fascist parties. In light of this historical experience
and the electoral slump of the centre-left following the Great Recession, it is
particularly surprising that social democratic parties bought into the austerity
settlement again.
This book explains why social democratic parties accepted austerity and
explores the political consequences of this decision. For this purpose, I define
austerity as a macroeconomic policy that aims at fiscal consolidation (i.e.
the reduction of government debt) during hard economic times. In other
words, in using the term ‘austerity’ I am referring to fiscal consolidation
implemented when a given economy is operating below its potential. In
theory, such a programme can be achieved in different ways; for example,
it might be useful to distinguish between expenditure- and revenue-based
consolidations. In practice, however, austerity packages often include ‘some

⁶ For example, Labour Prime Minister Ramsay MacDonald formed a National Coalition government to
implement austerity in the UK (Skidelsky, 1970), while the German SPD rejected Keynesian-style policies
and supported the austerity measures implemented by the government under Heinrich Brüning (Berman,
1998).
6 Introduction

30
Vote share (in %)

Party family
20
Centre−left
Far left

10

0
50

60

70

80

90

00

10

20
45

55

65

75

85

95

05

15
19

19

19

19

19

20

20

20
19

19

19

19

19

19

20

20
Year

Figure 1.1 Average vote share of left-wing parties in Western Europe, 1945–2020
Note: The figure shows the average vote share that moderate and far-left parties received in
nineteen Western European countries. For any given year, the share was calculated by taking the
average of the vote share that a given party had received in the last election prior to that
particular year. The countries included are Austria, Belgium, Cyprus, Denmark, Finland, France,
Germany, Greece, Italy, Ireland, Luxembourg, Malta, Netherlands, Norway, Portugal, Sweden,
Spain, Switzerland, and the UK.

combination of measures to reduce public expenditure and to increase tax

revenues and other government receipts (such as the selling off of non-
financial assets)’ (Konzelmann, 2014, p. 703). Therefore, I do not make such
a distinction; rather, I focus on the broad outlines of the economic positions
that social democratic parties adopted in the wake of the Great Recession. Put
differently, the book focuses on the extent to which social democratic parties
supported fiscal consolidation during the economic crisis as a partisan strat-
egy. Rather than focusing on the implementation of austerity measures in
government, I seek to determine how and why centre-left parties approached
and adopted austerity politically (in government and opposition) and to eval-
uate the success of this strategy. This focus on the ‘supply’ of politics allows
me to disentangle the distinctive social democratic element of the austerity
settlement in the wake of the crisis.

Existing explanations for social democratic austerity

and their shortcomings

There are several existing approaches in the literature that could explain ‘aus-
terity from the left’ or ‘social democratic austerity’, i.e. the broad acceptance
of austerity by social democratic parties in post-crisis Europe. The most
 Existing explanations for social democratic austerity 7

prominent explanation focuses on the structural imperatives of the global

economy. Some scholars contend that the collapse of the Bretton Woods
system and end of the post-war economic boom that accompanied the
subsequent oil crises effectively killed off social democracy by ruling out
the use of traditional Keynesian policy tools (Bailey, 2009, p. 606; Lavelle,
2008; Panitch and Leys, 2001, p. 107; Rogers, 2013, pp. 8–9). Others point
to the rise of globalized capital markets in the 1980s—which were said
to empower footloose capital to punish inflationary economic policies—to
explain the ‘death’ of social democracy. Most prominently, Scharpf (1991,
p. 24) argued: ‘there is now no economically plausible Keynesian strategy
that would permit the full realisation of social democratic goals within the
national context without violating the functional imperatives of a capitalist
economy’.
Wolfgang Streeck (2014) has more recently updated this thesis, arguing that
the secular trends of stagnating economic growth, shrinking tax revenues,
and rising public debt have made sovereign governments increasingly vulner-
able to the whims of financial market actors who can impose strict austerity
via the threat of capital flight. Relatedly, critical perspectives on European
integration have explored the role of the EU in institutionalizing a ‘disci-
plinary neoliberalism’ (Bailey, 2009; Gill, 2003, pp. 65–7), including through
post-crisis developments such as the Fiscal Compact (Bailey, 2014, p. 245;
Escalona and Vieira, 2014, p. 26).
These accounts point to significant challenges for social democratic
parties, but globalization did not make their preferred policies impossible.
The economic globalization thesis of the 1990s and 2000s ignored ongoing
differences between national economies. Countries continued to exhibit
different varieties of capitalism (Hall and Soskice, 2001) or growth models
(Baccaro and Pontusson, 2016; Baccaro et al., 2022), and governments
could still pursue different economic policies (Boix, 1998; Garrett, 1998a).
This was not only limited to supply-side policies; different countries were
also able to mediate the pressures associated with globalization in order
to pursue Keynesian policies (Clift and Tomlinson, 2007). Governments
such as the British Labour government of 1974–9 pragmatically adjusted
to the monetarily constrained post-Bretton-Woods environment without
sacrificing all the elements of their Keynesian programmes (see Crook, 2018;
Hay, 1999, pp. 209–12). Moreover, the return of emergency Keynesianism in
the immediate wake of the financial crisis demonstrated that expansionary
fiscal policy was still an effective part of policymakers’ toolkits (Raess and
Pontusson, 2015).
Second, it is not evident that financial markets have imposed austerity
since 2008. In an otherwise toxic environment, post-crisis interest rates on
8 Introduction

government bonds plummeted in many of Europe’s major economies as

capital desperately searched for safe assets. As a result, governments in coun-
tries such as Germany, France, and the United Kingdom (UK) were able to
borrow cheaply despite high levels of debt. In fact, in 2010, market actors
came to perceive the fiscal position of some European governments as frag-
ile only because the role of the European Central Bank (ECB) as lender of
last resort was not guaranteed (De Grauwe, 2013b). They did not demand
austerity per se, but rather a credible backstop that would safeguard their
assets. When ECB President Mario Draghi provided this backstop in 2012,
promising to do ‘whatever it takes’ to save the euro, the financial pressure on
Europe’s periphery receded but austerity continued. Austerity was thus more
a political choice than an economic necessity.
Finally, EU integration is not sufficient to explain the austerity settlement
either. Even if the conditions of bailout agreements necessitated austerity in
debtor countries such as Greece, the same argument cannot be made in many
other countries where it was imposed. In creditor countries like Germany,
France, and the Netherlands, governments had more room for manoeuvre.
Moreover, even the UK government committed itself to an austerity pro-
gramme on a par with those of Portugal and Spain in 2010 without being
forced to do so. The UK has its own currency and central bank and even
before its exit from the EU, it was not subject to the rules of the eurozone in
the same way that other EU members were. Instead, the extent of the auster-
ity measures in the UK can only be explained by the ideological disposition
and political strategy of the Conservative-led coalition government (Gamble,
2015).
Yet even the literature attuned to the importance of ideas cannot fully
explain social democratic austerity. This constructivist literature views aus-
terity as the result of the dominance of neoliberal or ordoliberal ideas (e.g.
Baker, 2015; Ban, 2016; Blyth, 2013; Blyth and Matthijs, 2017; Carstensen and
Matthijs, 2018; Dellepiane-Avellaneda, 2015; Matthijs and McNamara, 2015)
which also influenced social democratic parties (Mudge, 2018). It demon-
strates that the concept of austerity is underpinned by a range of normative
and economic notions about the appropriate role of the state vis-à-vis mar-
kets. Some argue that neoliberal economic ideas, including the ‘crowding-out’
effect of government borrowing (Barro, 1974) and the alleged ‘expansion-
ary’ effect of fiscal consolidations (Alesina and Ardagna, 1998; Giavazzi and
Pagano, 1990), have shaped austerity. Others argue that ordoliberal ideas,
including a rule-based approach to economics and the ‘moral hazard’ asso-
ciated with government debt, have contributed to the dominance of austerity
in Europe. In perhaps the best-known account of post-crisis austerity, Blyth
 Outline of the argument 9

(2013) artfully traces a range of ideational developments before the crisis and
shows that, in fact, a symbiosis or a cocktail of these ideas underpins the ways
in which its actors engaged with austerity.
These approaches are useful because they highlight how economic ideas
have fed into the post-crisis politics of austerity. However, to date, the litera-
ture has been unable to effectively explain why austerity was not challenged
by other economic viewpoints. In countries outside of Europe, governments,
indeed, pursued alternative economic policies, and it remains unclear why
other economic ideas gained so little traction in Europe after 2010. In par-
ticular, in focusing on neo- and ordoliberal ideas, the existing literature
potentially delimits our understanding of why social democratic parties
embraced fiscal consolidation.⁷ Historically, social democratic parties were
neither associated with neo- nor ordoliberalism. They developed from a dis-
tinct intellectual tradition, which still influences these parties to this day.
Nonetheless, social democratic parties adopted strategies that embraced an
element of austerity both prior to and during the crisis (see Chapter 3). Why
did the left not articulate an alternative that challenged the dominance of
austerity?
Overall, the existing literature provides several starting points to explain
the austerity settlement, which are more fully reviewed in Chapter 2. These
approaches generate valuable insights, but none of them provide a suffi-
cient explanation for austerity from the left. Unless our conception of social
democratic austerity boils down to suggesting either that social democratic
parties had little choice but to accept austerity or that such actors have merely
accepted a neo- or ordoliberal economic outlook entirely, it is clear that social
democratic austerity requires another explanation. Even today, we still have
a limited understanding of the ways in which social democratic actors have
come to engage with, understand, and ultimately embrace austerity policies,
and this book addresses this shortcoming of the existing research.

Outline of the argument

My explanation of social democratic austerity is based on the premise that

austerity was a political choice and that political actors, including parties,
influence the governance of advanced economies. Fiscal policies are not only
a matter of economic necessity, but are at the heart of politics itself. In the
words of Peter Gourevitch (1986, p. 19), ‘to understand policy choices …we
must understand the politics that produces them’.

⁷ For important exceptions, see Mudge (2018) and Hindmoor (2018).

10 Introduction

This is especially true in the context of economic crises, including the Great
Recession. Such crises are often ‘critical junctures’ (Capoccia and Kelemen,
2007; Collier and Collier, 1991) that open up the political space. They shake
the foundations of the political system and lead to a great deal of uncertainty,
which allows policy entrepreneurs to engineer change. Crises can provoke
actors to shed previous policy commitments and force them to seek new solu-
tions (Kahler and Lake, 2013, p. 10). As actors need to make decisions that
lie outside the normal pattern of politics, agency and contingency come to
the fore (Capoccia and Kelemen, 2007). Since parties serve to articulate the
interests of different social groups and classes (Hopkin, 2020, p. 23), we need
to study austerity as a partisan strategy and understand the political conflicts
behind it.
To this end, my theoretical framework integrates two distinct perspec-
tives. It combines an approach based on ‘the political sociology of political
economy’ (Gourevitch, 1986) with an approach that takes the role of ideas
seriously. Put differently, this book explores the interaction of the electoral
and the ideational foundations of social democratic austerity and studies its
political consequences. Following Beramendi et al. (2015), it highlights that
parties are strategic actors that are constrained by the institutional ecologies
that they inhabit. They are, first and foremost, guided by electoral consider-
ations and use economic policies as the bedrock of electoral strategies that
allow them to build political coalitions. Still, parties are not just conveyor
belts for electoral interests; they are also rooted in distinct ideological tra-
ditions. My framework, therefore, stresses that economic policies are also
influenced by the ideas that parties hold about how the economy works (e.g.
Blyth, 2002; Hall, 1989; Widmaier, 2016). This is particularly true during eco-
nomic crises, when ideas provide explanations of what has gone wrong and
how to fix it (Blyth, 2002; Matthijs, 2011; Widmaier et al., 2007).

The electoral pressures for social democratic austerity

Traditionally, political economy focuses on the interests and ideas of elites

and largely ignores electoral politics. However, during economic crises, this
approach is not tenable because ‘mass politics trumps interest group politics
when both come into play’ (Hooghe and Marks, 2009, p. 18). Supply-side
explanations might explain politics on non-salient issues, which are in the
realm of quiet (Culpepper, 2011) or ‘technocratic politics’. Yet, the demand
side becomes important for salient issues, which are in the zone of loud or
‘electoral politics’ (Busemeyer et al., 2020). In this case, policies are chosen
 Outline of the argument 11

by politicians and ‘when politicians make choices …their choices are con-
strained by the need to mobilize or retain support’ (Gourevitch, 1986, p. 19).
This is particularly true of fiscal policies, which are less insulated from party
politics than other economic policies, including monetary policy or financial
regulation. They have significant distributive consequences, they are highly
visible, and they receive a lot of media attention. Consequently, the supply
of fiscal policies is not independent of the demand for them: while politi-
cians can shape and influence public opinion to some extent, they are also its
servants.
To explain social democratic austerity, it is necessary to take electoral pol-
itics seriously (Beramendi et al., 2015) and to focus on the strategic choices
that party leaders faced in the context of the Great Recession. We have to
explore the interdependence between political economy and electoral poli-
tics (Kitschelt, 1999, p. 318), analysing how party leaders cope with voters’
changing demands. Party leaders are political animals, and their actions are
guided by their short-term electoral instincts. As they compete in elections,
they carefully craft their programmes with reference to electoral considera-
tions. They stay closely tuned to the dominant policy mood (Erikson et al.,
2002) or the ebb and flow of public opinion (Soroka and Wlezien, 2010), and
in recent decades, this has been especially true of social democratic parties.
During the Third Way era, these parties adopted a technocratic and man-
agerial approach to politics, viewing being in office as a means to reform
free-market capitalism.
In the context of the Great Recession, this ‘instrumental’ approach to pol-
itics also shaped the centre-left’s programmatic response to the crisis. On the
one hand, low-income households, which social democratic parties aim to
represent, were particularly at risk during the crisis. Expansionary fiscal and
social policies protected them in its immediate aftermath. On the other hand,
the financial crisis was widely narrated as a crisis that had resulted from exces-
sive liberalization of the financial system. This presented centre-left parties
with a window of opportunity to oppose economic liberalism and distance
themselves from the causes of the Great Recession. They shifted to the left on
issues relating to both welfare and economic liberalism, thereby retracting
large parts of their Third Way programme.
However, when the financial crisis turned into a fiscal crisis of the state,
leading European policymakers began to demand the implementation of aus-
terity. The case of Greece set the tone of the debate because the crisis quickly
came to be described as one that had been caused by excessive levels of gov-
ernment debt and ‘irresponsible’ behaviour by governments. Since it was no
longer viewed as a ‘crisis of growth’ but as a ‘crisis of debt’, the salience of
12 Introduction

public debt dramatically increased. This presented social democratic par-

ties with a fundamental dilemma: their programme—that of protecting and
expanding the welfare state—might have been popular but was not perceived
as credible. As public deficits became a taboo (Lynch, 2020), reducing govern-
ment debt was seen as ‘common sense’. Public perceptions had been shaped
by decades of media coverage, political discourse, and economic ‘folk theo-
ries’ (Rubin, 2003), which ensured that fiscal consolidation resonated more
with the public than Keynesian deficit spending.
Social democrats had to respond to the changing political discourse fol-
lowing the first Greek bailout. As the crisis was reframed as a sovereign debt
crisis, they supported austerity in order to appear electable and fit to gov-
ern. Based on the firm belief that the path towards power leads through the
centre, they tried to appeal to centrist voters. They thought that these voters
were fiscally conservative and that they therefore needed to establish their fis-
cal credibility (Kraft, 2017). Especially in countries where social democratic
parties were in power when Lehman Brothers collapsed, the financial crisis
had hurt the perceived economic competence of these parties. They hoped
orthodox fiscal policies would help them (re)gain economic competence and
close the ‘credibility gap’ by establishing their hawkish credentials. Operat-
ing from a defensive position, they adopted fiscally orthodox policies as a
cornerstone of the social democratic electoral strategy.

The ideational pressures for social democratic austerity

The electoral pressure to espouse austerity created a difficult situation for

social democrats: while they perceived voters to be fiscally conservative,
austerity policies hurt their traditional supporters and undermined the wel-
fare state. However, parties are not only rational office-seeking actors; they
can also craft party programmes in different ways in order to combine
heterogeneous demands into a single political platform. Moreover, their eco-
nomic policies respond to public opinion and the interests of their main
constituencies, but—at least in the medium-to-long run—this demand is
not independent of the supply. Politicians, therefore, have some degree of
freedom to shape and aggregate public opinion.
However, the importance of different electoral pressures is mediated by
the ideas that politicians hold. These ideas shape the way decision-makers
understand crises and the possible responses available to them. They serve
to legitimize policies and allow actors to articulate their demands. To explain
 Outline of the argument 13

the reluctance of social democratic parties to challenge the austerity settle-

ment, it is, therefore, also necessary to understand the ideational pressures
for austerity.
As argued earlier, the existing research focuses on neo- or ordoliberal
ideas as ways to understand post-crisis economics. Even during the height
of monetarism, most social democrats did not really buy into these ideas
(Hindmoor, 2018), but it is true that they came to accept the dominance of
the market as the fundamental mechanism of economic allocation after the
end of the Cold War (Mudge, 2018). Following the economic crisis of the
1970s and 1980s, there was a widespread belief among social democrats that
they could neither spend their way to growth nor to equality. They aban-
doned traditional Keynesian demand management. Instead, they drew on an
alternative set of normative and economic ideas, based on New Keynesian
theory and supply-side economics, which underpins the way in which social
democratic actors have engaged with austerity.
Based on a synthesis of new classical and Keynesian arguments, New Key-
nesianism suggests that macroeconomic policies should maintain output in
response to economic crises. Macroeconomic stabilization, however, is said
to only be effective in the short run. On top of this, New Keynesianism holds
that demand management is best achieved by monetary policy, and not fis-
cal policy. It justified the rise of independent central banks and prescribed a
much more limited role for fiscal policy.
Towards the end of the twentieth century, social democrats accepted these
ideas and became more sceptical of using fiscal policy to fine-tune economic
demand. Instead, they used insights from supply-side economics to argue for
an active role of the state in governing the economy. Based on endogenous
growth theory (Romer, 1994) and the social investment paradigm (see e.g.
Hemerijck, 2017; Morel et al., 2012), the centre-left argued that the state has
a fundamental role in the creation of wealth. Yet, for the state to play this role,
it needs to retain the capacity to act in the long run. Fiscal policy thus needs
to be concerned with the sustainability of public finances, which leads to what
Haffert and Mehrtens (2015) call the ‘progressive consolidation thesis’.
According to this view, public debt undermines the sustainability of the
welfare state and constrains politicians’ ability to invest and deliver the ser-
vices essential for generating growth. Accumulating debt is said to be a
burden on future generations because it foreshadows painful spending cuts
and makes states subject to pressures from financial markets. To avoid both,
consolidation is an important element to ensure the viability of the state; in
other words, ‘consolidation is not an end in itself but a means to regain fiscal
capacity’ (Haffert and Mehrtens, 2015, pp. 120–1).
14 Introduction

Internal cognitive pressures, therefore, bounded the choices of social

democrats (Berman, 1998) and limited their imaginations. Lingering eco-
nomic ideas ensured that they interpreted the crisis more through the lens
of the 1970s than that of the 1930s. They accepted a structural explanation of
the crisis, emphasizing competitiveness and supply-side problems as its cause
and paid little attention to the lack of aggregate demand. Contrary to the
existing literature (e.g. Mudge, 2018), my account stresses that the ideational
foundations of social democratic austerity remained distinct from neo- and
ordoliberal austerity. Policies such as austerity can mean different things to
different actors, who draw upon and use a variety of ideas to justify their pol-
icy programmes (Ban, 2016). Ideas can be differently absorbed in different
contexts (Blyth, 2002; Matthijs, 2011), and establishing that a distinct set of
ideas provides the intellectual framework for social democratic austerity is
important for understanding the pervasiveness of austerity in Europe.

Paradigm change, social democrats, and the Great

Recession

Acknowledging that there was a complex entanglement of electoral and

ideational pressures for austerity still begs the question of why social demo-
cratic parties were not able to move beyond them. Following a Kuhnian logic,
Peter Hall (1993) suggests that paradigm change occurs when anomalies
accumulate that the dominant theory cannot explain. Given that austerity
policies did not work and that they hurt traditional social democratic con-
stituencies, the literature on social democracy is rightfully puzzled by the
social democratic response to the crisis (e.g. Bailey et al., 2014; Coates, 2017;
Keating and McCrone, 2013). It cannot explain why social democratic par-
ties were unable to push for paradigm change in the shadow of the Great
Recession.
To explain why this happened, this book rethinks the question of when
paradigm change is likely. It brings back politics and re-evaluates the condi-
tions that lead to economic policy output. In the short run, paradigm change
is constrained by public opinion and the prevailing political discourse. In
most circumstances, vote- and office-seeking politicians are not the right peo-
ple to push for paradigm change. They have to work with preferences from
the electorate that are shaped by the legacies of their previous policies and
programmes. In this context, paradigm change cannot happen if voters do
not want it to happen. Politicians can only strategically move their position
in the existing issue space, positioning themselves vis-à-vis other parties. In
 Outline of the argument 15

the medium-to-long term, politicians and other elites have a greater degree of
freedom, however. They can create coalitions against the existing paradigm
by pointing out its shortcomings and proposing an alternative prism through
which to interpret the economy. This process takes time, but it relies on the
existence of leaders who play with new ideas that rally voters against the
previous paradigm and shore up support for the new paradigm.
Social democratic parties were unable to take up this role in the immedi-
ate aftermath of the 2007–8 financial crisis because they were trapped and
divided, which undermined their ability to push for ideational renewal. In
the absence of a clear new economic paradigm, they combined short-term
strategic considerations with technocratic policy initiatives and convinced
themselves that austerity was necessary.
The problem for social democratic parties was twofold. First, they faced
an electoral trap resulting from path dependency. Structural changes had
changed the electoral constituency of social democratic parties (Kitschelt,
1994; Piketty, 2020; Rueda, 2007), but this was compounded by the poli-
cies that these parties had implemented before the crisis. In general, previous
policies have distributive consequences, including the potential to fragment
and divide the electorate (Esping-Andersen, 1985, p. 322). Prior to the Great
Recession, this is what happened as a result of the Third Way. Many working-
class voters had abandoned social democratic parties, and, in the shadow of
the crisis, the complex task of building electoral coalitions became more dif-
ficult. Social democrats were squeezed between an (anti-austerity) far left and
a (pro-austerity) centre-right and faced a dilemma that was not unique in the
history of social democracy: either to promise austerity policies that would
appeal to the median voter but contribute to their own long-term decline
or to adopt policies that opposed austerity but that would keep them out of
power.⁸
Second, social democrats also faced an ideational trap because the imple-
mentation of certain ideas and policies before the crisis had destroyed alter-
natives (Galbraith, 1958). At the beginning of the crisis, observers expected
the financial crash to undermine the dominant intellectual edifice. Yet, in the
short run, the crisis only led to a narrow debate about the merits of finance.
Although the 2010s were a period of flux in macroeconomic thinking, the
basic macroeconomic paradigm remained intact for some time.⁹ Policymak-
ers were able to prevent the Great Recession from turning into another

⁸ For a similar argument for different time periods, see Kitschelt (1994, pp. 93–4) as well as Luebbert
(1991, pp. 227–32).
⁹ Arguably, and as discussed in the Conclusion, the COVID-19 pandemic and the subsequent return
of inflation contributed to a more fundamental rethinking of macroeconomics.
16 Introduction

Great Depression, and the perceived success of the immediate response to

the crisis undermined the intellectual renewal that some had expected at
its beginning. For social democratic parties, this ideational trap was made
worse by the experience of the eurozone crisis. While the economic pain for
the crisis-ridden debtor countries only really started in 2010, other coun-
tries like Germany bounced back relatively quickly. Conventional wisdom
attributed this success to Germany’s Agenda 2010, which was a set of supply-
side reforms that the centre-left government had implemented in the early
2000s. The crisis was thus portrayed as a crisis of debt and competitiveness
rather than a crisis of demand. This made it difficult for social democrats
to disavow supply-side Keynesianism, as they remained trapped by their
previous economic ideas and discourse. Witnessing a remarkable expan-
sion of unconventional monetary policies, they accepted that central banks
should do the heavy lifting to fight low growth, embracing orthodox fiscal
policies.
The problem for social democratic parties was compounded by deep inter-
nal divisions, which are common on the left (Watson, 2015). Actors from the
left wing of these parties opposed austerity, while centrist social democrats
held onto supply-side Keynesianism and the progressive consolidation thesis.
Left-wing factions, however, had been marginalized within their parties in
the 1990s and early 2000s. They lacked the necessary leadership to turn these
parties against the austerity settlement. Rather, social democrats leveraged
strategic considerations focused on public opinion to win the intra-party
conflict. They argued that social democratic parties had to play sensibly to
voters’ concerns about government deficits and debt and presented auster-
ity as a policy that was ‘good’ in economic terms (because it safeguarded the
‘fiscal capacity’ of the state) as well as in political terms (because it enhanced
the ‘fiscal credibility’ of their programme). As a result, in most countries,
opposition to austerity was mobilized by forces outside the traditional social
democratic parties, for example by Syriza in Greece, Podemos in Spain, and
Jean-Luc Mélenchon’s movement in France.
Social democratic austerity was not inevitable, though. Anti-austerity posi-
tions were popular among left-wing voters and party members, and in some
countries, left-wing factions within social democratic parties were able to win
the intra-party conflict over time, for example in Portugal and the UK. These
actors were able to push for an anti-austerity platform and eventually moved
from the outskirts of their parties to the leadership.1⁰ Even in countries where
this happened, however, it was a slow process. This not only serves to remind

1⁰ See Chapter 6 for an analysis of the British case.

 Outline of the argument 17

us that paradigm change takes a long time but also highlights that the social
democratic dilemma was difficult to overcome: anti-austerity policies were
popular but were not perceived as credible in the context of the sovereign
debt crisis.
The problem was that in its search for economic credibility, the centre-left
converged with the centre-right. This undermined the functioning of democ-
racy, as voters were offered little choice by mainstream parties on one of
the most important policy questions of the time (Mair, 2013; Streeck and
Schäfer, 2013). Moreover, as social democrats watered down their economic
programme, they diluted their brand (Lupu, 2016). Although centre-left
parties often lose as a result of economic crises in the short run, they
can benefit from them in the long run (Lindvall, 2014). Embracing auster-
ity during the Great Recession undermined this because it alienated many
(potential) social democratic voters. As austerity developed its full force,
it subverted the welfare state and caused widespread economic grievances.
In this context, it was no longer sufficient for social democratic parties to
combine centrist economic policies with progressive cultural policies, as
they had successfully done during the Third Way (Abou-Chadi and Wagner,
2019). Voters no longer knew what these parties stood for and what eco-
nomic policies they would pursue, as contradictions emerged within their
programme.
Consequently, austerity failed as an electoral strategy (see Chapter 8). As
much as parties tried to win over voters by moving to the centre, they alien-
ated some on the left and failed to persuade some of those they were aiming
to move towards. Many potential centrist voters did not believe that the
centre-left would be best at fiscal consolidation, while the parties’ core voters
opposed austerity and turned away in disappointment. Similar to an earlier
process in Latin America (Lupu, 2016; Roberts, 2014), this contributed to an
electoral crisis of social democracy in Europe.
This book thus argues that social democratic parties need new economic
ideas and electoral strategies to address this crisis. In the wake of the COVID-
19 pandemic, which has led to the highest level of borrowing outside of
wartime, social democratic parties need to confront their programmatic con-
tradictions head-on and set about redefining their brand. As the fight over
budgetary priorities could intensify again in the wake of the pandemic, they
need to carve out an economic programme that is capable of building new
electoral coalitions and gives new meaning to the entire social democratic
project.
18 Introduction

Research design and methods

To make this argument, the book uses a mixed-method research design, with
each chapter adding a new layer from a different (but related) analytic per-
spective. It draws on a wide variety of data, and it is divided into four parts,
as summarized in Table 1.1.
The first part asks whether and how the programmatic claims of the centre-
left with regard to the economy have changed during the crisis. It uses the
economic policies of social democratic parties as the dependent variable
and aims to provide a comprehensive description of the social democratic
response to the Great Recession. In particular, it analyses the programmes
of social democratic parties in three different issue areas (welfare, economic
liberalism, and budgetary rigour) and focuses on both the salience that these
parties attribute to economic issues and the positions that they adopt towards
these issues. For this purpose, it uses quantitative content analysis, relying
on a large data set that records the positions of parties in election campaigns

Table 1.1 Research design

Analytical steps Questions Method Data

Puzzle 1) What economic policies did Quantitative Media data

SD parties adopt? content from election
analysis campaigns
2) How did their positions
change in response to the
crisis?
Demand-side 1) What is public opinion on Survey Eurobarometer
fiscal consolidation? analysis surveys;
online survey
experiments
2) What makes people more
likely to be fiscally
conservative?
Supply-side 1) What did SD politicians and Qualitative Elite
policymakers think? process interviews
tracing
2) How important were electoral
and ideational concerns for
them?
Electoral effects 1) What were the electoral Time-series Opinion
consequences of social and survey polls; British
democratic austerity? analysis election
study
 Research design and methods 19

through core sentence analysis. The data come from the manual coding of
newspapers in eleven Western European countries (Austria, France, Ger-
many, Greece, Ireland, Italy, the Netherlands, Portugal, Spain, Switzerland,
and the UK), following the approach used by Kleinnijenhuis and Pennings
(2001) and Kriesi et al. (2008, 2012). Descriptive analysis and time-series
cross-section (TSCS) analysis are then used to explore the data.
The second part of the book studies the demand side of politics. It
analyses public preferences regarding fiscal consolidation as the dependent
variable for evaluating how strong the electoral pressure for austerity was
during the crisis. To this end, I first use data from existing surveys to
study preferences for fiscal consolidation across Europe. In particular, I pool
responses from twelve waves of the Eurobarometer and use regression analy-
sis to examine country- and individual-level determinants of ‘debt aversion’.
However, existing surveys—like the Eurobarometer—that include questions
about preferences regarding fiscal consolidation are problematic. They do not
acknowledge that austerity is potentially costly, i.e. that it is associated with
the cutting of (welfare state) spending or the increase of taxes. While many
respondents might in principle agree that balanced budgets are desirable, it
is not clear whether they are also willing to accept the trade-offs associated
with them. Hence, I also use data from a split-sample experiment and a con-
joint survey experiment (conducted in Germany, Italy, Spain, and the UK),
in which respondents were asked to evaluate different fiscal policy packages.
This allows me to further explore preferences for fiscal policies and to eval-
uate how constrained social democratic parties were in the context of the
economic crisis.
The third part studies the supply side or the ‘elite politics’ of fiscal policies.
It uses case studies to explain the fiscal policies that the British Labour Party
and the German SPD adopted in response to the Great Recession. The focus
of these case studies is not on the actual implementation of austerity measures
in government; rather, the case studies explain party strategies in the wake of
the Great Recession. As argued earlier, they attempt to determine a broadly
‘social democratic’ element of how these parties approached and internally
legitimized austerity.
Importantly, the British Labour Party and the German SPD are used as
‘crucial case studies’ because in both countries the external constraints that
political parties faced during the Great Recession were weaker than in other
European countries. Even before Brexit, the UK was not part of the eurozone
and was subject to less control from Brussels than other European countries,
while Germany emerged as the dominant country during the euro crisis.
Furthermore, interest rates on government bonds remained extremely low in
20 Introduction

both countries, as investors looked for safe havens in the wake of the financial
crisis. This allowed these countries to finance government debt very cheaply,
which meant that market pressures for austerity were effectively absent in
both Germany and the UK. This should have given politicians in these two
countries more freedom to adopt the fiscal policies of their choice, at least
compared to the crisis-ridden debtor countries. And they would have had
good reason to embrace more expansionary fiscal policies, as both of them
experienced a sharp decline in economic output in the wake of the finan-
cial crisis. Although unemployment never reached the heights seen in some
southern European countries, their economies only recovered slowly from
the crisis. Both economies were still running below their potential in 2010,
when Europe’s governments turned towards fiscal consolidation, and eco-
nomic growth remained low for some, as Germany confronted a massive
investment gap while the UK suffered from low economic productivity. In
hindsight, policymakers should have borrowed much more to finance public
investments.
Still, in both countries, social democratic parties largely accepted conserva-
tive fiscal policies and supported voluntary fiscal consolidation. In Germany,
the SPD was instrumental in the introduction of the German constitutional
debt brake in 2009, which was an early sign of the fiscal orthodoxy that would
haunt Europe in the following years. Afterwards, the SPD supported this path
of fiscal consolidation, irrespective of whether it was in opposition (from
2009 to 2013) or in government (from 2013 onwards). It supported almost
all the measures (such as the balanced-budget policy, the Schwarze Null,
and European bailout packages) that the government introduced in response
to the eurozone crisis and which enforced austerity across Europe. In the
UK, Labour lost the general election in 2010 and it was in opposition when
David Cameron implemented austerity. Still, prior to the general election, the
Labour Party had already endorsed the so-called ‘Darling Plan’, which called
for substantial fiscal consolidation and which helped to frame the economic
discourse in the UK for years to come. In opposition, under Ed Miliband,
the party then struggled to define its own fiscal policy, but eventually, it con-
tinued to support fiscal consolidation, advocating deficit reduction and ‘iron
discipline on spending’.
This support for austerity among the centre-left cannot be explained by
structural forces, given that Germany and the UK diverge on many differ-
ent dimensions, as summarized in Table 1.2: they have different economic
systems, they operate in different political systems, and their social demo-
cratic parties had different positions in government at the time of the crisis.
This leads to a ‘most different systems design’ (Przeworski and Teune, 1970),
 Outline of the book 21

Table 1.2 Logic of case selection

Germany UK

Strategic position Core of eurozone Outside of eurozone

(creditor)
Fiscal position No fiscal problems Some fiscal problems
Market pressure No market pressure Some market pressure
Variety of capitalism* CME LME
Growth model** Export-led growth Consumption-led
growth
Electoral system Mixed-member First-past-the-post
proportional
representation
Government responsibility*** G⇒O⇒G G⇒O
Explanatory variables Electoral constraints & Electoral constraints &
economic ideas economic ideas
Dependent variable No challenge to austerity No challenge to austerity

* Adopted from Hall and Soskice (2001).

** Adopted from Baccaro and Pontusson (2016).
*** Govt. responsibility of SD parties from 2008 to 2015 (G = govt.; O = opposition; ⇒ = change).

which allows me to test whether my theoretical framework can explain the

policies that the German SPD and the British Labour Party adopted. To this
end, I use process tracing, primarily based on evidence from more than forty
interviews with leading policymakers in both Germany and the UK. Inter-
viewees were selected by combining a ‘purposive’ sampling method with a
‘chain’ or ‘snowballing’ method. They included former cabinet members,
budgetary spokespeople, and a range of high-level economic and political
advisers.
Finally, the fourth part studies the electoral consequences of social demo-
cratic austerity. It uses monthly time-series analysis from twelve countries
to examine the impact of implementing austerity on the electoral popular-
ity of social democratic parties in monthly opinion polls. Further, it uses
individual-level panel data from the UK before the 2015 election to exam-
ine the electoral effects of adopting orthodox fiscal policies during election
campaigns.

Outline of the book

Extended literature review and theoretical framework

Concretely, this book is divided into nine chapters. Chapter 2 situates this
work in the context of the existing literature on political economy and party
22 Introduction

politics and outlines the analytical framework. The chapter begins by review-
ing the policies that the centre-left pursued before the Great Recession.
Afterwards, it discusses the various theories that can be used to explain aus-
terity from the left in the context of crisis. It provides a more comprehensive
assessment of these explanations and argues that they are not sufficient to
explain this phenomenon. Therefore, the chapter offers a new explanatory
framework that combines two different approaches. The framework attempts
to bring the ‘electoral turn’ (Beramendi et al., 2015) to the study of fiscal pol-
icy, but it also takes the role of ideas seriously. By analysing the electoral and
ideational foundations of social democratic austerity, it attempts to explain
partisan choices for macroeconomic policies, and focuses on public opin-
ion and its interaction with ideas and the dominant political discourse. This
model will be developed to explain the response of social democratic par-
ties to the recession, but theoretically, it should apply equally to other party
families.

The response of social democratic parties to the Great

Recession

The third chapter analyses how social democratic parties changed their elec-
toral strategies in the context of the crisis. It tests whether parties are strategic
actors that change their programmes in response to economic crises, i.e.
whether we can expect crises to influence party positions in the first place.
The results suggest that this is the case, given that social democrats moved to
the left in response to the crisis. However, this leftward shift did not extend
to all economic issues. On the one hand, social democratic parties defended
the welfare state and opposed economic liberalism after the 2007–8 finan-
cial crisis, which partly reverted their own Third Way. On the other hand,
many parties also supported the reduction of government deficits and taxes
during the crisis; i.e. they joined the chorus of austerity that became the
dominant tune during the euro crisis. This confirms that the positions of
social democratic parties on fiscal policies did not align with their positions
on other socioeconomic policies in the shadow of the economic crisis. The
remaining part of the book explains this incoherent platform by focusing on
the puzzling support for austerity among the centre-left. It focuses less on
the variation among social democratic parties in the extent to which they
accepted austerity, and more on explaining the broad acceptance of austerity
by the centre-left across Europe.
 Outline of the book 23

The popular politics of austerity: studying the demand side

of politics

For this purpose, the fourth chapter studies the popular politics of auster-
ity, i.e. the demand side. It uses existing data from Eurobarometer surveys
that ask respondents about their attitudes towards fiscal policy. In particu-
lar, the chapter shows that a large number of voters felt uneasy about their
country’s government debt and seeks to understand why this was the case.
At the beginning of the crisis, on average, 72 per cent of respondents in the
EU agreed that ‘measures to reduce the public deficit and debt [could not]
be delayed’ in their country. Even in 2015, a majority of individuals still
agreed with this statement, indicating that support for fiscal consolidation
remained high throughout the crisis. Chapter 4 analyses this staggering sup-
port for fiscal consolidation and systematically investigates the public’s ‘debt
aversion’ across a large number of countries. It uses regression analysis to
examine the country- and individual-level determinants of preferences with
regard to fiscal policy. The results show that less-well-off people are gener-
ally less concerned about government debt, generating a positive relationship
between income (or wealth) and debt aversion. On the aggregate level, voters
respond to changes in the economy in an anti-Keynesian fashion: they are
more likely to support fiscal consolidation during the bust than during the
boom. Moreover, people’s individual experiences of the economy also medi-
ate the influence of macroeconomic conditions on their support for fiscal
consolidation.
The fifth chapter digs deeper in order to understand the preferences for
fiscal policies better. It uses data from two survey experiments conducted in
Germany, Italy, Spain, and the UK to re-evaluate how strong the electoral
pressure to support austerity really is. First, it uses a split-survey experiment
to analyse to what extent and whether individuals support fiscal consolida-
tion when this comes at the cost of lower government spending and/or higher
taxes. Second, the chapter uses a novel conjoint survey experiment to evaluate
the support for different fiscal policy packages. Following existing approaches
that use conjoint analysis (Hainmueller et al., 2014), respondents had to eval-
uate different combinations of fiscal policies, including fiscal consolidation.
In other words, in a pairwise comparison, participants chose between two
simplified fiscal policy packages and indicated the degree to which they sup-
port each of the proposals. Through randomization, this analysis allows me
to identify the causal effect that consolidation has on the support for a given
24 Introduction

fiscal package. The results from both experiments show that fiscal consolida-
tion is less popular than commonly assumed. Although most citizens support
fiscal consolidation in principle, it is not a priority for them; rather, they are
more concerned about levels of government spending and taxation. This sug-
gests that the centre-left had some scope to interpret and influence public
opinion, despite the consensus for fiscal consolidation that Chapter 4 identi-
fied. The case studies will take up this finding, analysing the extent to which
social democratic parties perceived this as a possibility.

The elite politics of austerity: studying the supply side

of politics

In Chapters 6 and 7, I analyse the elite politics of austerity, i.e. the supply side
of politics. Both chapters primarily use ‘explaining-outcome process tracing’,
as outlined by Beach and Pedersen (2013), to study the fiscal policies of the
German SPD and the British Labour Party in response to the Great Recession.
While Chapter 6 explores the electoral and ideational pressures for auster-
ity within the British Labour Party, Chapter 7 analyses the same pressures
within the German SPD. They situate the fiscal policies of each party in a
historic context and use quantitative content analysis to fully explore these
parties’ programmatic responses to the economic crisis (based on the data
used in Chapter 3). Each chapter then draws on over twenty elite interviews to
draw out the causal mechanisms that contributed to social democratic auster-
ity. Both chapters argue that social democratic politicians are not neoliberal
or ordoliberal ideologues that have accepted the dominance of the market.
Instead, both parties are portrayed as strategic actors that were confronted
with a common problem: the need to establish economic competence and
credibility in the eyes of voters. Faced with a great deal of distrust among
voters with regard to higher deficits and convinced that the path to power
leads through the centre, they tried to appeal to fiscally conservative voters.
They did not believe that they could change public opinion, accepting evi-
dence from conventional surveys as well as focus group research. Internally,
however, these positions were also legitimized by economic ideas that social
democratic parties had adopted before the Great Recession and that were part
and parcel of their Third Way. This ideological framework, based on New
Keynesianism, supply-side economics, and the social investment paradigm,
is distinct from neo- or ordoliberalism, but it contributed to social democratic
austerity and helped to mainstream austerity in Europe.
 Outline of the book 25

The electoral consequences of social democratic austerity

The last empirical chapter examines the electoral consequences of social

democratic austerity. Some research suggests that mainstream parties bene-
fit from moderation because it allows them to capture ‘potential’ voters from
the centre. However, austerity is often opposed to the brand of social demo-
cratic parties, threatening to undermine the partisan attachment of their
‘core’ voters. This chapter tests which effect dominates by analysing the elec-
toral effects of social democratic austerity during the Great Recession. It uses
TSCS analysis to examine the relationship between austerity events and the
popularity of centre-left parties in twelve European countries from 2008 to
2017. The results show that social democrats lose support when they imple-
ment austerity and that this effect persists over time. The chapter then uses
individual-level panel analysis based on the British Election Study (BES) to
examine how voters respond when social democrats adopt orthodox poli-
cies in election campaigns. It shows that potential voters who are fiscally
conservative are unlikely to support Labour. In fact, orthodox fiscal policies
undermine the party’s ability to mobilize its core voters, who are opposed to
austerity. This phenomenon has contributed to the electoral crisis of social
democratic parties in Europe.
Chapter 9 then summarizes the main argument and the empirical findings
of the previous chapters. It brings together the key insights gathered from
studying the popular and elite politics of austerity and further discusses the
political and economic consequences of social democratic austerity. Finally,
the book concludes by re-evaluating the fate of social democracy in Europe in
the twenty-first century in the wake of the COVID-19 pandemic. Following
the Great Recession, social democracy experienced a profound electoral crisis
across Europe, and the Conclusion explores whether and how social demo-
cratic parties can escape from this crisis. It argues that the economic crisis
caused by COVID-19 provides both opportunities and risks for the centre-
left: it has contributed to a favourable shift in economic discourse, but it has
also massively increased government debt. As the pressure on governments
to return to austerity could increase again, social democratic parties need to
escape from the electoral and ideational traps identified in this book. They
need to rediscover the state as a strong actor that corrects market outcomes
and protects the weakest members of society from the unwanted excesses of
capitalism. To this end, social democratic parties need to develop bold new
ideas that respond to some of the biggest economic and political challenges
of our time, redefining their raison d’être. Only this will allow them to regain
their place at the heart of European politics.
2
Social Democratic Austerity
A Theoretical Framework

Introduction

This chapter sets out the theoretical framework of the book. This framework
is based on the premise that austerity was a political choice and that indi-
vidual actors, including parties, play decisive roles in the macroeconomic
governance of advanced economies. Although capitalism is a system, there
are actors within that system whose choices matter. During economic crises,
a focus on agents and their choices is particularly important because these
events are often ‘critical junctures’ (Capoccia and Kelemen, 2007; Collier and
Collier, 1991) that open up the political space. During economic crises, ‘pat-
terns unravel, economic models come into conflict, and policy prescriptions
diverge’ (Gourevitch, 1986, p. 17). They shake the foundations of the polit-
ical system and lead to a significant amount of uncertainty, allowing policy
entrepreneurs to engineer change. Therefore, in the past, economic shocks
have led to major political upheavals, including swings in partisan politics,
institutional innovation, and changes in the dominant economic paradigm.
I thus assume that social democratic austerity was not inevitable. To make
this case, I integrate two theoretical perspectives to explain the economic
policies that social democratic parties adopted in response to the Great Reces-
sion. I combine an approach based on ‘the political sociology of political
economy’ (Gourevitch, 1986) with one that takes the role of ideas seriously
(e.g. Blyth, 2002; Hall, 1989). In doing so, I argue that neither electoral
interests nor economic ideas on their own are deterministic. Rather, it is
necessary to consider both the electoral and the ideational foundations of
social democratic austerity. Following Beramendi et al. (2015), I assume
that parties strategically respond to voters’ (perceived) preferences. They use
economic policies to build electoral coalitions and address the concerns of
particular constituencies. However, parties are not just conveyor belts for
electoral interests. They are also rooted in distinct ideological traditions,

Austerity from the Left. Björn Bremer, Oxford University Press. © Björn Bremer (2023).
DOI: 10.1093/oso/9780192872210.003.0002
 Social democratic parties and macroeconomic policies 27

which create internal cognitive pressures within them. These pressures shape
how policymakers interpret their political interests and the economy around
them.
To develop this framework, the chapter considers the policies that social
democratic parties pursued before the Great Recession. Then it reviews the
existing explanations for social democratic austerity and their shortcomings.
Many of these explanations may contain some truths, but none can fully
explain social democratic austerity. Consequently, I set out my theoretical
framework, focusing on both the electoral and the ideational pressures that
social democrats faced in the wake of the 2007–8 financial crisis. I contend
that social democratic parties were confronted with a dilemma: although aus-
terity was largely unpopular among social democrats, they endorsed fiscal
consolidation in their quest for economic credibility. As the Great Reces-
sion was recast as a ‘crisis of debt’ (rather than a ‘crisis of growth’), they
resorted to old economic ideas with the hope that this would help their
claim to be competent managers of the economy. Social democratic austerity
was, therefore, essentially a defensive move. Since the centre-left found itself
boxed in by old electoral and ideological approaches to fiscal policy, it was
unable to lead the charge against austerity. Over time, this hurt the centre-
left because it alienated some voters on the left and failed to persuade many
of the fiscally conservative voters that social democratic parties were moving
towards.

Social democratic parties and macroeconomic policies

before and during the Great Recession

The existing literature is inconclusive on the importance of political par-

ties to economic policymaking. Still, according to a significant amount of
research from the twentieth century, different parties implement divergent
economic and social policies. Focusing on macroeconomic policy, Hibbs
(1977, p. 1467) argued that ‘governments pursue macroeconomic policies
broadly in accordance with the objective economic interests and subjective
preferences for their class-defined core political constituencies’. Accepting
the trade-off between unemployment and inflation that existed according to
the Phillips curve, he showed that the centre-left adopts policies that reduce
unemployment and increase inflation, whereas the centre-right adopts those
with the opposite effect. Social democratic parties have thus implemented
Keynesian policies of demand management more often than other parties
have done (also see Alesina and Rosenthal, 1995; Boix, 2000; Tufte, 1978).
28 Social Democratic Austerity

Although there has never been a single social democratic model (Bartolini,
2000; Keman, 2017), the marriage between social democracy and Keynesian-
ism goes back to the Great Depression.1 European social democratic parties
had been born of the labour movement, a few decades before the historic
economic shock of the Depression. Closely allied with trade unions, polit-
ical parties emerged to fight for the interests of the working class. In the
wake of the Bolshevik revolution in Russia at the beginning of the twentieth
century, however, the labour movement split (Lindemann, 1983): revolu-
tionary socialists who wanted to emulate the revolution in Russia opposed
moderate socialists who sought to reform capitalism.2 In most countries, the
latter group became known as social democratic or labour parties and began
participating in the democratic process.
In 1929, when the Great Depression struck, some of these parties were
even in government; in this context, many social democrats advocated and
implemented deflationary policies, with disastrous consequences (Berman,
1998; Temin, 1989). In the UK, Labour Prime Minister Ramsay MacDonald
opted for austerity against the wishes of a significant segment of the Labour
Party (Skidelsky, 1970). His decision to form a National Government split
the Labour movement, leaving deep scars for decades to come. Similarly, in
Germany, the SPD supported Heinrich Brüning’s government, which imple-
mented harsh spending cuts that worsened the deflationary spiral.3 Only in
Scandinavia did social democrats implement a bold economic programme in
response to the Great Depression; this involved a social compromise between
labour and capital and a shared commitment to full employment (Berman,
1998; Paterson and Thomas, 1986).
After the Second World War, the thinking of John Maynard Keynes (1936)
gave social democratic parties an ideological roadmap with which to abandon
austerity. Keynes believed that the economy did not follow natural laws and
argued that market orthodoxy paid insufficient attention to the problem of
demand. According to his key insight, private investment was volatile, follow-
ing pro-cyclical tendencies and leading to booms and busts. Assuming that
demand fluctuates while supply is stable, he argued that output gaps could
emerge, leading to an under-utilization of economic resources. To address

1 Keynesianism here is defined as a macroeconomic theory which explains and influences the business
cycle. It proposes to use a variety of monetary and fiscal policies to smooth the amplitude of that cycle.
Keynesians suggest that, during economic crises, governments should use loose monetary policies and a
combination of deficit spending and tax cuts to stimulate the economy.
2 The ideological fathers of social democracy, including Eduard Bernstein, emphasized the primacy of
politics, which allowed them to reject Marxist historical materialism. They believed that political action
could significantly improve the condition of the working class.
3 Although largely forgotten in contemporary Germany, these cuts contributed to the rise of Hitler,
paving the way for the Second World War (Galofré-Vilà et al., 2021).
Another random document with
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 “Yes,” she said; and I knew that she had satisfied herself. “Will you
take me away now, at once, please?”
The idea of escape, of liberty once realized, it would have been
dangerous to balk her by a moment. I had acquainted mamma that I
might possibly bring her a visitor. Well, it simply meant that the
suggested visit must be indefinitely prolonged.
Miss Gray accompanied me home, where certain surprises, in
addition to the tenderest of ministrations, were awaiting her. All that
becomes private history, and outside my story. I am not a man of
sentiment; and if people choose to write poems and make general
asses of themselves, why—God bless them!
The problem I had set myself to unravel was what looked deucedly
like a tough psychologic poser. But I was resolute to face it, and had
formed my plan. It was no unusual thing for me to be out all night.
That night, after dining, I spent in the “converted” flat in West
Kensington.
I had brought with me—I confess to so much weakness—one of
your portable electric lamps. The moment I was shut in and
established, I pulled out the paper Miss Gray had typed for me,
spread it under the glow and stared at it. Was it a copy of my
circular? Would a sober “First Aid Society” Secretary be likely, do
you think, to require circulars containing such expressions as
“William! William! Come back to me! O, William, in God’s name!
William! William! William!”—in monstrous iteration—the one cry, or
the gist of it, for lines and lines in succession?
I am at the other end from humour in saying this. It is heaven’s
truth. Line after line, half down the page, went that monotonous,
heart-breaking appeal. It was so piercingly moving, my human terror
of its unearthliness was all drowned, absorbed in an overflowing pity.
I am not going to record the experiences of that night. That
unchanging mood of mine upheld me through consciousnesses and
sub-consciousnesses which shall be sacred. Sometimes, submerged
in these, I seemed to hear the clack of the instrument in the window,
but at a vast distance. I may have seen—I may have dreamt—I
accepted it all. Awaking in the chill grey of morning, I felt no surprise
at seeing some loose sheets of paper lying on the floor. “William!
William!” their text ran down, “Come back to me!” It was all that same
wail of a broken heart. I followed Miss Gray’s example. I took out my
match-box, and reverently, reverently burned them.
An hour or two later I was at Paul’s Exchange, privately
interviewing my manager.
“Did you ever employ a Miss Lucy Rivers?”
“Certainly we did. Poor Lucy Rivers! She rented a machine of us.
In fact——”
He paused.
“Well?”
“Well—it is a mere matter of business—she ‘flitted,’ and we had to
reclaim our instrument. As it happens, it was the very one purchased
by the young lady who so interested you here two days ago.”
“The first machine, you mean?”
“The first—and the second.” He smiled. “As a matter of fact, she
took away again what she brought.”
“Miss Rivers’s?”
He nodded.
“There was absolutely nothing wrong with it—mere fad. Women
start these fancies. The click of the thing gets on their nerves, I
suppose. We must protect ourselves, you see; and I’ll warrant she
finds it perfection now.”
“Perhaps she does. What was Miss Rivers’s address?”
He gave me, with a positive grin this time, the “converted” flat.
“But that was only latterly,” he said. “She had moved from——”
He directed me elsewhere.
“Why,” said I, taking up my hat, “did you call her ‘poor Lucy
Rivers’?”
“O, I don’t know!” he said. “She was rather an attractive young
lady. But we had to discontinue our patronage. She developed the
most extraordinary—but it’s no business of mine. She was one of the
submerged tenth; and she’s gone under for good, I suppose.”
I made my way to the other address—a little lodging in a shabby-
genteel street. A bitter-faced landlady, one of the “preordained” sort,
greeted me with resignation when she thought I came for rooms, and
with acerbity when she heard that my sole mission was to inquire
about a Miss Lucy Rivers.
 “I won’t deceive you, sir,” she said. “When it come to receiving
gentlemen privately, I told her she must go.”
“Gentlemen!”
“I won’t do Miss Rivers an injustice,” she said. “It was ha
gentleman.”
“Was that latterly?”
“It was not latterly, sir. But it was the effects of its not being latterly
which made her take to things.”
“What things?”
“Well, sir, she grew strange company, and took to the roof.”
“What on earth do you mean?”
“Just precisely what I say, sir; through the trap-door by the steps,
and up among the chimney-pots. He’d been there with her before,
and perhaps she thought she’d find him hiding among the stacks. He
called himself an astronomer; but it’s my belief it was another sort of
star-gazing. I couldn’t stand it at last, and I had to give her notice.”
It was falling near a gloomy midday when I again entered the flat,
and shut myself in with its ghosts and echoes. I had a set conviction,
a set purpose in my mind. There was that which seemed to scuttle,
like a little demon of laughter, in my wake, now urging me on, now
slipping round and above to trip me as I mounted. I went steadily on
and up, past the sitting-room door, to the floor above. And here, for
the first time, a thrill in my blood seemed to shock and hold me for a
moment. Before my eyes, rising to a skylight, now dark and choked
with snow, went a flight of steps. Pulling myself together, I mounted
these, and with a huge effort (the bolt was not shot) shouldered the
trap open. There were a fall and rustle without; daylight entered; and,
levering the door over, I emerged upon the roof.
Snow, grim and grimy and knee-deep, was over everything,
muffling the contours of the chimneys, the parapets, the irregularities
of the leads. The dull thunder of the streets came up to me; a fog of
thaw was in the air; a thin drizzle was already falling. I drove my foot
forward into a mound, and hitched it on something. In an instant I
was down on my knees, scattering the sodden raff right and left, and
—my God!—a face!
She lay there as she had been overwhelmed, and frozen, and
preserved these two months. She had closed the trap behind her,
and nobody had known. Pure as wax—pitiful as hunger—dead! Poor
Lucy Rivers!
Who was she, and who the man? We could never learn. She had
woven his name, his desertion, her own ruin and despair into the
texture of her broken life. Only on the great day of retribution shall he
answer to that agonized cry.
 THE FAIR WITH GOLDEN HAIR
Ho! bring me some lovers, fat or lean,
That I may crunch ’em my teeth between!
I could eat so many, so many, so many,
That in the wide world there would not be left any.

Ho! Here is Avenant to be seen,

Who comes to draw your teeth so keen;
He’s not the greatest man to view,
But he’s big enough to conquer you.
Planché’s “D’Aulnoy,” slightly misquoted.

Sir Richard Avenant came home from Abyssinia to an interesting

notoriety. He had been associated—a sort of explorative free-lance
—with the expedition of Mr. Bruce, who was not yet returned from his
adventures up the Nile in quest of the sources of that bewildering
water; and, upon his arrival in London, he found himself engaged to
a romance which was certainly remote from his deserts.
Now he was a strong, saturnine man, but apt to whimsical
decisions, whose consequences, the fruits of whatever odd
impulses, he never had a thought but to hold by; and as the self-
reserved must suffer the character accorded to their appearance (the
only side of them confessed), Sir Richard found himself accredited,
by anticipation, with deeds adapted to the countenance he had
always addressed to the world.
He was strolling, some days after his return, through the streets,
when he was accosted by an acquaintance, a preux chevalier of the
highest ton, curled, be-ruffed, and imperturbably self-assured.
“Why, strike me silly, Dick!” cried this exquisite, “what do you,
wandering unsociable in a shag coat, and all London by the ears to
lionize ye?”
“Well, I know not, George. What have I done to be lionized?”
“Done! Done? asks the man that will not devour a steak but ’tis cut
raw from the buttock of the living beast! Done? asks Bluebeard (and
stap me, Dick, but your chin is as blue as a watchman’s!)—done, he
says, that brings grass-petticoats in his train enough to furnish the
Paradise of the Grand Turk! Prithee, Dick, where hast stowed ’em
all? O, thou hast a great famous reputation, I assure thee, to justify
thyself of with the women! Such is the report of thy peris—their teeth,
their raven hair, their eyes like stars of the night—there’s no virtue in
town could resist, if asked, to be thy queen and theirs.”
He was chuckling, and taking a delicate pinch of martinique, with
his little finger cocked to display a glittering stone, when his eyes
lighted on a house over against which they were standing.
“Hist!” said he, pointing with his cane; “pan my honour, the single
reservation.”
“Single reservation?” repeated the explorer. “To what? To this
London of frailties?”
“To be sure,” said the other. “The one party, I’ll dare swear, that
would not put her nose in a ring for thy sake.”
“Indeed!” said Avenant. “Then she’s the one I must wed.”
The elegant cocked his head, squinting derisive.
“I lay you a double pony to a tester you don’t, within the decade.”
“Done! Tell me about her.”
“I’ll do more. I’ll carry you in to her, here and at once. Tell me about
her, quotha! She’s the Fair with Golden Hair, and a guinea and a
suitor to every thread of it.”
“Whence comes she?”
“From Arcadia, man, with a fortune of gold and roses. She cuts out
hearts raw, as you do steaks, and devours them by the dozen. O,
you shall know her!”
“But by what name, George, by what name?”
“Have I not told you? It shall suffice for all your needs. Thou shalt
take a pack of Cabriolles, and never hunt her to the death. Come,
my friend!”
He led Sir Richard to the house, and had himself announced. They
ascended a flight of stairs, going up into a heaven of floating
fragrance and melodious sounds. Their feet moved noiseless over
silken carpets. They crossed an anteroom ruffling with lackeys, and
were ushered into the Fair’s boudoir.
 She sat at her mirror, in the hands of her perruquier. She was the
most beautiful insolent creature Sir Richard had ever seen. There
was not an inch of her which Nature could have altered to its
improvement. The very patch on her cheek was a theft from
perfection. But to so much loveliness her hair was the glory, a
nimbus which, condensing in the heavy atmosphere of adoration,
dropped in a melting flood of gold, which, short of the ground only,
shrank and curled back from its gross contact.
All round and about her hummed her court—poets, lords, minstrels
—suitors straining their wits and their talents for her delectation,
while they bled internally. Many of them greeted Sir Richard’s
chaperon, many Sir Richard himself—good-humouredly, jealously,
satirically, as the case might be—as the two pushed by. A stir went
round, however, when the rough new-comer’s name was put about;
and some rose in their seats, and all dwelt inquisitively on the
explorer’s reception.
It was condescending enough; as was that of his friend, who loved
himself too well, and too wittily, to show a heart worth the beauty’s
discussing.
“Have you got back your appetite, sir,” said the Fair to Avenant,
“for dressed meats?”
“And ladies?” whispered Sir Richard’s friend.
“O, fie!” said madam.
“I will return the question on you,” said Sir Richard, in a low voice.
The Fair lifted her brows.
“Why, I am told, madam,” said Avenant, “that you feed on raw
hearts; but I am willing to believe that the one lie is as certain as the
other.”
The imperious beauty bit her underlip, and laughed.
“I perceive, Sir Richard,” she said, “that you do not court by
flattery.”
“I do not court at all, madam,” he answered.
“Ah, true!” she replied. “You buy in the open market. It must be
simpler; though, in the plain lodging where I hear you lie at present,
the disposal of so responsible an establishment must exercise your
diplomacy.”
 She spoke aloud, evoking a general titter; and so aloud Avenant
answered her.
“By no means, madam. I have in my sleeping-room a closet with
three shelves. On one of these lies Beauty, unspoiled by adulation;
on another lies Virtue, that respects her sex too well to traduce it; on
the third lies feminine Truth, loveliest of her sisters. These are my
whole establishment; and as they are shadows all, existing only in
the imagination, they exercise nothing but my fondness for
unattainable ideals.”
The company broke into much laughter over this Jeremiad; and
the girl joined her young voice to theirs. But a little glow of colour
was showing in her cheek, verily as if Sir Richard had flicked that fair
surface with his glove.
“O!” she said, “this is a sad regale! Sure, sir, does the climate of
Abyssinia breed no hotter than Leicestershire Quakers? Why, I have
heard a lion roar fiercer in a caravan. Now, pray, Sir Richard, put off
your civilities, and give us news instead of lessons. They say there is
a form of lawless possession in the women of the country you
visited.”
“It is very true there is, madam. It is called the Tigrétier—a seizure
of uncontrollable vanity, during which the victim is so self-centred
that she is unable to attend to the interests, or even to distinguish the
sexes of those about her. She will, for instance, surround herself with
a circle of male admirers, assuming all the time, apparently, that they
are the gossips of her own sex, with whom, like a decent woman,
she would wont ordinarily, of course, to consort in private.”
The Fair cried out, “Enough! Your stories are the most intolerable
stuff, sir. I wish Mr. Bruce joy of your return, as I hear you are not to
remain in England.”
Then she turned her shoulder to him, her flush deepening to fire;
and Sir Richard, bowing and moving away, fell into conversation with
one or two of his acquaintances. Presently, looking up, he was
surprised to see the room near empty. Goldenlocks had, in fact,
issued her wilful mandate, and her court was dismissing itself.
The explorer was pressing out after the rest, when a maidservant
touched his sleeve, and begged him to return to her lady, who
desired a word with him. Sir Richard acquiesced immediately. He
found the Fair standing solitary by her dressing-table, frowning, her
head bent, her fingers plucking at a wisp of lace. Her hair, still
undressed, hung down deep over her shoulders, mantling them with
heavy gold, like a priest’s chasuble.
“Did you seek my acquaintance, sir,” she said imperatively, “with
the sole purpose to insult me?”
“Nay, madam,” he answered, as cool as tempered steel; “but
because you was described to me as the one woman in London that
I might not marry, if I had the will to.”
“Why not?” was on the tip of her tongue; he saw it there. But she
caught at herself, and answered, “So, sir, like sour reynard, I
suppose, you would spite what you found it useless to covet.”
“I covet, madam!” he said, in a tone of astonishment. “I aspire to
wrest this wealth and beauty from a hundred worthier candidates!
Believe me, my ambition halted far short of such attainment.”
Her lips smiled, despite herself. What were the value, she
suddenly thought, in a world of suitors that did not include this
shagg’d and rugged Jeremiah? Her speech fell as caressing as the
sound of water in a wood.
“Yet you confess to some ambition?” she murmured.
“True,” he answered; “the virtuoso’s.”
She lifted her beautiful brows.
“I will be candid, madam,” he said. “I have the collector’s itch.
Whithersoever I visit, I lay my toll on the most characteristic
productions of the tribes—robes, carvings, implements of war—even
scalps. Madam, madam, you must surely be of the sun children!
Your hair is the most lovely thing! I would give my soul—more, I
would give a thousand pounds to possess it.”
“I see, sir,” she said; “to carry your conquest at your belt.”
“Nay,” he answered, with feigned eagerness. “Not a soul need
know. The thing is done constantly. You have but to subscribe to the
fashion of powder, and you gain a novel beauty, and I a secret I
swear to hold inviolate.”
“O!” she said softly “This is Samson come with the shears to turn
the tables on poor Delilah!”
And on the instant she flashed out, breaking upon him in a storm
of passion. That he dared, that he dared, on no warrant but his
reputation for inhumanity, so to outrage and insult her.
“Go, sir!” she cried. “Return to your Nubians and Dacoits—to
countries where head-hunting is considered an honourable proof of
manliness!”
He stood, as outwardly insensate as a bull.
“Then you decline to deal?”
Her only answer was to throw herself into a chair, and to abandon
herself to incomprehensible weeping. But even her sobs seemed to
make no soft impression on him. He took a step nearer to her, and
spoke in the same civil and measured tone he had maintained
throughout.
“Take care, madam. I never yet set my will upon a capture that in
the long run escaped me.”
She checked her tears, to look up at him with a little furious laugh.
“Poor boaster!” she said. “I think, perhaps, that recounting of your
Tigrétier hath infected you with it.”
“By my beard, madam,” said he, “I will make that hair my own!”
“See,” she cried jeeringly, “how a boaster swears by what he has
not!”
Sir Richard felt to his chin.
“That is soon remedied,” said he. “And so, till my oath is
redeemed, to consign my razors to rust!” And with these words,
bowing profoundly, he turned and left the room.
Shortly after this he sailed to rejoin his expedition, and was not
again in England during a period of eighteen months.
At the end of that time, being once more in London, he devoted
himself—his affairs having now been ordered with the view to his
permanent residence in the country—to some guarded inquiries
about the Fair with Golden Hair. For some days, the season of the
town being inauspicious, he was unable to discover anything definite
about her. And then, suddenly, the news which he sought and
desired came in a clap.
He was walking, one day, down a street of poor and genteel
houses, when he saw her before him. He stood transfixed. There
was no doubting his own eyesight. It was she: tall, slender, crowned
with her accustomed glory, the flower of her beauty a little wan, as if
seen by moonlight. But what confounded him was her condition. Her
dress was mean, her gloves mended; every tag of cheap ribbon
which hung upon her seemed the label to a separate tragedy. Thus
he saw her again, the Fair with Golden Hair; but how deposed and
fallen from her insolent estate!
She mounted a step to a shabby door. While she stood there,
waiting to be admitted, an old jaunty cavalier came ruffling it down
the street, accosted her, and accompanied her within. She might
have glanced at Avenant without recognizing him. The rough dark
beard he wore was his sufficient disguise.
Sir Richard made up his mind on the spot, and acted promptly.
Having no intention to procure himself a notoriety in this business, he
rigidly eschewed personal inquiry, and employed an official informer,
at a safe figure, to ferret out the truth for him. This, epitomized,
discovered itself as follows:—
Cytherea—Venus Calva—Madonna of the magic girdle, who had
once reigned supreme between wealth and loveliness, who had
once eaten hearts raw for breakfast, feeding her roses as vampires
do, was desolate and impoverished—and even, perhaps, hungry. A
scoundrelly guardian had eloped with trust funds: the crash had
followed at a blow. Robbed of her recommendation to respect;
deposed, at once, from the world’s idolatry to its vicious solicitation,
she had fled, with her hair and her poor derided virtue, into squalid
oblivion; that, at least, she hoped. But, alas for the fateful recoils on
Vanity! She drives with a tight rein; and woe to her if the rein snap! A
certain libidinous and crafty nobleman, of threescore or so years,
had secured, in the days of the Fair’s prosperity, some little bills of
paper bearing that beauty’s signature. These he had politicly
withheld himself from negotiating, on the mere chance that they
might serve him some day for a means to humiliate one who, in the
arrogance of her power, had scoffed at his amatory, and perfectly
honourable, addresses. That precaution had justified itself. The peer
was now come to woo again, and less scrupulously, with his hand on
a paper weapon, one stroke from which alone was needed to give
the Fair’s poor drabbled fortune its quietus. She was at bay, between
ruin and dishonour.
Sir Richard came immediately to a resolve, and lost no time in
giving it effect. He wrote a formal note to the Fair, recalling himself
courteously to her remembrance, reminding her of his original offer,
and renewing it in so many words. He would do himself the honour,
he said, to wait upon her for her answer on such and such a day.
To this he received no reply; nor, perhaps, expected one. He went,
nevertheless, to his self-made appointment with the imperturbable
confidence of a strong man.
Passing, on his way, by a perruquier’s, he checked himself, and
stood for some moments at gaze in a motionless reverie. Then he
entered the shop, made a purchase, and, going to a barber’s,
caused himself to be shorn, shaved, and restored to the
conventional aspect. Thus conditioned, he knocked at the Fair’s
door, and was ushered up—bawled up, rather, by a slattern landlady
—into her presence.
She rose to face him as he entered. She had his letter in her hand.
Her beautiful hair, jealous, it seemed, to withdraw itself from the
curioso’s very appraisement, was gathered into and concealed under
a cap. Her features, thus robbed of their dazzling frame, looked
curiously, sadly childish and forlorn. There were dark marks round
her eyes—the scarce dissipated clouds of recent tears. Who can tell
what emotions, at sight of this piteous, hard-driven loveliness, stirred
the heart of the man opposite, and were repressed by his iron will?
“This letter, sir,” said the Fair, holding out the paper in a hand
which shook a little. “I have tacitly permitted you to presume a right
to a personal answer to that which it proposes, because such a
course appeared to me the least compromising. I cannot write my
name, sir, nowdays—as scandal doubtless hath informed you—but
Fortune will be using it to my discredit.”
Sir Richard bowed.
“There is this difference only, madam: my word is the bond of a
gentleman. I vowed you secrecy.”
“That is to assume, on your part,” she said quietly, “a
confidentialness which, in its insult to misfortune, is at least not the
act of a gentleman. Moreover, a gentleman, surely, had not taken
advantage of circumstances to propose to destitution what affluence
had once refused him.”
“Beware, madam!” said Avenant. “Pride must make some
sacrifices to virtue. If, in renewing a pure business offer, I, a simple
instrument in the hands of Providence, give you an opportunity to
maintain that priceless possession unimpaired, would it not be the
truer self-respect to secure your honour at whatever cost to your
sentiments?”
“I thank you, sir,” she said. “I have not forgotten, nor forgotten to
resent, my self-constituted Mentor. I will assure him that, for the
matter of my virtue, it is safe in my hands, though I have to arm
those against myself.”
“Good heavens, madam!” cried Avenant. “You are not at that
resource?”
“Give yourself no concern, sir,” she answered coldly. “The moral I
learned of your insult, was to save myself in its despite.”
His deep eyes glowed upon her.
“You have sold your hair?” he said.
“Yes,” she answered; “to pay my debts. ’Twas your letter decided
me.”
“At a thousand pounds?”
“At a hundred.”
Then she added, as if irresistibly, because she was still little more
than a child, “And now, sir, how is the boaster vindicated? But your
oath, I perceive, still goes beardless.”
“Within the hour only,” said he; and, thrusting his hand into his
breast, he drew out the long tresses of the Fair With Golden Hair.
She stared, amazed a moment; then threw herself upon her knees
by a chair, weeping and crying out—
“O, I hate you, I hate you!”
He strode, and stood over her.
“I saw them through a window as I came. How could I mistake
them? There is not their like in the world. But now, my oath
redeemed, it is for you to say if I am to destroy them.”
“O, my hair!” she wept; “my one beauty!”
“I have staked all on this,” he cried. “If your hair was your one
beauty, my beard alone redeemed me from appalling ugliness by so
much as it hid of me. Well, I have lost on both counts, if the net result
is your hatred.”
She looked up, with drowned bewildered eyes, and held out her
hand blindly.
 “Give me back my hair,” she said, “and you shall have the hundred
pounds.”
“Nay, sweet Delilah,” quoth he; “for that would be to return you
your strength, and I want you weak.”
Her arm dropped to her side.
“That you may insult me with impunity!” she said bitterly.
“Ah, Delilah!” he cried; “is it so bad, that the offer of my hand and
heart is an insult to a woman?”
She sank back, sitting on her heels. From under her cap, fallen
awry, curled shavings of gold hung out—the residue of a squandered
wealth. Her eyes were wide with amazement.
“So bad?” she whispered. “Are you asking me to marry you?”
He was not a conformable wooer. The love-wise sex shall say if he
was a diplomatic one. He threw himself on his knees beside the Fair,
seized her in his bear-like grip, and kissed her lips.
“Now,” he said, “it is neck or nothing. None but a parson can wipe
out the stain. Hate me now, and put Love to bed for by and by.”
She smiled suddenly—like the rainbow; like an angel.
“Yes,” she said, “if you insist. But the poor thing has slept so long
in my heart, that it would fain wake up at last, and confess itself.”

The peer took his settlement with a very bad grace; but he had to
take it, and there was an end of him.
“Avenant,” whispered the Fair, on the evening of their wedding
day, “I have been vain, spoiled, perhaps untruthful. But I wished to
tell you—you can put me to sleep on the middle shelf of your
cupboard.”
“It has been converted into a closet for skeletons,” he said. “I was
a bachelor then.”
 THE LOST NOTES
The faculty of music is generally, I believe, inimical to the
development of all the other faculties. Sufficient to itself is the
composing gift. There was scarcely ever yet a born musician, I do
declare, who, outside his birthright, was not a born ass. I say it with
the less irreverence, because my uncle was patently one of the rare
exceptions which prove the rule. He knew his Shakespeare as well
as his musical-glasses—better than, in fact; for he was a staunch
Baconian. This was all the odder because—as was both early and
late impressed upon me—he had a strong sense of humour.
Perhaps an eternal study of the hieroglyphics of the leger lines was
responsible for his craze; for craze I still insist it was, in spite of the
way he took to convince me of the value of cryptograms. I was an
obstinate pupil, I confess, and withstood to the end the fire of all the
big guns which he—together with my friend, Chaunt, who was in the
same line—brought to bear upon me.
Well, I was honest, at least; for I was my uncle’s sole provisional
legatee, and heir presumptive to whatever small fortune he had
amassed during his career. And day by day, as the breach between
us widened, I saw my prospect of the succession attenuating, and
would not budge from my position. No, Shakespeare was
Shakespeare, I said, and Bacon, Bacon; and not all the cyphers in
the world should convince me that any profit was to be gained by
either imagining or unravelling a single one of them.
“What, no profit!” roared my uncle. “But I will persuade you, young
man, of your mistake before I’m done with you. Hum-ti-diddledidee!
No profit, hey? H’m—well!”
Then I saw that the end was come. And, indeed, it was an open
quarrel between us, and I was forbidden to call upon him again.
I was sorry for this, because, in his more frolicsome and
uncontroversial moments, he was a genial companion, unless or
until one inadvertently touched on the theme, when at once he
exploded. Professionally, he could be quite a rollicking blade, and his
settings of plantation songs were owned to be nothing less than lyric
inspirations. Pantomime, too, in the light of his incidental music, had
acquired something more than a classical complexion; and, in the
domain of knockabout extravaganza, not only did the score of “The
Girl who Knew a Thing or Two” owe to him its most refined numbers,
but also the libretto, it was whispered, its best Attic bonnes-bouches.
However, all that good company I must now forgo—though Chaunt
tried vainly to heal the breach between us—and in the end the old
man died, without any visible relenting towards me.
I felt his loss pretty keenly, though it is no callousness in me to
admit that our long separation had somewhat dulled the edge of my
attachment. I expected, of course, no testamentary consideration
from him, and was only more surprised than uplifted to receive one
morning a request from his lawyers to visit them at my convenience.
So I went, soberly enough, and introduced myself.
“No,” said the partner to whom I was admitted, in answer to a
question of mine: “I am not in a position to inform you who is the
principal beneficiary under our friend’s will. I can only tell you—what
a few days before his death he confided to us, and what, I think,
under the circumstances, you are entitled to learn—that he had quite
recently, feeling his end approaching, realized on the bulk of his
capital, converted the net result into a certain number—five, I think
he mentioned—of Bank of England notes, and… burned ’em, for all
we know to the contrary.”
“Burned them!” I murmured aghast.
“I don’t say so,” corrected the lawyer drily. “I only say, you know,
that we are not instructed to the contrary. Your uncle” (he coughed
slightly) “had his eccentricities. Perhaps he swallowed ’em; perhaps
gave ’em away at the gate. Our dealings are, beyond yourself, solely
with the residuary legatee, who is, or was, his housekeeper. For her
benefit, moreover, the furniture and effects of our late client are to be
sold, always excepting a few more personal articles, which, together
with a sealed enclosure, we are desired to hand over to you.”
He signified, indeed, my bequest as he spoke. It lay on a table
behind him: A bound volume of minutes of the Baconian Society; a
volume of Ignatius Donnelly’s Great Cryptogram; a Chippendale tea-
caddy (which, I was softened to think, the old man had often known
me to admire); a large piece of foolscap paper twisted into a cone,
and a penny with which to furnish myself with a mourning ring out of
a cracker.
I blushed to my ears, regarding the show; and then, to convince
this person of my good-humoured sanity, giggled like an idiot. He did
not even smile in reply, the self-important ass, but, with a manner of
starchy condescension, as to a wastrel who was getting all his
deserts, rose from his chair, unlocked a safe, took an ordinary sealed
envelope from it, handed it to me, and informed me that, upon giving
him a receipt, I was at liberty to remove the lot.
“Thanks,” I said, grinding my astral teeth. “Am I to open this in your
presence?”
“Quite inessential,” he answered; and, upon ascertaining that I
should like a cab called, sent for one.
“Good morning,” he said, when at last it was announced (he had
not spoken a word in the interval): “I wish you good morning,” in the
morally patronizing tone of a governor discharging a prisoner.
I responded coldly; tried, for no reason at all, to look threatening;
failed utterly, and went out giggling again. Quite savagely I threw my
goods upon the seat, snapped out my address, closed the apron
upon my abasement, and sat slunk into the cavity behind, like a
salted and malignant snail.
Presently I thumped the books malevolently. The dear old man
was grotesque beyond reason. Really he needn’t have left life cutting
a somersault, as it were.
But, as I cooled outwardly, a warmer thought would intrude. It
drew, somehow, from the heart of that little enclosure lying at the
moment in my pocket. It was ridiculous, of course, to expect anything
of it but some further development of a rather unkind jest. My uncle’s
professional connexion with burlesque had rather warped, it would
appear, his sense of humour. Still, I could not but recall that story of
the conversion of his capital into notes: and an envelope——!
Bah! (I wriggled savagely). It was idiotic beyond measure so to
flatter myself. Our recent relations had precluded for ever any such
possibility. The holocaust, rather! The gift to a chance passer-by, as
suggested by that fool of a lawyer! I stared out of the window,
humming viciously, and telling myself it was only what I ought to
expect; that such a vagary was distinctly in accordance with the
traditions of low comedy. It will be observed that I was very
contemptuous of buffoonery as a profession. Paradoxically, a joke is
never played so low as when it is played on our lofty selves.
Nevertheless, I was justified, it appeared. It may be asked, Why
did I not at once settle the matter by opening the envelope in the
cab? Well, I just temporized with my gluttony, till, like the greedy boy,
I could examine my box in private—only to find that the rats had
devoured all my cake. It was not till I was shut into my sitting-room
that I dared at length to break the seal, and to withdraw——
Even as it came out, with no suggestion of a reassuring crackle, I
realized my fate. And this was it: please to examine it carefully—

Now, what do you make of it? “Ex nihilo nihil fit,” I think you will say
with me. It was literally thus, carefully penned in the middle of a
single sheet of music-paper—a phrase, or motif, I suppose it would
be called—an undeveloped memorandum, in fact—nothing else
whatever. I let the thing drop from my hand.
No doubt there was some capping jest here, some sneer, some
vindictive sarcasm. I was not musician enough to tell, even had I had
spirit for the endeavour. It was unworthy, at least, of the old man—
much more, or less, than I deserved. I had been his favourite once.
Strange how the idée fixe could corrode an otherwise tractable
reason. In justice to myself I must insist that quite half my
disappointment was in the realization that such dislike, due to such a
trifle, could have come to usurp the old affection.
By and by I rose dismally, and carried the jest to the piano. (Half a
crown a day my landlady exacted from me, if I so much as thumped
on the old wreck with one finger, which was the extent of my talent.)
Well, I was reckless, and the theme appeared ridiculously simple.
But I could make nothing of it—not though Mrs. Dexter came up in
the midst, and congratulated me on my performance.
 When she was gone I took the thing to my chair again, and
resumed its study despondently. And presently Chaunt came in.
“Hullo!” he said: “how’s the blooming legatee?”
“Pretty blooming, thanks,” I said. “Would you like to speculate in
my reversion? Half a crown down to Mrs. Dexter, and the use of the
tin kettle for the day.”
“Done,” he said, “so far as the piano’s concerned. Let’s see what
you’ve got there.”
He had known of my prospective visit to the lawyers, and had
dropped in to congratulate me on that performance. I acquainted him
with the result; showed him the books, and the tea-caddy, and the
penny, and the remnants of foolscap—finally, handed him the
crowning jest for inspection.
“Pretty thin joke, isn’t it?” I growled dolefully. “Curse the money,
anyhow! But I didn’t think it of the old man. I suppose you can make
no more of that than I can?”
He was squinting at the paper as he held it up, and rubbing his
jaw, stuck out at an angle, grittily.
“H’m!” he said, quite suddenly, “I’d go out for a walk and revive
myself, if I were you. I intend to hold you to that piano, for my part;
and you wouldn’t be edified.”
“No,” I said: “I’ve had enough of music for a lifetime or so! I fancy
I’ll go, if you won’t think me rude.”
“On the contrary,” he murmured, in an absorbed way; and I left
him.
I took a longish spin, and returned, on the whole refreshed, in a
couple of hours. He was still there; but he had finished, it appeared,
with the piano.
“Well,” he said, rising and yawning, “you’ve been a deuce of a time
gone; but here you are”—and he held out to me indifferently a little
crackling bundle.
Without a word I took it from his hand—parted, stretched, and
explored it.
“Good God!” I gasped: “five notes of a thousand apiece!”
He was rolling a cigarette.
“Yes,” he drawled, “that’s the figure, I believe.”
“For me?”
 “For you—from your uncle.”
“But—how?”
He lighted, took a serene puff or two, drew the jest from his
pocket, and, throwing it on a chair, “You’ll have to allow some value
to cryptograms at last,” he said, and sat down to enjoy himself.
“Chaunt!”
“O,” he said, “it was a bagatelle. An ass might have brayed it out at
sight.”
“Please, I am something less than an ass. Please will you interpret
for me?” I said humbly.
He neighed out—I beg his pardon—a great laugh at last.
“O,” he cried: “your uncle was true blue; he stuck to his guns; but I
never really supposed he meant to disinherit you, Johnny. You
always had the first place in his heart, for all your obstinacy. He took
his own way to convince you, that was all. Pretty poor stuff it is, I’m
bound to confess; but enough to run your capacities to extinction.
Here, hand it over.”
“Don’t be hard on me,” I protested, giving him the paper. “If I’m all
that you say, it was as good as cutting me off with a penny.”
“No,” he answered: “because he knew very well that you’d apply to
me to help you out of the difficulty.”
“Well, help me,” I said, “and, in the matter of Bacon, I’ll promise to
be a fool convinced against my will.”
“No doubt,” he answered drily, and came and sat beside me. “Look
here,” he said; and I looked:—

“You know your notes, anyhow,” said he. “Well, you’ve only got to
read off these into their alphabetical equivalents, and cut the result
into perfectly obvious lengths. It’s child’s play so far; and, indeed, in
everything, unless this rum-looking metronome beat, or whatever it
may be, bothers you for a moment.”