Why the intellectual debate (and the R&R debacle) can't change Europe

There has rightly been much ado about the Reinhart-Rogoff affaire, an academic and intellectual debacle of two prominent economists who provided gunpowder to austerians' claim that terrible things happen when a country's debt-to-GDP ratio rises above the imaginary tipping point of 90%. The notorious R&R's paper where this was suggested, it turns out, was based on fuzzy math, buggy Excel coding and data cherry picking.

This was a huge thing, possibly a tipping point, because the debate that followed helped to unveil the simple truth that behind the austerian claims there were class interests, for actually austerity is good for the 1%.

Dean Bakers nicely spelled out why in few broad strokes:
"High unemployment weakens workers' bargaining power allowing employers to get the vast majority of the gains from productivity growth over the last 5 years. While the rise in profit shares may not always offset the loss in profits due to weaker growth, this is likely true today in many countries. From this vantage point, austerity is just great for those on top. The pressure for austerity also opens the door for lowering tax rates on the wealthy in the future, for example by cutting back programs like Medicare and Social Security in the United States, and their equivalents overseas. If these sorts of social commitments can be reduced, then the wealthy can look forward to being able to keep more of their income 10-20 years in the future. And if we think there is nothing that the government can do about unemployment because of the demands of the austerity gods, then we can blame workers' problems on their lack of skills and inability to deal with the technological advances of a global economy.
In short, austerity serves some very useful purposes for the rich and powerful. […] It is extremely useful to have ostensibly reputable studies like Reinhart and Rogoff that can be used to make the case that austerity serves the general good and not just the rich."

Being the interests thus disposed, can a change in the intellectual debate change policies? I'm not a cynic, ideas do change the world, if not otherwise then at least by unveiling particular interests behind the claims of the general good, which is always salutary.

So, you'd expect all this would be beneficial for the debate in Europe on austerity. After all, eurocrats like Olli Rehn and José Barroso were blatantly using R&R findings to support their austerity shrieks, so you'd at least expect their stances to be now shaken.

But not so soon, for there are good reasons why all this debate around R&R is raising much less dust and shaking much less the austerians in Europe than in the USA. Why? Because if you want even to imagine the possibility of a serious debate about what's the general good of a country, well, you first actually need to have a country. That is, a moral community where people feel and are held responsible for the good of other peoples, a community where they care for each other on a higher degree that just on that of the universal human piety.

Sadly, The European Union proved to be no such community. Indeed, the effects of the European austerity are very different among European countries. And it economically favours – at least for the moment – the countries of the northern economic core, led by Germany.  So in Europe, you don't have just 1% vs. 99%, but also some countries vs. other countries. 

That it is not only an interplay of conflicting class interests, but also among countries, is demonstrated by a curious observable fact. While in the USA and in the UK, the right is austerian and the left is pro-stimulus, this is not the scheme of things on the Continental Europe. Here the southern European right is openly antiausterian (take for example Berlusconi and Rajoy), while the left in the north is austerian (take German Spd).

Being things as they are in Europe, what effect may possibly have an intellectual debate, if any?

Which brings me to the question: what then can end the austerity in Europe? Some say Germany will change position when things get so bad it starts to feel the bites of the depression (say, from the plunge of the demand from its European commercial partners). I wouldn't be so sure that's enough, for there would be further and more prosaic political obstacles: German politicians have told their voters that it's a morality play, that PIIGS must suffer for their past sins, and that Germany should not pay the bills for their past irresponsible behaviour (which, by the way, is at most a half-truth, it may hold for Greece, but pre-slump Spain was actually very responsible, with low debt and running budget surpluses).

So if and when the situation on the field changes for Germany, their politicians will be reluctant to change their moral posturing, and will probably stick to their positions far beyond the tipping point of depression starting to seriously harm Germany. Things will have to go far beyond that tipping point. As the Player from "Rosencrantz and Guildersten are Dead" would have put it: "Generally speaking, things have gone about as far as they can possibly go, when things have gotten about as bad as they can reasonably get."

To see this reluctance at work, don't look far away, but just cross the channel. It is now clear by all the reasonable standards that Cameron's economic policy was self-defeating and has double-dipped the UK economy. But notwithstanding all that evidence, the Chancellor of the Exchequer Ms. Osborn's faith in austerity seems unshaken. Even when the historically austerity-maddened IMF is telling him to back off and soften.

So, no, I'm much more a sceptic on this, the fact the keynesians are winning the intellectual debate will change little things in Europe, and if it does, it will be slowly and painfully. And the reason is that Europe has proven not to be a moral community and a political space where a true public debate matters.