True, the neoclassically trained economist Paul Krugman does echo the ideas of the leftist journalist Doug Henwood, but what is truly surprising is that someone as mainstream as Krugman even mentioned the almost unknown Polish economist Michał Kalecki (unknown because neoclassical economics, which is simply called economics today, basically has no sense of its own history).

Here is the matter: Out of the many explanations for why capital in the 70s decided to end its truce with labor, a truce that began around 1947 and initiated what many call the Golden Age of Capitalism (a great book on this subject is Capitalism Unleashed:Finance, Globalization, and Welfare by late Andrew Gyn—the link leads you to my highlights on the Kindle edition, which I hope are visible to the public), two stand, I think, closest to the truth: one is by the Italian Marxist economist Carlo Vercellone and the Polish economist Michał Kalecki.

With Vercellone, the end of the Golden Age of Capitalism has its roots in the rise of what the Marxist Autonomists call the "general intellect," a form of social production first recognized or mentioned by Marx in the Grundrisse. Vercellone argues that with the generalization or massification of productive techniques, knowledge, and information, the rich saw the power they had over the population deteriorate considerably. The more developed the society became, the more its subjects depended on one another rather than capital to make things happen. To escape this politically dangerous situation, the rich migrated from the manufacturing sector to the financial one. Banks, unlike factories or shops, can only be mastered by capital. And so the financialization of society (the movement from production to rent) is all about extending and spreading the power of a very small and specific class of people.

As for Kalecki, he wrote:

[U]nder a regime of permanent full employment, the "sack" would cease to play its role as a disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension.

So the 70s were not about the collapse of Keynesian economics—indeed, it was a great success for the West—but the reinstitution of class power at the price of capitalism itself. As the South Korean economist Ha-Joon Chang frequently points out, capitalism has not performed as well under neoliberalism as it did under Keynesian (indeed, Kaleckian) macroeconomic policies. And so Krugman writes:

Two and a half years ago Mike Konczal reminded us of a classic 1943 (!) essay by Michal Kalecki, who suggested that business interests hate Keynesian economics because they fear that it might work — and in so doing mean that politicians would no longer have to abase themselves before businessmen in the name of preserving confidence.

In short: Austerity is a political rather than economic program.