On this blog, we talk a lot about internecine publishing issues, broad business topics, and overarching technology trends. But one thing we can’t ignore is the larger economic picture around the world, where inflated real estate values, opaque risk vehicles, and bank liquidity all collapsed within a relatively short period, thrusting Western economies into a downward spiral few are grappling with competently. As Winston Churchill said in 1936:

So they [the Government] go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent.

The response overall has been framed politically in parochial images of home budgets and bank books — austerity in tough times, not spending money you don’t have, and the like. But austerity for national economies struggling to regain lost wealth and find growth again is a faulty strategy. Economies that have attempted it — Spain, Greece, France, just to name three — are all worse off than they were when the problems started. Unemployment in Spain is now at 21%, and retail sales are down 6.6%. Greece’s austerity measures led to riots and are likely to lead to more convulsions. France is in a vicious cycle of austerity leading to scarcity leading to higher prices leading to lower consumption leading to lower revenues leading to slower growth leading to more austerity and around again.

As the United States debates increasing its debt ceiling while cutting government spending, it seems we here are also contemplating the failed path of austerity, even as joblessness spreads and the prospects for a near-term recovery diminish.

The chilling part of the current trends in thinking is how “baked in” the notion of austerity and a balanced checkbook are becoming. It’s unprecedented in American history, according to the American History Guys who run the BackStory podcast (these guys are no flakes — one is the Thomas Jefferson Memorial Foundation Professor of History at the University of Virginia; another is President of the University of Richmond and served as Hugh P. Kelly Professor of History and Dean of the College of Arts and Sciences at the University of Virginia; and the third is Professor of History at the University of Virginia and Director of the Fellowship Program at Governing America in a Global Era Program at UVA’s Miller Center of Public Affairs).

The notion of debt, which is becoming newly toxic in American politics, once served to bind the nation in the early history of the United States. In fact, by relieving states of their debts, the federal government was able to unite various factions in a way other enticements couldn’t. But while debts were viewed as a way of aligning interests and a reasonable amount of debt was accepted as necessary for growth and prosperity, the American political enterprise has always accepted that paying off debts was also necessary — mainly by raising revenues through taxes, bond drives, and other sensible approaches.

Now, however, we have profligate government spending started under a Republican administration with no revenue offsets to lighten the debt burden, while the same Republican party is refusing tax increases and insisting on sizable cuts to services for the poor, sick, elderly, young, and middle-class.

When the real estate bubble popped, it decimated the middle-class. In the United States, there has only been the most tepid of political responses focused on reviving this crucial part of the population and economy. Similar weak responses have led to deep and long-term problems for economies around the world:

And make no mistake, the middle class has been ruined: Its wealth has been decimated, its income isn’t even keeping pace with inflation, and its faith in the American economy has been shattered. Once, the middle class grew richer each year, grew more comfortable, enjoyed a higher living standard. It was real progress in material terms. . . . The prosperity of the middle class has been the chief engine of growth in the economy for a century or more. But now our mass market is no longer growing. How could it? The middle class doesn’t have any money.

The middle-class has been a source of growth for many sectors of most economies, but it has run out of coping mechanisms — having both parents work, relying on credit card debt, and finally relying on home values and mortgage debt. With unemployment barely budging, credit cards increasingly unavailable or onerous, and home values sinking, there are no clear options left.

This has very real implications for the growth of higher education overall. With less faith in the future, less confidence in economic improvement, and less money to spend, a major feeder into higher education is withering before our eyes. Austerity at the government level only compounds this, with student loans and financial assistance likely to face the chopping block as well.

Faculty are feeling this, in ways both subtle and unmistakable. A recent story by Leonard Cassuto in the Chronicle of Higher Education shone a light on how stagnation in the economy equates to stagnation for people in academia:

Departments that sought to “improve” did so by hiring high-profile researchers. Notice that I’m using the past tense here. The academic “star system,” as it’s been named, is confronting economic weakness in one of its foundation pillars: The recession is now keeping many ambitious senior faculty members—especially those in the hard-hit humanities—in place.

This has hit the humanities especially hard, with 40%+ drops in openings across universities.

However, lack of mobility between institutions and fewer paths for advancement don’t mean that academics will stop wanting to publish:

The intramural gold standard remains publication. One need not be a published economist to conclude that if most raises are awarded for publication, then most professors will direct their energies toward publishing. And the entire academic value system is built around publication: All of those vexed ranking systems that everyone complains about, but that everyone looks at anyway, measure faculty value mostly through publication and citation records. Publication is still the attainment that is most easily understood across institutional borders—and within them.

What this means for people in scholarly communications can’t be ignored — the pressure to create, expand, and offer publications to a growing and perhaps increasingly tenacious academic community will continue. With scraps left to fight over, the fights could become more heated. Depressingly, the supply-side pressure will be increasing while the demand-side ability to pay will stagnate:

• For open access publishers, funding from authors could slowly dry up. While there can be significant latency between austerity and diminished funding in aggregate, economics dictate that fewer authors will have access to fewer funds over time.
• For subscription publishers, price increases based solely on tradition and prior trends will be harder to implement as the academic economy stalls further and revenue options evaporate.
• For librarians, budgets that are already constrained and difficult to expand will face further cuts and constraints as overarching financial and growth issues at the institutional level bear down.
• For publishers with significant advertising revenues, the news may be slightly better — the battle for scarce dollars could lead to less attrition in the advertising space. However, as the consequences build over time, these dollars may also start to evaporate. Businesses have shown a tendency to hoard cash during the downturn so far.
• For ancillary revenues from reprints and permissions, stagnation hits again — fewer new titles or revised editions are commissioned, so fewer permissions are needed; reprint sales slow or begin to shrink significantly as just-in-time begins to look better and better.

This may sound like Chicken Little crying “the sky is falling,” but there is real risk in a long-cycle economic and political era defined by austerity, analogs to household budgets as national budgets, and disdain for governmental power and spending. It has astounded me how weak and ineffectual President Obama has appeared in the face of opposition on these issues, and he is not alone — the UK, Spain, Greece, Ireland, France, Japan, and other nations have at various points over the past 10-20 years (most of them more recently) embraced austerity, only to see it stall their economies, fail to solve their debt problems, drive business investments elsewhere, and compound the problems they sought to address.

As a small part of this larger story, we can’t ignore the potential implications for research funding, information funding, and scholarship.