There's nothing new about austerity. It's a program of lower deficit spending, reduced government expenditure, and debt reduction. This is a part of a program that goes by another name. Neoliberalism. Neoliberalism came to be associated with policies dubbed the Washington Consensus.
It's been tried in many places. In the 80's countries in Latin America attempted to install governments that expanded social spending, income redistribution and the like. Basically the opposite of austerity. The response was a terrorist war and imposition of thuggish governments that did in fact impose the Washington Consensus. In Haiti the people attempted to install Aristide. Once again he advocated progressive economic policies. He was ousted and replaced by a World Bank official that retained the austerity type programs. The failure of these methods is obvious.
But let's suppose you're not a history buff and you're unaware of this. That's fine. Take a look at the places where austerity has been implemented since the turn of the century in Europe. It's places like Ireland, Spain, Italy, and Greece. How have they performed since their austerity measures? About as bad as could possibly be conceived.
Not every country has gone that path. Take Iceland. The movie "Inside Job" used Iceland as it's initial focal point. The reason is because it was just that bad. The failure was so big that a bank bail out wasn't even an option. So they had no choice but to tell creditors to take a hike. They in fact expanded the social safety net. Once again the opposite of austerity. They're one of the few European nations doing rather well.
Precisely the same thing happened in Argentina. In 2001 they defaulted on debt. Rather than bailing out the banks (rewarding the rich) and repaying that by punishing the poor (implementing cuts in social services) they did the opposite. Screw the creditors. Expand the welfare state. The result? An economy that is growing like gangbusters.
What else would you expect? Impose Haitian and Latin American economic models on countries and those countries go straight down the crapper just like Haiti and countries in Latin America did. It doesn't work. We've known it doesn't work for decades. We're learning again as we watch even 1st world nations now falter.
But it's not just that it doesn't work. It's unjust. It's a reward to the rich for their abuse paid for by the poor. Mark Blyth, professor at Brown University explains why.