As the Austrian economist Stephan Schulmeister recently noted, the politics of austerity in the Eurozone are dominated by what the Germans call ‘Swabian housewife logic’. If any individual Swabian husband is spending more on drink than his pay-packet permits, it makes sense for his wife to rein in his expenditure and keep the family out of debt. If, however, such austerity is imposed on ALL Swabian husbands at the same time there will be unforeseen macroeconomic consequences along the lines that Keynes set out in the General Theory. Total consumption spending will fall, and with it the demand for labour. Many Swabian housewives will find their husbands out of a job and the family finances in ruins. To deny this entails a (very damaging) fallacy of composition.

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