Austerity: the global reach of a bad ideology

2014-12-25-racetothebottom-thumbThe Western world is in the grip of a bad idea that its governments can’t seem to shake off—although its peoples are starting to.

The idea is called “austerity.” It is the belief that public goods must be destroyed in order to increase private wealth.

Banks impose this policy on indebted nations such as Greece.  They say the governments must curtail public services, including schools and public health, while raising taxes and adopting economic policies that will result in higher prices and lower wages.

Supposedly the money saved can be used to pay off the nation’s debts.  The problem is that so-called austerity destroys the nation’s ability to generate new wealth, and so, as long as countries accept the “austerity” meme, they stay in debt indefinitely.

Nations that default on their debts, as American states frequently did in the era before the Civil War, are threatened with loss of credit.  But the fact is that the banking system literally has more money than the bankers know what to do with.  In practice, lending always starts up again after a few years.

Members of the European Union that use the Euro as their currency have a special problem.  Historically the exchange rates of currencies fell when the issuing nation had a balance of payments deficit.  This tended to bring the balance of trade into balance, because their exports became cheaper in relation to foreign currencies and their imports became more expensive.

Under austerity, nations attempt to achieve the same thing by increasing prices, lowering wages and cutting government services.  Unlike with change in the exchange rate, the burden does not fall upon the whole nation equally, but only on the less wealthy and politically powerless.

Austerity involves raising taxes, but never taxes on the wealthy.  That is because the wealthy are considered to be the “job creators” who must be catered to in order to bring about economic recovery.

The “job creator” philosophy is popular here in the USA.  The saying is, “No poor man ever gave me a job.”  The conclusion is that the key to jobs is to have more and richer rich people.

Well, we Americans have made that experiment, repeatedly, and it hasn’t worked.

If we want mass prosperity, we need to invest in the things that create wealth—education, public infrastructure and scientific research—and then see that the benefits of the new wealth are widely spread, so as to create markets for private business.

We Americans once made that experiment, too, and it did work.


Thomas Piketty: the rise of anti-austerity parties good news for Europe by Stephen Burgen for The Guardian.

The French economist Thomas Piketty has signed on as an informal policy adviser to Polemos (“We Can”), the new Spanish anti-austerity party.  Piketty is famous for his recent study showing how wealth becomes ever more concentrated in the hands of a tiny elite, in the absence of countervailing forces.

We Americans like to think of ourselves in the forefront of world progress, but we should not be too proud to learn from leaders and thinkers in countries such as Spain who are more aware of the realities of today’s world than most of us seem to be.

Trojan Hearse: Greek Elections and the Euro Leper Colony by Greg Palast.

The investigative reporter Greg Palast criticizes Syriza, the anti-austerity Greek party, for committing to remain within the Euro zone.  He said that is like promising to cure leprosy without leaving the leper colony.

Enter the Carpetbaggers: Ukraine’s New Finance Minister a U.S. Citizen, New Economy Minister from Lithuania by Mike Shedlock for Misha’s Global Economic Trends.

The Lure of Foreign Investment in Ukraine – Meet Jaanika Merilo by John Helmer for Dances With Bears.

d1610The Ukraine government is full of foreign carpetbaggers who will manage the sale of national assets to foreign interests and local oligarchs.  They include Jaanika Merilo, pictured at right, a native of Estonia who will give advice on foreign investment to Alvavas Abramovicus, the Lithuanian-born minister of economic development.  Rounding out the economic team is the U.S.-born Natalie Jaresko, minister of finance.

Dianne Feinstein’s husband’s real estate firm poised to make $1 billion selling post offices by Stephen Rosenfeld for AlterNet.

When national assets are sold to private interests, it is almost always at a fire-sale price.

Louisiana higher education officials say campus closures are a possibility by Julia O’Donoghue for the Times-Picayune.

Austerity in action.

THE BIG SATISFICE on Gin and Tacos.

The writer uses a typically bad airline flight as an example of how we Americans, who once prided ourselves on being the best and having the best, now have taught ourselves to be satisfied if something is not the worst.

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2 Responses to “Austerity: the global reach of a bad ideology”

  1. prayerwarriorpsychicnot Says:

    Reblogged this on Citizens, not serfs.


  2. Bitten in the bum by serial promiscuity | The Nation said No Thanks! Says:

    […] have jumped on a Greek anti-austerity program. It ignores the real economists’ debate … I found this view more credible … I look forward to your response. There’s more interest in your blog from […]


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