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Death to Austerity

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Posted on May 7, 2012
(CC-BY-SA)

By Eugene Robinson

Economic austerity is a dangerous, self-defeating intellectual fad. Perhaps I should say that’s what it was, given Sunday’s election results in Europe. Perhaps I should also say good riddance.

Voters in France, Greece and even Germany—a hotbed of the austerity cult—told their political leaders, in no uncertain terms, that boosting economic growth is more important than cutting government spending. Here in the United States, I hope that Democrats, at least, were paying attention; I fear that the addled ideologues who control the Republican Party will never get the message.

On Sunday, French voters elected Socialist Party candidate Francois Hollande as president, ousting center-right incumbent Nicolas Sarkozy in what amounted to a referendum on Sarkozy’s embrace of austerity.

Sarkozy and German Chancellor Angela Merkel agreed on a common policy of budget cuts and partial “reform”—a euphemism for “dismantling”—of the welfare state. This, they decided, was the way to return Europe to prosperity and save the European Union’s common currency, the euro, from collapse.

But on Sunday, even Merkel got a message from voters: Her party was punished in local elections in the northern German state of Schleswig-Holstein, where it appeared that a center-left, anti-austerity coalition would end up in control.

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Also on Sunday, voters in Greece tried their best to say no to austerity. For them, sadly, it’s probably too late. The fiscal and debt crises there were so acute that the Greeks, from the start, have had only painful choices.

One obviously bad option would have been to withdraw from the euro, default on a mountain of debt and slowly climb back from a deep economic depression. Officials in Athens decided to go with a worse option—stay with the euro, impose draconian austerity, muzzle anyone who utters the word “default”—that also sent the country into a deep economic depression with no apparent way out.

Yes, one lesson from the Greek experience is that there are limits. There is a point at which deficits become too large, debt too crushing and social spending too generous. The lifestyle a nation enjoys must bear some relationship to what that nation produces.

But another clear lesson is that austerity has to be seen as a means, not an end. The goal is to recover from the massive blow inflicted by the global financial meltdown and return to prosperity. This may involve a measure of austerity—but definitely requires considerable economic growth, which should be policymakers’ first priority.

The reason is simple: If you can get the economy growing again, all other aspects of the crisis become more manageable. Debt and deficits shrink as a percentage of national output. Unemployment declines, as does the need for social spending.

But putting a chokehold on government spending at a time when economies are just sputtering back to life—as the austerity fetishists have tried to do in Europe, and as Republicans solemnly pledge to do in the United States—is monumentally self-defeating. Governments end up magnifying the constituent parts of the economic crisis, not minimizing them.

In Britain, the economy was growing when Prime Minister David Cameron took office two years ago. Adhering to the platform of his Conservative Party, Cameron took the austerity route with a host of gloom-and-doom budget cuts. Now unemployment is rising and the economy appears to be slipping back into recession. Nice job, Tories.

That loud chorus of “Duh!” you just heard came from the many leading economists who have been screaming at political leaders for years now that we’ll never cut our way out of this economic slump and instead must grow our way out. It is obvious that deficits, debt loads and entitlement spending have to be brought under control—but equally obvious that the necessary adjustments should be made when the economy is going great guns, not when it’s gasping for air.

It should be noted that there are some economists who disagree. They argue that draconian cuts in government spending will somehow awaken the animal spirits of private-sector executives, entrepreneurs and financiers. They further argue that austerity is needed to combat the scourge of inflation, although the best term to describe inflation in today’s economy is “imaginary.”

Mitt Romney and the GOP subscribe to the pro-austerity view. They are of course entitled to their opinion, even if it happens to be wrong. I sincerely wish them all the electoral success their ideological allies are having across the Atlantic.


Eugene Robinson’s e-mail address is eugenerobinson(at)washpost.com.
   
© 2012, Washington Post Writers Group


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By terry p, May 11, 2012 at 1:50 pm Link to this comment
(Unregistered commenter)

By DornDiego, May 10 at 8:13 am

“I can only wish most of the constant commenters…......”
——————————————

Your wish is granted, I’m sure—well, pretty sure those who read this article did pay attention.

The trick is getting the average voter and potential voter in the USA to pay attention to realities of austerity and who actually benefits as well as our friends in Europe. I’d guess the readers had a pretty good notion of the substance before this article was even written.

When you take away citizens ability to earn a decent living, you take away spending. Business suffers as well as the unemployed or underemployed. But the sly banksters make out either way with practically no gamble.

So, how painful do you think it is for banksters who manipulate markets and impose austerity from their Ivory towers?


tp:?)

PS: Check out “The Web of Debt” by Ellen Brown

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By DHFabian, May 10, 2012 at 10:13 am Link to this comment

Americans fully embraced austerity measures (at least, as applied to the poor) back when Clinton rolled out his “reforms.”  Surely we don’t want to limit austerity to the poor alone.

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By DornDiego, May 10, 2012 at 9:13 am Link to this comment

I can only wish most of the constant commenters who are inexplicably attracted to
Eugene Robinson’s work let what he has to say seep into their Balkanized minds,
before they begin their cockeyed economic analyses, citing dubious facts and
temporary verities like “Europe is paying for its excesses.”  Europe and England
have always suffered the effects of austerity imposed by its bankers and elites,
just as we lately have been and once before did during the
Coolidge/Harding/Hoover decline.  Austerity is not a fact, it’s a strategy.

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By Synonymos, May 9, 2012 at 9:11 am Link to this comment

The problem is the .01%ers. They feel as though they know best about how to solve everybody’s problems. So, since they have seized most of the worlds assets they became The Deciders.

They took our ability to keep record of our production. They set the worth of our labor. They determine who gets training and who don’t. They raise their children in luxurious illumination and keep us and ours in the dark. They operate in secrecy. They fixed the rate of exchange. They dictate our lives etc…

They are the Fractional Reserve Banksters. This kind of devious banking has cheated us of our liberty. It was discovered centuries ago by bankers who noticed receipts, which later evolved into paper money, being exchanged for goods instead of the gold deposited they represented. Gold was rarely removed so bankers began issuing more receipts than gold they had in deposit accounts. Until recently it was illegal. It is robbery plain and simple, legal or not. Debt is figured as an asset. In Fractional Reserve Banking assets are added to debt and legally multiplied by 11 to come up with their total lending capital worth. If the bank is large enough the factor 11 is only limited by law not practice. The size of their bottom line is relevant to their patronage to the law. The larger they become the less they care about following any rule of law.

If the Central Banks belonged to the people in a free society such as the USA is supposed to be, it could solve our economical problems by legislating Fractional Reserve Banking instead of taxation, as it was before The Federal Reserve Act of 1913. It could pay for health care, social projects and our infrastructure. But, since The 12 Federal Reserve Banks are private they only add to their bottom line which is to the stock holding Banksters who we won our independence from in 1776 only to give it back in 1913.

Revolution is the only answer now. Voting only legitimizes and fuels their system. However, revolution is impossible because it takes a large percentage of the population who must know the problem well enough to have the proper corrective movement to negate The Federal Reserve Act of 1913 and/or for a constitutional convention.

So, education is the first move. That is like forcing a thirsty mule to drink. The proverbial mule eventually gives in to dehydration and simply dies of stubborn arrogant pride or drinks from a proverbial fountain of knowledge. Either way change takes place as evolution keeps moving current events into history.

Read “The Web of Debt” by Ellen Brown to quince that thirst. Freedom is a wonderful idea.

It all takes time but now, it seems, time is running out—for everybody - 100%.

tp:?)

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THX 1133 is not in the movie...'s avatar

By THX 1133 is not in the movie..., May 9, 2012 at 2:32 am Link to this comment

By berniem, May 8 at 12:30 pm Link to this comment
Kill austerity and we kill capitalism! How cool is
that?
~~~~~~~~~~~~~~
Depends on what kind of capitalism you’re talking
about. Your statement is not true on it’s limited face.
The form of austerity being implemented is sure to kill
more than capitalism.
Do your homework…

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By berniem, May 8, 2012 at 1:30 pm Link to this comment

Kill austerity and we kill capitalism! How cool is that?

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By Marian Griffith, May 8, 2012 at 1:17 pm Link to this comment
(Unregistered commenter)

Austerity is nothing but the banks forcing the governments to ensure they keep paying their loans and interests even to the detriment of everybody else.

It is dressed up prettily to make it appear that it will help in the long run the people it is majorly screwing over, but it is much the same thing that turned a localised economic bubble bursting in the 1930s into a global depression that caused indescribable misery to hundreds of millions of people world-wide because of mismanagement and rigidly treating the symptoms instead of the cause.

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By balkas, May 8, 2012 at 12:02 pm Link to this comment

Big B,
yes, world-wide revolution or ‘terrorism’ against just the right individuals might cure the
disease [rich man’s rule; and their reforms, deforms, deregulations, regulations, teachings,
war-peace, etc.] now at least 8 k y old.
i expect that some individuals will eventually carry out some military action against well-
selected targets if they wld fully understand that nothing will ever change for better in
present structure of governance.
education cld work as well; however, the ONEPERCENT CONTROLS THAT ALSO and
controls what kids hear.
so, schooling had been for a long time a great tool for the 1% and ann extremely powerful
weapon against us.
and in november we may see the 1% get 98% approval. this wld prove what we are saying:
no change for better or actually a change, but for worse for a lot of people in US and
elsewhere.

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By Big B, May 8, 2012 at 10:17 am Link to this comment

balkas

its the golden rule buddy. Whoever has the most gold makes the rules. It’s always been that way. Human society has never been led by its best and brightest. Its has always been led by our wealthiest, our most aggressive, our most brutal.

Only with a worldwide revolution, in every nation at the same time, can things really change. And I don’t see that happening, at least not for a long while.

But, France and Greece are on the right track.

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By balkas, May 8, 2012 at 9:39 am Link to this comment

taxation [of whatever kind] is but a mere symptom of the desease.
treating it ONLY in any way whatever, does not treat the cause of the inequality [chasmic in difference in u.s,
india, et al] on econo-military-politico-information-educational level. [hey, folks, these are all connected and
from a whole; thus the hyphenations]
you begin to tax rich people more than they are paying now and you open news ways for them to remain rich or
even augment their riches.
recall, please just one fact: ALL u.s laws are written and interpreted/executed by the rich people or about 30% of
americans.
recall, please that they thunder: we are a nation of laws. this means u have to obey rich peoples’ laws—or else!
now if u get 100% of people [they have to be enlightened first] to write-intepret-execute laws, u’ve cured the
disease and the symptoms are gone forever.
just take away one aspect of the whole, the education, and replace it with vast miseducation [as is the case in u.s
and most lands] and u have made selves obedient servants for a life time.
so, all aspects of the above-posited whole need treatment or, rather, fundamental changes!!

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mrfreeze's avatar

By mrfreeze, May 8, 2012 at 7:48 am Link to this comment

rtb61 - You are absolutely correct. Tax the wealthy. Eliminate all the loopholes for corporations. Stop the unnecessary military spending. In other words: inflict some “reverse austerity” on the wealthy interests in this country. Since they presumably have the most to lose, they should contribute the most to the tribe.

Oh, but this would be considered “class warfare” by many of the moralists out there who would rather have grandma and the poor tighten their belts and pay higher taxes…..

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By balkas, May 8, 2012 at 6:10 am Link to this comment

the lesson to draw is not that deficits became too large, debt too crushing, and social spending too
generous—the lesson we shld elicit from this socalled crisis is the fact that we are not living in
accordance with what we actually need to be happy, peaceful, healthy, friendly to each other way,
etc.
in short, one shld strive to live in accords with the laws of nature: eat healthy food, use public
transport; don’t fly, use yachts, build ten-room houses, build jacuzzis, spas, ever ‘better arms’, go
on vacation [save by row boat], watch decadent sport/TV/movies, etc.
however, i do not expect ER is talking or wishing we engage in that kind of austerity.
the crisis or the ‘crises’ is the best thing that happened to us. it shld have happened a century ago,
but it didn’t. better late than never, i say!

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By balkas, May 8, 2012 at 5:45 am Link to this comment

countries shld live sustainably and welcome and love whatever lifestyle
ensues thereafter.
the fact is that europeans [others also] were living in a wasteful, abusing
of nature ways and it just cldn’t go on. it had to stop on its own and
against the will of the majority.
so, austerity, to me, is very good step to take; provided it is done across
the board about equally; while taxing much more heavily the rich people
than before!

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By rtb61, May 8, 2012 at 2:28 am Link to this comment

Raise taxes on the rich, eliminate access to tax havens and institute fair trade policies, where imported goods pay the same regulated costs applied to local produced goods.
It is high time to target and destroy tax havens, traders in blood money and thieves of other countries tax dollars. Why should regular citizens be forced to subsidies the greed of other countries in lost services and increased taxes.
Those the benefit the most by a society should pay the most to preserve and protect that society and it’s members, without it the rich make nothing.

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By diamond, May 8, 2012 at 2:20 am Link to this comment

Keynes worked out that austerity didn’t work many years ago.

“In fact his views were extremely cautious and were elaborated in response to the virtual collapse of classical economic theory. Keynes argued more boldly in favor of government stimulation of the economy…as a substitute for the collapse of domestic demand through the reluctance of savers to invest their money in a productive economy. 

In this he was surely right. The major problem in any slump is to find a reason for those with money to put it back into the system either by spending…through investing in enterprises whcih seem likely to generate profits or if interest rates are high enough, investing in bonds.

Keynes argued that governments should subsidize the economy with public works programs if private investment was sluggish, a standpoint that was widely denounced as socialist…Keynes on the contrary believed he was saving capitalism from its own destruction: he was a committed believer in the capitalist system.” (from ‘The Return of the Strong’, Robert Harvey)

The Depression of the 1930s

The Depression made it impossible to argue as the classical economists do that supply and demand inevitably balance each other. ‘Perhaps they did in the end but there were huge time lags and meanwhile terrible economic recession in which workers lost their jobs and lived on the breadline.

“In the long term”, as John Maynard Keynes wryly observed, “we are all dead”.

(From ‘The Return of the Strong: the Drift to Global Disorder’)

The alternative view to Keynes’, that of Milton Friedman, was, according to Harvey, ‘as mathematically ingenious as it was crude in human terms and represented a reversion to the laissez-faire philosophies of Say, Malthus and Ricardo. Let business get on with it, let government keep out and the market will inevitably and miraculously work things out for the best - provided the supply of money is controlled.”

Harvey dismisses the classical economic view as ‘theoretically attractive but nonsensical’ and I think that’s fair and balanced, as they like to say on Fox News. Austerity has only ever paralyzed the economy and caused mass unemployment and yet it is being forced down the throats of most of Europe by the IMF even though everyone who has read a history book knows it has always failed to mend broken economies - by stifling investment, employment and growth.

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