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The Subversive Summit – In These Times
The time is ripe—if not for the full-blown revolution, then at least for a transformative backlash to recenter the imperatives of social justice that have lately become so attenuated.
ZAGREB, CROATIA—What is often described in media, political and financial circles as the global “debt crisis” actually poses even more insidiously widespread dangers than the ubiquitous doom-filled reports commonly inform. “The greatest catastrophe threatening Greece and Europe is not the economic crisis,” says Costas Douzinas, professor of law at Birkbeck, University of London, “but the total destruction of the social bond, the way we see ourselves, the way we see our relation to the community. This is long-term. Economic crisis, fiscal deficits, can be restored in the medium term. But once you lose the social ethos, then there is no way back.”
That was the takeaway in May as scholars, writers, politicians and activists came together at Zagreb’s sixth annual Subversive Forum to plumb the depths of the current malaise, but also to propose remedies for the five years of European economic upheaval that has produced personal hardship, civic unrest, governmental instability and a general sense of paralysis.
For two weeks every year, Zagreb’s civic festival welcomes hordes of progressive lecturers and audiences to a program of films, debates, roundtable discussions and protest-planning sessions. Running past midnight in the city’s elegant 1920-vintage movie house Kino Europa, standing-room-only keynote speeches attract staunch partisans for advancing the interests of the public sphere against the authoritarian mediocracy that now prevails.
The cataclysm of human and social devastation in Europe is this generation’s defining moment. But calling it a debt crisis, as Greek economist Yanis Varoufakis explains, is like going to the hospital with advanced inoperable cancer and having the doctor diagnose your suffering as a pain crisis.
Yes there is pain, but the pain is symptomatic of bigger problems. The “debt crisis” is also a food crisis—people can’t afford to buy enough to eat. It’s a housing crisis, an education crisis, an unemployment crisis, an immigration crisis, a human rights crisis. In Greece, the New York Times reports, prostitution has surged 150 percent in the last two years as a direct result of social desperation, with supply-and-demand dynamics driving prices for sex work as low as five euros.
The Left rightly rejects austerity, despising it as collective punishment of citizens who had nothing to do with the financial collapse. Public health scholars David Stuckler and Sanjay Basu explain in The Body Economic: Why Austerity Kills that such spending cuts drastically lower life expectancy due to a higher prevalence of suicide, HIV, alcoholism, heart disease and depression.
Underlying all these other crises is the steady transformation of the over-bureaucratized European Union into a democracy-free zone. Voter turnout is in decline (especially for European Parliament elections, but also in national contests), as constituencies manifest apathy or disenfranchisement. Decisions that people should be able to make for themselves and that are consequential for their lives—how much society spends on healthcare, on education, on defense—emanate instead from afar by EU administrators. A “Merkiavellian” regime, some call it; a secular empire of finance.
The principles of democratic self-determination are hamstrung by the powerful Troika—the International Monetary Fund, the European Central Bank and the European Commission (the EU’s legislative and operational council)—which a disempowered citizenry increasingly views as an automaton that squelches democracy as it protects the interests of the power elite.
A teachable moment
But as many Europeans grow resigned to the “new normal,” a passionate movement of social democrats and subversive activists aims to recast a fatalistic narrative of inevitable capitulation. From the rubble of this financial catastrophe, they are extrapolating a systemic critique of how this mess came to pass and more importantly, how to use the collapse as a teachable moment. The time is ripe—if not for the full-blown revolution, then at least for a transformative backlash to recenter the imperatives of social justice that have lately become so attenuated.
The EU had been promoted as a strong “single market” (by many reckonings, the world’s largest economy) that would defuse Europe’s centuries of conflict: shared economic prosperity would generate cooperative unity. But clearly the EU has not delivered the promised transnational harmony. Capitalism is, after all, inherently a competition, which means there are winners and losers. Labor, always a weak player in this competition, loses the most in a race to attract foreign investment. Consequently, the labor movement fears a descent into what Slavoj Žižek calls a tyrannical “capitalism with Asian values.”
“Peripheral countries,” a label that has become so prevalent in the EU discourse, typifies the fault lines in the “union.” At the Subversive Forum, I noticed how keenly language highlights these tensions and fissures. Not surprisingly, people don’t like being thought of as peripheral—a lesson that might have been learned in light of the offense that the “third world” has always felt about that similarly condescending term. They also don’t appreciate being called PIIGS, the acronym that lumps together Portugal, Ireland, Italy, Greece and Spain (the extra “i” doesn’t soften the blow). The term is outdated anyhow as more countries slide into severe downturns. With France and the United Kingdom falling into recession and Cyprus imploding, we can expect even coarser acronyms in the future.
It’s not just about nomenclature. The discourse of “othering” reveals old and supposedly effaced neocolonialist prejudices at their worst. In the minds of those who oppose humane terms of support, the “pigs” are lazy and corrupt, unsophisticated and out of date. They have brought their troubles on themselves and forced austerity will do them good.
The idea of Europe and even the word itself, has become toxic, unstable; co-opted by the bureaucrats’ failed vision, nobody knows exactly what it means. Is the UK in Europe? What about other EU but non-Eurozone countries—like Poland or Sweden? Is Iceland, the canary in the coal mine for financial meltdown, European? Euro-Asiatic hybrids such as Russia and Turkey? Non-EU countries like Norway and Switzerland? Can a country be expelled from Europe?
“Europe” is uttered with a sneer or a spasm of abjection. “Euro,” which once denoted simply a strong cosmopolitan currency, is now a root that has spawned a more cynical vocabulary: Eurocritic, Euroskeptic, Europhobe. But if the establishment’s lexicon is becoming degraded, the radical retorts are more fiercely honed. “Union” and “unity” have been exposed as feckless in the face of European inability to sustain these, inspiring a more rousing synonym, “solidarity,” that resounds among those who are focused on social equality rather than financial technicalities. Paradoxically, the counter-rhetoric of the Left has expanded the context of the crisis by contracting the terminology. What was originally construed as “the global economic crisis” morphed into “the Eurozone crisis,” or “the Eurocrisis,” then became more tightly compressed into “the crisis,” and finally—stripping away everything else to convey simply a primordial vortex of personal agony and social decrepitude—the definite article dropped off, leaving just “crisis.”
“Crisis” has mobilized a radical critique of European capitalism. It’s not as simple as debating whether countries should leave the EU, or the euro—as bad as things are now, the alternative is probably catastrophic. But the Left has embarked upon a deep analysis of what sort of society has grown out of the EU’s financial autocracy. “Criminals, disguised as statesmen, were robbing us blind,” says Slovenian poet and critic Aleš Debeljak. “Crisis made us realize this truth.”
The radical mission is to uncover and expose the roots of this incompetence and institutional corruption, to question the motives and hidden agendas lurking beneath the “bankruptocracy” (another salient coinage), to educate and motivate suffering masses, and to reform the system.
“We can’t leave economic issues to the experts any longer,” says Maja Breznik, from the Slovenian Peace Institute. “It’s time for amateur investigations.”
These investigations, an end-run around the self-interested strategies of bankers and other EU cronies, begin from the premise that the vicious circle of debt is not the fault of immoderate spending by governments or households. Instead the primary goal of “recovery” has been a non sequitur: protecting the interests of private moneylenders and multinationals and refilling their coffers after their financial miscalculations and chicanery. The problem as it is being addressed bears little relation to the actual predicament, so society has plunged into deep recession.
As Europe tries to emerge from crisis, an exclusive focus on debt represents a class struggle designed by financiers to transfer losses from their books on to the taxpayers. Troubled countries are forced to sell off their economies to foreign investors. The Troika arranges bailouts under the harshest terms, with the heaviest burdens borne by agencies that support public welfare, because reducing social spending allows countries to pay more money, more quickly, back to the banks.
Privatization of the commons en- sues: everything that can be liquidated is sold, then rented back to the most disempowered classes. Much of the population is perpetually indebted and the idea of “permanent work” becomes a rarity, replaced by piece-work, part-time work and frequent lay-offs. The social contract has been broken.
We “amateur investigators” must ask questions about real value, as opposed to the merely monetary expressions of value that the Troika fetishizes. It seems reasonable to proclaim “bankrupt” (figuratively and literally) the discourse of valuation that culminated in the exotic, abstruse financial products that precipitated the crash.
It is our turn to open the discussion of what is valued from the perspective of the victims of fiscal malfeasance. (By “us” I refer to non-bankers, non-wealthy, non-functionaries and for good measure a healthy cadré of academic fellow travelers.) GDP itself is a subjective measure of value, a war-accounting mechanism that is not the only way to count. A euro is not just a euro: not every use of money is equally valuable. A different model of social accounting—one that focuses on the bottom, the workers, the poor and middle class, and starts with wages, taxes, social security—will produce a very different economic narrative than the one that has predominated for the last five years.
“We demand a new right,” argues Franco “Bifo” Berardi, a Marxist scholar from Milan’s Academy of Fine Arts, “The right to insolvency. We are not going to pay the tax. If I am insolvent, I don’t have money, so I won’t pay the debt.” Instead, there should be a moratorium on interest payments, some debt should be canceled and some repaid with a growth clause (as Germany did in the 1950s). Countries would pay as they grow, and as they can afford it.
Žižek—the Subversive Forum’s patron saint since its inception—warns that the radical Left has historically had a proclivity to sit on the sidelines: “They prefer sometimes not to take power so that when everything goes wrong they can write their books explaining in detail why everything had to go wrong. There is some deeply rooted masochism of the radical Left. Their best books are usually very convincing stories of failure.”
But today there is an especially high onus to take action, to engage in political reform. Leftist activists and politicians do have a concrete agenda for fixing the crisis. In Greece, defying the eulogies of democracy, Alexis Tsipras’ Syriza coalition has shown impressive strength in the last few elections and stands within grasp of parliamentary victory and a majority coalition in the near future. Nearly destroyed by crisis, Greece may soon emerge as the most advanced site of resistance. “The future of Greece is the future of Europe,” Tsipras proclaims, providing a heartening reverberation for the slogan that protestors chant across the continent, “Nous sommes tous des grecs”: We are all Greeks.
The Left’s challenge is to reorganize in a more cooperative, collective way: reclaiming the commons, reappropriating the wealth that is now in the hands of the state and the banks, and reconstituting the social fabric that was destroyed by economic restructuring.
Political platforms like Syriza’s draw on a wealth of theoretical foundations and strategic visions for reform.
Erik Wright, a University of Wisconsin sociologist who wrote Envisioning Real Utopias, is one of many academic subversives who offered Zagreb audiences a sophisticated array of fresh ideas for transcending the status quo of capitalism and replacing it with an emancipatory alternative, a democratic egalitarian pathway that empowers people to take control of their own destinies. Wright described a range of innovations that can be introduced “inside of capitalism” but that embody non-capitalistic principles and more fully reflect the values of democracy: worker-owned cooperatives, participatory budgeting (where citizens help determine civic priorities), freely provided public services like transportation and libraries (which we can think of as anti-capitalist ways to give people mobility and books), and unobstructed access to the commons of intellectual property. Peer-to-peer collaborations like Wikipedia illustrate how a non-capitalist means of production can flourish within capitalism and ultimately displace capitalism altogether (as evidenced by the recent demise of the print edition of that imperialist icon, the Encyclopedia Britannica).
Urban farms organized through community land trusts can support food production divorced from agribusiness. Crowd-sourcing finance like Kickstarter sidesteps the entrenched hegemonies of cultural production. The gift economy in music from the Internet allows people to download songs for free and pay whatever they want. (Wright believes these musicians actually make more income than they would in a conventional sales model because they have created a more palatable moral economy with their fans.)
The crisis of capitalism offers, as a silver lining, the opportunity for us to reconceptualize more democratic and sustainable systems of social and commercial existence. It’s a moment that is uniquely receptive to new ideas, as the old ones have proven so worthless. A subversive smorgasbord can be created in the world as it is, prefiguring things that might be in the world as it could become. Are these just utopian fantasies? A questioner at Wright’s lecture asked whether a smattering of such small-scale interventions could really inspire fundamental social change, to which the sociologist responded sublimely: “We don’t know for sure. The day before Wikipedia was invented, it was impossible.”
ABOUT THIS AUTHOR
Dr. Randy Malamud is regents’ professor and chair of the department of English at Georgia State University. He is the author of eight books, including Reading Zoos: Representations of Animals and Captivity (NYU Press, 1998) and An Introduction to Animals and Visual Culture (Palgrave Macmillan, 2012). He can be reached at rmalamudgsuedu.
The global leadership crisis
Austerity measures imposed on already depressed economies have not been very helpful. Anyone with pedestrian knowledge of economics would have predicted that austerity measures imposed during a recessionary period would do more harm than good.
The IMF, which has been party to policy absurdities in the eurozone, now armed with the benefit of hindsight, admits to the damage that their nonsensical austerity measures have caused, more especially to the Greek economy. Former IMF managing director Dominique Strauss-Kahn when interviewed by Richard Quest on CNN also admitted to the unimaginative approach by the IMF, the European Commission and the European Central Bank and its failures. Forcing Greece to cut government spending when the economy was in recession was not only stupid but dangerous. Unemployment in Greece has since skyrocketed from a low of 8.5% in 2008 to an eye-popping 26.9% in 2013. Consumer spending, which is a critical component in the engine of economic growth, failed to grow due to lack of stimulus.
The one-size-fits-all policy approach to the eurozone under the dictatorship of Angela Merkel will not assist with economic recovery and will continue to negatively impact on the global economy. A policy shift is necessary to respond to the global economic realities. The global economic outlook has been slashed. Major economies have recorded declining growth rates. Emerging economies, which have been driving global economic recovery, are also under severe strain while still posting positive growth rates.
Japan has struggled for many years to fondle its economy back to decent growth. Its economy has been plagued by protracted periods of deflation, which are exacerbated by lower than desired consumer spending. The stimulus package of about $600 billion has had minimal inflationary effect to reach the target of 2% by 2015. Instead the Bank of Japan has cut the inflationary outlook, in spite of pumping liquidity into the market. The significant increase in government spending does not seem have the desired effect on the $5 trillion economy.
China, which has grown at mouth-watering rate for a consistent period, is also experiencing a slowdown. Some instructive lessons could be drawn from how Beijing has managed its economy over a period of three decades and how it continues to respond to changing circumstances with appropriate policy. The manner in which China manages its economy has offended some like the US, which accused Beijing of manipulating the exchange rate. The Chinese economy had been export-led for a number of years and low exchange rates served a meaningful purpose. There has been a policy shift in that there is an attempt to focus on consumption-led growth going forward. Low exchange rates, which the US has been whining about for a number of years, are of no significant consequence in the long-run. Consumer spending in China is about 40% of total GDP, compared to 70% in the US.
Policy-makers ordinarily see consumption as an opportunity for long-term growth and have responded accordingly with a stimulus package of about $600 billion. The results of policy intervention in China are evidenced by rising demand in luxury goods. Consumer spending on luxury products has been on steroids. The obvious question raised is the sustainability of these policy measures and potential bubbles created in the system, which may return later to cause heartache. But one thing remains, China appears to be demonstrating practical approaches to its own economic situation.
There are numerous global economic forums, like the G20, the World Economic Forum and so on, where global leaders converge on a regular basis to discuss problems confronting the world and how best to respond to them. These forums have become nothing more than talk-shops that do not generate any meaningful outcomes. There seems to be a greater need by world leaders to be seen to be doing something about global problems when in practical terms only narrow national interests take priority. The amount of hot-air emitted during these global forums could be the biggest contributor to global warming. The people are not doing enough to hold their leaders accountable and keep them honest.
Until the people begin to forcefully demand that leaders commit themselves to promotion of common welfare, they will keep getting the leaders they deserve. When leadership fails, it becomes the responsibility of the people to transform society and their conditions into what they should be. The act of transformation in the vacuum of leadership should begin with the overthrow of purposeless government, in the knowledge that revolutions are merely a means to an end but not an end itself. A successful revolution must equally transform the general thinking of society and strengthen their resolve in the pursuit of what is just and equitable. According to Che Guevara: “The revolution is not an apple that falls when it is ripe. You have to make it drop.” This persistent deterioration in the general welfare of society should be enough to agitate people to rebel against their thieving governments and punish crooked politicians. The people must rise!
The Irish bail-out programme: The meaning of exit
WHEN tapes of conversations between senior executives at the failed Anglo Irish Bank at the height of the financial crisis in 2008 were leaked in June, Irish credibility as a true penitent among the five bailed-out euro-zone countries took a knock. At last month’s European summit Angela Merkel, the German chancellor who calls the shots in the 17-state currency block, expressed her contempt for the bankers’ conduct, which included crass anti-German sentiment.
But any fears that this unwelcome reminder of past sins and sinners might upset Ireland’s path to exit from the rescue programme have been short-lived. This week’s review by the troika – the European Commission, the European Central Bank (ECB) and the IMF – concluded that Ireland should be able to leave on schedule by the end of 2013. That’s precisely three years after fiscal and banking woes forced the Irish to go cap in hand for €67 billion ($87 billion) of official loans from Europe and the IMF.
A punctual Irish exit has seemed likely for some time if only to show that the German-inspired programmes of austerity and structural reform can work. The worse things get in other bailed-out countries – Greece, Portugal, Cyprus and Spain (for its banks) – the more that Ireland is favoured. Thus Portugal’s recent political ructions, which has caused the planned inspection by the troika on July 15th to be postponed, have strengthened Ireland’s hand.
Moreover, Irish debt managers have deftly exploited chances to raise funds as Ireland’s fiscal credibility improved and its bond yields subsided. They have benefited along with the other crisis countries from the ECB’s commitment last September to make unlimited purchases of bonds in secondary markets under strict conditions – its “Outright Monetary Transactions” (OMT) programme, which has proved so successful a deterrent that it has not yet been used. Helped by the debt-management agency’s forays into the markets, the Irish government is now fully funded into early 2015.
That’s handy because on the economic front things haven’t been going so smoothly. Irish cheerleaders can no longer brag about their country being a bright spot in the recessionary gloom on the euro-zone southern and western periphery. In fact, GDP has shrunk for three consecutive quarters (the second half of last year and the first quarter of 2013) as exports have been hit first by a slowdown in global trade and secondly by the lapsing of patents on blockbuster drugs that have hurt pharmaceutical exports. The budget deficit remains high at 7.5% of GDP and public debt will reach 124% this year, a figure that underestimates the effective burden because a big chunk of Irish GDP is profits made by foreign multinationals which are lightly taxed.
The Irish government thus has good reasons to be nervous about having to fend for itself. That’s why Michael Noonan, the finance minister, is angling for a backstop to be available after the bail-out ends. But it is not just a credit line that the Irish are seeking: they want to be eligible for the ECB’s OMT programme.
That will be possible, however, only if the Irish apply to the European Stability Mechanism (ESM), the eurozone’s bail-out fund, for an “enhanced conditions” credit line. The Irish argue that there would be no need to comply with extra conditions, but whether the other euro-zone finance ministers who are on the board of the ESM will concur remains to be seen. Ireland may find that the best it can secure is a deal where it is still subject to intrusive monitoring.
If all goes to plan the Irish exit from its ignominious bail-out at the end of this year will be hailed as a big success. But the reality will be fuzzier. The official funding may end but the price of support remaining available if necessary is that Ireland will not secure full independence.
via The Irish bail-out programme: The meaning of exit | The Economist.
How Austerity Has Failed
Austerity has failed. It turned a nascent recovery into stagnation. That imposes huge and unnecessary costs, not just in the short run, but also in the long term: the costs of investments unmade, of businesses not started, of skills atrophied, and of hopes destroyed.
What is being done here in the UK and also in much of the eurozone is worse than a crime, it is a blunder. If policymakers listened to the arguments put forward by our opponents, the picture, already dark, would become still darker.
How Austerity Aborted Recovery
Austerity came to Europe in the first half of 2010, with the Greek crisis, the coalition government in the UK, and above all, in June of that year, the Toronto summit of the group of twenty leading countries. This meeting prematurely reversed the successful stimulus launched at the previous summits and declared, roundly, that “advanced economies have committed to fiscal plans that will at least halve deficits by 2013.”
This was clearly an attempt at austerity, which I define as a reduction in the structural, or cyclically adjusted, fiscal balance—i.e., the budget deficit or surplus that would exist after adjustments are made for the ups and downs of the business cycle. It was an attempt prematurely and unwisely made. The cuts in these structural deficits, a mix of tax increases and government spending cuts between 2010 and 2013, will be around 11.8 percent of potential GDP in Greece, 6.1 percent in Portugal, 3.5 percent in Spain, and 3.4 percent in Italy. One might argue that these countries have had little choice. But the UK did, yet its cut in the structural deficit over these three years will be 4.3 percent of GDP.
What was the consequence? In a word, “dire.”
In 2010, as a result of heroic interventions by the monetary and fiscal authorities, many countries hit by the crisis enjoyed surprisingly good recoveries from the “great recession” of 2008–2009. This then stopped (see figure 1). The International Monetary Fund now thinks, perhaps optimistically, that the British economy will expand by 1.8 percent between 2010 and 2013. But it expanded by 1.8 percent between 2009 and 2010 alone. The economy has now stagnated for almost three years. Even if the IMF is right about a recovery this year, it will be 2015 before the economy reaches the size it was before the crisis began.
The picture in the eurozone is worse: its economy expanded by 2 percent between 2009 and 2010. It is now forecast to expand by a mere 0.4 percent between 2010 and 2013. Austerity has put the crisis-hit countries through a wringer, with huge and ongoing recessions. Rates of unemployment are more than a quarter of the labor force in Greece and Spain (see figure 2).
When the economies of many neighboring countries contract simultaneously, the impact is far worse since one country’s reduced spending on imports is another country’s reduced export demand. This is why the concerted decision to retrench was a huge mistake. It aborted the recovery, undermining confidence in our economy and causing long-term damage.
Why Fiscal Policy
Why is strong fiscal support needed after a financial crisis? The answer for the crisis of recent years is that, with the credit system damaged and asset prices falling, short-term interest rates quickly fell to the lower boundary—that is, they were cut to nearly zero. Today, the highest interest rate offered by any of the four most important central banks is half a percent. Used in conjunction with monetary policy, aggressive and well-designed fiscal stimulus is the most effective response to the huge decrease in spending by individuals as they try to save money in order to pay down debt. This desire for higher savings is the salient characteristic of the post–financial crisis economy, which now characterizes the US, Europe, and Japan. Together these three still make up more than 50 percent of the world economy.
Of course, some think that neither monetary nor fiscal policy should be used. Instead, they argue, we should “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” In other words, sell everything until they reach a rock-bottom price at which point, supposedly, the economy will readjust and spending and investing will resume. That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into the Great Depression. Mellon thought government should do nothing. This advice manages to be both stupid and wicked. Stupid, because following it would almost certainly lead to a depression across the advanced world. Wicked, because of the misery that would follow.
Austerity in the Eurozone
Some will insist that the eurozone countries had no alternative: they had to retrench.
This is true in the sense that members have limited sovereignty, wed as they are to a single currency, and had to adapt to the dysfunctional eurozone policy regime. Yet it did not have to be this way.
1. The creditor countries, particularly Germany, could have recognized that they were enjoying incredibly low interest rates on their own public debt partly because of the crises in the vulnerable countries. They could have shared some of this windfall they enjoyed with those under pressure.
2. The needed adjustment could have been made far more symmetrical, with strong action in creditor countries to expand demand.
3. The European Central Bank could have offered two years earlier the kind of open-ended support for debt of hard-pressed countries that it made available in the summer of 2012.
4. The funds made available to cushion the crisis could have been substantially larger.
5. The emphasis could then have been more on structural reforms, such as easing labor regulations and union protections that restrain hiring and firing and raise labor costs, and less on fiscal retrenchment in the form of reduced spending. Reduced labor costs could have made these nations’ export industries more competitive and encouraged domestic hiring.
It is possible to admit all this and yet argue that without deep slumps, the necessary pressure for adjustment in labor costs that is inherent in the adoption of a single currency (which is a modern version of the gold-standard-type mechanism that once ruled the advanced nations and helped bring on the Great Depression) would not have existed.
This, too, is in general not true.
1. In Greece, Ireland, Portugal, and Spain, at least, the private sector was in such a deep crisis that additional downward pressure as a result of rapid fiscal retrenchment simply added insult—and more unemployment—to deep injury.
2. In Italy, the pressure from years of semi-stagnation, with many more to come, would probably have been sufficient to restructure the labor markets, to bring about lower labor costs, provided structural reforms of the labor market were carried out, measures allowing companies to reduce their workforces and adjust wages more easily.
In short, the scale of the austerity was unnecessary and ill-timed. This is now widely admitted.
Austerity in the UK
The UK certainly did have alternatives—a host of them. It could have chosen from a wide range of different fiscal policies. The government could, for example, have:
1. Increased public investment, rather than halving it (initially decided by Labour), when it enjoyed zero real interest rates on long-term borrowing.
2. It could have cut taxes.
3. It could have slowed the pace of reduction in current spending.
It could, in brief, have preserved more freedom to respond to the exceptional circumstances it confronted.
Why did the government not do so?
1. It believed, and was advised to believe, that monetary policy alone could do the job. But monetary policy is hard to calibrate when interest rates are already so low (at or close to zero) and potentially damaging particularly in the form of asset bubbles. Fiscal policy is not only more direct, but it can also be more easily calibrated and, when the time comes, more easily reversed.
2. The government believed that its fiscal plans gave it credibility and so would deliver lower long-term interest rates. But what determines long-term interest rates for a sovereign country with a floating exchange rate is the expected future short-term interest rates. These rates are determined by the state of the economy, not that of the public finances. In the emergency budget of June 2010, the cumulative net borrowing of the public sector between 2011 and 2015–2016 had been forecast to be £322 billion; in the June 2013 budget, this borrowing is forecast at £539.4 billion, that is, 68 percent more. Has this failure destroyed confidence and so raised long-term interest rates on government bonds? No.
3. It believed that high government deficits would crowd out private spending—that is, the need of the government to borrow would leave less room for private borrowing. But after a huge financial crisis, there is no such crowding out because private firms are reluctant to invest, and consumers are reluctant to spend, in a weak economic environment.
4. It argued that the UK had too much debt. But the UK government started the crisis with close to its lowest net public debt relative to gross domestic product in three hundred years. It still has a debt ratio much lower than its long-term historical average (which is about 110 percent of GDP).
5. The government argued that the UK could not afford additional debt. But that, of course, depends on the cost of debt. When debt is as cheap as it is today, the UK can hardly afford not to borrow. It is impossible to believe that the country cannot find public investments—the cautious IMF itself urges more spending on infrastructure—that will generate positive real returns. Indeed, with real interest rates negative, borrowing is close to a “free lunch.”
6. The government now believes that the UK has very little excess capacity. But even the most pessimistic analysts believe it has some. Of course, the right policy would address both demand and supply, together. But I, for one, cannot accept that the UK is fated to produce 16 percent less than its pre-crisis trend of growth suggested. Yes, some of that output was exaggerated. There is no reason to believe so much was.
Assessment of Austerity
We, on this side of the argument, are certainly not stating that premature austerity is the only reason for weak economies: the financial crisis, the subsequent end of the era of easy credit, and the adverse shocks are crucial. But austerity has made it far more difficult than it needed to be to deal with these shocks.
The right approach to a crisis of this kind is to use everything: policies that strengthen the banking system; policies that increase private sector incentives to invest; expansionary monetary policies; and, last but not least, the government’s capacity to borrow and spend.
Failing to do this, in the UK, or failing to make this possible, in the eurozone, has helped cause a lamentably weak recovery that is very likely to leave long-lasting scars. It was a huge mistake. It is not too late to change course.
via How Austerity Has Failed by Martin Wolf | The New York Review of Books.
Austerity Today -Economic recovery ‘will take 20 years’
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| Lenders Pressuring Greece Over Austerity Pledges Voice of America The lenders – Greece’s European neighbors, the European Central Bank and the International Monetary Fund – have been meeting with government officials in Athens. They are demanding that the government make progress on its austerity pledges ahead of … See all stories on this topic » |
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| New Study Dispels Myths of European Austerity OpenMarket.org Cries throughout the media of “savage austerity” notwithstanding, only a handful of European countries have actually implemented austerity in the true sense of the term: reducing both public spending and taxation. On the other hand, most countries in … See all stories on this topic » |
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| Portugal gov’t in peril as another minister quits TheNewsTribune.com Portugal’s government was in danger of collapse Tuesday after Foreign Minister Paulo Portas, the leader of the junior party in the center-right coalition government, resigned over the bailed-out country’s austerity policies. By BARRY HATTON; Associated … See all stories on this topic » |
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| Rug buyers look for round rugs in austere times PRWire (press release) Rug buyers across Australia are looking to make their homes cosier as they hunker down for a period of relative economic austerity. That’s the view of the team at The Bespoke Rug Company (www.bespokerugs.com.au) Australia’s leading retailer of … See all stories on this topic » |
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| Bailed-out Portugal’s finance minister resigns Fresno Bee Workers’ unions called a 24-hour general strike to protest the government’s austerity measures with public transport and government offices expected to be the worst-hit services. The banner reads in Portuguese: “The street is our. Nothing to lose”. See all stories on this topic » |
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| The Tories must beware these feelings of irrational exuberance Telegraph.co.uk (blog) We have had enough of five years of austerity and doubt. All around there are signs that the economy is stirring, that the combination of low interest rates and high employment is beginning to encourage consumer activity. Even beyond the powerhouse of … See all stories on this topic » |
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| There are few bright spots for them in last week’s spending review by George … Third Sector There are one or two other bright spots for the sector in the sixth year of austerity announced by George Osborne in last week’s spending review, which was in effect the opening salvo of the next general election campaign. The continuing expansion of … See all stories on this topic » |
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| Portuguese Finance Minister’s Exit Elicits Few Gasps Wall Street Journal (blog) Yields on Portuguese government bonds ticked up a bit to 6.42% after the unexpected resignation of Mr. Gaspar–the architect of Portugal’s austerity plan–but volumes were low, and the news didn’t prompt predictions of outright default. Instead … See all stories on this topic » |
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| Democratic Deficit Scolds Get Desperate and Weird New York Magazine Liberals may complain about austerity, but, they argue, “we haven’t had an austerity budget.” Cowan and Kessler’s evidence for this — that the federal government spent more, on average, during Obama’s first term than during George W. Bush’s second … See all stories on this topic » |
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| Lapid: Deficit could cause collapse Globes Finance Minister: The austerity measures will stop Israel reaching the conditions in Europe with high unemployment. 2 July 13 12:42, Moshe Golan. Tweet. “The idea that we have people here whose lives are at risk because they are doing their jobs is … See all stories on this topic » |
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| EU Rehn: New Portugal Finance Minister Must Maintain Tempo of Reform Wall Street Journal The former treasury secretary took the post after Vitor Gaspar, chief enforcer of austerity demands under Portugal’s EUR78 billion international bailout program, said Monday he was stepping down after two years in the job. Mr. Rehn praised Mr. Gaspar … See all stories on this topic » |
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| The Strain in Spain Could Help Firefox OS Take Root TechNewsWorld Due to the extreme austerity measures in certain South American and European countries, “low-cost smartphones will be very appealing,” said Joshua Flood, a senior analyst at ABI Research. The ZTE Open — the first commercially available smartphone … See all stories on this topic » |
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| Merkel opponent derides jobless summit as cynical ploy Reuters BERLIN (Reuters) – Angela Merkel’s summit on youth unemployment in Europe is an attempt to paper over the economic consequences of the austerity policies she championed in the region, a leading member of Germany’s opposition Social Democrats … See all stories on this topic » |
| Portugal’s austerity government feels the pinch BBC News The resignation in quick succession of two of Portugal’s biggest political beasts has left many questioning whether the right-of-centre government which has enthusiastically embraced austeritymeasures can survive more than a few weeks, let alone months. See all stories on this topic » |
| Twenty years of austerity ahead, says Sir Jeremy Heywood Telegraph.co.uk Sir Jeremy Heywood also suggested that the cuts made to public services to date were not sufficient and that austerity measures would have to continue for “at least” another four years. The comments from the Cabinet Secretary will have a sobering … See all stories on this topic » |
| Austerity Blitz: Eurozone Notes From Beyond the Grave Truth-Out The criminal effects of the austerity blitz strategy that the European Union (EU) conceived of on Germany’s insistence as the answer to the global financial crisis when it hit Europe’s shores with the triggering of the Greek sovereign debt crisis have … See all stories on this topic » |
| Portugal’s Budget Austerity May Do More Harm Than Good KTEP LAUREN FRAYER, BYLINE: Of all the bailed-out countries in Europe, Portugal has been the good student – taking the austerity medicine its lenders prescribe. Portuguese Finance Minister Vitor Gaspar took it even further – doubling budget cuts and tax hikes. See all stories on this topic » |
| Public sector austerity drive ‘hitting women the hardest’ Gulf Times George Osborne’s revelation in his spending review that a further 144,000 jobs are to be slashed from the public sector means there is more pain to come for women, critics say. Data collated by the Guardian highlights the disproportionate blow to … See all stories on this topic » |
| Lapid: Without Austerity Measures, Deficit Could ‘Bury’ Israel Algemeiner Most Popular. Recent Posts. The BioHug vest. Photo: BioHug.com. Israeli-Developed Vest Hugs People to Health · Yair Lapid, leader of the Yesh Atid party. Lapid: Without Austerity Measures, Deficit Could ‘Bury’ Israel · Amy Winehouse. Photo: wiki commons. See all stories on this topic » |
| Portugal’s PM says he won’t quit despite resignations over austerity measures Fox News But the government’s future is hanging in the balance after the resignation earlier Tuesday of Foreign Minister Paulo Portas, the leader of the junior party in the governing center-right coalition, in protest against austerity measures. Passos Coelho … See all stories on this topic » |
| Trade unions call for social investment Morning Star Online And he said the people of Northern Ireland were suffering the same fate at the hands of the austerity-mad Westminster government. “Austerity is now no more than a mantra without meaning. The intellectual underpinning for it has been discredited,” he … See all stories on this topic » |
| Portugal’s finance minister resigns amid pressure for government to soften … Malaysia Sun Portugal’s finance minister resigns amid pressure for government to soften austerity | Malaysia Sun. Malaysia Sun. Issue 11/0183. Malaysia Sun · http://www.malaysiasun.com · Malaysia News · Southeast Asia News · Breaking International News · Asia … See all stories on this topic » |
| Activists climb County Hall, Westminster in anti war, anti austerity protest Indymedia UK The newly formed Black Katz Kollektive has within the last hour occupied County Hall on the south side of Westminster Bridge facing the Houses of Parliament, with banners unfurled down the side of the building. Their message is simple: stop the war … See all stories on this topic » |
| Portuguese government in peril as foreign minister, head of junior party in … The Republic Austerity is widely blamed for driving the jobless rate in Portugal to 17.6 percent and for what is forecast to be a third straight year of recession in 2013. Portugal needed a 78 billion euros ($102 billion) bailout two years ago after a decade of … See all stories on this topic » |
| Portugal PM defiant despite another resignation Boston.com Gaspar, a non-political economist specially selected by Passos Coelho to push the austerity drive, said he lacked the political and public support for his ongoing program of cutting public sector pay and pensions and raising taxes. Portas, the leader … See all stories on this topic » |
| Portuguese Finance Minister Gaspar resigns Channel News Asia Portuguese Finance Minister Vitor Gaspar, the architect of the country’s reforms under its EU-IMF bailout, resigned on Monday as the economy reels and social discontent mounts under the impact ofausterity measures. PHOTOS. File photo of Portuguese … See all stories on this topic » |
| Miss. tax receipts approach $5 billion in FY2013 WJTV Top budget writers say they expect pressure from schools, universities and state agencies that saw budgets slashed during four years of austerity. Tax receipts have surged more strongly than jobs or Mississippi’s overall economy, leading to notes of … See all stories on this topic » |
| Portuguese PM adamant he will not stand down Radio New Zealand Austerity measures are blamed for causing Portugal’s worst economic crisis since the 1970s. Portugal has been in recession for two years and the economy is expected to contract by 2.3% this year. Unemployment is over 17.5%. A general strike was held … See all stories on this topic » |
| Portuguese Finance Minister Resigns New York Times MADRID — Portugal’s finance minister, Vítor Gaspar, unexpectedly resigned Monday amid a prolonged recession that citizens have attributed largely to austerity measures that he helped enforce in accordance with the demands of the country’s … See all stories on this topic » |
| Concern over Portugal bailout Independent Online Lisbon – The resignation of the main architect of Portugal’s austerity policies has sparked concern over the country’s ability to complete its EU-IMF bailout programme. Analysts say the departure Monday of finance minister Vitor Gaspar has weakened a … See all stories on this topic » |
| Portugal foreign minister steps down in second major ministerial resignation Deutsche Welle Former Treasury Secretary, Albuquerque was appointed on Monday following the shock resignation of Finance Minister Vitor Gaspar, the main architect of the austerity measures. ccp/kms (AFP, AP, dpa). Date 02.07.2013; Share Send Facebook Twitter … See all stories on this topic » |
Ireland and the Basque Country: Massive Flight (Emigration) or General Strike?
Introduction
Many billions of Euros are being extracted from Europe’s vassal-debtor nations – Spain, Greece, Portugal and Ireland – and transferred to the creditor banks, financial speculators and swindlers located in the City of London, Wall Street, Geneva and Frankfort. Under what have been termed ‘austerity’ programs, vast tributary payments are amassed by ruling Conservative and Social Democratic regimes via unprecedented and savage budget cuts in salaries, public investment, social programs and employment. The result has been catastrophic growth in unemployment, under-employment and casual labor reaching over 50% among workers under age 25, and between 15% and 32% of the total labor force. Wages, salaries and pensions have been slashed between 25% and 40%. The age of retirement has been postponed by 3 to 5 years. Labor contracts (dubbed ‘reforms’) concentrate power exclusively in the hands of the bosses and labor contractors who now impose work conditions reminiscent of the early 19th century.
o learn first-hand about the capitalist crisis and the workers’ responses, I spent the better part of May in Ireland and the Basque country meeting with labor leaders, rank and file militants, unemployed workers, political activists, academics and journalists. Numerous interviews, observations, publications, visits to job sites and households – in cities and villages – provide the basis for this essay.
Ireland and the Basque Country: Common Crises and Divergence Responses
The Irish and Spanish states, societies and economies (which presently includes the Basque country, pending a referendum) – have been victims of a prolonged, deep capitalist depression devastating the living standards of millions. Unemployment and underemployment in Ireland reach 35% and in the Basque country exceeds 40%, with youth unemployment reaching 50%. Both economies have contracted over 20% and show no signs of recovery. The governing parties have slashed public spending from 15% to 30% in a range of social services. By bailing out banks, paying overseas creditors and complying with the dictates of the autocratic ‘troika’ (International Monetary Fund, European Central Bank and European Commission), the capitalist ruling class in Ireland and the Basque region have undermined any possible investments for recovery. The so-called ‘austerity’ program is imposed only on the workers, employees and small businesspeople, never on the elite. The Brussels-based ‘troika’ and its local collaborators have lowered or eliminated corporate taxes and provided subsidies and other monetary incentives to attract multi-national corporations and foreign finance capital.
The incumbent bourgeois political parties, in power at the beginning of the crash, have been replaced by new regimes that are signing additional agreements with the ‘troika’ and bankers. These agreements impose even deeper and more savage cuts in public employment and a further weakening of workers’ rights and protection. The employers now have arbitrary power to hire and fire workers at a moment’s notice, without severance pay, or worse. Some contracts in Ireland allow employers to demand partial repayment of wages if workers are forced to leave their jobs before the end of their contract because of employer abuse. The Spanish economy – including in the Basque country – is subject to a modern form of ‘tributary payments’ dictated by the ruling imperial oligarchy in Brussels. This oligarchy is not elected and does not represent the people it taxes and exploits. It is accountable only to the international bankers. In other words, the European Union has become a de facto empire – ruled by and for the bankers based in the City of London, Geneva, Frankfort and Wall Street. Ireland and the Basque country are ruled by collaborator vassal regimes which implement the economic pillage of the electorate and enforce the dictates of the EU oligarchy – including the criminalization of mass political protests.
The similarity in socio-economic conditions between Ireland and the Basque country in the face of crisis, austerity and imperial domination, however, contrasts with the sharply divergent responses among the workers in the two regions due to profoundly different political, social and economic structures, histories and practices.
Facing the Crisis: Basque Fight, Irish Flight
In the face of the long-term, large-scale crisis, Ireland has become the ‘model’ vassal state for the creditor imperial states. The leading Irish trade union federation and the dominant political parties – including the Labor Party currently in coalition with the ruling Fine Gael Party – have signed off on a series of agreements with the Brussels oligarchs to slash public employment and spending. In contrast, the militant pro-independence Basque Workers Commission, or LAB, has led seven successful general strikes with over 60% worker participation in the Basque country – including the latest on May 30, 2013.
The class collaborationist policies of the Irish trade unions have led to a sharp generational break – with older workers signing deals with the bosses to ‘preserve’ their jobs at the expense of job security for younger workers. Left without any organized means for mass struggle, young Irish workers have been leaving the country on a scale not seen since the Great Famine of the mid-19th century. Over 300,000 have emigrated in the past 4 years, with another 75,000 expected to leave in 2013, out of a working population of 2.16 million. In the face of this 21st century catastrophe, the bitterness and ‘generational break’ of the emigrating workers is expressed in the very low level of remittances sent back ‘home’. One reason the Irish unemployment rate remains at 14% instead of 20-25% is because of the astounding overseas flight of young workers.
In contrast, there is no such mass emigration of young workers from the Basque country. Instead of flight, the class fight has intensified. The struggle for national liberation has gained support among the middle class and small business owners faced with the complete failure of the right-wing regime in Madrid (ruled by the self-styled ‘Popular Party’) to stem the downward spiral. The fusion of class and national struggle in the Basque country has militated against any sell-out agreements signed by the ‘moderate’ trade unions, Workers Commissions (CCOO) and the General Union of Workers (UGT). LAB, the militant Basque Workers Commission, has vastly more influence than their number of formally affiliated unionized workers would suggest. LAB’s capacity to mobilize is rooted in their influence among factory delegates, who are elected in all workplaces, far exceeding all trade union membership. Through the delegates meeting in assemblies, workers discuss and vote on the general strike – frequently bypassing orders from central headquarters in Madrid. Direct democracy and grass roots militancy frees the militant Basque workers from the centralized bureaucratic trade union structure which, in Ireland, has imposed retrograde ‘give backs’ to the multi-national corporations.
In the Basque country, there is a powerful tradition of co-operatives, especially the Mondragon industrial complex, which has created worker solidarity in the urban-rural communities absent among Irish workers. The leading Irish politicians and economic advisers have groveled before the multi-national corporations, offering them the lowest tax rates, biggest and longest-term tax exemptions, and the most submissive labor regulations of any country in the European Union.
In the Basque country, the nationalist-socialist EH Bildu-Sortu political party, the daily newspaper Gara, and the LAB provide mutual political and ideological support during strikes, electoral contests and mass mobilizations based on class struggle. Together, they confront the ‘austerity’ programs as a united force.
In Ireland, the Labor Party – supposedly linked to the trade unions – has joined the current governing coalition. They have agreed to a new wave of cuts in social spending, layoffs of public employees, and wage and salary reductions of 20%. The trade union leadership may be divided on these draconian cuts, yet most still support the Labor Party. The more militant retail workers’ union rejects the cuts, but has no political alternative. Apart from support from the republican-nationalist Sein Fein and smaller leftist parties, the political class offers no clear progressive political program or strategy. [The Sein Fein has made the ‘transition’ from armed to electoral struggle.] According to the latest (May 2013) polls, it has doubled its voter approval rating from under 10% to 20% due to the crisis. However, Sein Fein is internally divided: the ‘left’ pro-socialist wing looks to intensify the ‘anti-austerity’ struggle while the ‘republican’ parliamentary leaders focus on unification and downplay class struggle. As a result of its collaboration with the ‘troika’ and the new regressive tax laws, the Labor Party is losing support and the traditional right-wing party, Fianne Fail, which presided over the massive swindles, speculative boom and corporate giveaways, is making an electoral comeback – and may even return to power. This helps to explain why Irish workers have lost hope in any positive political change and are fleeing in droves from the perpetual job insecurity imposed by their elite: ‘Better a plane ticket to Australia than a lifetime of debt peonage, regressive bankruptcy laws and boss-dictated contracts approved by trade union chiefs who draw six digit salaries’.
The Basque country’s revolt against centralized rule from Madrid is partly based on the fact that it is one of Spain’s most productive, technologically advanced and socially progressive regions. Basque unemployment is less then that of the rest of Spain. Higher levels of education, a comprehensive regional health system, especially in rural areas and a widespread network of local elected assembles, combined with the unique linguistic and cultural heritages, has advanced the Basque Nation toward greater political autonomy. For many this marks the Basques as a political ‘vanguard’ in the struggle to break with the neo-liberal dictates of the EU and the decrepit regime in Madrid.
Conclusion: Political Perspectives
If current austerity policies and emigration trends continue, Ireland will become a ‘hollowed out country’ of historical monuments, tourist-filled bars and ancient churches, devoid of its most ambitious, best trained and innovative workers: a de-industrialized tax-haven, the Cayman Island of the North Atlantic. No country of its size and dimensions can remain a viable state faced with the current and continuing levels of out-migration of its young workers. Ireland will be remembered for its postcards and tax holidays. Yet there is hope as the left republicans of the Sein Fein, socialists, communists and anti-imperialist activists, join the unemployed and underpaid workers in forming new grassroots networks. At some point the revolving doors of Irish politicos in and out of office may finally come to a halt. Unemployed and educated angry young people may decide to stay home, stand their ground and turn their energies toward a popular rebellion. One consequential socialist leader summed it up: “Deep pessimism and the influence of bankrupt social democracy and imperialist ideology within the labor movement are very strong. As you know we can’t start a journey other than from where we are”. The determination and conviction of Irish trade union militants is indeed a reason to hope and believe that current flight will turn into a future fight.
In the case of the Basque country, the rising class and national mass struggle, linked to the legacy of powerful co-operatives and solidarity based worker assemblies, provides hope that the current reactionary regime in Madrid can be defeated. The ruling neo-fascist junta (the ruling party still honors the Franco dictatorship and military) is increasingly discredited and has to resort to greater repression. With regard to the militant Basque movements, the regime has taken violent provocative measures: criminalizing legal mass protests, arresting independence fighters on trumped up charges and forcefully banning the public display of the photos of political prisoners (called ‘terrorists’ by Madrid). It is clear the government is increasingly worried by the strength of the general strikes, the rising electoral power of the pro-independence left and has been trying to provoke a ‘violent response’ as a pretext to ban the press, party and program of the EH Bildu-Sortu and LAB.
My sense is that Madrid will not succeed. Spain as a centralized state is disintegrating: the neo-liberal policies have destroyed the economic links, shattered the social bond and opened the door for the advance of mass social movements. The bi-party system is crumbling and the class-collaborationist policies of the traditional trade union confederations are being challenged by a new generation of autonomous movements.
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Irish government to impose austerity until 2020
The Fine Gael-Labour coalition in Dublin is currently discussing a proposal from Finance Minister Michael Noonan, which imposes austerity budgets until 2020.
Although the programme has not yet been published, government officials have made clear that its purpose is to intensify the spending cuts under the bailout agreed with the European Union, European Central Bank and the International Monetary Fund after the programme expires later this year.
Referring to the dictates of the troika, which have ensured the implementation of a large part of the more than €28 billion of austerity measures since 2008, Noonan said, “When we leave the programme we won’t have that kind of discipline within our system any more and I want to make sure that, because of more loose arrangements, that we don’t lose impetus.”
Specific savings are expected to be outlined by the proposal, and fiscal targets will be included. Spending ceilings for the coming three years are to be presented in the 2014 budget, which will be announced in October.
Minister for Jobs Richard Bruton, like Noonan a member of Fine Gael, was explicit that the government’s strategy would be to step up the downward pressure on labour costs in order to build a “competitive economy.”
“There isn’t a crock of gold that you can dip into and create an alternative to building sound enterprises that are oriented to export markets and who sell innovative products,” he proclaimed.
The Labour Party’s Public Sector Reform Minister Brendan Howlin is playing a leading role in slashing government spending. A letter was recently issued by him to each government department, detailing percentages of budgets to be cut in the years 2015 and 2016. These are thought to include annual savings of at least three percent in the budgets of the health and social protection departments. Other departments could face annual targets of five percent.
The state pension fund will be bled dry to offer incentives to foreign investors and private equity firms to come to Ireland. The Financial Times reported that the remaining six billion euros in the National Reserve Pension Fund would be used by the government to create a “co-investment” fund.
There has been hardly any public discussion on these new developments, which will condemn Irish working people to unending austerity for years to come. These policies will worsen the conditions of misery which already prevail, including an unemployment rate standing at 14 percent.
Essential to the enforcement of austerity is the full support of the trade unions, which the government can be assured of. The Irish Congress of Trade Unions (ICTU) has been locked in talks with the coalition since February to reach an agreement to impose the latest round of savings on public sector workers. The successor to the no-strike Croke Park Agreement between government, employers and the unions, which expires next year, aims to save €1 billion by 2016.
The unions are currently trying to force through the Haddington Road Agreement in the face of widespread opposition among workers. In the first vote on the deal in April, a large majority of workers rejected it, including an overwhelming number of teachers, medical staff and emergency service workers.
The bureaucracy then entered new talks on a union-by-union basis in order to divide the emerging opposition. They accepted as good coin the claim from Howlin that the three year agreement would be the last time workers would be asked to sacrifice their wages and working conditions to pay for the collapse of the banks, even as he prepared to outline with Noonan proposals which will see austerity and labour market reforms continue for at least another four years thereafter.
The deal now being voted on by the public sector unions retains all of the cuts demanded by the government. It contains reductions to overtime pay, longer working hours, redeployment measures designed to cut numbers in the public sector, and the freezing of pay increments.
These measures will exacerbate the exploitation of workers who have suffered significant pay cuts since 2008. In the public sector, average wages have fallen by 14 percent, while in other economic areas it is even more. This has been an integral part of the drive by the ruling elite to permanently lower labour costs. According to one study, labour costs in Ireland fell between 2008 and 2012 by 8.4 percent.
On this basis, the Irish stock market is achieving its largest rally since the crisis. Stock values have more than doubled since a low point in early 2009, and companies are predicting that they will secure their biggest profits since that time. One trader bluntly pointed to the source of these renewed gains, telling Bloomberg, “We have to give Ireland credit for actually sticking to the reform programme and taking the levels of painful social adjustment that few countries in Europe have come close to.”
The continued expansion of profits is unsustainable, and there are already clear signs of the danger of another banking collapse. Last week, it was revealed that €3.5 billion of funds loaned to Allied Irish Bank during the near collapse of the banking system in 2008-09 would not be paid back to the state, but would be converted into preferential shares. One press article pointed out that this one move would see the state lose more money than the total savings it had planned in the 2014 budget.
The banks will likely require access to even more financial support from the government, another important factor driving the cuts. Noonan discussed this possibility at his last meeting with the IMF, in the event the banks fail stress tests scheduled for early 2014. The tests, initially planned for autumn 2013, have been pushed back amid concerns over the stability of the banks. Fitch released a report this week stating that “significant risks” still remain in the financial system.
In the absence of agreement within the European Union on allowing the EU’s bailout fund to lend directly to banks, Dublin would be faced with taking even more debt on to the state balance sheet in order to cover the capital requirements of the financial institutions, under conditions in which state debt is already greater than 120 percent of GDP.
In an ominous report released at the end of May which indicates the scale of the developing crisis, Ireland’s Central Bank pointed out that a total of €25.8 billion of mortgages were in arrears by more than 90 days, and small businesses had fallen behind with payments on loans totalling €10.8 billion. The banks have only €9.2 billion in capital to act as a buffer.
While the banks can expect to obtain full access to billions more in state resources, the latest figures point to a sharp rise in severe poverty. One in ten are suffering from food poverty, defined as an inability to afford a meat or vegetarian equivalent meal every other day, or having missed a meal over a period of two weeks because of money problems. The real number of those living under such circumstances is certainly much higher, since the figures from this report were collected in 2010. In a separate study, the Irish League of Credit Unions revealed that almost 50 percent of the population have to borrow money to meet the cost of basic bills.
via Irish government to impose austerity until 2020 – World Socialist Web Site.
Neoliberalism has spawned a financial elite who hold governments to ransom
The International Monetary Fund has admitted that some of the decisions it made in the wake of the 2007-2008 financial crisis were wrong, and that the €130bn first bailout of Greece was “bungled”. Well, yes. If it hadn’t been a mistake, then it would have been the only bailout and everyone in Greece would have lived happily ever after.
Actually, the IMF hasn’t quite admitted that it messed things up. It has said instead that it went along with its partners in “the Troika” – the European Commission and the European Central Bank – when it shouldn’t have. The EC and the ECB, says the IMF, put the interests of the eurozone before the interests of Greece. The EC and the ECB, in turn, clutch their pearls and splutter with horror that they could be accused of something so petty as self-preservation.
The IMF also admits that it “underestimated” the effect austerity would have on Greece. Obviously, the rest of the Troika takes no issue with that. Even those who substitute “kick up the arse to all the lazy scroungers” whenever they encounter the word “austerity”, have cottoned on to the fact that the word can only be intoned with facial features locked into a suitably tragic mask.
Yet, mealy-mouthed and hotly contested as this minor mea culpa is, it’s still a sign that financial institutions may slowly be coming round to the idea that they are the problem. They know the crash was a debt-bubble that burst. What they don’t seem to acknowledge is that the merry days of reckless lending are never going to return; even if they do, the same thing will happen again, but more quickly and more savagely. The thing is this: the crash was a write-off, not a repair job. The response from the start should have been a wholesale reevaluation of the way in which wealth is created and distributed around the globe, a “structural adjustment”, as the philosopher John Gray has said all along.
The IMF exists to lend money to governments, so it’s comic that it wags its finger at governments that run up debt. And, of course, its loans famously come with strings attached: adopt a free-market economy, or strengthen the one you have, kissing goodbye to the Big State. Yet, the irony is painful. Neoliberal ideology insists that states are too big and cumbersome, too centralised and faceless, to be efficient and responsive. I agree. The problem is that the ruthless sentimentalists of neoliberalism like to tell themselves – and anyone else who will listen – that removing the dead hand of state control frees the individual citizen to be entrepreneurial and productive. Instead, it places the financially powerful beyond any state, in an international elite that makes its own rules, and holds governments to ransom. That’s what the financial crisis was all about. The ransom was paid, and as a result, governments have been obliged to limit their activities yet further – some setting about the task with greater relish than others. Now the task, supposedly, is to get the free market up and running again.
But the basic problem is this: it costs a lot of money to cultivate a market – a group of consumers – and the more sophisticated the market is, the more expensive it is to cultivate them. A developed market needs to be populated with educated, healthy, cultured, law-abiding and financially secure people – people who expect to be well paid themselves, having been brought up believing in material aspiration, as consumers need to be.
So why, exactly, given the huge amount of investment needed to create such a market, should access to it then be “free”? The neoliberal idea is that the cultivation itself should be conducted privately as well. They see “austerity” as a way of forcing that agenda. But how can the privatisation of societal welfare possibly happen when unemployment is already high, working people are turning to food banks to survive and the debt industry, far from being sorry that it brought the global economy to its knees, is snapping up bargains in the form of busted high-street businesses to establish shops with nothing to sell but high-interest debt? Why, you have to ask yourself, is this vast implausibility, this sheer unsustainability, not blindingly obvious to all?
Markets cannot be free. Markets have to be nurtured. They have to be invested in. Markets have to be grown. Google, Amazon and Apple haven’t taught anyone in this country to read. But even though an illiterate market wouldn’t be so great for them, they avoid their taxes, because they can, because they are more powerful than governments.
And further, those who invest in these companies, and insist that taxes should be low to encourage private profit and shareholder value, then lend governments the money they need to create these populations of sophisticated producers and consumers, berating them for their profligacy as they do so. It’s all utterly, completely, crazy.
The other day a health minister, Anna Soubry, suggested that female GPs who worked part-time so that they could bring up families were putting the NHS under strain. The compartmentalised thinking is quite breathtaking. What on earth does she imagine? That it would be better for the economy if they all left school at 16? On the contrary, the more people who are earning good money while working part-time – thus having the leisure to consume – the better. No doubt these female GPs are sustaining both the pharmaceutical industry and the arts and media, both sectors that Britain does well in.
As for their prioritising of family life over career – that’s just another of the myriad ways in which Conservative neoliberalism is entirely without logic. Its prophets and its disciples will happily – ecstatically – tell you that there’s nothing more important than family, unless you’re a family doctor spending some of your time caring for your own. You couldn’t make these characters up. It is certainly true that women with children find it more easy to find part-time employment in the public sector. But that’s a prima facie example of how unresponsive the private sector is to human and societal need, not – as it is so often presented – evidence that the public sector is congenitally disabled.
Much of the healthy economic growth – as opposed to the smoke and mirrors of many aspects of financial services – that Britain enjoyed during the second half of the 20th century was due to women swelling the educated workforce. Soubry and her ilk, above all else, forget that people have multiple roles, as consumers, as producers, as citizens and as family members. All of those things have to be nurtured and invested in to make a market.
The neoliberalism that the IMF still preaches pays no account to any of this. It insists that the provision of work alone is enough of an invisible hand to sustain a market. Yet even Adam Smith, the economist who came up with that theory, did not agree that economic activity alone was enough to keep humans decent and civilised.
Governments are left with the bill when neoliberals demand access to markets that they refuse to invest in making. Their refusal allows them to rail against the Big State while producing the conditions that make it necessary. And even as the results of their folly become ever more plain to see, they are grudging in their admittance of the slightest blame, bickering with their allies instead of waking up, smelling the coffee and realising that far too much of it is sold through Starbuck
Austerity could only ever bring Europe so far
There can be no solution to the European Union’s crisis without restructuring economic and monetary union
By
László Andor, Pervenche Berès, Joan Burton, Yves Leterme and Henri Malosse- The Guardian
Demonstrators in tents protest in Madrid about a youth unemployment rate of 40%. ‘The target must be full employment.’ Photograph: Emilio Morenatti/AP
Economic prosperity and social progress are key European Union goals. But for the past five years it has delivered neither. It has been in a double-dip recession since mid-2011, with unemployment now at a record high of 11% and no tangible improvement in sight.
The crisis has lasted longer in Europe than in the US or the rest of the world mainly because of poorly designed monetary union, without an appropriate framework of rules for banks and other financial institutions or sufficiently robust budgetary instruments.
So far the EU has only deployed the minimum collective response necessary for the euro’s survival: conditional emergency loans to troubled countries, conditional bond-buying by the European Central Bank, tougher economic policy co-ordination, and tighter restrictions on governments’ debts to assure markets of countries’ responsibility.
However, the reality of today’s eurozone is far too many people out of work, falling internal demand, increasing polarisation within societies – and a yawning chasm dividing relatively prosperous core countries from a periphery destined for depression. Without boosting macroeconomic demand, making labour markets more flexible in troubled EU countries – while often necessary – will not in itself create sufficient jobs.
Moreover, the pressure to make far-reaching “adjustments” often means that there is limited time to discuss reforms with trade unions and employers’ organisations before they are introduced, undermining reforms’ sustainability and sometimes leading to social unrest. Many citizens feel increasingly disconnected from national politics, and even more so from European decision-making, over which they feel they have little influence.
The real economy is being stifled by debt incurred by poorly regulated and supervised banks and other financial institutions in the pre-2008 age of easy money. As banks need to shrink their balance sheets, they are reluctant to lend to companies in the real economy. Meanwhile, the recession is pushing more households and companies into serious financial difficulties. All in all, Europe has not yet succeeded in eliminating uncertainty, and its people have paid a high price for this. The conclusion is clear: we will not recover through incremental steps that just appease the financial markets for a few months.
In the past year the EU policy debate has rightly shifted towards growth, as opposed to “austerity only”. But we still lack a robust recovery strategy worthy of the name. Such a strategy would require a new policy mix based on the following elements.
First, we must urgently set up an EU-level banking union to restructure or close down failed banks. Companies need access to more credit, under better conditions, to invest and grow. Europe’s financial sector must cut its debts faster, including through greater debt write-offs and shaking up banking structures.
Second, consolidation in weaker member states needs to be balanced by higher consumption in stronger EU countries. The monetary union cannot rely solely on squeezing troubled countries, which depresses overall demand. “Symmetrical rebalancing” requires structural measures in stronger countries, such as allowing wages to catch up with productivity and adequate minimum wages to prevent in-work poverty.
Third, if weaker member states are to regain competitiveness while keeping the euro, they need investment in the real economy. This must be based on sophisticated industrial policy and support for entrepreneurship, so that restructuring produces sustainable business models. If used wisely, EU funds such as the European social fund can be a major source of financial support, together with the European Investment Bank.
Fourth, Europe’s monetary policy must become more expansionary. The ECB has bought Europe time through its bond-buying pledge, turning itself into a conditional lender of last resort. That is to be welcomed. But it is becoming increasingly clear that Europe’s financial crisis cannot be overcome in a deflationary environment, so a different inflation outlook is necessary. We must rethink the ECB’s role and powers.
Fifth, Europe must invest in human capital – creating opportunities for people. EU ministers have agreed a youth guarantee, to ensure that every young person gets a job, apprenticeship or learning opportunity within four months of becoming unemployed. Now individual member states must put it into practice. Similar “social investment” must be boosted across the board – for example, through the provision of quality childcare and the re-skilling of older workers. The target must be full employment.
European leaders should focus on finding a systemic, long-term solution to the crisis, restoring each country’s growth potential and convergence within the monetary union. Europe should convene a Bretton Woods-type conference to put in place an economic and monetary arrangement for the coming decades.
For such a lasting arrangement, a grand bargain between surplus and deficit countries is needed, ensuring a sustainable economic future for each. Some pooling of government debt, and cross-country automatic stabilisers (where, for example, the costs of cyclical unemployment are shared between the member states by using common European funds) should be seriously considered for Europe’s monetary union.
Rebalancing through aggressive reduction of government spending and similar measures in deficit countries (under the euphemism “internal devaluation”) is, without higher domestic demand in the surplus countries, a recipe for long-lasting recession and disintegration. There is no solution to the crisis without reconstructing Europe’s economic and monetary union, and without shifting the focus on to people’s needs and potential. Austerity could only ever bring us so far. We must now move to the next stage.
via Austerity could only ever bring Europe so far | László Andor | Comment is free | The Guardian.
A thousand days of austerity
It is now three years since Europe-imposed cutbacks were first imposed on Spain
With rampant unemployment, the country’s suffering has never been more acute
Rereading John Williams’ novel Stoner recently, I was struck by the author’s description of the years between the end of World War I and the start of World War II. Williams describes the widespread feeling of desperation that he had seen as a child, before the Great Depression hit in 1929: the men and women whose lives had been destroyed, walking the streets aimlessly, reduced to begging for a crust of bread.
Williams’ description of the years leading up to the Great Depression will be increasingly familiar to many Spaniards. This week, in the early hours of Thursday to be exact, marks the third anniversary of the beginning of what might be called Spain’s age of austerity, the moment when European economy and finance ministers pressured the Socialist Party administration of José Luis Rodríguez Zapatero to change its economic policies: from the combination of growth and fiscal consolidation that Zapatero had been trying to apply to a policy of rigor mortis and constant sacrifice that continues to this day and shows no sign of abating. More than 1,000 days of worsening unemployment, reduced spending power and social protection, and a weakened democracy.
Three years ago, Spain’s public deficit was 11.2 percent of GDP, and unemployment was 20 percent of the workforce, or 4.6 million people. The EU communiqué outlined an agreement to create a European Financial Stability Mechanism to help countries in difficulty, in exchange for which, Spain and Portugal would intensify their fiscal consolidation and structural reforms. Three days later, a bruised and battered Zapatero appeared before Congress and left deputies speechless by announcing a series of unprecedented spending cuts: public sector workers’ salaries would be reduced and pensions frozen; the 2,500-euro payment to new parents aimed at increasing the birth rate would be stopped; state investment slashed, some of the payments to families caring for dependents ended; and huge savings imposed on regional governments, among other measures.
Zapatero was desperately trying to save Spain from the fate of the PIG nations of Portugal, Ireland and Greece, where the EU had sent in the men in black from the so-called troika of the IMF, the European Central Bank (ECB), and the European Commission to run things, or would soon do so. These states would be subject to deep-rooted adjustment programs in return for money to keep their near-bankrupt economies functioning. Spain’s economy would be spared this indignity, but only at the cost of Zapatero having to apply the same policies. It would cost him the leadership, and his party the next election in a defeat from which it is still struggling to recover.
More important for millions of Spaniards is that on May 9, 2010, an age of austerity was ushered in that has changed the way that most people live and see the world: an economy based on fear (on uncertainty, economic insecurity, being left behind in an increasingly unequal distribution of wealth, of being made permanently unemployed…) has morphed into one based on suffering (unemployment, impoverishment, no social protection and the demise of countless businesses…).
The nearest thing to the constraints imposed on Zapatero three years ago this week took place 19 years before, when French President François Mitterrand, after winning elections amid a kind of collective ecstasy during the high point of Socialist Party hegemony, was obliged by the markets to change his leftwing policies based on increasing demand and forced to backtrack on minimum wage promises, an increase in the deficit to pay for more public investment, a shorter working week, the nationalization of 36 banks and other reforms. Mariano Rajoy would sum up his country’s position in 2012, shortly after winning the general election, by telling Congress: “Spaniards cannot choose; we do not enjoy that freedom.”
The second stop in the “authoritarian austerity” program (so called because it has been imposed) took place one year later. The summer of 2011 was a time of speculative attacks on the Spanish economy, sending borrowing rates to dizzying heights. The volatility of the international markets made the cost of financing Spanish debt ever more expensive, and made life harder for businesses and households denied credit by the banks.
Three important events took place during this long, hot summer. First of all, Zapatero would call elections for November that year. The idea was that the winner (which from the outset was clearly going to be Rajoy’s Popular Party (PP), and by a landslide, giving it an absolute majority) would have the parliamentary and moral authority to continue the austerity program. Next, the ECB would send a still largely secret letter to Zapatero and another to Silvio Berlusconi, then prime minister of Italy (who made no bones about revealing its contents), obliging them to take bolder steps toward adjusting their respective economies and implement further reforms. In Spain’s case, this would be the second turn of the screw in as many months. In its missive, the ECB, an institution that has always defended its independence, told the Spanish government that it would have to implement a root-and-branch reform of the labor market, eliminate wage increases in line with inflation, impose further fiscal restrictions, and reform the energy, property, and professional services markets.
What makes the letter particularly special is that it is signed by Miguel Ángel Fernández Ordóñez, then governor of the Bank of Spain and a member of the board of the ECB. The next signature is that of ECB President Jean-Claude Trichet. Fernández Ordóñez, obsessed with labor reform, was writing to Zapatero from Frankfurt to demand of him what he could not in his capacity as governor of the Bank of Spain. In exchange for the cuts and reforms, Spain would receive the ECB’s help in resisting the international markets’ repeated attacks, which Zapatero had described thus: “The speculative bombardment that Spain is suffering is comparable to that suffered by the Americans at Pearl Harbor.”
Zapatero’s third measure aimed at calming the markets was the most controversial: the reform of the Constitution. In a country like Spain, where two main political parties have been unable or unwilling to reach agreement on updating constitutional issues, the Socialist Party and the Popular Party did just that, and with little fuss, limiting the structural deficit, putting a ceiling on public debt, and above all, prioritizing the payment of loans to meet interest on government borrowing above any other obligation, whether that be health, education, pensions, unemployment or other welfare spending. This had long been a demand of Europe’s rightwing parties: handing over the weapon of fiscal policy, and was undertaken by Spain’s Socialist government without any debate.
The most recent austerity measure has been with us without interruption since 2012. One might say that the first 18 months of PP government in Spain has been a kind of permanent May 9, 2010. When Rajoy took up residence in the Moncloa Palace, he threw out the electoral program that had won him an absolute majority, and began applying the policies dictated by Brussels. He abandoned each and every one of the six pillars of his “Join the change” platform: economic growth and employment creation; education; protecting the welfare state; modernizing the public sector; strengthening the country’s institutions and re-establishing Spain’s international credibility. From December 31, 2011, when Rajoy approved the biggest spending cuts in the country’s history along with a major tax hike, the country has been headed in the same direction. Rajoy’s goals are the same as Zapatero’s: to prevent the troika from sending in the men in black.
We have now seen two Spanish governments unable to apply their own policies to deal with the crisis, and who are subject to outside pressure – governments that, de facto, are not governing on the basis of the programs they were elected on. Spain’s membership of the European Union and the single currency means that whoever is in power is obliged to ignore the wishes of the people. As EL PAÍS columnist José Ignacio Torreblanca notes in a survey on Spain’s democracy commissioned by the Fundación Alternativas think-tank, there is a widespread perception that national governments’ room for maneuver has now been reduced beyond the point where it is democratically acceptable. Voters throughout the EU feel that the policies and decisions that affect their lives are no longer subject to the democratic process. Institutions such as the ECB, which are not elected, are imposing harsh conditions in order to keep the markets happy, while democratic national governments have no alternative but to apply the technocratic policies cooked up in Brussels, Frankfurt or Washington.
This has led to unprecedented levels of disaffection among the electorate. At the start of the crisis, in 2007, some 65 percent of Spaniards said they trusted the EU, with just 23 percent unhappy with it. At the end of 2012, that figure had grown to 72 percent, with barely 20 percent of those surveyed saying they still had faith in the EU. In December 2012, the Organization for Economic Cooperation and Development (OECD), a non-elected multilateral body, suggested that Spain increase sales tax, make it cheaper to sack workers, limit tax breaks for home buyers, and make it harder to claim unemployment benefit. If any government, regardless of its political affiliation, has to apply such measures, even if it does not agree with them, the main political parties supporting it will end up like Tweedledee and Tweedledum: arguing with each other over trivialities; they will be seen like Pepsi and Coke, or Tintin’s Thomson and Thompson.
In his book Las promesas políticas (or, Political promises), sociologist José María Maravall notes: “Representative democracy requires that the electorate be able to decide between two genuinely different alternatives and that parties with different proposals on important issues compete with each other. If the differences between the parties were to disappear, if they promise different things, but can only apply the same recipes, the electorate can vote, but not choose.”
The street protests organized by the myriad organizations and associations that make up the so-called Indignant Movement are an expression of the former. Slogans such as “they don’t represent us,” or “they call it democracy but it isn’t” reflect a widespread feeling among the electorate that their vote no longer counts for anything and that economic power (which cannot be punished through the ballot box because it is not democratic) will always prevail over political decisions. In the book Democracy’s Intimate Enemies, Bulgarian writer and thinker Tzvetan Todorov argues that the main threats to democracy today do not come from without, from those who openly declare themselves as its enemies, but from within, from ideologies, movements and acts that are supposed to defend those values: “In the fight against totalitarianism, democracy faced forces that impeded the individual’s freedom. This was a kind of hypertrophy of the collective to the detriment of the individual, and the collective itself was subject to a small core of tyrannical leaders. But in the present-day West, one of the main threats to democracy does not come from the uncontrolled expansion of the collective, but has to do with the unprecedented rise of certain individuals who suddenly endanger the wellbeing of the whole of society.”
While some talk about a three-year “dictatorship of austerity,” Pierre Moscovici, the French Minister of Economy and Finance, had redefined the concept: “Austerity is when they kill the patient.” The outcome so far of these 1,000 days of cuts, adjustments and sacrifices is one of increased poverty and inequality: Spain’s per capita income is around the same as it was in 2002: based on that piece of data alone it is now possible to talk in terms of a lost decade. According to Eurostat, the European Commission’s statistics office, Spanish society is now the most unequal in the EU, alongside Portugal, Bulgaria and Latvia. The fall in living standards has been far more extreme than in most other EU member states; poverty is more widespread and deeper. People’s expectations have fallen, hit hard by the lack of any hope that these reforms will have any impact in the short or medium term. Much of the country seems in the grip of a collective psychological malaise, and which has reduced spending on consumer goods; the negative impact on salaries and labor conditions (spurious objectives within an aggressive labor reform) is hard to overestimate.
Novelist and essayist Antonio Muñoz Molina warns in a recent piece entitled Todo lo que era sólido (or, All that once was solid) that it is not possible to reduce spending on education and health, legal aid and emergency services indefinitely without destroying society as we know it. Beyond a certain point, there is no return. Things deteriorate little by little, and then suddenly, one day, instead of continuing along lines that we have grown used to, the whole thing collapses, without transition, in the same way that a house that seemed to be an eternal ruin collapses overnight.
Long-term austerity programs imposed on societies with growing needs due to their economic difficulties do not reduce poverty, and instead generate further inequality. The way out of the crisis imposed on Europe until now has meant a hugely regressive distribution of income, wealth and power: from below upwards, a kind of Robin Hood in reverse.
The economist Joseph Stiglitz’s explanation of the widespread rejection of such policies is hardly surprising: most people see that the markets are not working, and particularly the labor market; they see that the political system we have created (democracy) does not correct the market’s faults; and as a result, there is growing disaffection with democracy and the market economy, something that sadly reminds us of less happier times.
No end in sight: a timeline of Spain’s crisis
- 02-05-2010. Greece accepts an EU/IMF bailout, followed in July by a second. In November, Ireland asks for help, and in April of the next year, Portugal’s economy is put under Brussels’ control. In March 2013, Cyprus requests a bailout.
- 12-05-2010. Prime Minister Zapatero announces spending cuts of 15 billion euros.
- 15-05-2011. The 15-M “Indignant” movement is born.
- 25-08-2011. The PP and the Socialist Party agree on changes to the Constitution limiting the public deficit to 0.4 percent of GDP from 2020. In August the European Central Bank (ECB) decides to buy Italian and Spanish debt, and sends a letter to both countries listing reforms they must implement.
- 20-11-2011. Rajoy wins a landslide election victory.
- 30-12-2011. The new government announces cuts of 8.9 billion euros, saying that the previous administration had under-calculated the true size of the public deficit.
- 10-02-2012. Labor reforms pushed through by decree.
- 29-03-2012. First general strike against Rajoy’s policies.
- 09-04-2012. The government announces further cuts of 10 billion euros to education and health.
- 09-05-2012. Failed lender Bankia is nationalized.
- 10-06-2012. The government asks Brussels for up to 100 billion to bail out Spain’s banks.
- 24-07-2012. The risk premium on borrowing reaches an unprecedented 638 basis points.
- 26-07-2012. ECB president Mario Draghi says he will take all necessary measures to save the euro. Spain’s risk premium falls 50 basis points in response.
- 11-07-2012. The PP imposes unprecedented spending cuts of 65 billion euros over two years.
- 29-09-2012. The government brings forward the 2013 budget, with yet more cuts.
- 14-11-2012. Second one-day general strike against the government’s economic policies.
- 30-11-2012. Government says it will not increase pensions in line with inflation.
- 25-04-2013. Unemployment hits 27.2 percent. There are 6.2 million people officially registered as being without work, and 1.9 million homes have only one wage earner. More than 52 percent of unemployed are aged under 25. The government admits that there will be 1.3 million fewer jobs when its term finishes in 2015 than when it took office.
- April 2013. The government says that there will be no economic growth until at least 2016, two years later than it had previously forecast. It maintains income tax hikes, and says that public debt will be around 100 percent of GDP in 2016. GDP for 2013 will fall by 1.3 percent, three times the figure previously forecast.
The Irish Economy – Three things all serious people know are true
Three things all serious people know are true
This post was written by Kevin O’Rourke
A holy trinity — or perhaps a troika? — of beliefs has guided policy since 2010. These are that austerity is expansionary; that the sky will fall in if ever the debt to GDP ratio exceeds 90%; and that the way to do austerity is to cut expenditure rather than raise taxes.
All of which is very convenient if what you really want to do is shrink the state.
We know how well the first two nostrums have performed when confronted with empirical evidence, so you might think that people would be just a wee bit cautious about stating the third as gospel truth. But no, here is Mario Draghi:
First, fiscal consolidation should be based on reductions in current expenditure rather than increases in taxes. Unfortunately, many of the fiscal consolidation measures were implemented in an emergency situation, with most governments choosing the simplest route, which was to raise taxes. And here we are talking about raising taxes in an area of the world where taxes are already very high, so it is no wonder that this had a contractionary effect.
Paul Krugman helpfully reminds us where this belief came from, and what happened next. The ECB is constantly telling us that it has a narrowly restricted mandate, with its primary concern being inflation. In that case, then surely the least that we are entitled to expect is that it keeps its views about the composition of fiscal adjustments to itself?
via The Irish Economy » Blog Archive » Three things all serious people know are true.
via The Irish Economy » Blog Archive » Three things all serious people know are true.
Do we Need the IRA to Fight the War Damage of Austerity?
We don’t have a leader to fight the war against austerity and given that we have no alternative should we ask the IRA to take up the cause on behalf of the citizens
I have no doubt that Kenny and Noonan have good intentions but can you see these men throwing down the gauntlet to force radical change to IMF/ECB policy… no these guys will not rock the boat for the are bonded to their masters
We are a country blitzed by the imposition of austerity…no credit, mounting household debt, high unemployment, plummeting standards right across the broad spectrum of education/social services and finally the Government selling off the what remains of the family silver. Light at the end of the tunnel I don’t think so all I see is devastation and more ruin. Given the level of mounting Government debt at some stage we are going to reach the point of no return and what then. Do we have to wait until the bitter end to face face reality.
Public Sector
Cutting public sector jobs means higher unemployment and fewer people in work paying taxes
Freezing public sector pay and higher unemployment means less disposable income to be spent in the private sector, with a knock-on effect on private sector jobs
Cutting business taxes means less revenue to close the deficit and pay off our debt.
The government is presenting its plans as simply ‘dealing with the deficit’, but that is a smokescreen for another agenda. The government wants to cut and privatise public services because it believes in a market for even essential goods and services; that business should be free to extract profit from any public service, even schools, hospitals, welfare ETC.
The government’s policies are failing because the public sector is not the real problem.
Instead of solving the crisis, these policies are making it worse.
Austerity is not working
It’s not just in the Ireland that austerity isn’t t working. Just look at Greece,Italy, Portugal, UK and Spain
In Spain the unemployment rate is now 25%, while youth unemployment is over 50%.
Why inequality has to be addressed
We are the 99% – and as an end game harassing the 99% cannot not work.
Wages have disportionately . Inflation has been higher than the annual increase in pay. This fall in real wages means we are able to buy less with our money than before, as we have less disposable income.
. . . .
Redistribution: to the 1%
Why is this happening and where is the money going? At the same time that wages and other income has been squeezed for the majority of people, a few people at the top are doing better than ever A few at the top are getting very rich by cutting pay and pensions for the rest.Freedom of information
The very fundamentals of democracy are build on freedom of information and yet on a worldwide basis it appears to be politicians want to squeeze the information been fed to its citizens. Why will the Irish/EU not release the full details of the bailout agreement to its people.
Education
Cutbacks In in education will mean will mean we revert to being a nation of unskilled factory workers.
What next immigration to Bangladesh?
Education is one of the few remaining life lines open to the country
No sell off of public utilities
Everywhere this has happened it has been an unmitigated disaster
A banking system that works for people not profit
Some of the banks that were bailed out by the government are still using loopholes to advise their corporate and wealthy clients how to avoid paying tax.
They have also laid-off thousands of their own staff to maintain the greed at the top. It feels like we have nationalised the debts while the profits are privatised.
The banking collapse, which caused such economic damage , means the finance sector has lost the right to carry on as before. It must now act in the public interest; publicly owned and controlled.
The money, real money, that is held by the finance sector is ours anyway: our pension funds, our savings, and the cash in our current accounts. The rest of it is credit – electronic money (as over 90% now is) created out of thin air by the banks to lend. The banks are given the right to create credit by governments.
We therefore need the government to ensure that when banks create credit, or lend or invest with our savings or pension funds, they are doing so in our collective interest.
That means investing in infrastructure like new council housing not lending recklessly and creating a housing bubble (and inevitable crash). It means investing to create new jobs in renewable energy rather than speculating on food prices to profit from starvation. And it means investing in new businesses and ideas, not getting windfall dividends and bonuses for merging existing businesses and laying-off staff.
ConclusionEssential public services are being cut back and privatised, and people’s living standards have been falling , both for those in work and even more so for those unemployed.
There are social consequences too, which have clear financial costs.
Research from previous recessions shows that the increased financial pressures push more people into depression and substance abuse, means couples are more likely to separate, and suicide rates increase.
Politics is about choices – and there is always a choice and always an alternative. Because there always is an alternative but yet we are continually fed the mantra there is no alternative to austerity.
There is an economic crisis – one of rising unemployment, inequality and economic stagnation. Austerity isn’t working, and is not producing the economic growth that the government promised it would. But it is not just growth that matters. If we value people’s lives as more important than simply making more transactions, then the relevant tests for judging an economic recovery are:
Is unemployment falling?
Are people’s living standards rising
Is inequality reducing
Is the tax gap closing?
These are the tests against which we should measure the government’s economic strategy and proposals.
Also the government we have appear to be incapable of showing any leadership whatsoever. They sheep like continue to follow the dictate of their masters…Ollie Rehn. “the eurozone has shown a degree of resilience and problem-solving capacity that many observers and policymakers would not have predicted even a year ago”…Commission chief Jose Barroso insisted that the policy(austerity) is “fundamentally right” and working in Ireland, a risible statement if ever.
We need a leadership that knows how to play rough and this was familiar territory for the IRA. The lesson learnt was once the financial heart of London was bombed peace was in the making.
If the politicians do not heed the wishes of the electorate what then, protest marches …if they still do not listen…civil disobedience… if they still remain deaf well the options narrow. Revolution,guns , violence bombes I hope not.
May common sense prevail
misebogland 