Austerity = Suffering

Posted: July 23, 2011 in Austerity, Economy, Euro, Europe, IMF, Risk

Seems to me that austerity is a fancy and disingenuous way of inflicting suffering on millions of people without acknowledging it or taking responsibility for it. Austerity sounds like a noble financial principle, not a method of crushing the already have-nots by taking their jobs away, depriving them of access to health care and starving them. But that’s exactly what it is, in varying degrees.

Austerity theory. The theory behind austerity, which really makes no sense at all if you think about it for more than five minutes, is that by readjusting an economy through budget cuts, wage cuts and benefit cuts, that economy will run more efficiently. This, allegedly, will reassure international investors that budgets can be cut and the nation can get it’s fiscal house in order. Then, such investors will flock towards that country’s bonds, bringing down interest rates and making investment possible again. Also, austerity will somehow produce economic growth, because, again, international markets will be reassured.

Except this doesn’t happen. Austerity doesn’t show that a national government can get and keep it’s fiscal house in order because budget cuts are being imposed on the orders of outsiders in cahoots with wealthy and corrupt public officials. And the idea that austerity can somehow pull a rabbit out of it’s hat and produce economic growth is a preposterous myth. It brings economic growth to it’s knees, condemning the people who actually live in that country to a viscous cycle of devaluation in currency and wages, producing economic anguish as standards of living fall and millions of people suffer. There’s nothing in the least noble about it.

Austerity impact. And the ultimate irony is that austerity is inflicted on the people who, in the vast majority of cases, aren’t responsible for the state that the country is in. The people who suffer from austerity are the ones who have little in the first place, who are just trying to survive and are trying to create a marginally better life for their children. The ones responsible for whatever horrible state an economy has descended to are generally the financial and political elite, who either by stupidity or plain greed, have ruined that economy and forced it to it’s knees. If they suffer, it’s in a pretty marginal way. Maybe they have to reduce their fleet of jets; more likely, they benefit by profiting from the inevitable asset-stripping that is part of the IMF austerity recipe. For the financial elite, austerity doesn’t produce homelessness or starvation or a marginal existence hanging on the edge of those states, like it does for many of the have-nots who are punished by these policies.

Austerity also inevitably involves an attack on social services, on the social safety net that not only the poor rely on but the alleged backbone of the economy, the middle class. Pensions, healthcare, employment, housing and other “entitlements” end up on the chopping block. Although the middle class doesn’t suffer as much as the poor, they are victims because their economic security is endangered through these cutbacks, which are another type of wealth transfer to the financial and political elite both inside and outside the country where the austerity is taking place.

Not only does austerity involve dismantling social safety nets, it also ultimately attacks sovereignty. When the IMF comes into rescue a national economy, it requires that state to agree to financial reforms which undermine it’s sovereignty. In Greece, in fact, the EU and IMF have the upper in hand regarding issues such as asset sales — or asset stripping — and certain economic reforms.

Austerity history. For years, austerity was the by-word in the third world when the International Monetary Fund (IMF) “rescued” a floundering economy. Through methods designed to “restructure” an economy — another fancy and disingenuous term — the IMF would dismember an economy, strip assets and impoverish millions, all in the name of dispensing benevolent assistance. Bullshit. Economies would recover eventually, usually in spite of rather than because of the IMF. But not without inflicting widespread damage on the people such assistance was allegedly trying to help. The powerful in those economies would benefit via asset stripping and graft, but the suffering would flood downstream, inflicting severe pain on millions. But few paid attention because after all, this was the third world, and in some obscure way it seemed right, because they didn’t manage their financial affairs correctly afterwards and deserved a bit of punishment or austerity to teach them a lesson.

Austerity today. Now austerity is moving closer to home. In Europe, the peripheral economies of Portugal, Ireland, Italy, Greece and Spain are teetering, and the IMF, in concert with the European Union, European Central Bank and the Euro Zone itself, are determined to punish these wayward economies by inflicting severe austerity on the people in return for financial rescue. The impact of austerity on Ireland is so severe, that at this point the economy is in a economic depression, as if a recession wasn’t bad enough. Official unemployment rates in Spain are 20 percent for the populace as a whole and more than 40 percent for youth.

But despite bailout after bailout, Greece is still floundering and the markets are no more sanguine than they were last year. All austerity has accomplished is to send an already teetering economy into a deep recession, inflict vast amounts of economic pain on the populace and make it that much harder to climb out of the debt-engendered economic hole that the country finds itself in. Ireland and Portugal are also receiving bailout funds and both Spain and Italy are at risk. Italy has the third largest bond market in the world, and if it goes, watch out for the Euro.

The IMF, EU and ECB seem to be coming to their senses a bit, because the latest bailout trims borrowing costs for the peripheral countries and forces bondholders to take a haircut, reducing the ultimate debt loan for those countries. But it’s not nearly enough. Without the option of an internal devaluation of currencies, the peripheral countries will have a long, painful journey of years trying to work their way out of a massive load of debt with a shrinking economy. Not a pleasant prospect.

And the US, the debt ceiling issue still hasn’t been solved. Massive amounts of budget cuts in the federal budget are on the table, on top of city and state budget cuts. With the economy barely growing, the housing market on its knees and employment growth anemic at best, all this budget cutting will do is send the economy back into a recession. The social safety net is being shredded further with gigantic cuts in education, healthcare, employment and housing just when people need it the most.

Where will it end?

Advertisements
Comments
  1. […] and here in the U.S. I’ve written about it previously, in a post two years ago entitled Austerity = Suffering and last year, Greece brutalized by more […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s