One of the great contradictions of modern day nation-state socio-economics is how and why capitalists continue getting away with sticking average working people with their mistakes. Capitalists receive fees and interests payments for/on issuance of debt by countries and average working people fund the resulting debt crises, bailing out capitalists… this is the “Capitalista Virus.”
When nation-states crash and burn from excessive debt, neoliberals oversee the austerity plans, a la Ireland, Portugal, and Greece; they (neoliberals) open wide the vistas for private interests to capture public assets whilst workers sweep up the messy streets.
Ireland, for example, since undergoing a $90B bailout in 2010, continues to struggle after agreeing to austerity cuts for ordinary citizens; nurses, professors and other public sector employee’s salaries were cut 20%. Taxes were increased on housing and water. This year the government is enacting additional cuts to health care and programs for children. The average worker in Ireland is reeling, cutting way back to bare bones on normal purchases of goods and services, which, in turn, softens final sales as registered in Gross Domestic Product (“GDP”), a vicious cycle that spirals downwards, not upwards.
Ireland’s Third Quarter Gross National Product fell 2.2% mainly due to falling personal consumption and calling into question the imposed austerity program. The country’s economy has been in a recession ditch now for three years.
According to a NY Times article d/d December 5, 2011, “…the Irish example shows the dangers of taking from ordinary people to pay off creditors rather than sharing the burden more broadly.”
The Occupy Dame Street movement in front of the Irish Central Bank is focused on this dichotomy whereby bondholders didn’t share in Irish banks’ loses that were assumed by taxpayers.
Meanwhile, on the Continent, in Lisbon, mid February 2012, 100,000-to-300,000 people packed Lisbon’s Palace Square rallying against austerity plans crafted by the EU/IMF last May.
Why the demonstration now?
The EU/IMF has under consideration additional austerity measures, orchestrating more spending cuts across all public services, including health care, the elimination of Christmas and holiday bonuses and allowing private companies to extend workdays without commensurate overtime pay, yet another example where the burden to fulfill neoliberal policy wonk ideals falls upon worker’s shoulders.
According to a study by the UK’s Institute for Social and Economic Research, the 2010 Portugal austerity measures were “clearly regressive,” causing the poor to give up a bigger share of disposable income than the wealthy. As a result, a new class has sprung up in Portugal called “New Poor,” these are people who marginally earn too much, i.e. €620/month, to qualify for social welfare programs but do not earn enough to meet mortgage payments, health, and education costs.
Today, a quarter of Portugal’s 10.6 million people live below the poverty line. The country’s GDP fell 1.3% the 4th quarter of 2011.
In Greece, the country on the hot seat these days, a second austerity plan (the wonks really should find a word other than ‘austerity’ to describe their plans to soften the blow to the masses) has been approved, further hiking the VAT tax on all citizens, and further cutting worker benefits. The last austerity plan fell short. Accordingly, the new austerity plan includes cuts in pensions, minimum wage, health care and defense spending as well as additional layoffs of state employees and state asset sales. A recent Forbes headline, February 21, 2012, claims: “Greek Bailout Deal A Farce To Benefit Banks At The Expense Of Greece.”
As of today, €386 billion has been committed to Ireland, Greece, and Portugal, and experts expect Portugal to come back for more relief fairly soon.
Whether additional European countries like Italy are forced to bite the bullet remains to be seen; however, there is little doubt the Capitalista Virus has infected the region, and economists know this virus, similar, in some respects, to the Minsky Moment, triggering catastrophic consequences. A Minsky Moment is a unique phenomenon that comes after a long period of prosperity and rapidly increasing asset values in the private economy, not in the public economy, which, in turn, encourages more speculation with borrowed money. The Minsky Moment arrives when over-indebted private investors are forced to sell good assets to repay loans, a process that is self-liquidating. Well… if nation-states rather than private enterprise ever do qualify for quasi-Minsky Moment status, it most certainly is now with the Capitalista Virus running rampant in Europe.
The Capitalista Virus ravages countries’ economies because it is austerity-driven rather than growth-driven. The neoliberal wonk mindset, which dictates the terms of austerity plans, is wedded to the value-added proposition of the private sector combined with ‘globalization’ over any value proposition whatsoever for state-run enterprises.
However, is not government an enterprise in and of itself? The government employs people like corporations do, and it is a safe bet they do not cheat on taxes.
The government is responsible for services that directly benefit Gross Domestic Product like administration of justice, education, the road system, social statistical reporting, national parks, safety of drugs and foods, hydroelectric power, prisons, corps of engineers, arts, rail transportation, weather service, libraries, geological surveys, insuring bank deposits, hospitals, patent and trademark sanctity, inventing/developing the Internet and thousands of other practical inventions used by private enterprise, printing/issuing currency, and national defense. A case can be made that government production, in a positive fashion, enhances and directly impacts the economy, similar to private enterprise. We’ve simply been conditioned to consider it a frivolous estate of the realm.
As a result of digressive thinking, public service jobs are always the first cut under austerity plans. Neoliberals bring their knives to the negotiating table, aimed at cutting public services and selling government assets to private interests, see Naomi Klein’s treatment of this phenomenon, The Shock Doctrine:The Rise of Disaster Capitalism (2007). Over time the net result of austerity programs decreases the influence of government and enhances the influence of private enterprise, and this is the end game of the neoliberal think tanks.
In the end, countries like Greece and Ireland and Portugal become viruses in Petri dishes, experimental projects for furtherance of international neoliberal ideals, not saying the countries did not ask for it; they did, but the capitalists permitted it, they enabled it, and in the final, final analysis, they relish it, the opportunity to gut public enterprise, selling A-1 public assets, like telecom companies, post savings banks, the state lottery, and shipping ports to private enterprise and further undercutting the benefits of the Fourth Estate, and of the Third Estate, accruing to the enrichment of the Second Estate. Alas, the sale of public assets to private interests under Capitalista Virus conditions inevitably occurs during dire, troublesome times when the economy is down, and the respective public assets fetch bottom dollar.
Like dominoes, the dots of the game connect along a long line from country-to-country until neoliberalism eventually comes face-to-face with its own destructive impulses, dislocated economies wherein the average citizen is priced out of the consumerism game, and the poor are deadly poor, leaving the wealthiest of the Second Estate to do what?
Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.