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Austerity Backlash


The countries that are doing very well in Europe are the Scandinavian countries. Denmark is different from Sweden, Sweden is different from Norway – but they all have strong social protection and they are all growing. The argument that the response to the current crisis has to be a lessening of social protection is really an argument by the 1% to say: “We have to grab a bigger share of the pie.”

— Joseph Stiglitz

There are few themes the American right likes better than accusing the centrists of the Democratic party of trying to enact European socialism.  Led by their corporate candidate for the White House, they point with apparent glee at the economic slide in Europe and proclaim the triumph of conservative economic theory.

Nothing could be further from the truth.  Europe’s decline was in fact a direct consequence of its adopting American-style free enterprise economics.  The initial crisis (along with our own) was caused by drinking the kool-aid of Wall Street’s brave new theory:  that wealth could be created where none actually existed.

Under the leadership of Europe’s new Iron Lady, Angela Merkel of Germany, and France’s conservative Nicolas Sarkozy, the continent embraced the assumption that financial markets could govern themselves.  When the fraud was exposed in America and the markets imploded worldwide, Europe responded with rightwing ideological zeal.

Europe discarded the lessons of practical economics and marched lockstep down the road to austerity.  The result is a prolonged, profound, double-dip recession that threatens at once European unity and the sovereignty of its member nations.

Spain should have been an exception to the austerity mandate but its socialist government fell in line, yielding to the influence of Europe’s more powerful nations.  Socialist in name only, Jose Luis Rodriguez Zapatero followed the examples of discredited former Prime Minister Tony Blair and former American President Bill Clinton.  Claiming the mythical “third way” he discarded his most fundamental principles by lowering taxes on the wealthy, cutting public spending by record amounts, cutting wages for public workers, and freezing pensions.

As any practical economist would attest, Zapatero and indeed most of Europe not only failed to act responsibly; they did the opposite of what was required.

Zapatero was swept from office at the end of 2011 and others will soon follow.  The democratic backlash against the austerity mandate has swept through the Netherlands, smashed through Greece and Italy and today (as I write these words) it rolled over Sarkozy’s France.

The people have served notice that they will not stand idly while their governments sell out to the interests of the elite.  They will not pay for what the financial institutions broke.  They will not suffer while the wealthy prosper.  They will not watch their pensions disappear, their wages cut, their unions broken, their services stripped bare while the international corporations that conspired in this crisis continue to prosper.

If this sounds familiar to American readers, it should.  Austerity is what the Republican right wants to bring to our nation in the name of freedom.

Socialist Francois Hollande of France has promised to challenge the austerity mandate, fundamentally changing the Euro Zone by strengthening the European Investment Bank, launching Euro bonds to finance the debt while funding infrastructure projects and public works.  He proposes a financial transaction fund (a tax on the wealthy) and fiscal reform to allow nations to carry larger deficits.  He seems to understand what economists have long understood:  that deficits must be allowed to stimulate a stalled economy in a prolonged recession.

We can only hope that Hollande holds true to his principles and, backed by popular support throughout the continent, he is able to hold sway over his more powerful rival for the reigns of the European Union.

The only nations that have largely been spared the ravages of the austerity regime are the Scandinavians of Denmark, Norway and Sweden, who managed to retain their social safety nets and social consciousness.

There is much we can learn from the lessons of Europe but we must first lose our irrational fear of words.  The economic principles of socialism are neither the enemy of democracy nor of the American people.  In its essence, socialism is less an economic system than an ideal.  Whenever the public good is considered in public policy, the principle behind that consideration is socialism.

There is not and never has been a purely socialist economy on a national scale.  Simply because a government exerts control over the economic sector does not mean its policies are for the public good.  The oligarchies of Russia and China (though both have incorporated significant elements of free enterprise capitalism) use their control largely for the benefit of the elite and ultimately to the detriment of the people at large.

I would argue that any nation that does not employ democracy as its system of government is inherently anti-socialist because it denies the will of the people as an expression of the public interest.  Moreover, any nation that denies the fundamental rights of labor is anti-socialist as the vast majority of people work.  By this standard the most socialist nations on earth are the Scandinavian nations that have survived the global economic downturn relatively unscathed without exploiting labor.

All social programs, including public pensions, public works, public health care, public education, job training and unemployment benefits, proceed from the socialist ideal.

To imagine an America without its socialist component is to imagine a nation without highways, without dams, without Medicare, without Social Security, without public hospitals or clinics, without public schools or universities, without unemployment benefits, without mass transit systems, on and on.  In short, a purely capitalist America would be a very different place and not one that many of us would enjoy.

There is of course no nation on earth that is purely capitalist.  Every nation strikes a balance between individual interest and public good, between the wants of the one and the needs of the many, between free enterprise and social responsibility.

Free enterprise provides an economic force that generates wealth but it also tends to encourage greed and corruption.  Governments must function to control that force, to mediate inevitable conflict between workers and employers, to counterbalance the powerful against the powerless, to counteract corruption and moderate greed.  Social programs by any name are essential to a functioning society.

The American electorate is too easily dazed and confused by words meant to evoke a guttural response.  Socialism is one of those words.  In the next election we will hear that word like a daily drumbeat.  The word we will rarely hear is austerity.  That is a shame because the party seeking the White House, controlling the House and obstructing the Senate is running on an austerity platform.

Listen to the people who have experienced austerity first hand and heed their warning.  Austerity is economic suicide and all but the wealthy will suffer.  Listen to the people of Europe and understand what is at stake.

Jack Random is the author of Jazzman Chronicles (Crow Dog Press) and Ghost Dance Insurrection (Dry Bones Press.)

Jack Random is the author of Jazzman Chronicles (Crow Dog Press) and Ghost Dance Insurrection (Dry Bones Press.)

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