• Monthly
  • $25
  • $50
  • $100
  • $other
  • use PayPal

SPRING FUNDRAISER

Is it time for our Spring fundraiser already? If you enjoy what we offer, and have the means, please consider donating. The sooner we reach our modest goal, the faster we can get back to business as (un)usual. Please, stay safe and we’ll see you down the road.
FacebookTwitterRedditEmail

Who Benefits From Austerity Politics?

With so called “technocrats” being installed in Italy and Greece to lead governments through austerity programs, the discussion of who benefits from these programs and who pays remains largely in the background. When benefits are discussed they are usually couched in terms of systemic benefits under the guise that if the “system” benefits then everyone benefits. But the austerity programs being implemented straightforwardly benefit the large banks to the detriment of the citizens of these countries.

The banks see two benefits from austerity policies: the use of state power to enforce their claims that debts be repaid and they see asset prices driven down. The first goal is intuitive enough and it well explains why even in the U.S. government policies have been designed to facilitate debt repayment rather than to dismiss debts outright. No matter how malodorous the terms under which bankers lent the money, as long as borrowers can be forced to repay it, the banks benefit. And with sovereign debt, the “borrowers” being forced to repay the debt tend to be ordinary citizens who had little to do with incurring it and who just as likely saw no benefit from it.

The second benefit to bankers is less intuitive but more insidious. After all, why would banks want to see the value of the assets that are the collateral for the loans that they’ve made fall? The reason why is that the assets that the banks own are the loans that they’ve made and not the underlying collateral. As long as borrowers are forced to repay these loans the payments that the banks receive become worth more as collateral values fall because the money received will then buy more. Expand this idea to state assets in Greece and Italy and the banks can own water systems and roads from which they can extract fat incomes in perpetuity.

Why would core EU political leaders (and leaders in the U.S.) perceive it to be in their interest to be shills for the large banks by implementing austerity policies? Simply put, if the banks can’t enforce debt repayment they will either require bailouts in excess of what is politically feasible or the global banking system will re-enter the systemic crisis from 2008 that was never adequately resolved. The European banks are materially larger relative to the size of European economies than U.S. banks are. But banking liabilities are interconnected and if European banks fail they will take the large U.S. banks down with them.

Austerity policies are catastrophic for the citizens of countries that implement them because they force repayment of debts in ever more internally valuable currencies. The persistent economic weakness that these policies create produces high unemployment, falling wages and a broadly recessionary environment that can last for decades. They are being pushed because they benefit the banks but they come at the expense of the economic wellbeing of the citizens of these countries. The bind the banks put themselves in through excess leverage makes this a fight for survival from their perspective. And their use of the European and U.S. political systems to force debt repayment puts these governments on the sides of the banks and against the interests of their own citizens. Prepare for a long fight that will certainly get uglier.

Rob Urie is an artist and political economist in New York.

 

More articles by:

Rob Urie is an artist and political economist. His book Zen Economics is published by CounterPunch Books.

May 25, 2020
Marshall Auerback
If the Federal Government Won’t Fund the States’ Emergency Needs, There is Another Solution
Michael Uhl
A Memory Fragment of the Vietnam War
Anthony Pahnke – Jim Goodman
Make a Resilient, Localized Food System Part of the Next Stimulus
Barrie Gilbert
The Mismanagement of Wildlife in Utah Continues to be Irrational and a National Embarrassment.
Dean Baker
The Sure Way to End Concerns About China’s “Theft” of a Vaccine: Make it Open
Thom Hartmann
The Next Death Wave from Coronavirus Will Be the Poor, Rural and White
Phil Knight
Killer Impact
Paul Cantor
Memorial Day 2020 and the Coronavirus
Laura Flanders
A Memorial Day For Lies?
Gary Macfarlane – Mike Garrity
Grizzlies, Lynx, Bull Trout and Elk on the Chopping Block for Trump’s Idaho Clearcuts
Cesar Chelala
Challenges of the Evolving Coronavirus Pandemic
Luciana Tellez-Chavez
This Year’s Forest Fire Season Could Be Even Deadlier
Thomas Hon Wing Polin
Beijing Acts on Hong Kong
George Wuerthner
Saving the Lionhead Wilderness
Elliot Sperber
Holy Beaver
Weekend Edition
May 22, 2020
Friday - Sunday
Hugh Iglarsh
Aiming Missiles at Viruses: a Plea for Sanity in a Time of Plague
Paul Street
How Obama Could Find Some Redemption
Marc Levy
On Meeting Bao Ninh: “These Good Men Meant as Much to Me as Yours Did to You”
Jeffrey St. Clair
Roaming Charges: Shallò: 120 Days of COVID
Joan Roelofs
Greening the Old New Deal
Rob Urie
Why Russiagate Still Matters
Charles Pierson
Is the US-Saudi Alliance Headed Off a Cliff?
Robert Hunziker
10C Above Baseline
Pam Martens - Russ Martens
The Fed’s Chair and Vice Chair Got Rich at Carlyle Group, a Private Equity Fund With a String of Bankruptcies and Job Losses
Eve Ottenberg
Factory Farming on Hold
Andrew Levine
If Nancy Pelosi Is So Great, How Come Donald Trump Still Isn’t Dead in the Water?
Ishmael Reed
Alex Azar Knows About Diabetes
Joseph Natoli
Will Things Fall Apart Now or in November?
Richard D. Wolff
An Old Story Again: Capitalism vs. Health and Safety
Louis Proyect
What Stanford University and Fox News Have in Common
Pete Dolack
Work is Inevitable But its Organization is Not
David A. Schultz
America and the Rise of the Chinese Century
Ramzy Baroud
Why Israel Fears the Nakba: How Memory Became Palestine’s Greatest Weapon
Heather Gray – Jonathan King
Coronavirus and Other US Health Threats? Fund Public Health Not Foreign Wars
Brian Cloughley
Don’t Be Black in America
Kenn Orphan
A Pandemic and a Plague of Absurdity
Matthew Stevenson
Our Friend Eugene Schulman
Richard C. Gross
The Man Who Cried Wolf
Ron Jacobs
Road Trippin’
Robert P. Alvarez
A Simple Solution for the Coronavirus Crisis in Prisons
Aadesh Ravi
The Long March of the Locked-Down Migrants
Kollibri terre Sonnenblume
The Proliferation of Conspiracy Theories & the Crisis of Science
Nilofar Suhrawardy
The Other Side of Covid-19
Binoy Kampmark
Battles Over Barley: Australia, China and the Tariff Wars
Cesar Chelala
Donald Trump can Learn Something from Mao Zedong’s Mistakes
FacebookTwitterRedditEmail