“An urgent, tough and structural redesign of the International Monetary Fund is needed to prevent crises… Meanwhile, inequality in our countries will grow because of those [IMF] reforms; tears will be shed and poverty caused for those millions excluded… They will say their ‘mea culpas’ and we will see the number of poor increase if we do as they say.”
— President Nester Kirchner of Argentina, September 21, 2004
The Austerity Regime is coming like a runaway train, like a goose-stepping army, like the vengeance of an angry deity. It replaces your dreams with Orwellian nightmares. It steals your homes and offers them to the highest bidder. It transforms your neighborhoods into sprawling slums. It attacks your right to organize, your right to protest, your right to fair representation in government. It offers you jobs without benefits at subsistence wages and crushes anyone who resists.
Austerity is the hammer of a new global economic order, created of, by and for the corporate elite, for the purpose of securing and maintaining wealth in the hands of the few to the detriment of the working masses.
With the impetus of the 2008 global economic crisis, the Austerity Regime is fully operative but the hammer is yet to drop. With the International Monetary Fund, the European Central Bank and the newly created European Finance Stability Facility, austerity is currently working its way across Europe, slamming Greece and Ireland, infecting Portugal, Spain and Italy.
In America and Great Britain, government has become so corrupted by corporate interests that the people are being subjected to voluntary austerity.
In America, the hammer awaits the findings of the Deficit Committee. A joint committee of congress, it was created as a part of the latest debt-ceiling “crisis” and charged with identifying $1.5 trillion in budget cuts in the next ten years over and above the $917 billion already agreed upon. If the commission fails to reach an agreement or if that agreement fails to win a majority vote in both houses of congress, then $1.2 trillion across the board cuts will automatically go into effect.
Either way, the Austerity Regime is coming and everything is on the table. Social Security, Medicare and Medicaid are on the chopping block. Education, job training and aid to the states are on the block. That a bloated, empire building military budget is also on the block is little consolation.
The Austerity Regime is coming and at a time of extreme unemployment, record home foreclosures, diminished wages and skyrocketing poverty, if you do not believe it will hurt, you are about to be shocked (see Naomi Klein: The Shock Doctrine).
If you think this is a rightwing conspiracy, please understand that what is about to take hold was the creation of both parties, with the official stamp of approval from a Democratic White House, a Democratic Senate as well as a Republican controlled House of Representatives.
How did it come to this?
The International Monetary Fund
The International Monetary Fund was created in 1945, alongside the Marshall Plan, with the intent of stabilizing economies across currencies and aiding under-developed nations. In the mid 1970s and early eighties, the IMF acquired an ulterior purpose. It became the agent of the world’s most powerful corporations. Its mandate was Free Trade and its target was so-called third world nations, ripe for exploitation.
The IMF enticed nations struggling with debt by offering large loans at reasonable interest rates on the condition that they reduce regulations and eliminate tariffs and subsidies designed to protect domestic industries and markets from foreign competition. The infusion of capital invariably failed because the reforms tilted the balance of trade, weakened industry, decimated labor, increased poverty and trapped the target nation in a spiral of debt.
In order to qualify for the next loan, the target nation was subjected to the Austerity Regime, a full-throttle assault on labor and the government safety net. The resulting layoffs, lowered wages and an accelerated poverty rate left the government ever more destitute.
Beginning with the very public default of Argentina on their IMF loans, most of Latin America declared itself independent from the IMF regime. In 2005 Brazil and a resurgent Argentina repaid their loans in advance. From 2005 to 2008 Latin America’s share of outstanding IMF loans fell from 80% to one percent and the establishment of the Bank of the South in 2009 assured the region that the age of dependency was over.
Having lost the bulk of its clientele, the IMF should have been well positioned to answer the needs of Europe in the wake of the global economic meltdown circa 2008. The nations that were traditionally on the delivery side of the IMF-austerity program were on the receiving end.
The European Union and the Eurozone
When the European Union was strengthened by the creation of the Euro and the Eurozone, there was some hope that a united Europe would function as a counterbalance to the American economic policies embodied in the IMF. Europeans, after all, had no inbred fear of socialism. Most Europeans understood that an advanced economic system necessarily included a balance of socialist and capitalist principles.
Alas, the hope was soon dashed as it became clear that the European Union was just another partner in the Free Trade movement. Its policies are interchangeable and its financial institutions are committed to enforcing deregulation, privatization and corporate exploitation through its own Austerity Regime.
When the real estate/financial fraud crisis first hit and after the rescue of the banks and brokers, it hit Iceland, Ireland and Greece hardest. How they responded and where they stand today is instructive.
Iceland nationalized the domestic operations of its three largest banks and placed their foreign operations in receivership (bankruptcy). It enacted its own package of spending cuts and tax increases to ease through the crisis without taking IMF loans. As a result of these actions, Iceland is on the mend.
Ireland backed its banks, assuming responsibility for their debts, and accepted an 85 billion Euro bailout by the IMF and the European Central Bank. Ireland, once the darling of Free Trade capitalists everywhere, has changed governments and is now under the hammer of austerity for the foreseeable future.
Greece was likewise experiencing robust growth until the bottom fell out circa 2007-2008. Finding itself out of compliance with European monetary guidelines, it did what any corporate entity would do: It hired the very same companies responsible for the crisis (including Goldman Sachs) to cook the books.
Little known fact: A financial institution hired to perpetuate fraud on the unknowing public can and routinely is granted contractual immunity from prosecution.
The cover up did not last long. By May 2010, Greece had accepted 110 billion Euros in IMF/Eurozone loans, the European Central Bank was floating its bonds, and the Greek people were facing a fourth round of the Austerity Regime.
When Prime Minister George Papandreou threatened to put the European Union bailout deal on the ballot for the approval of the Greek people, a wave of panic swept through the global market place. How dare he engage the people in a democratic government!
The weight of the world came down on Papandreou and within days he resigned and his nation effectively lost its sovereignty.
As we now know, the same fate would follow in Italy, where great crowds celebrated the resignation of Prime Minister Silvio Berlusconi, a rightwing capitalist who certainly deserved his fate. Unfortunately, Berlusconi’s prime mission was accomplished. He leaves behind a subservient government, a government of bureaucrats who take their orders in Brussels under the iron hands of Berlin and Paris.
The Italian celebration will be short lived. Tomorrow they will awaken to the loss of self-governance and they will wonder if the European Union was ever worth the price.
A united Europe had the power and the clout to stop the austerity machine in its tracks. It could have declared the bulk of European debt odious, the product of fraud, transferring accountability from the nations that hold the markers on the debt to the financial institutions that created it. It could have declared bankruptcy on foreign banking interests as Iceland did. It could have done any number of things. Instead, it chose austerity. Instead, Europe chose to protect the financial institutions and the corporate elite.
At least six of seventeen nations in the Eurozone are under the hammer of austerity and it has only begun. Some nations have austerity thrust upon them while others, like Britain and America, impose it on themselves.
Austerity Comes to America
America’s financial geniuses created the derivative formulae that deceived the marketplace and led to a global economic collapse, triggering a wave of debt that brought nations to their knees and compelled them to walk the plank of the Austerity Regime.
That it was fraud to portray worthless mortgage debt as top rated bonds is without question yet far from having to pay for their misdeeds they have profited greatly. If you watch the markets you realize that Wall Street and all its partners across the globe are in love with austerity. It seems counter-intuitive because austerity unavoidably exacerbates poverty, punishes the working class and depresses the demand that drives the economy. But Wall Street loves austerity because it means the blood of its toxic debt will be extracted from the people rather than the culpable financial institutions.
If we are a democracy, why is there no legislation in congress to cancel the debt of individual mortgage holders who were victimized by this monumental fraud? Why are there so few attempts to punish the perpetrators and extract a cost? Why is the federal government pressing for a settlement that will bury culpability forever? Why is there no serious attempt to establish an independent regulator of financial institutions?
Little known fact: Fannie Mae and Freddie Mac, the government backed institutions that the right wing like to blame for the economic meltdown, lacked effective regulation because their regulatory functions were outsourced to private corporations with inside ties to the industry.
Why is there no debate on trade policy?
The answer of course is that neither we nor the nations of Europe are true democracies any longer. We sacrificed our representative government when our Supreme Court decided in its infinite wisdom that corporations were people and money was speech and both were protected by the constitution.
We now have governments so poisoned by corporate influence that they are willing to give up their hold on power to protect the odious riches of the wealthy.
As a voice of democracy, Europe has abdicated. America has signed on the dotted line. The Austerity Regime is coming and, as it sweeps across the nation, the victim class will grow exponentially and they will look for somewhere to make a stand.
The only folks who are standing up to corporate dictatorship are the protesters engaged in Occupy Wall Street: Occupy London, Occupy San Francisco, Occupy Boston, Occupy Madrid, Occupy Rome, Occupy Los Angeles, Occupy Berlin, Occupy Frankfurt, Occupy Toronto, Occupy Amsterdam, Occupy Seattle, Occupy Portland, Occupy Bloomington, Occupy Santiago, Occupy Barcelona, Occupy Athens, Occupy Hong Kong, Occupy Tokyo, Occupy Zurich, Occupy Denver, Occupy Vancouver, Occupy Mexico City, Occupy Lisbon, Occupy Miami, Occupy Philadelphia, Occupy San Juan, Occupy New Haven, Occupy Valencia, Occupy Tulsa, Occupy Little Rock, Occupy Brussels, Occupy Columbia, Occupy Sacramento, Occupy Seoul, Occupy Taipei and Occupy Oakland.
What can we do to fight back? Support your local occupation. The blowback is under way. From New York to Portland, from Denver to Oakland, from Berkeley to Seattle, mayors are hiding behind the police as they brutalize protesters and tear down the camps. But the camps keep coming back.
Keep it alive and when next November comes, refuse to be bullied and brutalized. Refuse to vote for the Democrats and Republicans who perpetrated this fraud and ordered the siege. Refuse to be predictable.
Come next November occupy the ballot box.
The best and only hope is to rebuild our democracies from the ground up.