FacebookTwitterGoogle+RedditEmail

Greek Austerity

Britain’s iconic Tory Prime Minister Winston Churchill once intoned, “The United States always does the right thing [long pause] ….after exhausting all other options.” It seems this past truth still resonates today.

The US and Europe passed through the greatest economic storm since 1929 and have not yet fully exited from the turbulence. Both the US and Europe addressed the crisis with belt-tightening austerity, with the US having tightened its belt a bit, and Europe a lot more. Several years later, we have the results: the US economy, while not in the best of health, is better off than much of Europe’s.

If all government budgets are gutted, the result is akin to one’s view at a concert if everybody stands to improve their view. When everyone stands nobody sees better. In short, what works for one person can fail if applied to all. Nowhere has this been more evident than in Europe. European governments responded to the crisis by tightening their belts all at once. The result, ironically, was increasing government debts and sluggish economic growth.

In the United States, many governors practiced European-style draconian budget cuts. But, because the US has a true federal government (unlike the EU), its budget cutting states have continued receiving federal payments in the form of Social Security, Medicare, Student Loans, etc. Ironically, the very New Deal legacy that austerians work to euthanize in the US, is the chief thing that prevented the US economy from completely crashing. The EU does not have these federal transfers to its budget cutting member states, and thus, have faired worse.

Politicians in this country frequently warn their opponents’ policies threaten the United States with a fate worse than Greece’s. Americans have a curious view of democracy’s birthplace. They seem to think Greeks have been overtaxed. In fact, the opposite is true. Unlike the United States where only some of the rich evade taxes (as Warren Buffet has mentioned), Greece is more democratic in that nearly everyone evades them. Tax evasion contributed to Greece’s original fiscal mess. Budget cutting then deepened it. Greece tried remedying this by raising taxes at the peak of the crisis, but a crisis is no time to raise taxes. Greece also radically cut budgets and
globalmino tried another policy supported by some in this country: cutting wages. The result? So far, following the budget and wage cuts national income fell by a massive 25 percent.

While one worker can find employment more easily if she is willing to work for less, when many workers are paid less, there is simply not enough demand for the goods and services they produce to keep them employed. In Greece, job creation stalled under austerity. The clear lesson from Greece is that private and public sector employment are linked. Cutting one hurts the other.

Fortunately, America is not in danger of becoming Greece. For one, a few, but growing number of, conservatives (such as Silicon Valley millionaire, former publisher of the American Conservative, and past GOP California gubernatorial primary candidate Roy Unz) are recognizing that increasing the minimum wage has two merits. First, it can help cut public spending as it reduces the number of Americans on benefits. Second, that low-wage workers spend most of their disposable income on local goods and services, thus generating business and profits. By contrast, cutting taxes for the wealthy in the United States typically results in them taking another vacation with their money to my (Varoufakis) country, Greece: good for us, bad for you.

Reflecting back to Churchill’s observation on America exhausting its austerity options, the US could do the “right thing[s].” Americans invest more on research & development (this being done primarily at US universities) than Europe and they will profit if they invest even more. Despite attempts to kill them, the US has preserved “entitlement” spending as a cushion against economic crises. It also seems there is an emerging recognition that higher wages are in fact good for business and for cutting government deficits. The only thing halting this potential prosperity are the austerians.

Thus, the message from Greece on austerity is the phrase I have seen on many American adventure television programs: “don’t try this at home.”

Jeffrey Sommers is Associate Professor of Political Economy & Public Policy in, and Senior Fellow at the Institute of World Affairs at the University of Wisconsin-Milwaukee. He is also Visiting Faculty at the Stockholm School of Economics in Riga. He is co-editor & contributing author to The Contradictions of Austerity: the Socio-Economic Costs of the Neoliberal Baltic Model.

Yanis Varoufakis is Visiting Professor at the Lyndon B. Johnson School of Public Affairs of the University of Texas at Austin.  He is also Professor of Economic Theory at the University of Athens.  He is the author of the Global Minotaur and of A Modest Proposal for Resolving the Euro Crisis with James Galbraith and Stuart Holland.

 

 

 

 

 

April 19, 2018
Ramzy Baroud
Media Cover-up: Shielding Israel is a Matter of Policy
Vijay Prashad
Undermining Brazilian Democracy: the Curious Saga of Lula
Steve Fraser
Class Dismissed: Class Conflict in Red State America
John W. Whitehead
Crimes of a Monster: Your Tax Dollars at Work
Kenn Orphan
Whistling Past the Graveyard
Karl Grossman - TJ Coles
Opening Pandora’s Box: Karl Grossman on Trump and the Weaponization of Space
Colin Todhunter
Behind Theresa May’s ‘Humanitarian Hysterics’: The Ideology of Empire and Conquest
Jesse Jackson
Syrian Strikes is One More step Toward a Lawless Presidency
Michael Welton
Confronting Militarism is Early Twentieth Century Canada: the Woman’s International League for Peace and Freedom
Alycee Lane
On David S. Buckel and Setting Ourselves on Fire
Jennifer Matsui
Our Overlords Reveal Their Top ‘To Do’s: Are YOU Next On Their Kill List?
George Ochenski
Jive Talkin’: On the Campaign Trail With Montana Republicans
Kary Love
Is It Time for A Nice, “Little” Nuclear War?
April 18, 2018
Alan Nasser
Could Student Loans Lead to Debt Prison? The Handwriting on the Wall
Susan Roberts
Uses for the Poor
Alvaro Huerta
I Am Not Your “Wetback”
Jonah Raskin
Napa County, California: the Clash of Oligarchy & Democracy
Robert Hunziker
America’s Dystopian Future
Geoffrey McDonald
“America First!” as Economic War
Jonathan Cook
Robert Fisk’s Douma Report Rips Away Excuses for Air Strike on Syria
Jeff Berg
WW III This Ain’t
Binoy Kampmark
Macron’s Syria Game
Linn Washington Jr.
Philadelphia’s Top Cop Defends Indefensible Prejudice in Starbucks Arrest Incident
Katie Fite
Chaos in Urban Canyons – Air Force Efforts to Carve a Civilian Population War Game Range across Southern Idaho
Robby Sherwin
Facebook: This Is Where I Leave You
April 17, 2018
Paul Street
Eight Takeaways on Boss Tweet’s Latest Syrian Missile Spasm
Robert Fisk
The Search for the Truth in Douma
Eric Mann
The Historic 1968 Struggle Against Columbia University
Roy Eidelson
The 1%’s Mind Games: Psychology Gone Bad
John Steppling
The Sleep of Civilization
Patrick Cockburn
Syria Bombing Reveals Weakness of Theresa May
Dave Lindorff
No Indication in the US That the Country is at War Again
W. T. Whitney
Colombia and Cuba:  a Tale of Two Countries
Dean Baker
Why Isn’t the Median Wage for Black Workers Rising?
Linn Washington Jr.
Philadelphia’s Top Cop Defends Indefensible Prejudice in Starbucks Arrest Incident
C. L. Cook
Man in the Glass
Kary Love
“The Mob Boss Orders a Hit and a Pardon”
Lawrence Wittner
Which Nations Are the Happiest―and Why
Dr. Hakim
Where on Earth is the Just Economy that Works for All, Including Afghan Children?
April 16, 2018
Dave Lindorff
President Trump’s War Crime is Worse than the One He Accuses Assad of
Ron Jacobs
War is Just F**kin’ Wrong
John Laforge
Nuclear Keeps on Polluting, Long After Shutdown
Norman Solomon
Missile Attack on Syria Is a Salute to “Russiagate” Enthusiasts, Whether They Like It or Not
Uri Avnery
Eyeless in Gaza   
Barbara Nimri Aziz
Iraq Then, Syria Now
FacebookTwitterGoogle+RedditEmail