Monday, August 25, 2014

To Be Or Not To Be....Austerity?

Today, French President Francois Hollande asked his Prime Minister, Manuel Valis dissolve his latest government and put together a new one. Why? Hollande, The Socialist President,  came into office with the good wishes of the people who elected him after 5 years of increasingly right wing manipulation and strident racist policies of Conservative Centrist, Nicolas Sarkozy. Sarkozy's government lurched violently to the far right in an attempt to subvert the rise of the fascist right Front Naional and in the process participated in the destruction of the Middle Class and eroding the social services that the French poor and middle classes depend on to survive. He was perceived as favoring the wealthy with tax cuts and subsidies as taxes rose, jobs left France. We really thought that Hollande was going to reverse this trend, but he seems to be treading water and taxes continue to rise, social services continue to be eroded and he seems unable to deal with the corporations who are still getting favorable treatment. He has lost the support of the ecologists in spite of the appointment of Segolene Royale as minister of Ecology. She is a force for good, but in the process, he made the former minister into an avowed enemy. Through his in action and inability to make firm decisions, he has continued with the policies of austerity. Austerity, the wrong approach. The approach of the 1% to maximize their immediate profits and create an impoverished cheap labor source. On Sunday, Hollande was criticized by his  Minister of Industrial Renewal, Arnaud Montebourg, who openly criticized the policies of austerity that Hollande has stuck by, and fired his first broadside in an interview with Le Monde on Saturday and followed up with a speech to a Socialist party rally the following day. In a veiled reference to President François Hollande, he said that conformism was an enemy and "my enemy is governing". "France is a free country which shouldn't be aligning itself with the obsessions of the German right," he said, urging a "just and sane resistance".
He was joined in his criticism by the education minister Benoit Hamon, who on Monday denied that he had been disloyal. A third minister, Aurélie Filipetti, also appeared in danger of losing her job after wishing a "good day" on Twitter to her two dissident colleagues. In effect, Hollande's inability to deal in a rational political manner to criticism has opened the nation onto a voyage in uncharted political waters.Europe’s economic depression has now lasted longer than the Great Depression of the 1930s. Meanwhile, America’s “Great Recession” also drags on thanks to cutbacks in government spending since the stimulus.
Europe’s leaders somehow were convinced that austerity – “deficit reduction” through cutbacks in government – would somehow lead them out of their economic doldrums. They believed that taking money out of the economy would help the economy. The result is that  Europe’s austerity-lengthened depression  has become one of the biggest catastrophes in economic history.
To top it off, Europe’s governments are learning that cutting back on spending not only worsens the economic picture, causing terrible unemployment, poverty and human misery, but the worsened economic picture means less revenue coming in, thereby increasing deficits instead of lowering deficits. In other words, austerity cutbacks to fight deficits have instead made deficits worse and hurt people.
Europe’s Policy-Driven Depression
In “Worse than the 1930s: Europe’s recession is really a depression,” Matt O’Brien writes,
It’s a policy-induced disaster. Too much fiscal austerity and too little monetary stimulus have crippled growth like almost never before. Europe is doing worse than Japan during its “lost decade,” worse than the sterling bloc during the Great Depression, and barely better than the gold bloc then—though even that silver lining isn’t much of one. That’s because, at this rate, it’ll only be another year until the eurozone is well behind the gold bloc, too.
The harmful effect of austerity is so obvious that even Europe’s policymakers are starting to get it. The New York Times, in “France Acknowledges Economic Malaise, Blaming Austerity,” reports that, “President François Hollande on Wednesday … indicated that the austerity policies France had been compelled to adopt to meet the eurozone’s budget deficit targets were making growth impossible.”
“The diagnosis is clear,” Mr. Hollande said in an interview published Wednesday in the French daily Le Monde. “Due to the austerity policies of the last several years, there is a problem of demand throughout Europe, and a growth rate that is not reducing employment.”
It was the most public rejection by France of the austerity medicine that Germany has long prescribed for the eurozone — which even the German chancellor, Angela Merkel, recently acknowledged might be impeding the currency bloc’s recovery.
The downside joke here was told on tonights Les Guignols de l'Info on their first show of the season, when the Valis puppet announces to Hollande that the government must be dissolved. A startled looking Hollande asks why. Valis informs him that he has discovered that some of the ministers are Socialists Leftists!
(Click here for a Businessweek/Bloomberg video in which Economist Joseph Stiglitz explains why Europe’s austerity has been a “dismal failure” and needs a change of approach.)
Demand Drives An Economy
Here’s the deal. In a slowdown consumers and businesses are not bringing enough “demand” to an economy. This lack of customers causes businesses to lay off workers and those workers stop being consumers, so businesses have to cut back even more. So they lay off workers and those workers stop being consumers, so businesses have to cut back even more. You get the picture: “Death spiral.”
This is when government (We the People) should step in. In the 20th century we learned a way out of recessions and depressions. During slowdowns government can spend, and this boosts the demand in the economy to make up for the demand shortfall from consumers and businesses. Government can invest in infrastructure, causing construction workers to be hired and suppliers of equipment and materials to thrive. Government can spend on things it needs like equipment and cars, etc. Government can hire to get things done that need to be done like teaching kids, daycare, adding police and firefighters … so many things.
And all of those thing help make the lives of We the People better in the long run. Good, modern infrastructure, schools and teachers, universities, police, firefighters, parks, libraries, courts, scientific research, environmental protection, food inspectors, job-safety inspectors and all the rest of the things government does make our lives better – and boost our economy in the long term.
Stimulus Helped The U.S. Economy, Deficit-Cutting Hurt
Just after President Obama took office there were enough Democrats in the House and Senate to pass the “stimulus.” This was the result:

Unfortunately Republicans gained seats in the Senate and have filibustered every single attempt to help the economy since. The post Three Updated Charts to Email to Your Right-Wing Brother-In-Law explains how this has hurt us,
Government spending does not “take money out of the economy.” In fact it puts money into the economy, creates jobs and lays the foundation for future prosperity. … this chart from The Atlantic, “The Incredible Shrinking U.S. Government,” shows how government spending to create government jobs helped us get out of the 1981, 1990 and 2001 recessions. But since the 2007 “Great Recession,” we instead have laid off hundreds of thousands of government employees, obviously making unemployment even worse.

… This chart from Roger Hickey’s post, Continued Jobs Growth. But Highway Bill Shows Austerity Still Hurts., shows how “conservative budget cutting has undermined growth from mid-2010 through 2014″:

“As you can see, the impact of austerity on the economy is projected to be reduced over the next two quarters, but the next budget is not expected to be expansionary – and Republicans are still writing budgets under the mistaken conservative theory that spending cuts somehow stimulate growth.”
Government spending obviously helps boost a flagging economy. Cutting government spending during a slowdown obviously takes badly needed money out of the economy at the very times it needs the help.
Some Believe Government Is Bad And “Markets” Should Make The Decisions
There are those who think that it is wrong for government (We the People) to be able to do things like this, and these decisions should be left to “the market.” They want “limited government” and demand that government get “out of the way” of “the market” – i.e. those with money – and let the big corporations and the billionaires behind them make the decisions, not We the People.
Terms like “the market” and “free enterprise” is modern wording applied to the age-old fight between those who already have great wealth and power, and regular people who are powerless unless they are able to band together in democracy to protect each other from the power of the wealthy.
The thing is, the “private sector” is the very sector that is in a downward spiral during slowdowns. Without an outside force – government – stepping in to boost demand there is nothing to interrupt the downward spiral. “Austerity” cutbacks in government literally take money out of the economy. Austerity cuts back on maintaining the infrastructure and teachers and police and firefighters and construction workers and scientific research – all at the very time that businesses are also laying people off.
We know this, but I don’t think we can do anything about it. Think about it: We looked at the policies and programs that were implemented from FDR to Reagan, which took the US to its height of wealth and productivity, and chose to reverse course, doing the direct opposite. Democrats and the media marketed to liberals embraced the right-wing socioeconomic agenda, effectively pitting the middle class against the poor. Divide and conquer. Millions voted for Barack Obama in hopes that he could launch a legitimate public discussion about our poverty crisis. He tried a number of times. Lib media continue to focus on appealing to middle class consumers and campaign donors. Not everyone can work, and there aren’t jobs for all who need one. The US shipped out a huge chunk of our working class jobs since the 1980s, and Democrats ended welfare in the 1990s. The middle class has enthusiastically supported the austerity agenda as applied to the poor, and it’s their own fault for thinking it wouldn’t trickle-up to pull them down, too. What the rich are now doing to the middle class is what the middle class already did to the poor.
We have seen this in the United State because of budget cuts forced by Republicans – especially the “sequester” forced by the debt-ceiling standoff. But in Europe, the austerity has been much worse than America, and the result have been much more devastating to Europe’s economy and people.
We can only hope that Europe’s leaders are starting to get it that taking money out of the economy takes money out of the economy.


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