16 June 2012     

Time to choose!

By W. Owl

The slogan “Austerity isn’t working” has been the subject of some debate, with some people thinking that it is—not in the interests of working people but in the interests of the capitalist class.
     Others, though, contest the argument that austerity is a way, the only way according to some, to get capitalism out of this present crisis.
     One of those who contests the claim is Ha-Joon Chang, who teaches economics at the University of Cambridge and is the author of 23 Things They Don’t Tell You about Capitalism.
     He counts the Marxist professor Bob Rowthorne as one of those who influenced his thinking, so his recent Guardian article (5 June) entitled “Austerity has never worked” probably doesn’t come as a surprise. He states that the so-called austerity policies now being pursued are not just about “current economics,” as history shows that slashing budgets always leads to recession.”
     Last week, he writes, saw a string of bad economic news reports, with euro-zone leaders “unwilling or unable” to change from their austerity policies,” even as Greece and Spain fall apart and the core euro-zone economies contract.
     He quotes Britain as heading for the third consecutive quarter of contraction with its unexpected sharp fall in manufacturing, adding that the previous week’s jobs figures also “confirmed that the US recovery is stuttering.”
     Even the largest economies, India, Brazil, and China, are slowing down.
     Four years from the start of the present crisis many rich capitalist economies have not recovered the pre-crisis output levels, he claims, and he adds that International Labour Organisation figures estimate that 60 million fewer people are employed worldwide than there were prior to four years ago, with unemployment reaching 25 per cent in Greece and Spain, youth employment being as high as 50 per cent.
     Even in the US and UK unemployment is between 8 and 10 per cent, but if we take into account those who have given up looking for work and those in part-time employment the “real” figure is 15 per cent or over, according to Ha-Joon Chang.
     The “remedies” on offer, though, are “well known,” he writes. Reducing budget deficits by cutting spending is one, “especially unproductive social welfare spending that reduces growth by making poor people less willing to work.”
     The second one is cutting taxes at the top and deregulating businesses so that the so-called “wealth-creators” have a greater incentive to invest and generate growth—oh, and of course make hiring and firing easier.
     As an aside, the Morning Star reported that the Engineering Employers’ Federation and the Federation of Small Businesses thought the hire-and-fire proposals contained in the Beecroft Report were both “counter-productive” and “unnecessary.”
     Ha-Joon Chang claims that whilst it is “increasingly accepted” that the present policies are not working, there is plenty of historical evidence showing that they have never worked, quoting the 1982 developing world debt crisis, the 1994 Mexican crisis, the 1997 Asian crisis, the Brazilian and Russian crises in 1998 and the Argentine crisis of 2002. All these countries were forced, “usually by the IMF,” to cut spending, “only to see their economies sink deeper into recession.”
     There is no historical evidence either, he claims, that there is a need to cut social spending to revive growth. He quotes the period 1945–1990, where income per capita in Europe grew considerably faster than in the US, “despite its countries having welfare states on average a third larger than that of the US.”
     As regards the belief that making the rich richer benefits us all, the so-called trickle-down effect, it was tried in many countries after 1980, “with very poor results.”
     In the book he makes the point that the “poor results” were that the rich got richer and the poor got poorer.
     The deregulation argument alongside hiring and firing is not grounded in “historical fact” either; indeed he quotes very low unemployment figures from 1945 to 1980 “despite increasing regulation.”
     He then poses the question that if history shows that the present remedies are not going to work, what are our political and economic leaders doing? “Perhaps they are insane?” he asks, if we follow Einstein’s definition of insanity, that of “doing the same things over and over again and expecting different results.”
     He finishes by asking, Do we want a society where a tiny minority control a disproportionate share of everything, wealth, political power, and influence, or has the time come to choose the kind of society we want to live in?

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