BBF Talk April 2013
Panel discussion topic: Is there an alternative to austerity?
What is austerity?
1) Public sector: cuts to government spending. But also private sector: wage and job cuts.
2) Austerity in Europe and other rich regions since 2009. Rest of world not suffering austerity, in fact the opposite: “developing” world continues to grow apace, and moves towards greater welfare compromises (e.g., Latin America).
3) But austerity now is very similar to neoliberal “structural readjustment” policies pushed by WB and IMF in 80s and 90s in “3rd world” and Eastern Europe after fall of Soviet regime.
Summary: more broadly, austerity = end of post-war consensus in rich parts of world(high employment economy with half-decent wages and working conditions, and social safety net.)
What made the post-war consensus?
1. Class struggle. Ruling elites had to surrender some of their profits to keep workers from revolting.
2. Growth. What made it easier for the ruling elites is they didn’t really have to give up much of their wealth. So long as growth keeps up, can give some of the new stuff to workers, rather than redistribute existing wealth away from the rich. See this also in developing countries clearly today: e.g., welfare projects in Brazil, Venezuela, and through Lat Am funded not by redistribution of wealth but from rapid growth.
3. Neo-colonialism. Remember that most of the world never had a welfare state. Direct: how much of UK welfare state funded by colonial exploitation? Indirect: terms of international trade in which 1W (“first world”) countries dominant, could exploit resources and markets of 3W.
Why austerity? (1)
Immediate answer: policy decision by states. In poorer European countries, pushed on local govts by the Troika (EU, IMF, WB). In richer countries like UK, choice of local govt.
Partly genuine: within globalised financial markets need to reassure finance sector, investors, fear to lose rating, so raise country’s borrowing costs.
Corruption: revolving door, politicians and bankers all in it together.
Ideology: victorious neoliberal consensus, all main parties agreed. (Thatcherism).
Could a national government go against austerity within existing global capitalist system?
Ideology aside, if a country defaults it will be shut out from global financial system. But there are successful examples from Latin America: Argentina, Ecuador.
2 reasons Argentina succeeded:
1) more recently, local funding from Venezuela, so didn’t need to access global markets (and increasing strength of regional financial markets in the “South” means increasing independence);
2) cheap exports: because it had stuff to export.
What would Greece, or UK, export? More generally, both these points connected to fact that there is a global shift towards economies of LatAm, they are booming – but same shift is away from Europe.
Global shift.
1) Neoliberalism: from 70s on, expansion of global capitalist financial system bringing more countries into global market. Accelerated in 90s with fall of communism.
2) Outsourcing: manufacturing shifts to low-wage economies (see Exhibit A).
3) Financialisation: (in general) manufacturing no longer profitable in 1st world, but big profits to be made in financial sector, creaming profits off global trade through NY, London. 1960s: financial profits were 15-20% of all profits in the US; 2000s: they were 35-40%. (See exhibit B).
4) Consumer debt bubble: a) need people to keep on consuming; but b) workers in 3W too poor to buy shit, whilst in 1W unemployment up, wages stagnant; luckily c) booming deregulated finance sector with loads of money to lend. Solution: lend money to consumers, so they can keep on spending even though wages low.
Summary: (exhibit B) in UK, 7 million people working in finance, helping cream profits off the global market. Another 7 million people making them cappuccinos. Wages low, but consumer lifestyles funded by debt.
Yes, we have been living beyond our means.
Austerity politicians say we have been living beyond our means, borrowing more than we can produce. This is not true of public spending: public borrowing up not because of wasteful public sector, but because nationalised debts of banks. (See exhibit C).
But it is true of the consumer economy. Consumers in 1W have been living beyond our means. (See exhibit D). Our consumer lifestyles, the amount of shit we consume, have raced ahead, while we have produced less and less of the stuff we use. This stuff is produced in Asia and Latin America, by workers living in Dickensian conditions.
As the debt bubble collapses, we will no longer be able to afford all this stuff. More of it will be consumed in Asia and Latin America, as a middle class develops there.
So what now?
Could we keep alive the post-war consensus going?
Do we have class struggle?
Do we have growth?
Do we have neo-colonialism?
Answer 1: produce more stuff here. Rebuild manufacturing industry. Problem: no growth. In globalised economy, we can’t compete with low wages in 3W.
Answer 2: tax the rich. Redistribute from the rich elites to keep funding public services. Problem: no class struggle. (Another problem: globalisation, so easier capital flight.)
Answer 3: we can’t. There is no alternative to austerity, not within the globalised capitalist system.
So: choices for anarchists.
Choice 1: keep on believing in consumer/welfare dream, along with the remnants of the left, hoping that by some miracle that mass class struggle and growth will reappear.
Choice 2: give up on growth economics. There is more to life than consuming shit products. Focus on getting control of the resources to produce the things we actually need. Don’t mourn the collapse of the paternalist mega-state, but see this as an opportunity for creating self-organised communities of mutual aid, and ways of living that can survive economic and ecological crisis.
—-
Exhibit A. Manufacturing wages per hour.
|
Germany |
$26.90 |
|
US |
$23.03 |
|
UK |
$21.14 |
|
Greece |
$10.38 |
|
Brazil |
$4.45 |
|
Mexico |
$3.93 |
|
Philippines |
$1.13 |
|
China |
$0.81 |
US Bureau of Labor Stats. Data from 2010, except China from 2006.
Exhibit B: Thatcherism under Blair
|
UK |
Manufacturing |
Financial, business service, and insurance |
Retail, hotels and restaurants |
|
1997 |
4.2 million jobs |
4.9m |
4.9m |
|
2007 |
2.9m |
7.15m |
7.1m |
(sources: Graham Turner; Office for National Statistics)
Exhibit C: government debt.
In 2007, the average government deficit (how much the state spends more than it receives in taxes) was 0.6% across the Euro countries. Governments owed on average 66% of their GDP. In 2010 the average deficit was 7%, and average debt 84%. The table below shows some of the changes in specific countries:
|
|
Deficit 2007 |
Debt 2007 |
Deficit 2009 |
Debt 2009 |
|
Spain |
1.9% |
36.1 % of GDP |
-11.1 |
53.2 |
|
Ireland |
0 |
25 |
-14.4 |
65.5 |
|
Italy |
-1.5 |
103.5 |
-5.3 |
115.8 |
|
Greece |
-6.4 |
105 |
-15.4 |
126.8 |
|
Germany |
0.3 |
64.8 |
-3 |
73.5 |
|
France |
-2.7 |
63.8 |
-7.5 |
78.1 |
Source: Eurostat / Economist Intelligence Unit estimates.