The Austerity Cult Continues to Devour Greece



German Chancellor Angela Merkel

It’s reasonable to assume that if a policy is making a country poorer and more miserable for five years running, one should at least consider a change.

That is how long Greece has been on a mandated program of “austerity”, measures which included raising taxes and cutting pensions, health, education and other government spending, courtesy of its German and International Monetary Fund overseers.  Predictably, the increased taxes on consumption and decreased social services benefits have resulted in a further decrease of demand, which resulted in further shrinking of the Greek economy, which caused businesses to lay off more workers, and make the total debt a greater percentage as compared to Greece’s Gross Domestic Product. Greece is now experiencing the biggest peacetime economic decline ever, with unemployment rates reaching Great Depression levels.

Has this changed any of the austerity supporters minds? Of course not. After rejecting another series of belt tightening measures in a referendum by a margin of over 20% last week, the German government has not budged, and insisted on Greece continuing on its path of self immolation, saying that there is “little room for compromise.”. And even outside the halls of power among the common folk, right wing supporters continue to sell their economically illiterate snake oil. If any of you have spent any amount of time on the internet discussing politics lately, you have surely heard the “Socialism is great. Just look at Greece” quip, a statement that I can only presume carries as much self adulation for the speaker, as it signifies ignorance to those who hear it.

When the global economic meltdown that started on Wall Street spread to Europe, Greece under a Socialist government went into a recession. Was that recession made worse by government incompetence and mismanagement? Absolutely. Unfortunately, government mismanagement is not limited to socialist governments. In capitalist America, federal regulators were asleep at the wheel as investment banks gradually started inflating an asset bubble which caused the worst recession in almost a century. Is that any less incompetent?

The reason for the five years of misery after the initial recession however, was caused solely by the economic malpractice of Greece’s creditors, who continued to insist on austerity measures, which is the equivalent of treating a bullet wound by thrusting a knife through it. No self-respecting socialist government would ever recommend such a self-destructive policy. The proper prescription to get out of a recession is to increase government spending to counteract the decrease in demand from the private sector, and jump start the economy via a fiscal stimulus.

Witness the difference in the recoveries of the United States and Europe since the 2008 recession. In Europe Greece is only one example of economic turmoil, as other countries on the periphery such as Spain, Portugal, Ireland, and even Italy, struggle with a sputtering economy. This is a direct result of trying to save your way out of a recession. By contrast, the United States with a Democratic president and a Democratic Congress enacted the fiscal stimulus in 2009 which jump started our economy. Although a great deal more needs to be done, the fact is that unemployment has been halved from its high point of approximately 10% and now stands at 5.3 percent. Had John McCain won the 2008 presidential election and done what he said he would do, which was to freeze spending just as Lehman Brothers was declaring bankruptcy, the United States could have found itself in even worse shape than Europe is in today.

But don’t expect to hear that on Fox News anytime soon, nor on any of the other outlets of the right-wing echo chamber. Priority for progressives and also other Democrats must be to advocate against these poison pills that masquerade as an economic philosophy. When a person continues to do something harmful, despite evidence of the harm, simply due to a blind belief that somehow all will be better at some point, that begins to resemble a dangerous cult. One to which we cannot give electoral legitimacy come next November.

 

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