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It’s Austerity, Not Globalization, That Pulls European Workers to the Right


#1

It’s Austerity, Not Globalization, That Pulls European Workers to the Right

Dean Baker

Both the Washington Post (1/22/17) and New York Times (1/22/17) had pieces about declining support for the left in France and the rise of a nationalist right in both Italy and France.


#2

Fact 1: Piketty (Capital in the Twenty-First Century, 2014) revealed clearly that both international wealth inequality and intra-national wealth inequality are growing trends.

Fact 2: The planet is finite.

Fact 3: Addressing Fact 1 in light of Fact 2 will involve pain.

Opinion 1: The uber-wealthy need to bear the brunt of that pain.


#3

Dean it is hardly incredible. What have the Times and the Post gotten right in the last ten years? That's a rhetorical question.


#4

Had Obama's 2011 grand bargain not fallen apart, the resulting austerity impacting the US electorate would have resulted in Trump winning the electoral college AND popular vote.


#5

The last few decades have been an amazing show. Conservatives like Reagan and Thatcher blamed liberals and big government for all economic problems. Neoliberals (in the form of Democrats like WJ Clinton, BH Obama; HR Clinton and not to forget Labour's Tony Blair an Gordon Brown) practiced conservatism light. The harder conservatives blamed liberals the more they moved right.

All conservativism has done is increased inequality, government debt and off-shoring of manufacturing. So here we are with slow growth, high debt and a popular consensus that we need to deregulate, cut taxes for the wealthy, reduce wages, blame immigrants and refugees and have more free trade in order to fix the problem. Somebody stop and say - that is what got us into problems in the first place.


#6

You are right, but the scare tactics about the debt fuel the austerity craze. People tend to look at the government as a business or their own personal finances. With those two, spending money you don't have is crazy. It does drive you deeper into debt and no way to get out.
But government is not like those two, government prints it's own money and there is always later in order to collect. But the problem is how our government has been doing things.
In good times, you are suppose to pay down the debt and in bad times borrow to get to the good times. But in good times you are suppose to raise taxes to increase revenue and only lower them during bad times. But when you are running a deficit no matter the economic condition, you have just ruined the ability to ever get out of debt.
Our tax rate is among the highest in the world as long as you ignore all the tax breaks and subsidies. The corporate tax is 35%, yet most rich corporations pay an ave of 11%. The tax on the rich is 35%, yet their ave is 14%, the poor pay 18%, and the middle class pay 24%. So you have the two poorest classes paying more out of their pocket than the rich and corporations.
We have a consumer economy, taking money of the hands of the people who would buy the most depresses the economy. By practicing austerity, we take more money from the people who buys the most, thus depressing the economy more.
Republicans do not accept that we are a demand economy, they say we are a supple economy. Thus we should help the corporations and rich who supply jobs and goods. But ask a small business person, they will tell you that all the supply and jobs in the world won't matter if no one buys anything. Republicans and neoliberals will not believe that at all. To them, give all the money to the rich and they will create jobs even when no one is buying and thus all their employees would be just standing around doing nothing.
So austerity is the word. Mustn't let the poor have any money. Strange how we had a much better economy for more people when taxes were higher and austerity was not in play.


#7

Yes Skip,
Conservative economists and politicians believe that we can increase supply (growth) by cutting demand. They think that transferring money to the wealthy it will increase economic growth. This has failed for almost 40 years.

The trick is that Liberals - especially the establishment of the Democratic party have bought into this failed thinking - hook, line and sinker.


#8

Skip,
The one bit I disagree with you is on governments printing their own money. When the federal government has a deficit it borrows money for the shortfall. It can get it from Americans, foreigners or corporations - it can also get it from the Federal Reserve - who puts in a floor price for the debt and buys it. You can call that printing money - but it is still debt.

If they decided to take over the printing press, print up the $20 trillion that they owe the country and the world; they what would be created to put the money toward?


#9

The reason why we don't do that is it would devalue the dollar significantly. What I mean by printing one's own money, is that unlike a business or a household, the government can never run out of money. We do add to the money supply by printing paper money. A business or household must have money coming from a source outside of itself, the government doesn't need that.


#10

Skip,
The US has run a trade deficit for over 40 straight years and that is another way of saying it is over valued. Just like Europe, Japan and much of the developed world it is a high-cost producer in a world of low cost production. I agree it could cause inflation - especially in stock prices and real estate.

When I was studying the Industrial Revolution they had a shortage of money so people used bills of exchange. I person would promise to pay on a certain date and exchange that for goods or services. People exchanged the bills just like money. I don't think it would be practical today but it is an example of someone making their own money without a government.


#11

People tend not to bite the hand that feeds them and the democrats don't want to bite the hand of the rich who give them money. While that economy model has been bad for most americans, it has been great for the rich and corporations who are making great profits. It is estimated that 1-2 trillion dollars are held overseas by american corporations to avoid paying any taxes. CEOs are making 300 plus times what they made in the 80s' while the ave worker's pay has stagnated.
And when people say the free market would help all those workers, I don't know whether to laugh or vomit, maybe both. That was one of my biggest complaints against hilary, who would have just continue down the same path. However, trump will hurtle down that path at greater speed.


#12

The russian government was weak back then. There would be no way we could set up such a system, it would be easy to make it illegal.
We have run a trade deficit because we have no way to stop an american corporation from sending jobs to another country and selling those goods from that country. I am not saying that we couldn't, it is just that we won't.
The history of the US has always been looking for the cheapest resource, whether labor or materials. It is why we took cuba, the philippines, s. america, parts of asia, the monroe doctrine, the louisiana purchase. Cheap land here, install a dictator friendly to the US overseas and call it an independent country while we enslaved the people to work for what we wanted. Back then it was sugar, rubber, rice, fruit, etc. Now it is nikes etc.
Back then though we exported manufactured goods to those countries so our trade was on our side, they were the ones who had to pay and pay. Now with american corporations manufacturing over there, our biggest export is food. So we end up on the short end.
Trump says he will change that, but that is a joke considering that he sent his own jobs overseas (while claiming china was stealing our jobs). There is no good solution, forcing american companies to make things here will start a trade war for what resources we can't get in the US. Plus american corporations merely change where they are located.
The only real solution is to wall ourselves off and import nothing, which is not a bright idea. We won't be able to export and there are things that other countries have that we need, esp in raw materials for high tech items such as computers.
Starting a tariff war doesn't work, they would just place tariffs on our goods and the deficit would remain the same.
And the american people can't afford to buy only american, they are too poor. As Rick Perry said, texas would lead the way for jobs to compete with china. That is by making wages lower for the worker, doing away with environmental and labor regulations, and basically becoming a 3rd world nation, which texas already is. But the rest of us would join them. Trump even said during a primary debate that american workers earned too much, totally ignored by his fanatic followers.
Teddy Roosevelt had the right answer, break up the corporations. The founders hated corporations, they were marked as evil. They understood the danger. And now we are ruled by them.
It would take a revolution or the destruction of the country to change things and that will be violent. There is no peaceful way to break the control of the rich. If the anger keeps building (and I see no ending of that), the labor movement will be seen as a love fest. Money was the main reason why we revolted against the british. And quite frankly those elites had it way better than the poor do today, most of them were the rich. The rich today have won the war, it is an oligarchy, if they can keep it. It is a matter of time until they can't.
But the problem with revolutions is that they rarely work for everyone, they just tend to install new masters who rule. Thus is the way the world works.


#13

I agree Skip. The only thing I would point out is that money held overseas is only held there by accounting tricks. Lots of American/Foreign money has been invested by offshore companies using the states as a safe haven.


#14

Of course. And those accounting tricks are because the rich make the laws. In a sane world such things would not happen, but we live in a world driven by greed.