STOCK MARKET WATCH -- Monday, 22 June 2015

[Demeter]

8. Austerity Isn’t Irrational by John Milios

https://www.jacobinmag.com/2015/06/syriza-greece-austerity-neoliberalism-tsipras/

In Greece and elsewhere, austerity is nothing more than capitalists imposing their class interests. After the outbreak of the 2008 global economic crisis, extreme austerity policies prevailed in many parts of the developed capitalist world, especially in the European Union (EU) and the eurozone. Austerity has been criticized as an irrational policy, which further deepens the economic crisis by creating a vicious cycle of falling effective demand, recession, and over-indebtedness. However, these criticisms can hardly explain why this “irrational” or “wrong” policy persists, despite its “failures.”

In reality, economic crises express themselves not only in a lack of effective demand, but above all in a reduction of profitability of the capitalist class. Austerity constitutes a strategy for raising capital’s profit rate. Austerity is the cornerstone of neoliberal policies. On the surface, it works as a strategy of reducing entrepreneurial cost. Austerity reduces labor costs of the private sector, increases profit per (labor) unit cost, and thus boosts the profit rate. It is complemented by economizing in the use of “material capital” (alas, another demand curtailing strategy); and also by institutional changes that, on the one hand, enhance capital mobility and competition and, on the other, strengthen the power of managers in the enterprise and shareholders and bondholders in society. As regards fiscal consolidation, austerity gives priority to budget cuts over public revenue, reducing taxes on capital and high incomes, and downsizing the welfare state.

However, what is cost for the capitalist class is the living standard of the working majority of society. This applies also to the welfare state, whose services can be perceived as a form of social wage. It is clear, therefore, that austerity is primarily a class policy. It constantly promotes the interests of capital against those of the workers, professionals, pensioners, unemployed, and economically vulnerable groups. In the long run, it aims at creating a model of labor with fewer rights and less social protection, with low and flexible wages, and no substantial bargaining power for wage earners. Austerity does lead, of course, to recession. However, recession puts pressure on every individual entrepreneur, both capitalists or middle bourgeoisie, to reduce all forms of costs, to more intensively follow the path of relative surplus value, i.e. to try to consolidate her profit margins through wage cuts, intensification of the labor process, infringement of labor regulations and workers’ rights, massive redundancies, etc. From the perspective of big capital’s interests, recession thus gives birth to a process of creative destruction. There is a redistribution of income and power to the benefit of capital, and concentration of wealth in fewer hands as small and medium enterprises, especially in retail trade, are being cleared up by big enterprises and shopping malls.

This strategy has its own rationality that is not completely obvious at first glance. It perceives the crisis as an opportunity for a historic shift in the correlations of forces to the benefit of the capitalist power, subjecting European societies to the conditions of the unfettered functioning of financial markets, attempting to place all consequences of the systemic capitalist crisis on the shoulders of working people. This is the reason why, in a situation of such an intensification of social antagonisms like today, a government that wants to side with labor and the social majority cannot even imagine succumbing to pressures to continue implementing austerity policies.

Capital vs. Workers AND GREECE! MORE AT LINK

AUSTERITY IS THE VISIBLE MANIFESTATION OF ELITE GREED...AND SELF-DEFEATING, HOWEVER "RATIONAL" IT MAY SEEM TO THE ELITE. THEY ARE KILLLING THE GOOSE THAT LAID THEIR GOLDEN EGGS, AND THE GEESE WILL RETURN THE FAVOR AND KILL THE ELITE....