Stop the Austerity Craze! Massive Budget Slashing Can Lead
to Economic Disaster, Violence and Repression

by Mark Ames

AlterNet

January 25, 2011

http://www.alternet.org/story/149659/stop_the_austerity_craze!_massive_budget_slashing_can_lead_to_economic_disaster%2C_violence_and_repression

	The DC-Wall Street power circuit, with a big assist
	from the corporate media, is blindly pushing an
	agenda that could lead to massive social upheaval.

Now that the shock of the Gabrielle Giffords shooting is
starting to wear off and the country is returning to its
more familiar climate of insanity, we're back to facing a
far worse, far more serious, and far more violent threat
than mere rampage shootings: Austerity.

The Washington-Wall Street power circuit has already decided
for the rest of us that "austerity" will define the 2011
political agenda. Austerity is what the oligarch-sponsored
Tea Party demanded, what the Republicans are promising to
deliver now that they're in control of drafting the budget
in the House, and what the Obama administration is going to
try to enact as part of its neo-Clinton triangulation
strategy. And the DC pols have the total endorsement of the
corporate media, which have been hammering home the same
message for months now: Austerity is the answer to our
problems - problems that were created by the same
establishment which wants to make us scream in pain again.

The way this austerity debate has been framed in all the
major media outlets, anyone pushing for austerity cuts and
"pain" is automatically labeled "courageous"-which is an odd
way of defining courage, since not a single rich politician
or pundit pushing for "austerity" will actually suffer that
pain, and most will profit from it. But that's what counts
as courage in our era.

Bush speechwriter-turned-Washington Post pundit Michael
Gerson has been an early promoter of the courage-austerity
complex. Here's Gerson writing about his old colleague,
former Bush OMB director Mitch Daniels, now Indiana
governor, whose first act upon taking oath was pawning the
Indiana Turnpike to a multinational as fast as you can spell
courageous: Daniels became a highly successful Indiana
governor, combining a motorcycle-driving, pork-tenderloin-
eating populism with courageous budget cutting, a solid
record of job creation and a reputation for competence.

By this logic, if Mitch Daniels is the courageous one, then
that means that the opposite of courage is us, the cowardly
masses of lazy slobs, who need to be whipped into shape with
a steady lashing of the "austerity" whip. We prove our
unworthiness whenever we call for "Austerity for the rich,"
which is of course the opposite of courage.

And while considering the implications of living in a
country where politicians and pundits are allowed to call
selling off juicy pieces of the state courageous acts,
there's something even more troubling about it; what has
happened in modern history after the austerity drive is
finished: These measures almost always end in the worst
worst-case-scenario imaginable: economic disaster, violence
and repression.

Let's start with the most catastrophic of all austerity
programs in history-the one austerity program none of the
Austerity Snake Oil peddlers want you to know about. It was
the disastrous austerity program tested out in Germany way
back in 1930, under Chancellor Heinrich Bruning, himself an
austere centrist.

The Depression was just spreading around the globe, and
Bruning, backed by Germany's industry titans, believed
Germany would only recover with a strong currency, which he
tethered to the gold standard, and a balanced budget through
brutal cuts in wages, pensions and unemployment benefits,
and hikes in taxes and fees. Bruning learned austerity as a
doctoral student at the London School of Economics -- which
nurtured and promoted "free-market" whores like Friedrich
von Hayek and the "Austrian School" that is still being
piped out to us through major outlets like the editorial
pages of the Wall Street Journal and the libertarian press.

Bruning applied the von Hayek medicine to Germany, and the
resulting backlash was so intense he suspended parliamentary
democracy and ruled by emergency decree, setting a fine
example for the next guy who took power. After just two
years of "austerity" measures, Germany's economy had
completely collapsed: unemployment doubled from 15 percent
in 1930 to 30 percent in 1932, protests spread, and Bruning
was finally forced out. Just two years of austerity, and
Germany was willing to be ruled by anyone or anything except
for the kinds of democratic politicians that administered
"austerity" pain. In Germany's 1932 elections, the Nazis and
the Communists came out on top - and by early 1933, with
Hitler in charge, Germany's fledgling democracy was shut
down for good.

That should have sealed the coffin on "austerity" and
"Austrian Economics," but somehow von Hayek and his fellow
Austrian aristocrats who were forced to flee from the fruits
of their economic programs, did a complete revision of
history. Once they were safely in England and America,
sponsored and funded by oligarch grants, hacks like von
Mises and von Hayek started pushing a revisionist history of
the collapse of Weimar Germany, blaming not their austerity
measures, but rather big-spending liberals who were
allegedly in charge of Germany's last government.

Somehow, von Hayek looked at Chancellor Bruning's policies
of massive budget cuts combined with pegging the currency to
the gold standard, the policies that led to Weimar Germany's
collapse, policies that became the cornerstone of Hayek's
cult - and decided that Bruning hadn't existed. That instead
Hitler came to power because Germany's government grew too
fat even as Bruning enacted massive spending cuts, its
currency a mere paper currency even though Bruning kept it
tied to gold, the German people a bunch of spoiled welfare
queens living too high on the socialist hog when in fact
they were starving in the streets suffering from unbearable
pay cuts, and that these profligate German fat-cat
pensioners and unemployment-insurance-queens were so
hellbent on enjoying their government handouts that they
elected a Nazi.

Austerity programs and gold-backed currencies were the cause
of enormous pain, violence and disaster throughout the West
in the early 1930s: In England, austerity measures led to
one of the biggest mutinies in Britain's military history
since the time of the French Revolution; the Invergordon
Mutiny of 1931, when up to half the Royal Navy rose up
against austerity cuts, took over ships and sent fears of a
Bolshevik revolution throughout the country. The mutiny and
strikes worked somewhat: Britain was finally forced to
abandon the gold standard, and wage cuts were softened.

As a counter-example, Sweden, just about the only country
that adopted a "mixed economy" model, suffered far less from
the Great Depression that affected the whole world; unlike
the austerity-dosing countries, Sweden was already back on
its feet and booming by 1932.

Take a look at just about any austerity program over the
past century, and the record is always the same: economic
destruction, political destruction and violence. Take
Venezuela; ever wonder why Venezuelans chose Hugo Chavez?
What made Venezuelans so radicalized that they'd to turn to
a Fidel Castro groupie to save them?

Austerity is what happened, cooked up in Washington by the
same financial elite we're facing today. In February 1989,
Venezuela elected as president a candidate, Carlos Andres
Perez, who campaigned as a populist-liberal promising voters
he would fight against the IMF and World Bank, which were
trying to force an austerity program on the country. They
believed Perez because the last time he was president, in
the 1970s, he'd nationalized the oil industry as well as
American iron ore interests.

But Perez was a fraud, a fake-liberal who'd secretly sold
himself to bankster oligarchs and conned the voters. Three
weeks after winning the election, President Perez rammed
through an austerity program written by the IMF that sparked
immediate mass protests. Perez did what all austerity-lovers
do: he declared a state of emergency and suspended the
Constitution, and called out the security forces, who
massacred at least 1,000 and perhaps as many as 3,000
Venezuelan protesters. While everyone in the West knows
about the comparatively smaller massacre in Tiananmen Square
that same year, few have heard about this massacre, which
Venezuelans call "the Caracazo." Naturally, this con-job and
massacre was an example of "courage" -- that's how IMF's
Michel Camdessus described Perez's decision to massacre
protesters. Here's an New York Times article from 1989:

    WASHINGTON, March 8 -The International Monetary Fund's
    managing director, Michel Camdessus, asserts that
    economic stabilization measures in Venezuela ''are
    proving even more painful'' because they were ''too long
    postponed.'' He made the comment in a letter written on
    Monday, just days after unrest caused by tough economic
    measures led to up to 375 deaths in Venezuela. Mr.
    Camdessus praised the new Government of President Carlos
    Andres Perez for its ''courage'' in embracing an
    economic shock program that was designed to increase
    economic efficiency, and said the I.M.F. would support
    it ''with all the influence at its disposal.'' But he
    rejected charges from Mr. Perez that the I.M.F. was at
    least partly responsible for last week's disturbances
    because it had recommended some of the revamping
    measures.

Notice the same twisted rhetoric used then as we see today;
the elites who impose austerity and slaughter civilians and
declare states of emergency to protect IMF programs are
labeled "courageous," while the people who are killed don't
get so much as a column inch. Notice how President Perez
blames Camdessus, and Camdessus blames an alternative
history that could have been if only previous leaders been
"courageous" too and enacted these insane price hikes and
wage cuts earlier.

Venezuela's austerity programs created greater poverty,
richer oligarchs, worse corruption, and the inevitable
backlash in the form of Hugo Chavez, who staged a coup in
1992 that almost succeeded...and later won the presidency
through the ballot box. Perez had to flee to Miami with his
family to avoid being put on trial for the massacre; he died
just last month in shame.

Austerity programs in the ex-communist Soviet countries led
to similar disastrous results: As I wrote about in the
Nation, Larry Summers oversaw Lithuania's austerity program
in the early 1990s, sparking overnight the world's highest
suicide rate, economic misery and a backlash that made
Lithuania the first country in the former communist bloc to
vote the communists back into power -- anything to stop the
pain.

In Russia, austerity measures dictated by the same Hayek
groupies in the IMF led to a complete financial market
meltdown, an over 50 percent collapse in the GDP, the
untimely deaths of millions, and of course the requisite
President Yeltsin ruling by decree, bombing his own
parliament, then finally snuffing democracy by handing the
Kremlin over to his crony, Vladimir Putin.

The Russian economists who helped design their austerity
program spent a lot of time learning from Friedrich von
Hayek's favorite austerity-program-cured country on earth,
the Chile of Generalissimo Augusto Pinochet (South Africa's
apartheid regime came a close second in Hayek's austere
Austrian heart). That austerity program, implemented in 1975
under the advice of von Hayek and Milton Friedman, was
implemented after the brutal massacres and destruction of
democracy, a clever reversal of the usual formula; Pinochet
overthrew the democratically elected president, Salvadore
Allende, in 1973, massacred roughly 3,000 opponents and
locked up and tortured countless more, providing the perfect
conditions for von Hayek's austerity measures.

In 1975, those measures were implemented, and the results
were, naturally, catastrophic. GDP collapsed almost 15
percent in just one quarter, while unemployment soared from
3 percent under Allende to 20 percent. The economy didn't
reach 1971 levels until the end of the 1970s-and then the
whole house of Austrian-economics cards collapsed two years
later. But the good thing for Chileans was, they didn't have
to go through the trauma of massacres and end-of-democracy,
since that was already served up in advance. By the end of
it all, Chile was left with a new class of massively
enriched financial oligarchs, the public sector unions in
tatters, and one of the world's worst wealth inequalities.

But you don't hear about that much, not outside of the
subculture of anti-globalization protesters and fans of
Naomi KIein's reporting. Thanks to inane but heavily funded
propaganda, Hayek's experiment in Chile is constantly called
a success story. When a private mining firm was too
inefficient and corrupt to rescue its own trapped miners
last year, the private company got the state mining company
to bail its trapped workers out. Nevertheless, the story we
Americans got through the Wall Street Journal was that the
rescue of the miners was somehow "proof" that Hayek and
Friedman's free-market experiments that Generalissimo
Pinochet tested out on Chile were somehow responsible for
saving those trapped miners. The logic goes like this: The
private company got their miners trapped and couldn't rescue
them; the state mining company rescued them; therefore, free
unfettered markets rescued the trapped miners. It's the
logic Hayek used to argue that phantom Big Government New
Dealers brought about the Nazis, rather than Bruning's
austerity measures.

We Americans alone among the world are the only suckers who
take it on faith that Pinochet performed an economic miracle
in Chile.

Now, at last, the same austerity programs that have led to
massacres, wars, pain and catastrophe all over the world are
finally coming home to the very people and country they were
intended to poison all along.

Why now, you ask? Why, after all the economic destruction
and inequality that resulted from decades of deregulation,
privatization, slashing taxes on the rich, and relentless
bashing of evil big-government-why would we adopt a far more
purified, radical version of the same disastrous free-market
program? Why would we have to take more pain medicine from
the same people who already poisoned us?

Simple: Because we're weakened from having our wells
poisoned by free-market, libertarian ideology over the past
three decades. We're weaker, poorer, we've turned against
the unions and the government, the only two potential
sources of counter-power to billionaires and corporations -
what predator wouldn't move in for the kill at this very
moment? Now's the perfect time to take everything that
Austrian economics has to offer to its practitioners.
Plundering the weak and shooting them in their heads when
they resist - that's the definition of courage to America's
degenerate ruling class.

[Mar Ames is the author of Going Postal: Rage, Murder, and
Rebellion: From Reagan's Workplaces to Clinton's Columbine
and Beyond.]

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