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PORTSIDE  July 2010, Week 1

PORTSIDE July 2010, Week 1

Subject:

Stimulus or Austerity: The People vs. the Banks

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Date:

Sat, 3 Jul 2010 13:50:05 -0400

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Stimulus or Austerity: The People vs. the Banks

By Shamus Cooke
Buzzflash
July 2, 2010

http://blog.buzzflash.com/contributors/3322

The most powerful nations in the world met recently at
the G-20 in Toronto and managed to agree on only one
thing of significance: the need to reduce deficits,
"half by 2013." Implied by the statement is the need to
lower deficits via "austerity," meaning eliminating or
reducing social programs.

Why does every mainstream political pundit or corporate
CEO fanatically agree that reducing deficits is the
most important thing to do now? Let Obama explain:

". if financial markets are skittish and don't have
confidence in a country's fiscal soundness, that is
also going to undermine our recovery."

Apparently, the most important policy for the world
economy cannot be said in plain English. What does
Obama mean? Essentially, he is saying that "financial
markets" should determine how wealth is distributed and
how the economy is directed.

What are financial markets? And why must every country
be at their mercy?

A financial market is anyplace the super-rich invest
their money.  It can be done through a bank, hedge
fund, or a private equity firm, etc. The rich demand
that their investments are safe and therefore are
especially "skittish" at the slightest hint of
inflation or other economic distress.

The rich who dominate financial markets advocate only
one solution to balancing budgets: reducing or
eliminating social programs. They ignore the other
solution- a massive public works project- because it
directly affects them in a negative way: raising taxes
on the wealthy.

This raises another issue. The investors who control
financial markets know that a day of reckoning is
coming: the massive debt that was pushing forward the
world economy for years needs to be paid back, and
those who own the banks don't want the responsibility.
Better for millions of workers to sacrifice social
services, pensions, wages, etc., than for thousands of
rich investors to be taxed.

Some people will argue that it is counterproductive to
tax the rich, since they will then choose not to invest
their money, causing further harm to the economy.   But
this is already happening and happens every time a
recession hits.

The New York Times describes one example of the rich
hoarding their money, until better, profitable times
return:

"Only on Wall Street, in the rarefied realm of buyout
moguls, could you actually have too much money..
Private equity firms, where corporate takeovers are
planned and plotted, today sit atop [are hoarding] an
estimated $500 billion. But the deal makers are
desperate to find deals worth doing." (June 24, 2010).

Rich investors are not investing in companies because
consumers are not buying the products that corporations
produce. And where mainstream economists blame
"consumer confidence" for this problem, the real issue
remains "consumer impoverishment."

It is the rich investor that lacks the "confidence"
that the unemployed or low-waged worker can buy enough
of the products produced by corporations. This is the
problem that will continue to haunt the establishment
economists, who will incessantly preach that the
economy is on a perpetual verge of recovery.

This illusion of recovery is being instituted into
government policy. The Obama administration has argued
that federal stimulus money is only needed in small
doses to put the economy back on track. With
politicians agreeing that the recession is "basically
over," less stimulus money is being offered.

Indeed, Congress has had a terrible time passing the
tiniest stimulus bill, which would extend unemployment
benefits and help states with Medicaid costs. If such a
bill is eventually passed, it will be a mere fraction
of what is needed.

Because Obama insists that "reducing deficits" is the
new governmental priority, the stimulus faucet will
quickly dry up (since government stimulus is financed
through deficit spending).

But for millions of U.S. workers, the debate over
stimulus spending is not theoretical, but a matter of
life and death. If no federal stimulus is passed- and
the current one has virtually died in Congress-
millions of unemployed people will have zero income.
Meanwhile, the states budget crises will worsen,
shutting off state-run health care, social services and
education, while slashing public sector jobs by the
thousands.

Both Democrats and Republicans agree that "financial
markets" should dictate the economic policy of the U.S.
The two parties disagree only to what degree and how
quickly to implement the same policy.

The American labor movement must find an independent
voice to demand that a stimulus bill be passed.  Labor
- especially public sector workers - must ally
themselves with the unemployed, students and teachers,
and other victims of the states' budget crises who will
suffer real tragedies unless a federal stimulus bill is
passed.

_____________________________________________

Portside aims to provide material of interest
to people on the left that will help them to
interpret the world and to change it.

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