Austerity Can’t Solve Crises of Capitalism By Gene Clancy

8 February, 2013

Millions of workers across the United States received a rude and unpleasant jolt this January when they discovered that their take-home pay had just shrunk by 2 percent. The Social Security payroll tax cut of 2009 was restored, costing workers an average amount of $850 a year, a significant wage decrease for workers on the edge of financial ruin.

This de facto pay cut is part of a march towards government <strong class=’StrictlyAutoTagBold’>austerity going on in the U.S. and around the world. What <strong class=’StrictlyAutoTagBold’>austerity really means is cutting government spending for social benefits and/or raising <strong class=’StrictlyAutoTagBold’>taxes to guarantee loan payments to <strong class=’StrictlyAutoTagBold’>banks. Austerity is an article of faith not only for the right wing, but for centrist politicians like the Obama administration and most European governments.

There was little to no discussion of the increase in the payroll tax, which will have a far greater negative economic impact than the small increases in <strong class=’StrictlyAutoTagBold’>taxes on the very rich that were ballyhooed in December.

More dangerous even than restoring the payroll tax are the proposed <strong class=’StrictlyAutoTagBold’>cuts in federal spending, including <strong class=’StrictlyAutoTagBold’>cuts to <strong class=’StrictlyAutoTagBold’>Social Security benefits. A preposterous lie, generated by the ruling class and its lackey media, is that <strong class=’StrictlyAutoTagBold’>Social Security and other benefits based on earlier contributions are somehow responsible for the large deficit, and that “reforms” must be made in order to “save” them.

In reality, <strong class=’StrictlyAutoTagBold’>Social Security has $2.6 trillion in its trust fund, enough to adequately fund it for at least the next 25 years, according to Jack Lew, President Barack Obama’s former budget director and new nominee for secretary of the Treasury. (, July 13, 2011)

<strong class=’StrictlyAutoTagBold’>Social Security should not even be included as part of the federal budget, and certainly not seen as a way to “reduce the deficit.” Its trust fund has been accumulated from the lifetime contributions of millions of workers through its own payroll <strong class=’StrictlyAutoTagBold’>taxes and should be used for that purpose only. To reduce the benefits of older workers in order to reduce the deficit is outright robbery of the working class.

Deficits, austerity and economic growth

There are many reasons why most capitalist governments worldwide have inadequate revenue to cover costs. For the U.S., they include outrageous military spending (over a trillion dollars on the Iraq and Afghanistan wars alone), tax <strong class=’StrictlyAutoTagBold’>cuts for big business and the very wealthy, and gigantic bailouts for the <strong class=’StrictlyAutoTagBold’>banks.

Most important though is the worldwide economic crisis, which has impoverished the working class by permanently removing tens of millions of jobs, thus reducing the tax base. There has been no capitalist upturn following the 2008 crash. Every attempt to start new production involves bringing in new technology that destroys more jobs than it creates. Thus, capitalism has reached a dead end.

The ruling classes, desperate to have governments guarantee loan and interest payments to <strong class=’StrictlyAutoTagBold’>banks, have ignored the advice of many of their own economists and agencies, and embarked on a policy of governmental <strong class=’StrictlyAutoTagBold’>austerity that only exacerbates the overall capitalist crisis.

For example, an International Monetary Fund study of 17 countries that implemented <strong class=’StrictlyAutoTagBold’>austerity plans in the last 30 years showed that alleged debt-reduction plans, aimed at reducing debt and leading to prosperity, on the whole failed to do so. (, Jan 29)

Moreover, says the <strong class=’StrictlyAutoTagBold’>IMF, “Income and employment don’t fully recover even five years after the <strong class=’StrictlyAutoTagBold’>austerity program is enacted.” (Washington Post, May 7)

Since the <strong class=’StrictlyAutoTagBold’>IMF’s own study shows that its <strong class=’StrictlyAutoTagBold’>austerity policies reduce economic <strong class=’StrictlyAutoTagBold’>growth, why does it continue to dictate such measures to governments all around the globe, especially in Africa, Asia and Latin America, and lately in southern Europe?

Policies please the banks, corporations

The answer is that these policies please the big capitalists and imperialists, especially the <strong class=’StrictlyAutoTagBold’>banks. They also please multinational corporations since they weaken unions and lower labor costs. The <strong class=’StrictlyAutoTagBold’>IMF’s real goal is not to grow any economy but to increase the power of capital over labor and the power of the imperialist countries and their allies over oppressed nations.

For example, five years of <strong class=’StrictlyAutoTagBold’>austerity in Greece has resulted in deep economic depression and increasing misery for Greek workers. The Greek gross domestic product, which is a measure of the value of the total goods and services produced in a country, stands at only 70 percent of what it was before the European Union and <strong class=’StrictlyAutoTagBold’>IMF imposed <strong class=’StrictlyAutoTagBold’>austerity measures on Greece.

The 17 eurozone governments, which have embarked on a policy of severe <strong class=’StrictlyAutoTagBold’>austerity, have not only produced a “double dip” recession throughout Europe. They have not even been able to significantly decrease their debt. (See “Eurozone Debt Burden Stuck Amid Low Growth,” <strong class=’StrictlyAutoTagBold’>AP, Jan 23)

The latest official estimate of U.S. economic <strong class=’StrictlyAutoTagBold’>growth, released Jan. 30 by the Department of Commerce, has provided further proof that budgetary <strong class=’StrictlyAutoTagBold’>austerity depresses the economy. According to this report, “the just-completed fiscal cliff deal … is expected to trim anywhere from 1 to 1.7 percent from economic <strong class=’StrictlyAutoTagBold’>growth this year. With economic <strong class=’StrictlyAutoTagBold’>growth averaging 1.8 to 2.4 percent over the past three years, the impact of the just passed budget package… may bring economic <strong class=’StrictlyAutoTagBold’>growth to a standstill.” (, Feb 1, 2013)

Capitalism is, in fact, at a dead end. Unable to solve the economic crisis which it caused, the ruling classes seek to squeeze a solution out of the world’s working and poor people through a combination of higher <strong class=’StrictlyAutoTagBold’>taxes and draconian <strong class=’StrictlyAutoTagBold’>cuts in needed health and social services. Progressives around the world must see to it that the rulers’ lies are exposed and that workers are not made to pay the price for the crises caused by capitalism.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.