Austerity: Why and for Whom? by Rick Wolff

Austerity: Why and for Whom? by Rick Wolff. On-line article at Links austerity programmes across Europe to conditions set by banks lending to governments due to fears of defaults on government debts. For instance the high rates of interest imposed on Greece in return for bail out loans by European banks. If governments default on loans then their credit rating may prevent them borrowing more, the banks will collapse and the Governments will not be able to borrow form banks to bail them out! Is this right? The banks have lent money to governments to bail themselves, the banks, out. Presumabley these are not the same banks – it is the banks not crippled by bad investment (the ‘national’ banks’?) that are lending to governments who then use the money to bail out the failing banks. The public funding cuts are to ensure governments can service these debts to the bank, maintain their credit ratings so that, if necessary, the governments can bail out the banks in the future. If the national banks lent the money to governments to bail out the failing banks, why couldn’t the banks have lent directly to other banks? I assume they want governments, their tax streams and assets, to guarantee the loans. It is generally recognised that European national banks will make significant profits out of lending to Greece as the interest rate is significantly higher than the banks can borrow money themselves.

All this leaves open the question – why do the austerity measures punish the poor and, despite everything, wealth still grows and concentrates? That’s because for the wealthy, every problem is an opportunity. And for the political right, ironically, via neoliberal policies, it is an opportunity to enact barely masked ideologically informed policies. Given the high profits banks will make out of loans to Greece, for instance, this looks like a direct transfer of money from the poor to the financial institutions that got us into the mess in the first place.

Reading 15-7-01

Considering the importance of liberalism in the current government’s economic and social policies, the restructuring and deficit reductions being undertaken throughout Europe voluntarily it seems and being forced upon less developed countries by the IMF etc. my reading over the last month, and still ongoing, has been an attempt to understand liberalism and how it is being ‘oerationalised’ across the globe in pursuit of state goals in general and the USA’s hegemonic project in particular. Apart from fairly abstract and theoretical readings I have been looking at concrete examples of neoliberal policies in accord with the principle “through their actions shall you know them”. This also looks at ways countries, areas and indigenous peoples have with varying degrees tried to resist the external neoliberal globalising forces. I will post here short reviews and comparisons of these readings in due course.

Currently reading:

Ray Bush (2007) Poverty and Neoliberalism: Persistence and Reproduction in the Global South Pluto Press
G Collier and E Quaratiello (1999) Basta! Land and the Zapatista Rebellion in Chiapas Food First Books
David Harvey (2005) A Brief History of Liberalism OUP
David Harvey (2010) The Enigma of Capital and the Crises of Capitalism Profile Books
John Holloway (2010) Crack Capitalism Plot Press
J Johnston & G Laxer ( 2003) Solidarity in the age of globalization: Lessons from the anti-MAI and Zapatista struggles in Theory and Society 32: 39-91
Mihalis Mentinis (2006) Zapatistas: The Chiapas Revolt and What it Means for Radical Politics Pluto Press

The Johnston and Laxer article is particularly interesting as it focusses on the central role of the Internet for linking national and global communication and resistance and the way that national governments have been unable to control the flow of information as they have in the past.

I will be looking at John Holloway’s other writing when I can get hold of the books. He has written specifically  about the Zapatistas and is referenced in Mentinis’ book.

Suggestions are welcome.

Privatisation of everything?

In a previous post – A neoliberal budget for business and marketisation? – I began to document the claim that the emergency budget was informed by the supposedly discredited neoliberal economic doctrine. The recent changes to the education system and the NHS proposed by the ConDem government both seem to offer opportunities for ‘back door’ privatisation and the general neoliberal objective of commodifying and marketising as much of public sector provision and services as possible. In the case of the NHS the plan is too pass a large part of the budget to GPs who will provide or purchase services on behalf of their patients.  The private sector is already circling to pick up the spoils.

NHS faces radical pro-market shakeup
“The plans could represent the biggest shakeup of the NHS in a generation, with a whole tier of the NHS decapitated: 10 strategic health authorities would be abolished by 2012 and the 150 primary care trusts scrapped by 2013; up to 30,000 managers face being cut or redeployed. […] By 2014 every hospital will be a foundation trust and all will be allowed to leave public ownership while still providing public services”.

NHS shakeup: Private companies see potential to expand their role
“Private companies believe the shake-up of the NHS will lead to a big expansion of their currently small role, as many GPs will need their help to carry out their new role as commissioners of healthcare. Firms which already have small-scale involvement with family doctors are preparing to exploit the chance to gain an unprecedented foothold in the NHS once GPs start spending £80bn of NHS funds”.

How Goldman Sachs gambled on starving the world’s poor – and won

Posted by Johann Hari

By now, you probably think your opinion of Goldman Sachs and its swarm of Wall Street allies has rock-bottomed at raw loathing. You’re wrong. There’s more. It turns out the most destructive of all their recent acts has barely been discussed at all. Here’s the rest. This is the story of how some of the richest people in the world – Goldman, Deutsche Bank, the traders at Merrill Lynch, and more – have caused the starvation of some of the poorest people in the world, just so they could make a fatter profit.

The effects of the recession

In the World Tonight broadcast by BBC Radio 4 on the evening of June 30th ( minutes 13 to 18) a couple of small business owners were interviewed to test the claim of the ConDem govt that the reduction of the jobs in the public sector would be more than compensated by the creation of new jobs in the private sector. As far as the intentions of the programme were concerned, the test was inconclusive. However, the programme was revealing in another, unremarked upon, way. The first business was a small fashion designer. SeeMe London. Their customers had not bought anything for most of 2009. To the credit of the owners they had kept their staff on while weathering the storm and restructuring their business. Business was now expanding again but they had ditched their previous customers and markets and how re-branded themselves at the high end of the market selling high value services. The future is now looking quite rosy. The second small business was a company that specialised in tuning high performance cars, Paramount Performance. Again, over 2009 business declined dramatically. One attempted solution was to diversify and offer economy tuning rather than performance tuning thinking that their customers, in straightened circumstances, would be more willing to spend money on saving fuel. To their disappointment this did not appeal and the attracted very few customers. However, this year business is growing again and it is the high end sector that is placing the orders and spending the money.

This is only anecdotal evidence of course but may prove to be symptomatic of how this recession will play out – the already poor and the middle classes getting poorer and the rich getting richer, as is evidenced by previous recessions.

The Power of Money (Marx)

Economic and Philosophic Manuscripts of 1844

“By possessing the property of buying everything, by possessing the property of appropriating all objects, money is thus the object of eminent possession. The universality of its property is the omnipotence of its being. It is therefore regarded as an omnipotent being. Money is the procurer between man’s need and the object, between his life and his means of life. But that which mediates my life for me, also mediates the existence of other people for me. For me it is the other person”.

“That which is for me through the medium of money – that for which I can pay (i.e., which money can buy) – that am I myself, the possessor of the money. The extent of the power of money is the extent of my power. Money’s properties are my – the possessor’s – properties and essential powers. Thus, what I am and am capable of is by no means determined by my individuality. I am ugly, but I can buy for myself the most beautiful of women. Therefore I am not ugly, for the effect of ugliness – its deterrent power – is nullified by money. I, according to my individual characteristics, am lame, but money furnishes me with twenty-four feet. Therefore I am not lame. I am bad, dishonest, unscrupulous, stupid; but money is honoured, and hence its possessor. Money is the supreme good, therefore its possessor is good. Money, besides, saves me the trouble of being dishonest: I am therefore presumed honest. I am brainless, but money is the real brain of all things and how then should its possessor be brainless? Besides, he can buy clever people for himself, and is he who has [In the manuscript: ‘is’. – Ed.] power over the clever not more clever than the clever? Do not I, who thanks to money am capable of all that the human heart longs for, possess all human capacities? Does not my money, therefore, transform all my incapacities into their contrary?

If money is the bond binding me to human life, binding society to me, connecting me with nature and man, is not money the bond of all bonds? Can it not dissolve and bind all ties? Is it not, therefore, also the universal agent of separation? It is the coin that really separates as well as the real binding agent – the […] [One word in the manuscript cannot be deciphered. – Ed.] chemical power of society”.

via Posterous and Joss Winn’s Things that stick

The Laws of Motion of the Capitalist Mode of Production

If Marx’s theory of surplus-value is his most revolutionary contribution to economic science, his discovery of the basic long-term ‘laws of motion’ (development trends) of the capitalist mode of production constitutes undoubtedly his most impressive scientific achievement.

No other 19th-century author has been able to foresee in such a coherent way how capitalism would function, would develop and would transform the world, as did Karl Marx. Many of the most distinguished contemporary economists, starting with Wassily Leontief (1938), and Joseph Schumpeter (1942) have recognised this.

The Social Responsibility of Business is to Increase its Profits

The Social Responsibility of Business is to Increase its Profits (full article) by Milton Friedman.  Also at

[But contrast the historical origin of keizai or “economy” in Japanese – Keizai comes from keisei zaimin, or “administering society and deliverance of people” in 18th century Osaka. Also Sen shows Friedman’s view is not that of Adam Smith].

The New York Times Magazine, September 13, 1970. Copyright @ 1970 by The New York Times Company.

When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free en­terprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing em­ployment, eliminating discrimination, avoid­ing pollution and whatever else may be the catchwords of the contemporary crop of re­formers. In fact they are–or would be if they or anyone else took them seriously–preach­ing pure and unadulterated socialism. Busi­nessmen who talk this way are unwitting pup­pets of the intellectual forces that have been undermining the basis of a free society these past decades.

The discussions of the “social responsibili­ties of business” are notable for their analytical looseness and lack of rigor. What does it mean to say that “business” has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.

Presumably, the individuals who are to be responsible are businessmen, which means in­dividual proprietors or corporate executives. Most of the discussion of social responsibility is directed at corporations, so in what follows I shall mostly neglect the individual proprietors and speak of corporate executives.

In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose–for exam­ple, a hospital or a school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.

In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.