The peoples revolt
Political Waves
Jon Stewart pointed out, tonight, the irony that
70 years after the war was won by the allies, Germany is in charge of Europe.
That won't make any headlines but now that France has elected a Socialist president,
look out for another round of Freedom Fries!
It's all very dicey -- but
a break from this pernicious, contracted notion of belt-tightening and
public-punishing austerity is very welcome. Especially now that everybody is talking about
Simpson-Bowles like it was the Holy Grail and that needs to be squelched. Write
Nancy Pelosi and tell her the progressives expect her to keep the
faith, not cave in!
There's time to handle debt AFTER we grow
ourselves an economy, and there's time to refresh the safety net on the OTHER
side of cynical political panic. Good ideas and analysis below from two of my favorites: Reich and Krugman.
A little
progress after a Beltane Supermoon ... and not just over the pond; look what's up in Wisconsin!
Jude
'Austerity' Becomes A Dirty Word In
Europe
SARAH DiLORENZO, Huffpo
05/07/12
http://www.huffingtonpost.com/2012/05/07/austerity-europe-dirty-word_n_1495908.html
Those Revolting Europeans
The French are revolting. The Greeks, too. And it’s about time.
PAUL KRUGMAN, NYT
May 6, 2012
http://www.nytimes.com/2012/05/07/opinion/krugman-those-revolting-europeans.html
Both countries held elections Sunday that were in effect referendums on
the current European economic strategy, and in both countries voters turned two
thumbs down. It’s far from clear how soon the votes will lead to changes in
actual policy, but time is clearly running out for the strategy of recovery
through austerity — and that’s a good thing.
Needless to say, that’s not
what you heard from the usual suspects in the run-up to the elections. It was
actually kind of funny to see the apostles of orthodoxy trying to portray the
cautious, mild-mannered François Hollande as a figure of menace. He is “rather
dangerous,” declared The Economist, which observed that he “genuinely believes
in the need to create a fairer society.” Quelle horreur!
What is true is
that Mr. Hollande’s victory means the end of “Merkozy,” the Franco-German axis
that has enforced the austerity regime of the past two years. This would be a
“dangerous” development if that strategy were working, or even had a reasonable
chance of working. But it isn’t and doesn’t; it’s time to move on. Europe’s
voters, it turns out, are wiser than the Continent’s best and brightest.
What’s wrong with the prescription of spending cuts as the remedy for
Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is,
claims that slashing government spending would somehow encourage consumers and
businesses to spend more have been overwhelmingly refuted by the experience of
the past two years. So spending cuts in a depressed economy just make the
depression deeper.
Moreover, there seems to be little if any gain in
return for the pain. Consider the case of Ireland, which has been a good soldier
in this crisis, imposing ever-harsher austerity in an attempt to win back the
favor of the bond markets. According to the prevailing orthodoxy, this should
work. In fact, the will to believe is so strong that members of Europe’s policy
elite keep proclaiming that Irish austerity has indeed worked, that the Irish
economy has begun to recover.
But it hasn’t. And although you’d never
know it from much of the press coverage, Irish borrowing costs remain much
higher than those of Spain or Italy, let alone Germany. So what are the
alternatives?
One answer — an answer that makes more sense than almost
anyone in Europe is willing to admit — would be to break up the euro, Europe’s
common currency. Europe wouldn’t be in this fix if Greece still had its drachma,
Spain its peseta, Ireland its punt, and so on, because Greece and Spain would
have what they now lack: a quick way to restore cost-competitiveness and boost
exports, namely devaluation.
As a counterpoint to Ireland’s sad story,
consider the case of Iceland, which was ground zero for the financial crisis but
was able to respond by devaluing its currency, the krona (and also had the
courage to let its banks fail and default on their debts). Sure enough, Iceland
is experiencing the recovery Ireland was supposed to have, but hasn’t.
Yet breaking up the euro would be highly disruptive, and would also
represent a huge defeat for the “European project,” the long-run effort to
promote peace and democracy through closer integration. Is there another way?
Yes, there is — and the Germans have shown how that way can work. Unfortunately,
they don’t understand the lessons of their own experience.
Talk to
German opinion leaders about the euro crisis, and they like to point out that
their own economy was in the doldrums in the early years of the last decade but
managed to recover. What they don’t like to acknowledge is that this recovery
was driven by the emergence of a huge German trade surplus vis-à-vis other
European countries — in particular, vis-à-vis the nations now in crisis — which
were booming, and experiencing above-normal inflation, thanks to low interest
rates. Europe’s crisis countries might be able to emulate Germany’s success if
they faced a comparably favorable environment — that is, if this time it was the
rest of Europe, especially Germany, that was experiencing a bit of an
inflationary boom.
So Germany’s experience isn’t, as the Germans
imagine, an argument for unilateral austerity in Southern Europe; it’s an
argument for much more expansionary policies elsewhere, and in particular for
the European Central Bank to drop its obsession with inflation and focus on
growth.
The Germans, needless to say, don’t like this conclusion, nor
does the leadership of the central bank. They will cling to their fantasies of
prosperity through pain, and will insist that continuing with their failed
strategy is the only responsible thing to do. But it seems that they will no
longer have unquestioning support from the Élysée Palace. And that, believe it
or not, means that both the euro and the European project now have a better
chance of surviving than they did a few days ago. ++
A
Question of Timing: What America Can Learn From the Revolt in Europe
Robert Reich
05/07/2012
http://www.huffingtonpost.com/robert-reich/a-question-of-timing-what_b_1496364.html
Who's an economy for? Voters in France and Greece have made it clear
it's not for the bond traders.
Referring to his own electoral woes, Prime
Minister David Cameron wrote Monday in an article in the conservative Daily
Telegraph: "When people think about the economy they don't see it through the
dry numbers of the deficit figures, trade balances or inflation forecasts -- but
instead the things that make the difference between a life that's worth living
and a daily grind that drags them down."
Cameron, whose own economic
policies have worsened the daily grind dragging down most Brits, may be sobered
by what happened over the weekend in France and Greece -- as well as his own
poll numbers. Britain's conservatives have been taking a beating.
In
truth, the choice isn't simply between budget-cutting austerity, on the one
hand, and growth and jobs on the other.
It's really a question of
timing. And it's the same issue on this side of the pond. If government slices
spending too early, when unemployment is high and growth is slowing, it makes
the debt situation far worse.
That's because public spending is a
critical component of total demand. If demand is already lagging, spending cuts
further slow the economy -- and thereby increase the size of the public debt
relative to the size of the overall economy.
You end up with the worst of
both worlds -- a growing ratio of debt to the gross domestic product, coupled
with high unemployment and a public that's furious about losing safety nets when
they're most needed.
The proper sequence is for government to keep
spending until jobs and growth are restored, and only then to take out the
budget axe.
If Hollande's new government pushes Angela Merkel in this
direction, he'll end up saving the euro and, ironically, the jobs of many
conservative leaders throughout Europe -- including Merkel and
Cameron.
But he also has an important audience in the United States,
where Republicans are trying to sell a toxic blend of trickle-down supply-side
economics (tax cuts on the rich and on corporations) and austerity for everyone
else (government spending cuts). That's exactly the opposite of what's needed
now.
Yes, America has a long-term budget deficit that's scary. So does
Europe. But the first priority in America and in Europe must be growth and jobs.
That means rejecting austerity economics for now, while at the same time
demanding that corporations and the rich pay their fair share of the cost of
keeping everyone else afloat.
President Obama and the Democrats should
set a clear trigger -- say, 6 percent unemployment and two quarters of growth
greater than 3 percent -- before whacking the budget deficit.
And they
should set that trigger now, during the election, so the public can give them a
mandate on Election Day to delay the "sequestration" cuts (now scheduled to
begin next
year) until that trigger is met. ++
~ The Reverand Martin Luther King