The Austerians Attack!
Crotty, James, In These Times
How we the people can fight back against plans to cut the social safety net
When the economic and financial crisis erupted in 2008, progressives hoped that it would trigger a popular revulsion against the right-wing economic policies that caused the crisis. It is now clear that these expectations are not being met. Moderate progressive policy moves have been overwhelmed
by public-sector layoffs and budget cuts as Republicans, too many Democrats and even President Barack Obama himself, have chosen austerity or "belttightening" as a main policy objective.
But how did the dogma of these "Austerians"- inspired by the Austrian School of economics - come to dominate public policy?
Progressives were not the only ones hoping to seize the opportunity of the economic crisis. A right-wing coalition of ideologues and industrialists saw it as a chance to achieve final victory in the war they have waged since the 1930s to destroy the New Deal institutions built under President Franklin Delano Roosevelt and extended through the late 1970s.
Those of us who believe in an economy designed to meet the needs of the majority can still win the war that the Austerians are waging against us. Our commitment to those who are suffering the most during the Great Recession does not need to be sacrificed on the altar of a balanced budget achieved not by taxing corporations and the very rich but by savagely cutting the social safety net. The Left's vision of a government that serves human needs is entirely compatible with moderate sustainable deficits and a shrinking public debt burden.
How is it that a right-wing coalition is closer to destroying social democracy in America than at any time since its emergence in the 1930s? Because the Right succeeded in creating a dominant media narrative that blames deficits on an American public that demands more government social spending than it's willing to pay for. In fact, deficit problems were actually created by the Right's neoliberal economic model imposed on the country after 1980, which involved the radical deregulation of the financial market, regressive tax cuts, rising inequality and unfunded war spending.
To fully understand how we got to this point, we have to go back to the 1920s. This historical context makes the solutions to today's deficit "crisis," offered below, even more obvious and compelling.
Capitalism in crisis
The boom of the second half of the 1920s was marked by little regulation of business, very low taxes on corporations and rich households, a crippled union movement, a powerful financial sector that rained money on the wealthy, and a political system dominated by economic elites. From 1923 to 1929, 70 percent of the growth in income went to the richest 1 percent and only 15 percent went to the bottom 90 percent of the income distribution. This was the Right's dream world.
The out-of-control capitalism of the period led to a financial crisis in late 1929. The ensuing financial collapse was accompanied by a severe depression.
The terrible economic costs of the Great Depression led to powerful political movements in the United States and Europe that demanded both an end to uncontrolled capitalism and its replacement with a new system designed to meet the needs of the people. The Western economic models that evolved from these movements are variants of social democracy, democratic capitalism, regulated capitalism or the mixed economy.
In 1933, Roosevelt and the Democratic Party took control of the government and began to implement a series of social-democratic programs that became known as the New Deal.
They included strict regulation of financial markets, creation of the Social Security program, support for the growing union movement, large public employment programs, implementation of various kinds of deficit-financed stimulus spending and the beginning of unemployment insurance.