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Monday, March 25, 2013

U.S. politicians pushing austerity ignore history, deny alternatives ─ Economist Richard Wolff

Solidarity against Austerity
Progressivist solutions
Editing, excerpting, brief comment by 
Carolyn Bennett

Pegged to social, employment, economic, banking, people crises sweeping Europe, the Mediterranean and America, economist Richard Wolff spoke today with Amy Goodman on Pacifica’s Democracy Now program.

Notes on Cyprus Cyprus is the third largest Mediterranean island, after Sicily and Sardinia, and lies about 40 miles (65 km) south of Turkey, 60 miles (100 km) west of Syria, and 480 miles (770 km) southeast of mainland Greece. This island in the eastern Mediterranean Sea has been renowned since ancient times for its mineral wealth, superb wines and produce, and natural beauty. In today’s news: AFP: “Cyprus secures bailout at cost of banks, jobs.”

Cyprus parliament last Tuesday “rejected a levy on bank deposits demanded in return for aid, raising the specter of a default for the island nation that could mean enduring wave after wave of spending cuts and tax rises, just like Greece.” … On Wednesday, “Greeks and opposition parties inspired by the Cypriot rejection … urged Athens to stand up to foreign lenders whose demands have resulted in repeated rounds of austerity that have made Greek life a misery.” [Reuters]

his some of what Richard Wolff had to say regarding the United States’ “Cyprus” crisis.

Dysfunction upon dysfunction

In the United States, Wolff said, we have a “dysfunctional government built on top of a dysfunctional economy.” 

Protests against austerity
[I call it a man-made crisis.]

“We have millions of people without work, millions of people losing their homes, an economy that doesn’t work for the vast majority,” Wolff recounts. And if “the government, the largest single buyer of goods and services, cuts back on the goods and services it buys, [then] companies across America will sell less and have less need for workers.” They will lay off workers and thereby worsen an already severe unemployment situation. 

Taxing the overtaxed

“We heard a lot of public debate [among Republicans and Democrats] about taxing rich people and not taxing rich people,” Wolff said, but “the tax on the wealthy” that went into effect on January 1, 2013, “is small compared to the tax on middle and lower incomes that went up on January 1st.…

Protests against austerity
Teachers, Students, Labor
Raising payroll tax … from 4.2 to 6.2 percent, raised more than $125 billion—a huge amount of money, much more than was raised by taxing the rich—savaged middle- and lower-income groups, those whom presidential candidates during the 2012 campaign pledged to save and support.

[Over]Taxing middle- and lower-income groups attacked them and limited their capacity to buy goods and services.

he combined middle- and lower-income tax increases and government-spending decreases amount to “what every European country imposing austerity has already discovered: the worsening of the problem. These austerity steps do not better but worsen the economic conditions of the mass of people, Wolff said. “And that ought to be put as a fire burning at the feet of politicians, so they [will] stop talking in abstractions and deal with the reality of what they’re doing.”

Central Banks
Enslaving the enslaved

On Democracy Now, Wolff said what is easily observable in the daily debt-driven junk mail that lands in Americans’ in-boxes. Banks “are (still) trying to get people to borrow more money.”

Government leadership or the masses’ refusal to change “the wage structure of America,” he said, “means Americans are required to go into debt to supplement their wages.”

[I call it enslavement in search of medieval debtors’ prisons].

Kick starting the economy, the language used by proponents of a model of austerity, consumption and more debt, Wolff says, is to put “that same train back on the track heading toward the same wall. In the first years of the twenty-first century, he says,

Launderers’ paradise
[The U.S.] economy was a train heading into a stone wall and if we get our economy going again ─ without fundamental changes ─ we are putting that same train back on the track heading toward the same wall. Cyprus shows us what’s happening.
owever, contrary to the “no-choice” view of contemporary promoters of austerity, Wolff penned in his 2012 Guardian (UK) article, there are alternatives, for the long term.

“Capitalism’s recurring tendencies toward extreme and deepening inequalities of income, wealth, and political and cultural power require resignation and acceptance – because there is no alternative?” This is untrue, he says. Alternatives do exist. 

“Every society chooses – consciously or not, democratically or not – among alternative ways to organize the production and distribution of the goods and services that make individual and social life possible.

“Modern societies have mostly chosen a capitalist organization of production. In capitalism, private owners establish enterprises and select their directors who decide what, how and where to produce and what to do with the net revenues from selling the output.

This small handful of people makes all those economic decisions for the majority of people – the majority who do most of the actual productive work.

The majority must accept and live with the results of all the directorial decisions made by the major shareholders and the boards of directors they select.

Major shareholders and boards of directors also select their own replacements.

“Capitalism thus entails and reproduces a highly undemocratic organization of production inside enterprises.

What to do: history lesson-plus

olff says in his Guardian article that what is required in the way of alternatives is “a radical change in policies,” going far beyond simply reversing the austerity program.

“The last time we had a breakdown of the capitalist system like this,” he recalls, “we didn’t have austerity; we didn’t have cutbacks. We had the opposite.” U.S. President Franklin Roosevelt, in the mid-1930s created the Social Security system. His administration  

Went to everybody over 65 and said, ‘I'm going to give you a check for the rest of your life.’

He created the unemployment compensation system, for the first time, giving the unemployed checks every week for a year or two.

He created a public employment program and hired millions of workers.

Britannica note: Franklin Delano Roosevelt (FDR), 32nd president of the United States (b. January 30, 1882 in Hyde Park, N.Y., d., April 12, 1945, Warm Springs, Georgia; presidential tenure: 1933 – 1945; the only U.S. president elected to the office four times, Roosevelt led the United States through two of the greatest crises of the 20th century: the Great Depression and World War II.

Under his administration came the “New Deal” and “Second New Deal.” The U.S. economy in 1935 was still bearing the effects of the 1929 Stock Market Crash. Millions of Americans were unemployed—many had been jobless for several years.

Roosevelt foresaw the possibility that in the 1936 presidential election he would face a significant third-party challenge from the left. And in 1935, to meet this threat, he asked Congress to pass additional New Deal legislation—sometimes called the “Second New Deal.”

The key measures of the Second New Deal were the Social Security Act, the Works Progress Administration (work program for the unemployed), and the Wagner Act (National Labor Relations Act, the single most important piece of labor legislation enacted in the United States in the 20th century, enacted to eliminate employers’ interference with the autonomous organization of workers into unions).

The Social Security Act for the first time established an economic “safety net” for all Americans, providing unemployment and disability insurance and old-age pensions. 

his is “the opposite of austerity,” Wolff says. “So any politician [who pushes austerity measures] ‘because there’s no option,’ has forgotten [relatively recent] American history.”

And Wolff wants to go further, “go in the opposite direction” from the current direction because “the problems run deep.” The economy needs to be reorganized, he says, “so that, for the first time, we can say we’re not only going to get out of this crisis; but ─

We’re taking the kinds of steps that can prevent us from having [the same problems] over and over again as our unstable business-cycle-ridden economy keeps imposing on us.

As painful as it is, we finally have to face the more profound change. 

After 50 years of a country unwilling to face these questions, we need basic change. 

oday 20 percent of tools, equipment, factory and office space sits idle. Office space is unused, Wolff references Federal Reserve figures. People want to work and we have the tools, equipment and raw materials for them to work with ─ so put people to work. Make this a national issue and make it happen, Wolff says.
Roosevelt went to the wealthy and to the corporations and he said to them  

‘You must give me the money to take care of the mass of people, because if you don’t, we’re going to have a catastrophe in this country. We’re going to have a social revolution.’

The argument Wolff says he is making is that the United States should go back to the same or in the neighborhood of the same tax rates that Roosevelt imposed ─ “which is much higher on wealthy people and much higher on corporations than we have today. That’s what he did and that’s how he funded it,” Wolff answering Goodman’s question about cost.

Far from a career-ender, Wolff says, decisions on proper tax rates together with a federal employment program now missing in this country would be the best legacy a president could leave history.
rogressivism, in my opinion, takes from the best of what we know or can know and betters it. This philosophy seems evident in Richard Wolff’s economics. 

Now, if only we could get Americans to read, write and reflect; to speak clearly and to think independently, rationally, and out of a sense of social sensibility.

Sources and notes

“Capitalism in Crisis: Richard Wolff Urges End to Austerity, New Jobs Program, Democratizing Work,” Monday, March 25, 2013, http://www.democracynow.org/2013/3/25/capitalism_in_crisis_richard_wolff_urges

“Yes, there is an alternative to capitalism: Mondragon shows the way ─ Why are we told a broken system that creates vast inequality is the only choice? Spain's amazing co-op is living proof otherwise” (Richard Wolff , guardian.co.uk), June 24, 2012 10.13 EDT, http://www.guardian.co.uk/commentisfree/2012/jun/24/alternative-capitalism-mondragon

Richard Wolff and some of his most recent works

“Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It” (book, film/DVD, 2009)

Democracy at Work: A Cure for Capitalism (2012).
Contending Economic Theories: Neoclassical, Keynesian, and Marxian (with Stephen A. Resnick, 2012)
New Departures in Marxian Theory (with Stephen A. Resnick, 2006)
Class Theory and History: Capitalism and Communism in the USSR (with Stephen A. Resnick, 2002)
Re/Presenting Class: Essays in Postmodern Marxism (with J.K Gibson-Graham and Stephen A. Resnick, 2001)
Class and Its Others (with J.K Gibson-Graham and Stephen A. Resnick, 2000)

Host of weekly one-hour radio program “Economic Update” on WBAI, 99.5 FM, New York City (Pacifica Radio)

Regular contributor to The Guardian, Truthout.org, and the MRZine; interviews: on RT-TV, Democracy Now, Al Jazeera English, National Public Radio, Alternative Radio, and many other radio and television programs in the United States and abroad. His work can be accessed at rdwolff.com.

Well known for his work on Marxian economics, economic methodology, and class analysis, Richard D. Wolff (b. April 1, 1942) is an American economist; Professor of Economics Emeritus (University of Massachusetts, Amherst) and Visiting Professor in International Affairs (Graduate Program, the New School University, New York). http://en.wikipedia.org/wiki/Richard_D._Wolff


Cyprus, the third largest Mediterranean island, after Sicily and Sardinia, lies about 40 miles (65 km) south of Turkey, 60 miles (100 km) west of Syria, and 480 miles (770 km) southeast of mainland Greece.

This island in the eastern Mediterranean Sea has been renowned since ancient times for its mineral wealth, superb wines and produce, and natural beauty.

AFP news ─ “Cyprus secures bailout at cost of banks, jobs” (by Charlie Charalambous),  March25, 2013, http://uk.news.yahoo.com/last-minute-deal-resurrects-cyprus-bailout-020846041.html#nLhPZ95

“Cyprus clinched a 10-billion-euro bailout on Monday averting a chaotic eurozone exit, allowing most banks to reopen after a 10-day closure, but at the cost of its status as an offshore banking centre.… The 11th-hour agreement deals a major hit to investors and depositors in the island’s biggest bank, the Bank of Cyprus, many of whom are Russian, and will also effectively shut down Laiki, its second-largest lender.

“Cyprus has become heavily reliant on banking deposits, including those of dubious origin, which have swollen to roughly four times the size of the island’s entire economy, and the biggest investors stand to lose the most.…

“Cyprus could now be in for a ‘deep recession caused by the shrinkage of the banking sector and severe de-leveraging,’ or paying down of debt, UBS economist Reinhard Cluse said. The fallout will begin immediately with food and medicine shortages likely in coming weeks as businesses struggle with a lack of cash in Cypriot banks, which were hammered by the agreement, said economic experts.

he final bailout will also probably involve a government austerity program, privatizations and tax increases at a time of deepening recession given job losses at banks and companies losing out on deposits.

Economists have forecast the Cyprus economy could now contract by at least 10 percent this year and by 8.0 percent in 2014.

Also http://www.reuters.com/article/2013/03/20/eurozone-cyprus-greece-heat-idUSL6N0CC79G20130320

orldatlas on Cyprus ─ Dateline: Monday, March 18, 2013 ─ “I mean, who is next? America? Canada?

“Cyprus President Nicos Anastasiades announced today (last Monday) that he is battling against eurozone demands that all Cyprus bank customers pay a one-time levy in return for a bailout. Mr. Anastasiades said he shared people’s unhappiness with the terms, whereby ALL BANK CUSTOMERS would pay a levy of 6.75percent or 10 percent on their bank deposits.

“The EU and IMF have demanded the levy in return for a 10bn-euro ($13bn; £8.6bn) bank bailout. Mr Anastasiades said it was the worst crisis since Turkey invaded in 1974. The worst crisis is that politicians are in charge!

“Cyprus, a onetime Greek colony and the site of many military incursions over the centuries, is still today an island in conflict between two opposing factions.

“…If the island of Cyprus is to refresh its reputation around the world, the Greek and Turkish leaders are going to have to make some very courageous decisions because they share one small island.

“Somehow this ancient island of sunny weather and fascinating history has survived, and with some of the most popular beaches in Europe. Travelers do journey to Cyprus in large numbers.” http://www.worldatlas.com/webimage/countrys/europe/cy.htm


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