Austerity: A Mental Pitbull

Why do we put up with this? "We" meaning all of the EU, The U.S., basically the entire modern world that has been hit by the 2008 recession. Why do we go along with this terrible idea of cutting "government spending"?

_{The Anti-Austerity Alliance is the predecessor of Ireland's socialist party "Solidarity"
source: Wikimedia Commons}

Actually it's not that hard to explain, as it makes perfect sense on the surface. When you spend too much as a family, when you spend more than you earn and consequently keep borrowing more and more money to sustain a lifestyle you can't actually afford, it makes sense to cut the spending. At least spend less until you found a way to earn more.

When the government points at a growing national debt, and then wags it's finger at you saying that you've been a naughty boy or girl for borrowing too much, for taking that second mortgage or not repaying that college-debt, the average citizen thinks this is reasonable, because apparently all average citizens have been living above their pay grade. So all average citizens are equally responsible for repaying part of the debt the country has amassed.

In the meantime this same average citizen hears and reads in the news that their wages don't rise anymore, that they have to work more hours for the same pay, and that they have to work more years before they'll get a pension (I just got word that I'll be working up to my 68^th birthday, and I expect it'll go up even more. If I'm allowed to stop working at 70, I'll be lucky). This also wouldn't be a problem; the average citizen would even swallow that bitter pill if this was the end of the story.

But it isn't. We also see in the news that all our bosses' wages are rising significantly; apparently they are somehow not responsible for the nations' debt. As a result the income gap between the average citizen and the top-paying management jobs is rising to never before seen highs. And because austerity means we need to cut government spending, the poorest among the citizens, the ones that cannot find a job for whatever reason, are becoming even poorer, accentuating the aforementioned income gap even more.

Consequently resentment between citizens grows; they blame each other for their diminished fortunes, rather than the real culprit. The real evil here is austerity itself. In the 1930s austerity gave rise to the nazi's and nowadays everywhere in Europe and the U.S. extreme right wing and left wing nationalist parties are winning big time during elections.

_{Trump's promise of a wall between Mexico and the U.S. was a masterful piece of misdirection.
Image by DonkeyHotey - source: Flickr}

In the EU this has led to Northern European countries blaming the southern countries. "It's those lazy Greek people that ruined the EU economy" is something you hear often, and the same is said about Italy, Spain, Portugal... And when that alone doesn't feel like enough of an explanation for our current misfortunes, it's "the lazy immigrants who refuse to work and live on welfare"... Historically this crude method of cutting government spending has never brought any good.

When we look up "austerity", this is what we find:

Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. Austerity measures are used by governments that find it difficult to pay their debts. The measures are meant to reduce the budget deficit by bringing government revenues closer to expenditures, which is assumed to make the payment of debt easier. Austerity measures also demonstrate a government's fiscal discipline to creditors and credit rating agencies.
_{source: Wikipedia}

See? Makes total sense... If the government was like a family! And it isn't! When an economy is in bad shape, the average citizen saves every penny he or she can save. Businesses do the same and don't hire new people nor do they raise current workers' pay. The government says, and we believe, that raising taxes on businesses is stupid because that would stop them from investing in growth and hiring people. Well, they've enjoyed tax cut after tax cut; if this theory were true, we would be swimming in available jobs right now.

In short: during a recession everybody sits on their money. Big businesses do even worse and start to buy back their stocks in addition to not investing in jobs. The government is the only actor in the national economy that can spend money in times of recession! And that's what they should be doing right now. Spend the money they should earn from raising taxes on the ones that benefit most from the economy; big business and rich people.

_{There's plenty of tax havens around the world to choose from, and The Netherlands isn't even on this map!
source: Wikimedia Commons}

Regrettably there's a problem with that scenario in our globalized economy; rich people and big business can bring their money where they want, thereby evading taxes in their own country. In the law there's a distinction between refusing to pay taxes, which is illegal and punishable as a crime, and simply evading taxes, which is perfectly legal; you pay tax in the place where your money is, not where you are necessarily. And for businesses and rich people there's a lot of tax havens to choose from: did you know that a lot of international music stars have an address in Amsterdam, because musicians pay relatively low taxes in The Netherlands? U2, The Rolling Stones and the likes have their official address in Amsterdam.

ROLLING STONES, U2 MANAGEMENT DENY TAX EVASION VIA DUTCH SHELL COMPANIES

Rock bands The Rolling Stones and U2 don't have offices in the Netherlands for tax-evasion purposes, but because of the "specific experience and expertise" the country has to offer, their management said to an investigative committee...
_{source: NLTimes.nl - June 12, 2017}

Yeah, right... If you consider yourself an average citizen of your country, you should understand that there's no third flavor to choose from here; it's raising taxes on the rich and increase government spending to jump-start the economy, or persist like a pitbull in austerity which will not end good. And please stop blaming the poor, jobless or immigrants of your country: they are not the architects of your financial misfortunes. Direct your anger where it belongs: your industry leaders, the bankers and their lackeys in the government.

I'll leave you with someone who can explain all this far better than I'm capable of. Here's the caption on that video:

One of the most persistent ideas in the politics of the West, whether we’re talking about Europe or the United States, is that government debt is best attacked through reducing government spending. Mark Blyth, warns though, that “austerity,” as such plans are known, is a historically dangerous idea.

I hope you have 25 minutes left to hear what he has to say (the lovely Scottish accent by itself is reason enough ;-) ):

_{Mark Blyth on "Story in the Public Square"}

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