Banks, corrupt politicians and mainstream media have convinced people there are no alternatives to austerity

But there are many alternatives. Just don’t look to mainstream media for them

No 473 Posted by fw, May 10, 2012

“The finance sector has started a lot of think tanks, they’ve funded the research institutes, and they’ve bought control of the public media, so that they’ve been able to convince people that there really isn’t an alternative, and only talk about whether there is more austerity or chaos.” —Michael Hudson

According to economist Michael Hudson, from the Democratic Party to European “Socialists”, they manage crises in the interests of financial capitalism.

Watch today’s interview with Hudson on The Real News Network. My abridged transcript featuring added subheadings and links follows the 13:30-minute interview. To access the original program and complete transcript, click on the following linked title.

What Americans can Learn from Eurocrisis, The Real News, May 10, 2012

ABRIDGED TRANSCRIPT

Introduction by Paul Jay, Senior Editor, The Real News Network — Headlines around the world greeted the election results in Greece and France as a rejection of austerity programs by the electors of those countries. Well, what can Americans learn from the results of these elections and from the crisis in the eurozone? Now joining us to talk about all of this is Michael Hudson. Michael is a former Wall Street financial analyst, and he’s a distinguished research professor of economics at the University of Missouri–Kansas City. He has a new book coming out soon called The Bubble and Beyond. So what should Americans take away from the European elections?

Once in power, Europe’s left-wing parties are selling out to financial backers

The same thing is happening in Europe that’s happening here. Left-wing parties, socialist parties, labor parties all say that they’re going to preserve the social contract, and as soon as they get into power, they sell out to their financial backers, they double-cross labor. The socialist party in Greece fell from 44 percent to 14 percent because the last party simply moved the most vicious anti-labor measures in Europe. Same thing in France now. Hollande of the French socialists, before the election, said he was going to beg, ask Europe, will you please not insist that we roll back our social programs. And just this morning he said, well, I asked and they said no. I’m afraid that in order to preserve Europe, in order to preserve the idea of a political harmony, we’re going to have to go ahead and impose more austerity on the people. I’m terribly sorry. But if you don’t like it, you can vote for another party in four years. But there’s going to be austerity, and we’re going to have to lower wages here, and there’s nothing to do. If you don’t lose our campaign contributors, the banks could lose, and we couldn’t have that, because if the banks lose, they say that that’s intolerable to them.

Why the sellout? Is it simply the case that the financial sector is too powerful for political leaders to defy?

The banks really have no power at all except the power to bribe, and in Europe—in South America, the power to assassinate, which they do quite frequently. All they can do is bribe.

In fact, banks have no economic power. What they do have is the power to bribe corrupt politicians who are in their (the banks’) pockets.

Remember, we had the same argument over here about three years ago, when Sheila Bair wanted to take over Citibank, and she said, look, we can foreclose on Citibank, we can close down all these big banks on Wall Street anytime. They’re insolvent. We can pay all the depositors. There’s no problem at all. If the government were to take over the banks, they can pay all the depositors. The only people who would lose would be the very wealthy, who have more money in the banks that are insured. Sheila Bair said the bank bondholders would suffer, the counterparties would suffer. The banks have no power at all. The problem is the corruption of the politicians, who are just demagogues pretending to oppose the banks while actually being in their pocket. The banks don’t have any [inaudible] power. They don’t have any economic power, except they can bribe politicians.

In fact, Governments have the power, not the banks! Bailouts of “banks too big to fail” proved that

The government became the major shareholder of the insolvent banks here, like Citibank and Bank of America. The same thing in Europe. If Europe banks caused the crisis, the governments can simply say, okay, we’re taking over the banks. Now we own them. Now that we own the banks, we’re going to write down the mortgages to the price that people can pay, which is [incomprehensible] We’re not going to pay other rich people. But financial reform and tax reform have to go together. And they’d say, we’re actually going to roll back all the tax cuts for the 1 percent, and we’re going to the begin taxing real estate again, we’re going to tax monopolies, we’re going to reintroduce progressive taxation just like we had for 30 years ago. If capitalism worked 30 years ago with higher taxation, with strong labor power, with a good property tax, and with affordable houses, it can work again. All of this is unnecessary.

Banks, politicians and the media have convinced people that there are no alternatives to austerity

Except if they can [inaudible] the banks and their politicians can convince people that there is no alternative. So that’s really the banks’ argument. The change over the last 30 years has been a drive by the finance sector to become more dominant steadily. So the finance sector has started a lot of think tanks, they’ve funded the research institutes, and they’ve bought control of the public media, so that they’ve been able to convince people that there really isn’t an alternative, and only talk about whether there is more austerity or chaos.

There are many alternatives. But the people won’t learn about them in the mainstream media, which is out to keep people entertained and ignorant

But, of course, the alternative to austerity isn’t chaos; its economic democracy, it’s progressive taxation, it’s taxing the rich, it’s writing down the debts. There are many alternatives. And what they’ve done is make sure that none of these alternatives get discussed in the public press or in the media. That’s why we’re on The Real News Network talking about it, not in The New York Times or the Fox media.

Welcome to the age of financial capitalism – increase the public debt load, raise debt service rates and voilà – an indentured 99%

So finance today is the means of conquering a country and getting what in the past took an army. Financial conquest is how you shift the taxes onto the population to pay the financial sector, how you load a population down with debt and make a population pay interest and amortization and penalties on debt service, you make a population pay for schooling instead of getting it free or a low price as used to be the case, you make a population take on a lifetime of debt in order to get a home that used to be affordable, you make the governments go into debt for the banks, so that in Europe governments can’t—don’t have a central bank to monetize their own deficits but actually have to borrow money from banks. You achieve—you essentially empty out an economy, and you take its economic surplus financially without an army, just by trying to promote what really is junk economics and junk politics, if the economics of Rubinomics in America under Clinton and Rubenomics in America under George Bush, and now with a vengeance under Obama—.

Come the 2012 election, backers of the Republicans are same as backers of Obama

I think the people who vote for Romney are the same people who voted in Europe for, essentially, throw the rascals out. When people are unhappy with an economic situation, they simply vote for the other party, whoever it is, and it’s a flip-flop back and forth. The Republicans very much want—the backers of the Republicans are the same backers who backed Obama. They’re the Wall Street people. They want Obama to come in for a second term and then really move against Social Security.

Compared to extreme right-wing Republicans, Obama looks reasonable. The choice is between ‘terrible’ and ‘bad’

Obama’s the only person—only a Democratic president can swing a Democratic Congress or Senate over to the right wing. So you need the Republicans to make—go so far on the right that Obama, who in the past would have been looked at as a right-winger or Republican, you need to make him look reasonable. And if you can push the crazies, as the Republicans are doing, then Obama seems less bad than the alternative. In fact, he gave a campaign speech a month ago, and he said, well, look at the alternative. I’m better. Isn’t that crazy choice, to have to choose between these two, between an absolute terrible alternative and just a bad alternative? That’s the choice we have. Yes, please, or yes, thank you, to a choice that—

Where’s the left in America and Europe?

Where is the left in America? Where is the left in Europe? Where is what used to be the left? I don’t see it anymore anywhere. Back in the 1950s, I used to go to socialist meetings, and people would say, why do the trade union people keep thinking they’re locked into the Democrats? And the answer is: well, that’s the two-party system. There isn’t really room for a third party here. And all the Republicans have to do is say, no, we’re worse, and it just scares people to actually vote for the Democrats. But people have been asking that question for 60 years, and nobody’s come up with a better answer since.

Hudson predicts that Americans have become so dispirited that “most” won’t vote this November

I think you need a third party or you need to break away from the Democratic Party for people like Dennis Kucinich or the more progressive people. You need what was called 50 years ago realignment. And that realignment that people saw even then was necessary hasn’t occurred, and it hasn’t occurred in Europe either. That’s why everybody is so frustrated. In France and Greece and everywhere else in Europe, they’re equally frustrated. There doesn’t seem to be any alternative. And that’s exactly what Mrs. Thatcher liked to say, there is no alternative. And it’s just amazing when there really are so many alternatives that people can be convinced that there aren’t and become so dispirited they just give up. So the fact is that most Americans are going to vote with their backsides. They’re just not going to vote this November.

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• George Carlin’s prescient political shtick, “The American Dream”, playing out before our very eyes – “Forget the politicians. The politicians are put there to give you the idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land. They own and control corporations. They’ve long since bought and paid for the Senate, the Congress, the state houses, and city halls. They got the judges in their back pocket. And they own all the big media companies so they control just about all the news and information you get to hear. They got you by the balls.”

• Was Huxley right — Will our “infinite appetite” for pleasurable distractions be our downfall? — “Huxley feared the truth would be drowned in a sea of irrelevance… [That] we would become a trivial culture, preoccupied with some equivalent of the feelies, the orgy porgy, and the centrifugal bumblepuppy.”

Fair Use Notice: This blog, Citizen Action Monitor, may contain copyrighted material that may not have been specifically authorized by the copyright owner. Such material, published without profit, is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues. It is published in accordance with the provisions of the 2004 Supreme Court of Canada ruling and its six principle criteria for evaluating fair dealing.

Democratic governments in Italy and Greece gutted — central bankers rule

Public assets, pensions, labour laws targetted

No 444 Posted by fw, March 26, 2012

“In September 2011, at a time when the sovereign debt raiders, as some people call them, were focusing on Italy as their next target, the European Central Bank sent a letter—supposed to be secret, but it was leaked. And in this letter it gave very direct instructions, you could say, to then prime minister Berlusconi about privatization, lowering pensions, changing hiring and firing, regulations and laws—all things one would think should be the outcome of the political process within Italy. So what is this about banks telling countries how to govern themselves?” —Paul Jay, The Real News Network

Following is a video and my abridged transcript, with added subheadings, of Paul Jay’s interview with Gerry Epstein, codirector of the Political Economy Research Institute (PERI) and Professor of Economics.   The content of the transcript focuses exclusively on the words of Gerry Epstein.

Banking Technocrats Undermine Democracy, The Real News Network, March 26, 2012.

TRANSCRIPT

Central bankers in Italy and Greece doing bidding of large banks – overruling democratically elected governments, privatizing public services, privatizing water, gutting labour protection laws, cutting public pensions

We have this trend now where instead of democratically elected governments controlling these countries, so-called technocrats, the central bankers, are coming in, taking over as the prime ministers of governments in Italy, in Greece. In Italy we have Monti, and in Greece we have Papademos. These are supposed to be neutral arbiters of economic policy, but in fact are mostly doing the bidding of the large banks. And the other European countries, especially Germany, they want austerity.

And what’s amazing to me about is they’re going way beyond any kind of narrow policies with respect to debt repayment, monetary policy. They’re going into the deep core of social and economic policy in many of these countries. And that letter from the European Central Bank [to prime minister Berlusconi telling him to make deep reforms], went to the highly contested issues that have plagued Italy for many years about labor laws, privatization, and many others.

In Italy, the letter from the European Central Bank to the Berlusconi government said, you have to pursue privatization of public services. And this includes water, privatization of water. And, in fact, just months before, there had been a referendum in Italy about privatization of water, and the voters had rejected it. And now the so-called independent technocratic European Central Bank is coming in and telling them to overthrow what the people have decided and engage in privatization.

Another important goal of these kinds of so-called technocratic policies is to gut labor protection laws. In Italy there are strong protections for—in terms of hiring and firing. And what they’re trying to impose are these so-called labor flexibility, with the idea that this is going to generate more economic growth and more employment. But as David Howell from the New School for Social Research, Dean Baker, and others have shown, labor flexibility does not lead to more employment and more economic growth; it just leads to lower wages and higher profits.

Well, [public pensions] are such a big issue in Europe because for two reasons. One is it’s a big liability of the government, and so there is a big—a high degree of budget impact on that. But the second is trying to undermine the power of labor and forcing workers into the hands of the banks. So if you reduce public pensions, not only do you make it so that workers have to take any job they can get to support themselves and work longer, but it also gives more room for private pension plans. And as we know from the debate over privatizing Social Security here in the United States, that’s been one of the long-term goals of finance. Indeed, the general push of all of these policies is to gut the welfare state as much as policy and return all of these kinds of protections to profit-making opportunities for banks and other private companies.

Orwellian language being used to obscure what is really going on – e.g., “fiscal consolidation” is doublespeak for gutting public services and generating unemployment

Part of what is so evil about this whole approach is the transformation, the distortion of language that is part of it, the use of the term technocrat to hide the fact that Trichet, that Monti, Draghi, all of these people have very, very close ties to the big banks. Most of them worked at one time or another for Goldman Sachs or other big financial firms. We have the same kind of thing, of course, in the United States, where we had Larry Summers, who works for the financial sector and makes millions of dollars doing so, being put forward as a quote-unquote “technocrat”. We have the Federal Reserve that has engaged, as you know, in all kinds of backdoor bailouts of the financial sector again seen as sort of a technocratic solution, but we see the revolving door between the Federal Reserve and the private financial sector, using the term fiscal consolidation for gutting public services and generating unemployment. All of this is Orwellian language, which is meant to obscure what is really going on, which is the takeover of democratic control, which, as you said, is already undermined by money, and putting it firmly in the hands of the financial sector.

Bankers’ anti-democratic policies “infantilize” the people

In The Financial Times, there was an article recently talking about the profile of Papademos, the prime — the technocratic prime minister there, saying that he was heading up a caretaker government, you know, as if the Greek people are a bunch of infants and they have to—we have to wait till they can grow up and exercise their democratic rights.

“There’s a great need for the left forces in all of our countries to really unite to oppose these kinds of policies”

Part of the frustrating thing is that these kinds of elite pushes to control these democratic systems are possible because the left is so divided in the European countries, and divided here in the United States as well, of course. Part of the left in Italy, for example, didn’t protest when this letter came out, because they were so focused on just trying to get rid of Berlusconi, and they’ve accepted Monti as a prime minister because they were just so happy to get rid of Berlusconi. So I think there’s a great need for the left forces in all of our countries to really unite to oppose these kinds of policies. We have to break this whole lock-hold of anti-democratic structures that have been built up by the elites under neoliberal policies over the last 20 years, so that once we have more democratic elections and vision, we actually have the ability to implement them.

RELATED POST

• What can we learn from “savage austerity measures” being imposed on Greeks? Michael Hudson explains

Fair Use Notice: This blog, Citizen Action Monitor, may contain copyrighted material that may not have been specifically authorized by the copyright owner. Such material, published without profit, is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues. It is published in accordance with the provisions of the 2004 Supreme Court of Canada ruling and its six principle criteria for evaluating fair dealing.

What can we learn from “savage austerity measures” being imposed on Greeks? Michael Hudson explains

Neoliberal bankers are pushing Greeks to the breaking point

No 409 Posted by fw, February 15, 2012

“Well we should be learning, what the European bankers are learning, and that is — What is the result of a great experiment that’s going on? For the last five years in Latvia, the neoliberals have lowered wages by about thirty percent. The basic premise of today’s model builders is you don’t know how far you can lower wages and pensions until people begin to press back. Well in Latvia they still haven’t begun to press back when they’ve lowered to thirty percent. Now they’re moving towards Greece — on the way to Spain and Portugal and Italy — and they’re trying to figure out how much can we lower wages, how much can we drain an economy until there is pressure to come back?” —Michael Hudson

So says Michael Hudson in his response to Paul Jay’s opening question: “What should we [the US and Canada] be learning from what’s going on in Greece?” To find out Hudson’s answer, watch the 11-minute video below. My transcript, with minor revisions, follows. Subheadings, reflecting my own personal inferences from Hudson’s commentary, and text highlighting have been added.

The Greek Experiment, uploaded by The Real News, Feb 14, 2012

TRANSCRIPT

Europe’s financial elites imposing “savage austerity measures” in Greece. What can we learn?

Paul Jay – In Greece, the financial elites in Europe have gotten agreement from the Greek government to another round of what some are calling “savage austerity measures”. For example, lowering the minimum wage by twenty-two percent, a new round of privatizations and cuts to pensions and many other social programs. This is, I guess, an example of banks and a banking technocrat — that now leads the Greek government directly intervening — calling government policy. So what does this tell us here in the US, Canada and other countries that are watching this? Now joining us to discuss all this, Michael Hudson is a former Wall Street financial analyst, a distinguished research professor of economics at the University of Missouri, Kansas City. So, Michael, what should we be learning from what’s going on in Greece?

It will be to our own peril if we fail to learn important lessons from “the great experiment” now going on in Greece

Michael Hudson – Well we should be learning, what the European bankers are learning, and that is — What is the result of a great experiment that’s going on? For the last five years in Latvia, the neoliberals have lowered wages by about thirty percent. The basic premise of today’s model builders is you don’t know how far you can lower wages and pensions until people begin to press back. Well in Latvia they still haven’t begun to press back when they’ve lowered to thirty percent. Now they’re moving towards Greece — on the way to Spain and Portugal and Italy — and they’re trying to figure out how much can we lower wages, how much can we drain an economy until there is pressure to come back?

Lesson one – Start getting organized now because the neoliberal squeeze is already in progress here

And the right-wing who’ve essentially appointed a bank lobbyist – which is called a technocrat – in charge of Greece is let’s not try the experiment to just see how much we can squeeze out because they realize that the left in Europe is completely fragmented. They don’t have a defence available. They don’t have a body of concepts available to say wait a minute. This is crazy. When you’re lowering wages you’re actually sinking an economy. When you’re cutting the budget deficit you’re reducing the amount of money that comes into the economy to promote demand. So, in effect, what Europe is doing is bleeding economies very much like a medieval doctor would bleed blood on the grounds that this is going to make economies more productive. The only response that the Greek people have, not simply the left but the right and the Greek people is, look if you think you’re going to increase the surplus, increase taxes by lowering our wages and cutting our pensions and cutting out health care, we’re going to do what the Egyptians are doing and what the Arab Spring is doing, we’re going to tear the economy apart and there won’t be anything for you.

Lesson two – Neoliberals are putting our democratic institutions at risk

And PASOK, the socialist party that inaugurated this whole austerity program, now has an eight percent approval rating in Greece. That’s even lower than Mr Obama has for cutting wages here. So what the Greeks are saying, look when the premier said that they were going to have a referendum for whether we want to cut back the wages to pay the bankers, the first thing Angela Merkel said was you can’t have a referendum. We’re going to suspend democracy. We’re going to impose a dictator on you. And we’re going to tell you what to do. Well, under modern international law, if there’s no democratic commitment to pay then the debt taken on is null and void. Well, the European Common Market has had its lawyers say okay we’re going to get the agreement of congress. Well the Greek people can say look you can come down with bags of money and you can buy all the parliament members that you want to approve the deal but as soon as there’s an election we’re going to throw them out. They’re not acting on our behalf.

Lesson three – There’s probably no political party in the US or Canada that you can trust to reverse the neoliberal tide

Paul Jay – But it’s not clear by polling that the next election would actually elect a government that wouldn’t go along with this. Most of the parties that seem capable of winning elections in Greece have signed on to this deal. But can I go back to something earlier you said. Is not one of the big objectives more about privatization? That if you can create so much chaos and dependency on the Greek government, on the European financial elites, they’re going to sell everything off. And apparently they’re talking now about selling airports, and seaports, like a whole other level of privatization.

Privatization of public assets will be the bankers’ spoils for manufacturing this crisis. We’re at war!

Michael Hudson – Not only that but also the water systems, the sewer systems, real estate, the islands. You’re right. They think that if they create a crisis it becomes a grab-bag. And bankers and people who have a plan usually do much better in a crisis than people who don’t have a plan. So this indeed seems to be it. Finance today achieves what military invasion used to do in times past. So the new mode of warfare is financial not military. It’s much cheaper and it’s much safer for the country doing the attack. So you’re quite right. Privatization is a big role. And that’s why yesterday the European Union said wait a minute. We’re not even going to give you the money to pay us, namely, for us to pay our own banks that have bought your bonds, unless you spell out exactly what you’re going to privatize and commit to it now. And this is the sticking point. In the past, the Greeks have made promises, and thank heavens they haven’t privatized. Because once they begin to sell things off then there’s going to be a real squeeze and even more of an opposition. This looks pretty grim.

Europeans are committed to “savage austerity”, US not so much. Why the difference?

Paul Jay – There actually does seem to be some kind of different approach between Wall Street and the Europeans. You can hear interviews with Wall Street representatives who actually say no, you do have to have short-term stimulus before you have these kinds of austerity measures. You can’t force the world into a global depression. You hear that kind of language out of New York and out of President Obama. The Europeans seem so committed to severe austerity.

Michael Hudson – There are two reasons for that. Number one: from the very beginning of the last century America has already had, in the private sector, what was in the public domain in Europe. Europe had its power companies, electric and gas systems in the public domain. America privatized them but as regulated public utilities. The public utilities were regulated as to how much bond and equity they could get, what their rate of return would be. Europe has no body of law to regulate the prices or rent extraction that public utilities can charge because they had always had these in the public domain just like Russia, the Soviet Union, had no system like this. The objective of privatizing in Europe — first of all there’s much more property and public assets to grab in Europe than there were in the United States. And secondly, there’s no regulatory body in Europe because of the fact in the past power and sewer and water public utilities were supplied either at cost or at subsidized rates to make the economy more competitive.

Cut wages and workers will vote with their feet in mass emigration

So the idea in Europe is not only that you cut wages by thirty percent but you’re now going to raise the price of what you just mentioned – the access to water, sewers, transportation, everything else – you’re going to raise the price to put the real squeeze on wages. And the result in Greece will probably be the same as it was in Iceland, Latvia and other countries – there’s going to be a large emigration of working age labour and the result will of course be to make the economy much less competitive.

Greece’s GDP just fell 7% annual rate, a sure sign of an economy in steep decline

In this morning’s newspaper when it turned out that Greece’s GDP fell at a seven percent annual rate, not the five percent expected, as usual the newspaper said, to everyone’s surprise, the situation is worse than projected. Well of course it really wasn’t to our surprise because we know that when you’re strangling an economy, of course it can’t cope very well. And they’re strangling the Greek economy. They’re using it, I think, as a laboratory experiment to see what’s going to happen when we really just squeeze labour and squeeze labour. It’s like trying to feed a horse less and less to see whether it’s really going to be more efficient until it keels over dead.

Paul Jay – And I guess it’s always the way large-scale unemployment is always a good threat against the employed within a country. The more you can beat up Greece, Spain, and Portugal, the more you can threaten the working classes of France and Germany where I guess the big targets eventually will be.

Can the European Union survive a class-based economic war?

Michael Hudson – Well if that happens there’s going to be a renewed nationalism that’s going to cut the common market apart. And you’re going to have all of a sudden a realization that — when Europe united, the whole idea if it’s united was that it would never go to war again. Military war. But now that it’s united under neoliberal bank rules, they think, wait a minute we’re united and we are going to war. But it’s a class war. It’s an economic war. And this isn’t what we wanted. If the idea of uniting in Europe is for a class war under rules where we’re guaranteed to lose then we’re saying no to Europe, just as the Icelanders voted not to join Europe. Just as other countries that had planned to join Europe – all the way to Turkey at the other end — are saying wait a minute, if that’s the Europe that’s coming, an oligarchic Europe, whose program is austerity and shrinkage, why on earth would we want to join?

Fair Use Notice: This blog, Citizen Action Monitor, may contain copyrighted material that may not have been specifically authorized by the copyright owner. Such material, published without profit, is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues. It is published in accordance with the provisions of the 2004 Supreme Court of Canada ruling and its six principle criteria for evaluating fair dealing.