Politicians’ wilful blindness commits tens of thousands to death-by-austerity, wrecks lives worldwide

New study reveals introduction of austerity measures in aftermath of this great recession has had devastating health impacts on the vulnerable

No 753 Posted by fw, May 22, 2013

“You know, coming from the public health field, we have something called the “precautionary principle,” which is that when an idea or policy is controversial, we should first do whatever protects people the most. And what we’re doing is entirely the opposite. We’ve essentially had a massive untested experiment. That experiment has failed, and it sounds like it’s quite deadly, given all the data through history.”Dr. Sanjay Basu

In their new book, The Body Economic: Why Austerity Kills, economist David Stuckler and physician Sanjay Basu examine the health impacts of austerity across the globe. Their research demonstrates that steep, abrupt austerity cuts impose social health costs and rising suicide rates, whereas targeted, gradual cuts do more to reduce deficits.

Click on the following linked title to watch a Democracy Now interview with the book’s authors and access a complete transcript of the interview. Or scroll down to watch an embedded copy of the 15-minute interview and read an abridged version of the transcript with added subheadings, text highlighting and hyperlinks.

Why Austerity Kills: From Greece to U.S., Crippling Economic Policies Causing Global Health Crisis, interview with David Stuckler and Dr. Sanjay Basu, Democracy Now, May 21, 2013

ABRIDGED TRANSCRIPT

[Introduction by Amy Goodman]

“Early last month, a triple suicide was reported in the seaside town of Civitanova Marche, Italy. A married couple, Anna Maria Sopranzi, 68, and Romeo Dionisi, 62, had been struggling to live on her monthly pension of around 500 euros [about $650 a month], and had fallen behind on rent.

Because the Italian government’s austerity budget had raised the retirement age, Mr. Dionisi, a former construction worker, became one of Italy’s esodati (exiled ones)—older workers plunged into poverty without a safety net. On April 5, he and his wife left a note on a neighbor’s car asking for forgiveness, then hanged themselves in a storage closet at home. When Ms. Sopranzi’s brother, Giuseppe Sopranzi, 73, heard the news, he drowned himself in the Adriatic.”

Those are the opening lines to a startling recent article in The New York Times headlined How Austerity Kills. The authors of the piece, David Stuckler and Dr. Sanjay Basu, have just published a new book looking at the health impacts of austerity across the globe. The authors estimate there have been more than 10,000 additional suicides and up to a million extra cases of depression across Europe and the United States since governments started introducing austerity programs in the aftermath of the economic crisis. In Greece, where spending on public health has been slashed by 40 percent, HIV rates have jumped 200 percent, and Greece has seen its first outbreak in malaria since the 1970s.

David Stuckler is an economist and public health specialist. He’s a senior research leader at Oxford University. Dr. Sanjay Basu is a physician and epidemiologist. He teaches at Stanford University. Together, they’ve written this new book, out today, called The Body Economic: Why Austerity Kills—Recessions, Budget Battles, and the Politics of Life and Death.

David, let’s begin with you. Lay out the thesis of this book.

Government austerity measures can turn recessions into severe epidemics

DAVID – We’ve been studying how recessions affect people’s health over the past decade, looking at the Great Depression through the East Asian financial crisis, right through to the present Great Recession. And what we found is that recessions hurt. Unemployment, job loss, foreclosure, unpayable debt are risks to health. But what ultimately matters is how politicians respond. And when they make large cuts to social supports, social protections, they can turn recessions into severe epidemics.

Greece is in the middle of a public health disaster….To meet budget deficit reduction targets set by the so-called troika—the International Monetary Fund, the European Central Bank and European Commission—Greece has cut its health sector by more than 40 percent. At a time when homelessness is escalating and austerity has further driven up youth unemployment, we’ve seen HIV infections jump, concentrated in injection drug users. The malaria outbreak was linked to the cut in mosquito-spraying prevention programs, creating an outbreak that’s much more costly to control than the short-term money saved by reducing the budget. Healthcare access has declined substantially. The majority of people who have lost access are pensioners who have contributed to the system their entire lives. And these are just a few of the many health effects seen in Greece, mirrored in Spain, Italy and, to some extent, the U.K. and the U.S.

Case in point — The tragic eviction-suicide death of Amaia Egaña, 53 — Democracy Now producer Maria Carrión talks about this loss

[Source: General Strike Sweeps Europe as Millions Reject Austerity as Solution to Economic Crisis, Democracy Now, November 14, 2012]

MARÍA — Amaia is a former city council member in a town—the town of Barakaldo in the Basque Country. And her case is especially tragic because she actually didn’t share just how bad off the situation was even with her husband. So, most people had no idea that there was a whole—there had been a repossession and an eviction process. She was so desperate and so ashamed of the situation that she jumped out of her balcony, her fourth floor apartment, as court employees came to evict her. This comes two weeks after police found a man dead in his apartment as they went in to evict him from his home after repossession.

And—but, you know, the movement to stop these evictions and repossessions has been working very hard on this for almost two years, and this is just the watershed. This has been the one situation that has actually forced government and the opposition and banks to come to the table and talk about real reform. Before this, you had these evictions taking place—500 orders every single day—silently. And thanks to the 15M movement—this is—was the Occupy movement in Spain just over a year ago—the platform against evictions was incredibly energized. And so, they have been able to stop hundreds of evictions.

But those are evictions of people who come to them and who say, you know, “My home is being repossessed. I’m facing eviction. Can you help me?” There are a lot of people like Amaia who did not do this, out of perhaps a sense of guilt or embarrassment. And so, her case is really representative and emblematic of what has gone wrong in Spain with, you know, thousands of people being left homeless after repossession and eviction.

DAVID — I was at a conference with the Barcelona Public Health Agency. The meeting got cut short as protests erupted onto the streets of Barcelona. People were outraged at the eviction-suicide of Amaia, at the hardship perpetuated by deep budget cuts under the Rajoy government in Spain.

Case in point — The April 4, 2012 suicide death of retired Greek pharmacist, Dimitris Christoulas, 77, as told by his daughter Emi at his funeral

EMI – You found it unacceptable that they were killing our freedom, our democracy, our dignity. You found it unacceptable as they tightened the harsh noose of economic austerity and apartheid around us, to the unacceptable act of surrendering our independence and the keys to the country. It was unacceptable to you that Greece did not acknowledge its children and its children did not recognize their own country. You found the bestiality of capitalism unacceptable, that it infiltrated our lives and no one tried to stop it. Then, you made your decision to become the fear, the death, the memory, the sorrow of our ruined lives.

Case in point – Iceland’s call for public vote on austerity resulted in very different outcome

DR. SANJAY BASU – Now, Greece and Iceland are very different socially, politically and economically, but Iceland serves as a nice case in point right now. They had faced a debt at 800 percent of GDP, the largest banking crisis in history compared to the size of the economy. All three major banks failed. And they had invested, of course, in U.S. mortgage-backed securities. After this, the Iceland politicians decided to do something truly unique as compared to the rest of Europe. They actually put the austerity plan to a public vote. And the public voted that instead of paying off bankers’ debts immediately through public cuts, they would instead do it gradually. They would still bail out their banks, but over the course of time and with great pace towards preserving their social safety net. And indeed what Iceland ended up doing was maintaining some of the healthiest standards in the world and the highest level of happiness.

Icelandic Parliamentarian Birgitta Jónsdóttir says the people wanted to “slash down” the IMF

[Source: Birgitta Jónsdóttir on Criminalization of Cyber-Activists, Bradley Manning & Iceland’s Pirate Party (Pt. 2), Democracy Now, April 8, 2013]

BIRGITTA JÓNSDÓTTIR – Actually, everybody has the same access to health and education. So even I, as an MP, ended up in a hospital in November, and I got exactly the same treatment as the woman working in the factory or in McDonald’s or Domino’s. And I like that. I love that. I think that is so important. And so, we pay just about the same amount of taxes as U.S. taxpayers. We don’t have to live in this insurance jungle. So we just, you know—and that was actually one of the first things they wanted to slash down, the IMF—no surprise.

Governments that chose economic stimulus early on in a recession did better than those that choose austerity 

DR. BASU – She [Birgitta] highlights one of the key issues here…that stimulus early on does not actually produce higher, longer-term debts, but it generates the revenue and the building of the economic cycle that allows us to pay off those longer-term debts. By contrast, these short-term cuts end up so slowing the economic cycle that we find both economic and public health devastation as a result.

Case in point — Sweden gave priority to addressing unemployment thus preventing a mental health crisis

DAVID – Sweden faced a large banking crisis. Unemployment jumped by more than 10 percentage points. And yet suicides fell steadily. What we learned is that when politicians managed the consequences of unemployment well, they were able to prevent a mental health crisis. The specific programs we found are called active labor market programs. These help the newly unemployed link to caseworkers, develop an action plan and return into jobs. They treat unemployment like the pandemic it is. It not only saves money on healthcare bills, but even pays for itself by helping spur economic recovery.

DR. BASU – What we have found in our research is that these suicide rate spikes seem to correspond quite closely to state-level unemployment rates….We find that it’s the new unemployment that seems to trigger new onset of depression and suicide, particularly among our most vulnerable, adults over 50, who, when they lose a job, are often discriminated against or have a very hard time finding new work. There’s a great deal of shame, and also it’s quite hard for our healthcare system to access those individuals, given the degree of barriers that they have, social barriers, to accessing mental healthcare.

Case in point – New York cuts to TB prevention program in 1990s taught them that austerity in health care is a false economy

DAVID – Austerity in health is a false economy. The cliché, an ounce of prevention is worth a pound of cure, is really true. New York City officials learned this the hard way in the early 1990s, when they cut TB prevention programs by $120 million but ended up with a drug-resistant TB outbreak that cost more than $1.2 billion to control. What we found is that smart investments in public health can have a return on investment, for each dollar, of up to $3.

Why do Americans pay so much more for health care and get so much less? Big Pharma here drives their profits up by delivering “inequality” disguised as “choice”

DR. BASU – I’m not a politician and—but I do analyze data. And I think, in looking comparatively among OECD countries, you see a lot of false claims about the U.S. health system. Why is it that we cost so much more and seem to be getting less? I think comparing our country to other OECD nations, European, Japan, Australia and so forth, and you can see a lot of the myths by just looking at the data.

So, what are the theories? The theory is, for example, maybe it’s just American obesity. Well, actually, the costs started well before American obesity and don’t seem to correspond actually statistically to obesity. Maybe it’s that we have an older population, but not so. Switzerland actually pays more in nursing home care. Japan has an older population, yet they still pay less while getting more in terms of health. Maybe it’s just technology. We do a lot of research and development. But, in fact, if you look at the Securities and Exchange Commission data, the R&D pharmaceutical industry, while they make a higher percent profit as a percentage of revenue than any other Fortune 500 industry at the moment, they actually spend almost double on marketing as compared to research and development. And while we do use more technology and we do tend to have some higher costs from technology, it doesn’t actually explain the majority of the bundle.

In fact, the healthcare industry in the US is a classic example of “market failure”

What you do see, on the other hand, if you just look at the raw data, is that we get more—we get more incentives to test the people who are covered, in order to bill more. And there’s a lot of companies making quite a bit of money on that margin. You can go to one hospital across town and be charged double or more of what another hospital has on a different side of town. But it’s not like a consumer market. If I’m in a car accident, I can’t say to the surgeon, “Hold my hand there for a moment before sewing it back on. I’m just going to go across town and compare prices for a minute.”

So healthcare is a different kind of industry, in which we have what is classically called “market failure” by the Nobel Prize winner Kenneth Arrow back in the ’60s, but people ignored his work. I think what we really have is a system where we confuse inequality with choice. The majority of our costs come from common conditions in a small number of patients who have complications of diabetes, heart failure, hypertension. And we need more primary care prevention rather than paying for the ICU care.

Placing people and their health care at the center of economic recovery speeds up the recovery process

DAVID – Investing in public health is a wise choice in good times and an urgent necessity in the worst of times. Had austerity been organized like a clinical trial, it would have been discontinued, given evidence of its deadly side effects. There is an alternative choice that we found in the historical data and through the present recessions, that when we place people and their health at the center of economic recovery, it can help get our economy back on track faster and yield lasting dividends to our society.

Case in point – In California, budget cuts led to closing of public system laboratories after labs had discovered the cause of a local West Nile outbreak

DR. BASU – Down in Bakersfield in California, there was a suspicion about why crows were dropping from the sky and people were also showing up in hospitals. A variety of theories were posited, ranging from polio to heat stroke, but in fact it amounted to a West Nile outbreak that, through a number of our colleagues’ research, it was found that the abandoned and foreclosed homes had stagnant water in old swimming pools and in other locations that were breeding mosquitoes. And this led to a rather large West Nile outbreak. Indeed, the reason why it was discovered was something called the California Encephalitis Project, a group of public system laboratories that work in concert with the CDC. And ironically, after helping to control that outbreak, they were closed due to budget cuts.

Case in point – In Greece, drug users became more self-destructive after cuts to drug prevention programs

DAVID – This is a devastating situation we’re seeing in Greece with a drug crisis escalating at a time when drug prevention budgets are being cut. With gaping holes in social safety nets from austerity, people are becoming desperate, turning to the means of self-harm. We’ve seen drug use and infected needles spread HIV, creating rise of more than 200 percent, leading to an epicenter of HIV/AIDS spread in Europe.

What we’re learning is that recessions can hurt, but austerity kills

What we can learn from these mistakes, and areas where we see successes in policy, is that recessions can hurt, but austerity kills. When politicians make smart choices to protect people during hard times, it doesn’t happen at expense of recovery but can help put our societies back on track to a happier, healthier future.

Cuts to healthcare in the US risk causing repeat of disasters occurring in Europe

Currently, we’re facing and implementing a large sequester in the U.S. While it’s too early to see the full health consequences, what we are seeing is the Women, Infants, Children’s health program, which provides nutritional subsidies to women, will be forced to reduce those subsidies from 600,000 pregnant women. And that program has been linked to reducing infant mortality. We’re also seeing large cuts to public housing budgets at a time when 1.4 million homes are still in foreclosure. We are concerned that, if done rapidly and indiscriminately, that budget cuts in the U.S. could create a repeat of the disasters that we’re seeing in Europe.

Not only has austerity failed it has proved to be “quite deadly” — We should first have done whatever protects people most

DR. BASU – You know, coming from the public health field, we have something called the “precautionary principle,” which is that when an idea or policy is controversial, we should first do whatever protects people the most. And what we’re doing is entirely the opposite. We’ve essentially had a massive untested experiment. That experiment has failed, and it sounds like it’s quite deadly, given all the data through history.

FAIR USE NOTICE: This blog, Citizen Action Monitor, may contain copyrighted material that may not have been specifically authorized by the copyright owner. I claim no ownership of such materials. 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.

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.

RELATED POSTS

  • 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.”
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.

“No one has the political will, courage or imagination to deal with the Eurozone crisis” —Ilene Grabel

No 368 Posted by fw, December 16, 2011

“I think the even bigger problem is this kind of institutional lacuna. There isn’t actually a space in the global economy for action to be taken. And so I think that’s why we have this effort to shift the problem back and forth between the European Union and the IMF and national governments. And not one of those entities actually has the political will or the courage or the imagination to actually deal with the problem – or the courage, for that matter. And so every day we find we’re watching for some decisions to come from some body, whether it’s the European Union or the IMF or to come out of the German and French dialogue. And yet every day we’re greeted with the kind of news that they’re going to consider it, they have a new plan, we don’t know what the plan is, no one knows what the plan is.”Ilene Grabel

In a Real News video interview conducted by host Paul Jay, University of Denver Economics Professor Ilene Grabel explains why there’s neither the political will nor the courage to take on the austerity and privatization policies pushed by financial markets, maneuvering to augment their power. My abridged transcript, including subheadings, follows the video.

The G20 and Global Policy Paralysis by Ilene Grabel, uploaded by The Real News on December 12, 2011

 

ABRIDGED TRANSCRIPT (with added subheadings)

No one has the political will, courage or imagination to deal with the Eurozone crisis

When the G20 met in early November in Cannes, they had, of course, many very important things on their agenda. What we’ve been seeing at the last few G20 meetings, including the most recent one in November, there’s been a game of hot potato that’s being played between the G20, the IMF, the European Central Bank and the leaders of Germany and France. And every time they meet in the context of the global crisis they have failed to reach any clear decision that would take the Eurozone out of crisis and to deal with many of the important issues that have been on their agenda since the crisis really began in 2008. And in this last meeting in November, the G20 ministers essentially handed the ball back to the European Union and the European Central Bank and the German and the French governments. They [in turn] handed it back to the IMF. The IMF handed it back to the G20. And at this point we have a situation where nothing at all is happening and we’re seeing financial markets react to that uncertainty because it’s not clear who is going to take responsibility for getting Europe out of its national malaise. It’s clear that the IMF is not going to do it. European governments are not doing it. And as we saw late last night, leaders of the European Union are also not prepared to take any steps to get the zone out of the crisis.

Every day there’s news of a new plan but nobody knows what the plan is

The fundamentals are certainly all wrong. I think the even bigger problem is this kind of institutional lacuna. There isn’t actually a space in the global economy for action to be taken. And so I think that’s why we have this effort to shift the problem back and forth between the European Union and the IMF and national governments. And not one of those entities actually has the political will or the courage or the imagination to actually deal with the problem – or the courage, for that matter. And so every day we find we’re watching for some decisions to come from some body, whether it’s the European Union or the IMF or to come out of the German and French dialogue. And yet every day we’re greeted with the kind of news that they’re going to consider it, they have a new plan, we don’t know what the plan is, no one knows what the plan is. And of course last night, we had the announcement that some important European government, like the English government, is not prepared to participate in these dialogues in any sort of meaningful way.

Meanwhile the financial sector takes advantage of the crisis to augment its power

The financial sector is using the opportunity, the crisis, to push forward on the kinds of reforms that financial actors have long sought, which is to say, policies which give the financial sector far more power than it ordinarily has — pushes government into austerity, pushes government into dismantling the welfare state, pushes them into privatizing state-owned enterprises and generally shrinking the public sector and public employment. So it certainly is an opportune time for financial actors to push forward on the kind of agenda that they have long sought in Europe.

“We haven’t seen the worst of this at all”

I think we’re entering the period where the crisis is actually going to intensify. We may have hoped that all of the bad news was actually out but I think we haven’t seen the worst of this at all. The plan that was announced last night and was being discussed this morning doesn’t at all address the seriousness of the crisis in Europe. And, indeed, this morning the credit-rating agencies downgraded three major French banks. There’s talk of downgrading further banks in Europe. There have also been studies which have shown that European banks have a huge deficit of capital and that they’re seriously undercapitalized. That should make things far worse. And the European Union, this morning, is in much worse shape than it was in even last night because of the failure to reach an agreement. And so it’s hard to imagine that European leaders can engage in some new round of productive dialogue. After all they failed to reach a decision at the most important moment last night. And so I think that they’re very much out of the picture right now.

The US is not going to ride to the rescue of European banks

I think that the suggestion that the US Fed should come to the rescue and buy up some of these European bonds is completely implausible. I understand that that proposal has been discussed. It’s impossible for me to imagine the US Federal Reserve actually taking on that role. US Treasury Secretary Timothy Geithner has been making it clear over the last couple of months that Europe’s problem is Europe’s problem. And given the political heat that he’s faced over the bailout in the US, I think it’s just politically not possible for the US Treasury and for the Obama administration to play any role in Europe other than to say “We feel your pain” at this point. But it’s really impossible to imagine the Federal Reserve taking responsibility for buttressing the capital reserves of European banks or in any way facilitating any further activity by the European Central Bank.

Sure, Europe’s problem is Obama’s problem but US isolationist sentiment prevents intervention in Europe

I think it [the European crisis] is very much [President Obama’s] problem because we cannot separate the fate of European economies from the fate of the American economy. That’s certainly true. But I think politically isolationist sentiment in the US right now is such that it really prevents the President and the US Treasury Department from taking any kind of decisive action that commits US economic resources to Europe. I just don’t think it’s politically possible to do so even though failure to do so certainly has very serious negative ramifications for the US economy.

“We will stumble into deeper global recession”

I think it’s clear that we will stumble into deeper global recession. It’s been fascinating over the last couple of weeks to see Europeans go hat in hand to some of the largest and most rapidly growing developing countries. We know that European leaders have been really trying to pound the pavement in China, in Chile, in Brazil, saying — “Okay, we need your sovereign wealth fund money, we need your governments to buy up European bonds.” And I think many of the rapidly growing developing countries’ policy makers have very rightly suggested that they’re not really interested in playing the role of bailing out Europe.

Policy makers in rapidly developing countries question the credibility of the entire Eurozone project

I agree with what some of the Chinese commentators are saying — “Why don’t we wait until it bottoms out then we’ll think about coming in.” It’s clear that Chinese policy makers, and policy makers in many other rapidly developing countries are quite rightly skeptical about the credibility Eurozone’s planning and even the credibility of the entire Eurozone project. So they’re not keen to commit any economic resources to stabilize Europe. We know that Brazil has very recently agreed to provide more funding through the IMF but not directly to the Eurozone itself because of the lack of credibility, the lack of commitment that Eurozone leaders have really shown to take serious action to get out of crisis.

“We have real reason to be worried about the future of the world economy”

I think people should be worried. At this point it seems clear that we’re headed for a new round of crisis coming this time from Europe. And this is really the time, I suggest, to batten down the hatches. I mean certainly we can try to influence debate in the US to press our government to get more involved in trying to get the US out of recession, to promote employment, to get behind the President’s job promotion plan. But we are in a situation of political gridlock, and this is the silly season in the US right now. It doesn’t seem like the US government is actually able at this point to take steps that make any sense to get us out of the crisis. With the President being hammered on all sides by Republican candidates really puts him in a situation where he’s paralyzed. And as you noted, Eurozone leaders are also paralyzed. And so this is the time I think when we have real reason to be worried about the future of the world economy.

Past missed opportunities for decisive action constrain future bold initiatives

There were certainly missed opportunities to make the case that getting the US out of the financial crisis was in everyone’s interest. That moment seems to have been lost in the US right now. And I think that makes it even more difficult to imagine the US government taking steps to try to stabilize Europe because after all there isn’t even a consensus among the broader populous of the US that further steps need to be taken to get the US out of its crisis.

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