10) THE CLASS NATURE OF THE DEBT "CRISIS"
By Anna Pha, from the Guardian, weekly newspaper of the Communist Party of Australia (abridged)
The world's largest financial institutions are waging an all out assault on what is commonly referred to as the welfare state, on the sovereignty of governments, on democratic and workers' rights. The vehicle being used to slash welfare payments and pensions, cut health and other services, sack public servants, reduce their wages and working conditions is the "debt crisis".
Governments that have amassed large debts are now being stood over by global financial monopolies (the most powerful, corrupt, speculative and parasitic form of capital) to wind them back. They are being subjected to credit squeezes and threatened with downgradings by private, unaccountable rating agencies. In the US, the approval of Congress was required to extend the government's debt limit or face defaulting on loans.
The European Central Bank, the International Monetary Fund, financial institutions and the ratings agencies are placing demands on Greece, Ireland, Portugal, Spain and Italy to make savage budget cuts to social spending. Belgium looks set to be the next country in line for the same treatment. Not all governments needed much pressure: the stand‑over tactics provided the excuse they needed to sell highly unpopular austerity programs to unwilling electorates.
The battle and concessions made to gain US Congress approval to increase the limit on US government borrowings has strong parallels with developments in the European Union. Questions are being raised as to how hard Obama really fought what appears to have been a highly stage‑managed crisis.
There is no doubt a number of these governments have accumulated large debts which have become a drain on the public purse to continue servicing. In part, the debts are due to the multi‑billion dollar bailouts of financial institutions and corporations during the global financial crisis and subsequent economic crisis. According to Michael Hudson, the US government has spent US$13 trillion in financial bailouts since Lehman Brothers failed in September 2008. ("The debt ceiling set for progressive repealing", Global Research, 29‑7‑2011)
But the bailouts are not the only contributing factor. Military budgets have remained quarantined from serious cuts, in particular in the US where 48 percent of the annual budget is drained by military spending and servicing debt on it. The governments of all of these countries have pursued neo‑liberal economic policies, privatising public enterprises and providing the corporate sector with generous handouts. Privatisation has resulted in loss of income. They have also set about cutting the taxation of corporate profits and incomes of the rich.
It is no accident that the actions being directed by the financial institutions and ratings agencies, without exception, fail to address the causes of government indebtedness and focus on austerity measures.
The very agencies that caused the global financial crisis, that governments bailed out, are now standing over governments to make pensioners, workers and their families pay yet again. Private debt was converted into public debt during the crisis, and now the public are expected to repay it to the criminals who brought on the crisis. Pension and other cuts will see millions impoverished, homeless, jobless and with no access to basic health care.
Instead of increasing the taxation of corporate profits and the rich and cutting military expenditure (which would make the world a safer place), cuts are being imposed on ordinary working people and their families. The cuts are highly contractionary. They will reduce the spending power of workers and pensioners, and will only drive economies deeper into recession with many more workers losing their jobs.
Every one of these governments has other options to reduce their debts. Yet they are putting up little or no resistance. Consistent with their adherence to neo‑liberalism, they are all too readily bowing to the market gods.
The standover tactics of financial institutions, dictating to elected governments how much to repay and what cuts to make, is an outright attack on the sovereignty of nation states and a further restriction on their democratic processes.
The sovereignty of nation states has already been severely undermined by free trade agreements, privatisation of key public assets and financial deregulation. Capital is becoming bolder and more direct in its global domination and dictatorship. For decades the International Monetary Fund and World Bank have dictated economic policy to Third World countries. Now, it is the turn of Western industrialised nations, as capital continues to wind back social security and public services, including health and education. It constitutes a massive transfer of public wealth to the private sector.
The "debt crisis" assault is the next big step in a process commenced under Thatcher, Reagan and in Australia by Hawke and Keating. It has been pursued by successive social democrat and conservative governments. Social democracy has been used to play a key role, taking the "hard decisions", because of its ability to contain resistance by the labour movement. If the Republicans in the US or conservative parties had attempted to bring in the same neo‑liberal, attacks on people's past gains, there would have been far stronger opposition.
In Australia, the major deregulatory and privatisation moves were made by Labor not Coalition governments. Labor also commenced the process of destroying the centralised award system governing wages and working conditions. Its reforms paved the way for the first individual employment contracts and non‑union agreements. The Howard government met strong resistance to its WorkChoices, but Labor's failure to repeal WorkChoices (only making minor changes) or abolish the Australian Building and Construction Commission have not met with the same degree of opposition.
The struggles against the anti‑people, budgetary cuts have reflected the strength of left forces in the labour movement, in particular the strength of communist parties.
Under the leadership of the communist‑led All Workers Militant Front (PAME) and the Communist Party, millions of people have been brought out onto the streets against the cuts across Greece. It has not been left to the parliamentary arena.
Communist Parties in Greece, Portugal and other EU countries are fighting for expansionary economic policies based on job creation, higher wages and pensions, nationalisation, controls on foreign finance and imports. They are calling for reductions in military budgets, an end to involvement in overseas wars. They are looking at increasing the taxation of financial institutions and other corporations. Their policies are expansionary, pro‑people and pro‑environment, and involve the abandonment of neo‑liberalism.
(The above article is from the September 1-15, 2011, issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $30/year, or $15 low income rate; for U.S. readers - $45 US per year; other overseas readers - $45 US or $50 CDN per year. Send to People's Voice, c/o PV Business Manager, 706 Clark Drive, Vancouver, BC, V5L 3J1.)