No Austerity Has Helped Any Economy

Paul Krugman’s recent column looks at the romance between the “austerians” — the promoters of austerity for economically troubled nations — and the need to inflict pain to get economic gain. His bottom line — no country that has tried austerity has seen a major economic benefit.

My bottom line — add “to its people” to the end of Krugman’s bottom line and you’ve got it exactly. There is an obvious economic benefit, but only for a few.

Let’s start with Krugman. He begins (my emphasis):

Looking for Mister Goodpain

Three years ago, a terrible thing happened to economic policy, both here and in Europe. Although the worst of the financial crisis was over, economies on both sides of the Atlantic remained deeply depressed, with very high unemployment. Yet the Western world’s policy elite somehow decided en masse that unemployment was no longer a crucial concern, and that reducing budget deficits should be the overriding priority.

That’s a familiar story, one we’ve detailed before. The answer to economic crisis is always budget cuts and austerity. Then he pivots to austerian attempts to find an example.

In recent columns, I’ve argued that worries about the deficit are, in fact, greatly exaggerated — and have documented the increasingly desperate efforts of the deficit scolds to keep fear alive. Today, however, I’d like to talk about a different but related kind of desperation: the frantic effort to find some example, somewhere, of austerity policies that succeeded. For the advocates of fiscal austerity — the austerians — made promises as well as threats: austerity, they claimed, would both avert crisis and lead to prosperity.

The column is interesting because it lays out that history. First the example was Ireland, which the head of the European Central Bank said in 2010 was “the role model for all of Europe’s debtor nations.” But events proved them wrong; Ireland is worse off today than it was back then. So then the U.K. became the touted model, until it wasn’t. Then little Latvia, which has recovered some, was pushed forward; but Latvia still has 14% unemployment. Hmm.

Krugman’s conclusion — nowhere in the world is there an example of austerity that works as the austerians said it would. The policy is “wrong on all fronts.” Yet they (Our Betters) still promote it.

“All your money are belong to us” — the song of the predator class

Krugman stops there, but I’ll continue with the obvious question. Why do they still promote it? Krugman’s answer, from elsewhere, is the Beltway Bubble and its international equivalent:

my side of the debate is actually paying attention both to the numbers and to the arguments of the other side, while the Very Serious People only listen to each other.

In other words, the poor darlings are just deluded, bubbled, sealed from understanding.

Those whom he calls Very Serious People, I call Our Betters. This difference in language (between his and mine) is indicative of the difference in analysis between Krugman and people like me. The language “Very Serious People” speaks to their role as pundits, opinion-generators and insider-echoists. “Our Betters” speaks about their power role — the role these people play in running our lives (at the Obama and Robert Rubin level) or in serving those who run our lives (at the David Gregory and Joe Scarborough level).

In other words, it’s certainly true that the baronial class and its servants and administrators listen only to each other, and thus reinforce in each other the comforting cover story that they’re only doing what’s in our ultimate good.

But the baronial class is also the predator class and they know precisely where the benefit (for them) always lies. This is the predator class in operation:

Income disparity 1979-2007_CBPP

The Predator Class in action. If you added the Top .001% to this chart, it would have to be taller than you are.

If you added the Top .1%, the Top .01% and the Top .001% to that chart, you’d need a chart as tall as your room. What the chart calls the “Highest Fifth” includes what I call the “retainers” — administrators, enablers (that’s you, CNN producers) and professionals needed to keep the system working. Everyone else is workers, and look what their hard work got them.

All of the gains of worker productivity (the harder smarter computer-enabled work of the lowest four-fifths) have gone into the pockets of the highest fifth and especially the very top earners. Note that these are individual incomes, not corporate incomes; as I’ve argued elsewhere, the corporation is just the collection device, the force extender, for the CEO class that wholly controls it; shareholder-ownership is the comforting cover story.

This is what James Galbraith calls “the predatory state” — and he means that economically. The predatory state is a state that enables and is controlled by economic predators, extremely wealthy vampires who feed on their fellow citizens. Galbraith (my emphasis):

That the looming debt and deficit crisis is fake is something that, by now, even the most dim member of Congress must know. The combination of hysterical rhetoric, small armies of lobbyists and pundits, and the proliferation of billionaire-backed front groups with names like the “Committee for a Responsible Federal Budget” is not a novelty in Washington. It happens whenever Big Money wants something badly enough.

Big Money has been gunning for Social Security, Medicare and Medicaid for decades – since the beginning of Social Security in 1935. The motives are partly financial: As one scholar once put it to me, the payroll tax is the “Mississippi of cash flows.” Anything that diverts part of it into private funds and insurance premiums is a meal ticket for the elite of the predator state.

By “elite” of the predator state, Galbraith means “owners” of the predator state, the top predators themselves. It’s that predatory feeding that produces policies, promises and pronouncements like these that Krugman describes:

Not only have we been ruled by fear of nonexistent threats, we’ve been promised rewards that haven’t arrived and never will.

They’ll say and do anything to get at more dollars; they’ll destroy the planet’s ability to support life itself, all for more dollars. Look again at the chart above. They’ve been looting the country, the government, the schools, the pension plans, your wages, the equity in your home, everything they can get their hands on since Reagan Days. Their only goal — All your money are belong to us. These are true monomaniacs, in the clinical sense.

So yes, they’re self-deluded. But like every feral beast, they also know where the food is. That food is us unless we stop them. And stopping them starts (in my most humble opinion) with naming them and shaming them.

An example of naming — does Obama serve the predators who finance his elections and his looming Legacy & Library Project or does he serve the people who elected him? Ask it loud and proud. The “debt ceiling–sequester” deal is his next chance to show us. As is Keystone, for those who are watching at home. But he can’t show us if we don’t ask him to, and in no uncertain terms.

My advice — dare to be bold, progressives. This game has a fourth quarter, and we’re in it. At some point, the predator will destroy all the prey and then die. Justice for the beast perhaps, but no fun for the already dead.