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The Connection Between Austerity and Privilege

by: Robert Cruickshank

Sun Jun 06, 2010 at 09:00:00 AM PDT


Yesterday I read an article about the recent G20 decision to turn away from stimulus and growth and embrace austerity:

Finance ministers from the world's leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction.

Hooverism has now gone global, and the result is likely to be prolonged deflation and even depression. Interestingly, as the article showed, Tim Geithner argued against the shift away from stimulus, calling on Germany and China to adopt stimulative measures - though it was unclear whether Geithner was doing that to have other countries pay to help fuel growth and provide the breathing room for the Obama Administration to embrace fiscal austerity here at home that the political and media elites, fueled by Pete Peterson's billions, are demanding.

The Hooverism we've been seeing here in California since 2007 has now gone global. And I got to wondering why that's the case. Over email I discussed this with Digby, who offered her take here (I'm the unnamed "correspondent"):

After thinking about it for a bit, I'm not sure the same phenomenon we see here isn't happening internationally. It's an article of faith among financial elites across the planet that the welfare state is an abomination and this is a global opportunity to end it. Each culture will deal with it slightly differently --- riots in Greece, marches in France, blog posts in America. But in the end, the result, short of revolution, will be similar everywhere --- the post-war welfare state will be weakened or destroyed. The left is barely relevant anywhere anymore and they simply do not fear any kind of serious populist uprising. I'm not suggesting conspiracy. I think it's more of a natural result of ideological capture.

Digby's argument, which I think is sound, is that we're essentially seeing the product of 20+ years of an effort to weave together an elite global economic philosophy that is inherently neoliberal in character that has, in her phrase, "ideologically captured" both governments and media discourse. The welfare state is seen as a drag on economic productivity, financial markets and creditors are seen as the most important economic actors in an economy, combining to convince many elites that deficits to fund a safety net are bad and should be eliminated. The Washington Consensus on steroids. Again, this makes sense.

But Digby went on to write something that helped me see what I was trying to put a name to, the underlying social factors that produced some amount of public buy-in for austerity:

Disaster capitalism depends upon the people being confused and stressed for its success. (In that sense, rioting in the streets may actually help them.) And all over the world right now, with the rapid change from globalization and resistance to modernity in general, there is a tremendous amount of social stress and cultural upheaval on top of this economic downturn. It's the perfect time to strike.

It's that "social stress and cultural upheaval," the "resistance to modernity in general," that I'm most interested in. More over the flip.

Robert Cruickshank :: The Connection Between Austerity and Privilege
That buy-in should not be overstated. Digby is right to talk about the defeat and disempowerment of the political left, one of the necessary conditions of neoliberal success over these last 30 years (and always one of their most overriding concerns). Here in California, polls show most voters do not want austerity, at least when it comes to core public services.

Yet there is some level of buy-in for budget cuts, austerity, and worrying about deficits. The logic of "belt tightening" is common. Even many Democratic voters I talk to, some of whom consider themselves progressive, believe there's just not enough money to go around, that we have to cut back, that's just what you do in a serious recession.

The shift to a "cuts are good" mentality in a recession is, as we know, extremely damaging and reckless policy. But it appears to flow not from a flawed economic assessment, but from a very different place entirely - the "social stress and cultural upheaval" Digby mentioned. Without it, austerity would not be possible.

The globe is entering a period of fundamental change. The assumptions, values, and lifestyles of the last 60 years are no longer viable and are on their way out. Virtually everyone seems to know it in their bones. Some of us embrace the opportunity to construct something better.

Others resist, and cling ever more tightly to their older values. Much of this is driven by a growing generational gap that is rooted in race. California's white population is "in decline", and states like California, Arizona, and Texas have a stark divide between a diverse youth and a white aged population.

We see this in other areas as well; Northern California appears to be abandoning mass transit as older homeowners fight vociferously against new transit systems, be it bus rapid transit in Berkeley, light rail here in Monterey, or high speed rail in the Palo Alto area. Current services are withering due to a lack of funds, and yet nobody seems moved to try and rescue them.

Austerity is being mobilized to protect existing privilege. Whites with some assets, property, and political/cultural dominance see in stimulus for everything from mass transit to schools and health care a threat to their privilege through government aid to those who are the agents of the massive change they feel is coming upon them, change they do not want.

Here in California, unemployment hits unevenly. Latinos, African Americans and young people are facing the highest unemployment rates. Those are among the same people who are at the core of the new California, the new America, a place that in 10 or 20 years will look different than the 1950s or 1980s version of America that the defenders of the status quo remember and cling to.

Austerity helps rip out the legs from underneath those people and gives those who feel threatened by a diverse, different future a sense that their privileges are secure. As we know, this is a totally false hope - not only will the passage of time ensure their America vanishes, but their embrace of austerity is going to rebound on them, especially when their Social Security and Medicare benefits are cut, their pensions slashed, and their home values collapse when nobody is able to sustain the current, overinflated prices (at least here in California).

That's how I see it working in California and the US more broadly - the embrace of austerity fueled by a desire to maintain white privilege and the trappings of a 20th century lifestyle that is no longer tenable.

So how do we get out of this? It's unfortunately not enough to make the economic argument against austerity. If it were, Hooverism would remain in its tomb.

Instead it seems we need to do two related things: rally those who lack or are being denied privilege in support of a stimulus that is connected to a clear, coherent vision of future prosperity, a vision that can be sold to enough people in the privileged class that we can cleave them apart.

Disaster capitalism thrives on the belief that there is no alternative. Austerity works because people believe we cannot afford to build the future. So we have to provide an alternative so that people feel willing to build the future, and cast aside the belief that we can only afford to prolong the failed status quo.

It may be the case that we construct such an alternative in fits and starts over the next decade or two, as austerity produces a global "lost decade" - that seems to be Richard Florida's argument in The Great Reset. I'd like to think there's a way to construct it sooner and shortcut that painful process.

In either case, the key to blocking austerity is to understand how it is rooted in privilege, and to articulate a future vision that can animate a movement to destroy privilege, resist the elite, and defeat disaster capitalism.

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in particular (0.00 / 0)
there is a driving necessity for that future vision and especially those who would preach it to focus in no small part on those whom saul alinsky called the "have a littles," and make the two related cases that

a) what they have is threatened, not protected as they've been led to believe, by the schemes and machinations of the big time have-a-lots

b) that the best way to preserve what they have is to work together, in solidarity with those building said future vision. in short, that we either all come up together, mutually enriching one another from the bottom-up, or else we get squeezed by those at the top.

it is not going to be an easy sell, given the three decades now (at least) of "i've got mine" have-a-little-ism being pawns of the actual elites. our advantage is that the auto-cannibalism of the austerity budget pro-deflation policy proponents are simply going to involve squeezing them too, if just because it's running out of poor folks' mites to pocket.

should be interesting times. amazing that europe is rolling over for this, i had previously thought better of them.


That's right (0.00 / 0)
Which is why a vision and a plan is necessary. It's not enough to say "don't support austerity because it'll make you poor." We need to be emphasizing "support new investments because it will help provide the economic security you lack."

Some folks, like the Palo Alto NIMBYs fighting high speed rail, will probably never go along with it. Which is fine, we don't need them. We instead need to mobilize everyone else to reject the polices of defending someone else's privileges, and it requires a vision and a plan for a different future to accomplish it.

As to Europe, my initial questions that Digby was responding to were fueled by that very issue - why are they rolling over for this, too? Not sure I've got a clear answer yet.

You can check out any time you like but you can never leave


[ Parent ]
The engine for middle class confusion and stress is personal debt (0.00 / 0)
The fact is that many, if not most, of those clinging to the belief that they are middle class are actually living in a state of debt peonage.

The rise of personal debt in America over the past 20-30 years, including the massive predatory targeting of college students by credit card companies and private lenders, coincided with the real or imagined threat of loan defaults posed by debtor nations back in the 1980's. The lenders needed new targets from which to extract financial obligations.

Mired in car loans, college loans and home mortgages the  American middle class was told to "invest" in retirement accounts. The American "middle class" has been told they are living in an ownership society, but the vast majority are no better than poorly fed, sleep deprived indentured servants, who spend their spare cash on utterly useless distractions.

Now are we to become surplus consumers too? As bigger, more lucrative markets are to be created elsewhere? What does a degenerate society do with a surplus of consumers maxed out on debt?

We need to question the very concept of "growth" which is just another term for concentrated profit. I question whether a socially and environmentally sustainable economy can exist within the framework of this "growth" model. The profit motive demands excess and perverted decision-making.

Guess I still have San Francisco hippie values, although I'm an engineer


The point I'm trying to make (0.00 / 0)
is that the public buy-in for austerity is rooted in people's real personal economic situations. The reality of the economic predicament of the American middle class needs to lead the edge of this discourse. The divide-and-conquer cultural fear-mongering of the elites needs to be put in a context that validates the outrage and channels it toward enlightened action.

Guess I still have San Francisco hippie values, although I'm an engineer

[ Parent ]
Yep (0.00 / 0)
They believe that austerity means someone else will suffer and the wolves at the door will be distracted by it, enabling their existing privilege to continue unmolested.

It's a self-defeating logic, but it has enough support in California to where the austerity policies of the last 3 years haven't yet produced the kind of powerful movement we need to overturn disaster capitalism.

And my argument is that we won't get that movement until we are able to articulate a different and better future.

You can check out any time you like but you can never leave


[ Parent ]
Loan ownership (0.00 / 0)
Larry, who runs the Irvine Housing Blog, calls people who buy homes "loan owners." They think they own a home but what they actually own is a mortgage. Their money goes not into equity but into a bank's pocket.

In a similar vein, Richard Florida in The Great Reset - a book which I keep meaning to write about more often here - argues that we need to see a shift away from homeownership and toward renting, at least in the key US megaregions, because renting is cheaper and more flexible than paying a mortgage.

Agree totally, then, that the American middle class is trapped in a cycle of debt and pursuit of "growth" along terms which are totally unsustainable.

You can check out any time you like but you can never leave


[ Parent ]
A more in-depth version of this (0.00 / 0)
Is posted at the European Tribune.

You can check out any time you like but you can never leave

downturns and the budget (0.00 / 0)
i agree with what you're saying here, but there's a basic problem with trying to move at the state level - the requirement for a balanced budget. sure we can and should do more to raise revenues, but there really are limits to how much you want to increase taxes during a recession.

even if the state could run a deficit, as long as we don't control our own currency, there are limits to how far you would want to go with that as well. but we have to figure out something more flexible than how it is now. i don't really know: going to a multiyear budget, a separate budget for capital investments, chartering a state bank - ?

but i think a good side of that is that those things seem like they'd be pretty easy to sell as "prudent", "getting our fiscal house in order", suchlike. not that the right won't portray them as Communist takeovers but that's what they'll do about anything anyway so we might as well ignore them and make the case for what makes sense (if only that party that starts with a D could figure this out...)


Are there? (0.00 / 0)
"there really are limits to how much you want to increase taxes during a recession."

I'm sure you're right. But I don't think we're in any significant danger of being anywhere near those limits, especially for the rich.

And yes, I think it is necessary for Democrats to begin articulating a holistic solution that goes beyond the current budget year. I like what I've seen from both PĂ©rez and Steinberg for 2010, but we do need long-term fixes.

I also think we should explore some kind of "recession bond" - floating a bond to prevent cuts and restore the ones made in 2008 and 2009, and levying a tax with the express purpose of repaying the bond. One the bond is retired, the tax either sunsets, or you put a time limit on it and deposit extra revenue in a rainy day fund and ask voters to renew it in 10 years, preferably at the November 2020 election.  

You can check out any time you like but you can never leave


[ Parent ]
Controlling the Debate (0.00 / 0)
Isn't it odd that Conservatives can always make the argument against raising taxes, regardless of the economic conditions.  In bad times they argue, "We must cut taxes to revive the economy."  In good times they argue, "You can't raise taxes now.  You'll kill this economic boom that we're in."  

Liberals, on the other hand, are not able to do the same thing in arguing against cutting spending.  Except for a brief period during debate over the Economic Stimulus Package (and even then it seemed with reluctance), when was the last time we heard a Progressive Democrat argue during bad times, "We must increase spending to stimulate the economy"?  I have never heard anybody argue during good times, "You can't cut spending now.  You'll kill the economy."

Stimulus is stimulus, whether it comes in the form of a tax cut or a check from Uncle Sam.  The effect on the government bottom line is the same.  That Liberals cannot or will not make the equivalent argument about spending to the Conservative argument about tax cuts indicates that the terms of the debate continue to be in Conservative hands.  The Conservatives are making the rules.  Until that changes, there is no real debate.


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