The Destructive Competitive Race of Austerity and Cuts
By Sebastian Mueller
[This article published in: Freitag, 12/19/2010 is translated from the German on the Internet, http://www.freitag.de
The history of the crisis of the western world that we all experience more or less consciously or unconsciously (or partly ignore) is a history of boundless lobbyism, political corruption, market fetishism and unbroken belief in growth. As polemical as all this sounds, this history is the history of the decline of the vision of a better world and of utopia as a motive of politics.
The time of the maliciously mocked do-gooders already came to its end when the time of neoliberalism began with the fundamentalist faith in the invisible hand of the market. With neoliberalism (and this is clearer than ever), the world plunged into a new radical delusion, into a time of intellectual decline and economic terror. Will the age of religious dogmatism and the Inquisition be swept away with the Enlightenment?
Every age had its worldview and dominant teachings which had their authority for their time. Theories and truths were refuted and replaced by new theories and truths. This was often a painful and tedious process. How long did it take until the geocentric became a heliocentric worldview? What turmoil occurred when Darwin’s theory of evolution came into competition with the doctrine of creation? Centuries held to this with great conviction even though they were long scientifically refuted – especially those of the church.
This is just as true with economics. A competition of ideas and theories was also waged here. Old knowledge was replaced by new knowledge again and again. Economic theories were and are children of their time, an illuminating discovery, a productive instruction for one epoch and suddenly unworkable after the end of this epoch and after a time of social and technological change. Every economic form and theory may bare its truth in itself for its time.
Expressed differently, regulation and development modes that were once valid are exploded when one economic concept replaces another. There is also no eternally valid universal truth in this area. Concepts worked out in the light of realities of a certain epoch which may have been just to reality at that time could prove unsuitable for another epoch. 
For example, the British economist David Ricardo (1772-1823) regarded saving as a virtue and spending money as a vice. Ricardo wrote his books in the early phase of capitalism marked above all by capital accumulation. A century later when the phase of original accumulation was completed in England, permanent consumption replaced capital as the drive of society. Then development depended on the demand for cars (the age of Fordism) and no longer on laying railroad tracts. Unlike Ricardo, John Maynard Keynes held spending money as a virtue and saving as a vice. Both were right, each in his time.
The ideology of neoliberalism was different. As a bastard of liberalism, it saw the light of the world when its theory had long been refuted by the experience of history. Thus Friedrich Hayek made a big mistake in the epoch when he held to Ricardo’s ideas in his famous debate with Keynes.  He erred as today’s neoliberals err. Neoliberalism orders bleeding white long unmasked as harmful after the patient – society and the economy – urgently needed a new medical prescription. The supposed solutions that neoliberals offer once again – low state spending, savings in public service and dismantling social security systems – recall the concepts that condemned national economies to a standstill in the 1920s. One thinks of the radical austerity- and deflation policy of Heinrich Bruning.
All this has not impaired the unbroken interpretation-sovereignty of the extremist ideology of neoliberalism and its inquisitors. Bleeding white all social, public and institutional capital ruins the economy and society even more. The ostracism of the Inquisition condemns those physicians who suggest an alternative salvation to the patient. We are in a new dark age, it seems. It is no accident that extremisms and fundamentalisms suddenly germinate all over. These are the symptoms of a seriously sick patient, a sick form of society.
Neoliberalism and its followers do not admit their own grandiose failure. Instead the dose of bleeding white is increased. The EU and the commission as its most important decision-making body – an institution besieged and corrupted by lobbyists – force member states to radical austerity conditions. In their course, education spending, social benefits and public jobs are massively cut; the state share is reduced. From Greece, Germany, Spain, Portugal, France, England and now Iceland, all states follow like lemmings. Thus attacks are directed against the institutions that guarantee the functioning of the state and society while lobbyists and rating agencies ensure that the state will be barred access to great revenue sources. The profiteers of the insidious decline of European states are the banks and corporations whose spokespersons control and supervise European policy.
Let us simply tell the facts. In the mind of the EU, Ireland will save 15 billion Euros within four years. The consequences will be cuts in social benefits and higher taxes and fees in the next four years. 10 billion Euros of public spending should be saved and 5 billion gained from tax increases. The low business tax of 12.5% will not be raised – a victory for the business lobby. 6 billion Euros of the total package – 40 percent – should be realized in 2011 alone. The government wants to regain the trust of the financial markets and rating agencies as fast as possible.
Portugal now appears as the next candidate. Portugal is currently shaken by one of the largest strikes of the last decades. Portugal must get a grip on its debt mountain and carry out drastic cuts in social benefits. This was originally avoided by the socialist government in Portugal that consolidated debts in an alternative way with higher top tax rates and property taxes. This led to a downgrading of the land by the rating agencies. This potential threat of the neoliberal way is now hammered into Portugal.
Rigorous austerity programs are imposed on the rest of the candidates. In the mind of the IMF and the EU, all these measures should increase the competitiveness of the impacted countries according to the German export-oriented model. It should be made clear the EU saves to death in its belief in competition. What will it mean for the domestic economy and the living standards of EU citizens if all Europe consists of export world-masters? All this represents a vicious cycle and has nothing to do with sustainable development,
With their low state shares in the 1980s, the Anglo Saxon countries were godfathers for the policy of continuous tax cuts (see Ireland, France and Germany). The revenue weaknesses of public budgets act as a lever to force spending reductions and privatization of state spending which we now witness again in the wake of the austerity packages. Both interlock and combine with the radicalization of traditional German mercantilism as a European development model. Growth should be based one-sidedly on export successes with acceptance of real wage losses.
In the past, we spoke only of the first round of dogmatic madness. As sect members were subjected to a brainwashing, the political decision-making will tighten the belt on vice in the public social sector while banks and corporations are subsidized again in the hope for investments. The background of all this is the unbroken faith in the promises of an unlimited possible economic growth, a relic of the 20th century. The profiteers of this long invalid growth-variable sell growth to people as an indicator of prosperity that is still valid – apart from the fact that the prescriptions of saving, cutting, privatizing and tax reductions were ineffective for the last century.
Thus neoliberalism or economic liberalism breaks down in two regards. Firstly, it uses methods for stimulating economic growth that were empirically discredited in the 1920s, 1930s, 1980s, 1990s and 2000s. Secondly, an economic policy that only aims at increasing competitiveness to generate growth contradicts the signs of the times. In the 1973 oil- and economic crisis, industrial nations had already reached the limits of growth. The times of the economic miracle in the 1950s and 1960s with partly double-digit growth rates cannot be forced any more with the most market radical policy. However this absurd goal encouraged the rise of neoliberalism that was already a stillbirth at that time.
It is the lie of the 21st century that an increasingly harassed population should be animated to keep silent. From today’s perspective, belief in economic growth is as dubious as the Ptolemaic worldview. For a long while, growth only occurred with a merciless and ruinous exploitation of humans and nature. The impoverishment of more and more people – even in industrial countries – is the price that has to be paid. The attempt to change anything in this runs aground in the totalitarian motto of neoliberals: There is no alternative. The totalitarianism of Hayekian neoliberalism is belief in the natural rule of evolution and selection in which the person as a limited being capable of reason cannot and may not meddle. This is not only a cynical social Darwinism. It also implies a turning away from the Enlightenment and the belief in the person as a subject capable of acting. This is the absolutist, intellectual and epistemological cul-de-sac in which we find ourselves in the times of post-capitalism.
Neoliberal totalitarianism is a backward step into the time of a religious fatalism according to which salvation should be sought in the world to come, not on this side. If we let the invisible hand run its course uninhibited, everything will ultimately change for the better. Perhaps neoliberals are right in this point. If the present vicious cycle may still be changed for the better, then the system out of which we seem to find no way out physically and mentally will destroy itself. No new life arises without death.
The seed of new ideas can already be seen as a faint light on the horizon. Since the limit of the material economy is reached, the economic rationality must also change. A new time requires new discoveries.
In the past, the quantity of produced goods was the basis for the prosperity of a community. To ensure this well-being, the productive sector had to be as efficient as possible. Today economic rationality has to be measured in the consequences for people. Once economic rationality was nothing but a cold instrument that produced enormous misery. Today its goal is to be useful to people. Unfortunately no one wants to see this.
This shift is not only theoretically important. It has effects on the decision-criteria of economic conduct. From the view of managers and economic strategists, the person was once a variable greatness. However the norms for worldwide trade can only be reversed when he becomes a fixed greatness – whose (life and not consumer) needs must be considered in economic conduct. Nature can no longer be a resource that one can exploit and plunder. Nature regains her meaning as mother of all life – a treasure that should be protected because nothing on our planet can exist without her. The foundations of economic decisions – nationally and globally – inevitably change with that reversal.
The NWI, the measurement for prosperity6 and social progress worked out by the progressive economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi as an alternative to the GDP (gross domestic product) as an indicator for prosperity and growth is helpful. The NWI presents a series of recommendations for the national frameworks (introduction of the NWI is now discussed in the German Bundestag). The goal of progressive economists is to develop indicators that grasp the actual situation of households and particularly incomes and consumption (not so much production) as well as assets and assets distribution. The inequalities in societies would also appear more clearly.
In the sense of a new rationality, these criteria extend to non-market-based activities as for example internal family services. All these indicators run crossway to neoliberal market radicalism, statistically refute the antiquated equation economic growth equals prosperity and empirically discredit the whole neoliberal crisis policy.