While the harrowing economic hardship that started in late 2007 and early 2008 rages on, and countless people in the United States, Europe and other parts of the world are losing their jobs, their homes and their sources of livelihood, policy-makers in the advanced capitalist countries of the West are standing idly by without lifting a finger to alleviate the onerous burden of the crushing recession. On the contrary, they have embarked on an orchestrated series of cruel belt-tightening austerity policies that have, indeed, contributed to the worsening of the recession.
The question is why? How can the policy makers' callous indifference to the plight of the people, or their pathetic inability to carry out effective policies of economic recovery, be explained?
The official explanation for not investing in the revival of the economy is that, due to the already huge debt and deficit, additional public spending would be "fiscal irresponsibility." In light of the fact that governments in the US, EU and other debt-ridden countries have showered the powerful international banksters and other financial moguls with trillions of dollars, this explanation falls miserably short of credibility; indeed, it can more appropriately be called an excuse than an explanation.
Explanations offered by most of the left, liberal, or Keynesian critics of the Neoliberal austerity policies are not satisfactory either. As I have argued in an earlier essay (pdf), these critics tend to characterize such policies simply as "shortsighted," "reckless," "misguided," "unwise," and the like--as if the governments that make such policies do not know what they are doing; or as if policy making is a simple matter of technical expertise or personal proclivities of policy makers, that is, a matter of choice. In other words, liberal/Keynesian critics tend to explain the class-biased austerity policies of the vicious global Neoliberalism in (the benign) terms of policy makers' "inability to distinguish "good' from "bad' policies: inability to realize that we can grow our way out of this crisis through deficit spending, just as we did in response to the Great Depression of the 1930s." (See, for example, any of the Nobel laureate Paul Krugman's economic columns in the New York Times.)
AN ALTERNATIVE EXPLANATION: THE RACE TO THE BOTTOM
The fact remains, however, that the kleptocratic rulers in the US, EU, and other debt-burdened countries know exactly what they are doing: to let the recession drag on, to take advantage of the crushing recession in order to extract "enough" concessions from the working people until welfare states are dismantled and labor costs in the more developed capitalist countries are made competitive with those of the less-developed countries. This explains why despite new signs of further global economic contraction, the reigning governments in these countries (whether they are nominally headed by Socialist, Social-Democratic, Labor, Democratic, Conservative or other parties) are maintaining their coordinated abstention from expansive or stimulating fiscal policies while continuing their brutal spending cuts on health, education, wages, pensions, and the like.
This is not to say that these governments do not want to have economic growth or job-creation--they do--but that they want them on their own (Neoliberal) terms, that is, through Neoliberal policies that would create jobs that would pay wages on a par with those of workers in less-developed countries. In other words, they prefer the kind of lopsided economic growth whose fruits would be reaped mostly by the wealthy--the so-called trickle-down or supply-side economic growth. As writer/reporter Patrick O'Connor points out, "In the US, Europe and other advanced capitalist economies, the aim is permanently reducing the living standards of working people.
It is not surprising then that, instead of calling for bold expansionary policies of growth promotion and job creation, US and European government heads, their economic policy makers and the collusive corporate media are frequently calling for "tolerance" and "endurance" in the face of economic hardship, exhorting the unemployed and economically distressed that they "need to be patient" because, as President Obama has occasionally put it, "the road to economic recovery does not follow a straight line," and that "it's going to take some time to fix it." (The President made this statement on ABC News' "This Week with George Stephanopoulos." Mr. Stephanopoulos obligingly spared the President the obvious question: "why is it, Mr. President, that fixing the enormously expensive problem of Wall Street gamblers did not take much time, but reviving the economy and creating jobs, which would take only a fraction of the cost of the Wall Street bailout, would take a long time?")
Through its editorials and columnists such as Thomas Friedman, The New York Times has been playing a leading role in preparing the American public to accept the new, protracted phase of economic challenges, and to reconcile with lower standards of living. Here is an example of how Friedman explains the need for belt-tightening: