"Tighten your belt" they say...and the public responds...

The trillion-dollar failure

The sovereign debt crisis in Greece has sparked a panic wave of radical policy demands for fiscal discipline throughout the European Union from a perverse coalition of neo-liberal public finance ideologues and anti-government conservatives. Proponents of fiscal discipline argue that the EMU and its common currency, the euro, will not be sustainable without the drastic restructuring of public finance in all eurozone member states through a combination of tax increases and deficit reduction through fiscal austerity. But creditors, mostly transnational bank, will be protected from having to accept "haircuts" on their holdings of sovereign debt.

Yet such harsh approaches of tight fiscal austerity at a time when the global recession of 2008 is still waiting in vain for a recovery will risk increasing the danger of a double dip recession in 2011 in a secular bear market. The alarmist voices of these fiscal deficit hawks clamor for fiscal austerity programs that are essentially punitive for eurozone workers; at the same time, they continue to tolerate abusive financial market manipulation that will benefit only the financial elite as the economic pain is passed on to the general public.

Fiscal deficits across the eurozone are to be reduced by cutting public sector wages, social benefits and subsidy expenditures so that transnational bank creditors will be paid in full while a blind eye is turned to blatant tax evasion and avoidance by the rich with non-wage income, which contributes to loss of government revenue and fiscal deficits.

The dysfunctional disparity of income and polarization of wealth between the wage-earning masses and the financial elite with income from profit and capital gain are the main causes of overcapacity in the economy. In past decades, the neo-liberal response to overcapacity was to shy away from the obvious solution of raising wages, turning instead to flooding the economy with huge mountains of consumer and corporate debt that eventually resulted in a tsunami of borrower defaults that turned into a global credit crisis. Repeating the same response to the current crisis will lead only to another global crisis down the road.

Thousands protested last Saturday in Rome against the recent austerity plans announced by the Italian government. The government of Silvio Berlusconi is seeking to cut public expenditure by nearly €25 billion over the next two years.

Hardest hit by the cuts are the health service, schools, universities and local administrations. Up to 400,000 jobs, mainly part-time and temporary, are to be slashed in public services while the salaries of those remaining in public service are to be frozen or cut. The government has also announced plans to once again increase the retirement age.

The dismantling of broad sections of public service is being accompanied by a huge attack on jobs and working conditions in private industry, such as at Fiat. The trade union bureaucracy fears a wave of social protests that they will be unable to control and the demonstration held last Saturday in Rome was a deliberate attempt by the unions to divert workers’ anger away from the government and political establishment.

In general, there was a marked change in the type of discussions compared to previous demonstrations. Angered and concerned at the unparalleled extent of the announced economic measures, new layers of the population are beginning to consider political alternatives and look for answers. Several participants at the demonstrations declared that they were participating in such a protest for the first time, because, as one young man on the demonstration in Berlin put it, “It is no longer sufficient to complain about politics within the safety of one’s own four walls”.

For more than 20 years now, the rise of workers' groups has accompanied that of Chinese democratic movements. However, because of the collusion between the Chinese Communist Party and its Western allies, they have been suppressed. Both labour and pro-democracy movements are hard to organise and keep alive and are often seen as failures. Sadly, the root cause of their ineffectiveness is the existence of this international alliance.

This alliance has forced the majority of Western politicians to surrender to the will of the Communist Party in order to protect the interests of big business. Even the labour organisations in the West are infiltrated by big business and are not concerned with workers movements in China. This lack of support is another important reason why China’s labour movement has been week for such a long time.

However, if Chinese workers are oppressed for too long and too hard, they will naturally reach a breaking point, when they will organise to seek their rights and defend their interests.