Banks increasing power; people increasing losses...

Public sector workers demonstrate in Spain.
Photograph: Susana Vera/Reuters


Child Poverty: Forgotten Casualties of the Recession

Consistently ignored in reporting on the economic crisis is the dramatic toll it’s taking on America’s children. The prevalence of poverty has expanded dramatically in light of growing unemployment, accompanied by state attacks on social welfare spending that benefits the disadvantaged. Child poverty grew nationally to a total of 22 percent of all children in 2010, an all time high for the last two decades, and an increase in five percent over the last four years. Half of the poor are now classified as in “extreme poverty” – described as living in families earning below 50 percent of the poverty line. The percent of children who are food insecure also increased to 18 percent in 2010. This growth translates into an additional 750,000 children nationwide who are malnourished.

Reliance on food stamps increased by 24 percent between August 2008 and August 2009, with the number of children benefitting them growing from nearly 30 million to 37 million. Some localities are suffering under even higher levels of poverty. Throughout Illinois, up to 1.5 million people were reliant upon food stamps as of June 2009 – an increase of 22 percent from 2007. From 2000 to 2008, child poverty increased by 72 percent in Colorado. Overall, more than 30 states saw their reliance on food stamps increase between 2008 and 2009.

Sadly, attention to child poverty isn’t considered “sexy” enough to make the headlines or features in the “paper of record” (New York Times) or other agenda setting media. A review of stories featuring child poverty from August 2008 (at the time of the economic meltdown) through June 2010 finds that the issue was only featured in a single New York Times story and just three stories in the Washington Post.

From Bloomberg News: "European lenders had $2.29 trillion at risk in Greece, Italy, Portugal and Spain at the end of 2009, including loans to governments, according to the Bank for International Settlements...German banks’ writedowns on loans and securities will probably reach $314 billion by the end of 2010, with state-owned lenders and savings banks facing the bulk of the losses, the International Monetary Fund said in a report in April."

See? The ECB is not buying Greek bonds because of a "sovereign debt crisis". They are buying them so the banks won't lose money. The "sovereign debt crisis" meme is all public relations hype. If it becomes too expensive to fund government operations, Greece can leave the EU and return to the drachma which would give it greater flexibility to settle its debts. That would increase demand for Greek exports and improve tourism. This is the best solution for Greece. So, where's the crisis?

If Greece, Portugal and Spain, leave the EU and restructure their debt, banks in Germany and France will default and bondholders will lose their shirts. In other words, the investors, who took a risk, will lose money---which is how the system is supposed to work.

One thing should be made clear about the situation in the eurozone economies that is not clear at all if we rely on most of the news reports. This is not a situation where countries face a "dilemma" because they have overspent and piled up too much public debt. They do not face "tough choices" that will force them to cut spending and raise taxes while the economy is weak or in recession, in order to "satisfy financial markets".


What is really going on is that powerful interests within these countries – including Spain, Greece, Ireland and Portugal – are taking advantage of the situation to make the changes that they want. Perhaps even more importantly, the European authorities – including the European commission, the European central bank and the IMF – who are holding the purse strings of any bailout funds, are even more committed than the national governments to rightwing policy changes. And they are further removed from any accountability to any electorate.


In 13 Bankers, by Simon Johnson (a former chief economist at the IMF) and James Kwak, the authors describe the emerging market crises of the 1990s and note that Washington used them to promote changes that it wanted: "When an existing economic elite has led a country into a deep crisis, it is time for a change. And the crisis itself presents a unique, but short-lived opportunity for change." Naomi Klein, author of The Shock Doctrine, provides an excellent history of how crises have been used to introduce or consolidate regressive and unpopular economic "reforms".