Tag Archives: Shock Doctrine

European Austerity – What’s Actually Happening?

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Are we “going the way of Greece?” Should we cut spending to head off a “debt crisis” here?
Conservatives in Europe and America say cutting back on what democracies do for their citizens is the solution to our economic troubles because it will bring economic growth that helps everyone. But this is not what’s happening where it is tried. These are not stupid people. Maybe economic growth wasn’t the goal of austerity.

What They Said Would Happen

Greece and others have been confronted by lenders demanding very high rates before they will make loans. This increases their debt payments to even more dangerous levels, so lenders demand even higher rates. Financial elites are forcing “austerity,” with Greece cutting government employees, pensions, etc. and privatizing public assets, saying this will free up more money for debt payments. Meanwhile European leaders say that austerity is needed everywhere, that cutting government spending will restore “confidence” which will get businesses investing and hiring again, which will boost economic growth.
Economists and anyone with a brain warned that the austerity approach would only make things worse. Now that many European countries have implemented austerity measures the actual results these efforts can be measured.

What Actually Happened

What the financial elites predicted is not what is happening, the cuts are making the economic situation much worse. Taking money out of the economy didn’t grow the economy! Instead of increased “business confidence” bringing about a round of investment and hiring, these countries are instead experiencing further economic slowdown. As public employees are laid off and citizens’ benefits reduced the resulting reduction in demand slows economic growth further. This reduces tax revenues. Unemployment is soaring. And the threat is that deflation will only further inflate the debt burden.

In The cruel stupidity that is economic austerity at Daily Kos this weekend, Lawrence Lewis outlined just how bad things are as a result of austerity policies,

How bad is it?

The economies of Europe are imploding, as conservative governments continue to pursue exactly the wrong policies at exactly the wrong time. …

But this is not really a surprise. It is exactly what was predicted. And now that it is clear that austerity is making things worse they are demanding more austerity as a cure.

Financial Elites Are Not Stupid

So here is the thing. Everyone can see that this is the result—the expected result—of austerity policies. And Europe’s financial elites are not stupid people—not by a long shot! Perhaps they can see the obvious, because it’s obvious, and therefore we might conclude that their campaign pushing austerity isn’t about growing the economy – it’s about something else — they have a different agenda.

When smart people are forcing something to happen we need to look at what is happening, and realize perhaps this is what they wanted to happen. Maybe economic growth wasn’t austerity’s goal at all. Maybe the results we see— the results we all knew would come from austerity—are the results they wanted.

What Else Happened?

The above-listed effect of austerity are not the only results. Forced privatization is also occurring. Here are a few examples from recent news:

European railway companies eye Greek network sale,

Three European railway companies are interested in buying all or part of Greece’s railway business, as the debt-laden country sells assets to satisfy its lenders, people familiar with the discussions told Reuters.

Greece: 14 firms formally express interest in privatization of DEPA state gas company,

Greece says 14 companies, including a subsidiary of Russian gas company Gazprom, have formally expressed initial interest in buying Greek state gas firm DEPA under the debt-crippled country’s mammoth privatization program.

Greece seeks Israeli buyers for ports, companies, roads,

As part of austerity measures, Greek government looking to sell stakes in major companies, development projects; head of privatization agency says Israeli investors already expressed interest…

In Greek Debt Crisis, Government Puts its Policemen Up For Rent,

With the economic crisis plaguing the country, drastic means have been taken to replenish the public coffers. It is in this context that the Greek government has adopted a measure allowing the use, for a fee, of the National Police and its equipment for private needs.

While the Ministry of Citizen Protection (in charge of the country’s security services) said the move will help to “pay for the cost of using police material and infrastructure, and allow modernizing them,” the average citizen’s security is being seriously compromised and it raises the question of how far Greece is ready to go to cut state funding.

Greece Opens Bidding For Rhodes Property,

ATHENS — Greece invited bids for property in the popular tourist destination of Afantou in Rhodes Tuesday, as part of a long-awaited privatization program to raise EUR19 billion by 2015 in aid of its huge debt crisis.

This is the fourth international real estate tender launched by the Greek government-established Hellenic Republic Asset Development Fund (HRADF).

Strong Investor Interest In Planned Sale Of Former Athens Airport Area

The country’s privatization agency said Tuesday there was strong investor interest in the planned sale of the former Athens airport area, marking the latest step in the country’s efforts to raise some EUR19 billion from the sale of state assets by 2015.

Privatization is happening. Greece is being forced to sell off public assets as a condition of getting help with its debt.

Question: If these assets are contributing to Greece’s debt problem, why would investors want to buy them? If these assets are bringing revenue that could help cover the debt, why would the financial elites want Greece to sell them? Unless forcing Greece to sell them was the point.

Shock Doctrine

Naomi Klein’s book The Shock Doctrine makes the case that financial elites have been following a strategy where they take advantage of crises and the resulting panic (and sometimes they make the crisis happen and whip up panic.) Crisis and panic set up chaotic environments in which it is easy to swoop in with pre-packaged “solutions” and take all the stuff. We see this shock-doctrine cycle over and over again: crisis, panic, panic accelerates, financial elites swoop in and take all the stuff. (America had its own experience recently of a crisis that generated terrible panic, with financial elites then swooping in and taking all the stuff. )

Debt often leads to such a a crisis. The book Confessions of Economic Hit Man exposed the strategy of convincing the leadership of underdeveloped countries to take on high debt. Then when it becomes difficult to carry the debt, financial elites swoop in and take all the stuff.

America’s Debt

In the United States our own financial elite are demanding “spending cuts” and other austerity measures as well — even though we can see in front of our faces what resulted from European austerity policies. Conservatives try to whip up panic, claiming our national debt will force the country into bankruptcy (and tried to prove it by nearly forcing the country into bankruptcy last year.) After forcing tax cuts for the rich, again and again, they now say we have to “cut spending” (but not spending on oil company subsidies or military — estimated upwards of $1 trillion this year.) They demand austerity — cuts in spending on things democracy does for its citizens.

But remember, at the end of the Clinton presidency the United States was paying off its debt. Federal Reserve Chair Alan Greenspan greenlighted the Bush tax cuts, saying that Clinton was paying down the country’s debt too fast! When the surplus vanished President George ‘W’ Bush said that a return to deficits was “incredibly positive news” because it would lead to a debt crisis that would force cutbacks in government.
The cycle repeats, supposed crisis, panic is whipped up, elites offer their “solution”, then swoop in and take all the stuff. Will we fall for it again?

See Also

In The Zombie Rises: The Return of Simpson Bowles CAF’s Bob Borosage writes,

After experiencing the horrors of this misguided policy, European leaders will eventually turn back to trying to get their economies moving again. What we need this fall is a different grand bargain—a global agreement, like that that was forged in early 2009, for coordinated action by governments to reflate the economy —to borrow and spend to put people back to work.

For this to occur, the bipartisan elite fixation about inflicting austerity now must be challenged. If we are to avoid a lost decade or worse, we need action to support still weak and staggering economies. Global coordination would be the best way to achieve that. That requires putting a stake in Simpson-Bowles, the Boehner-Obama grand bargain and other zombies.

In America will not go the way of Europe at the Washington Post, Ezra Klein says Greece’s problem is that lenders believe the government might actually default, which the US can’t do.

In Ezra Klein: Barking Up The Wrong Tree Borosage responds that Greece’s austerity is the problem—such cuts make economies worse. Jobs are the answer to deficits.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

A Bipartisan Move Against Democracy

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Step back from the day-to-day, hour-to-hour details of the debt-ceiling negotiations for a minute and look at the bigger picture. Look what we’re in the middle of. Our legislators are being stampeded by a manufactured “crisis” into profoundly changing the nature of our country and who our economy is “for,” on extremely short notice, against the clear wishes of the majority of the public. They are doing so without following the long-established process for due consideration of important issues; they are not holding hearings, not giving time for public input, not going through committees… The act of negotiating with these hostage-takers at all is itself a violation of our established, democratic system. The question to ask is not, “What painful cuts should we agree to to save our country,” but rather, “Why are we engaged in this anti-democracy exercise at all?”
A Functioning Democracy?
In a functioning democracy an informed public considers and debates its options and then comes to a decision on how best to proceed. In a representative republic our representatives are called “representatives” because they represent us, and vote to implement our wishes.
The founding idea of our country is that We, the People are in charge, and our country exists to promote the common good — “welfare” — of all of us. Elected officials take an oath of office to protect and defend our Constitution, which begins with those words, “We, the People.” Over time we have built up a system of institutions, processes, procedures, traditions and mechanisms to implement this founding idea. The oath they take is to protect and defend this system.
Oath Of Office: Protect and Defend Our System
Today all of this seems all to have fallen away from us. A fanatical but extremely well-funded minority is using a manufactured “crisis” to hold the country’s economy hostage. As ransom — if we don’t want the country to go into default, destroying our economy — they demand that we force fast and dramatic changes to the nature of our country and our social safety net. These changes will take effect before the public can react and gather the forces of opposition. They will be “locked in,” creating “facts on the ground” that we have to deal with, and which are extremenly difficult to undo, no matter what We, the People want or need.
Rather than honor their oath of office to protect and defend our We-the-People system from all enemies, foreign and domestic, and to listen to “We, the People,” and to promote the common good of all of us, our leaders have instead entered into negotiations with the hostage-takers. The act of entering into these negotiations is by itself an agreement to work outside of our established system, and the result of these negotiations will be to change the equation of who our system is for.
Crisis?
Is there really a “debt crisis” necessitating such a dramatic and immediate response? Just 10 years ago the “crisis” we faced was that we were paying off the debt too fast and it was claimed this would lead to socialism as government surpluses were invested in private assets. So taxes for the wealthy were cut. At the same time, enabled by another “crisis,” the military budget was dramatically increased — in ways that enriched “private contractors.”
The result of these changes was an immediate return from budget surpluses to the dramatic budget deficits initiated by President Reagan. Then-President Bush called these deficits “Incredibly positive news” precisely because they would bring on a debt crisis that would enable today’s stampede to change our system of government. The debt “crisis” was intentional.
Cause Of Deficits and Debt
The increase of deficits beyond $1 trillion occurred in President Bush’s last budget year — the consequence of the financial collapse and the resulting drop in tax revenue combined with increases in social safety-net program payments. But the underlying cause of the deficits was the Bush tax cuts and wars. Today, in How the Deficit Got This Big, the NY Times offers charts and figures that show that:

…under Mr. Bush, tax cuts and war spending were the biggest policy drivers of the swing from projected surpluses to deficits from 2002 to 2009. Budget estimates that didn’t foresee the recessions in 2001 and in 2008 and 2009 also contributed to deficits. Mr. Obama’s policies, taken out to 2017, add to deficits, but not by nearly as much.

As for the causes of the longer-term debt picture The Center on Budget and Policy Priorities has put together this chart, explaining:


Longer term most of our country’s future debt problem is from tax cuts, increases in military spending, and the effects of the economic downturn. Most of the rest is because of our private healthcare delivery system. These “debt-ceiling” negotiations are not addressing these causes of the problem at all. Instead they are about using whipped-up panic over those intentionally-created problems to move the common wealth into private hands.
Not The First Time
This tactic of whipping up panic over a “debt crisis” has been used before to stampede legislative bodies into making radical changes on short notice, moving common wealth into private hands. In the post Debt Crisis? Really? I hilighted a 1993 example from Canada that was very similar to today’s. From the source’s account,

By the time Canadians learned that the “deficit crisis” had been grossly manipulated by the corporate-funded think tanks, it hardly mattered – the budget cuts had already been made and locked in. As a direct result, social programs for the country’s unemployed were radically eroded and have never recovered, despite many subsequent surplus budgets.

There is example after of example of the use of manufactured “crises” to panic and stampede legislatures into privatizing public wealth, just as we are experiencing today.
Democracy Eroded
What is happening here is not supposed to be the process of decision-making used in a representative democracy. Instead what we are experiencing is designed specifically to engineer circumstances that persuade us to bypass established processes and safeguards. These safeguards are in place to protect us from making the very sort of panic-driven decisions that we are about to make. And they are designed to “lock in” the changes, so we can’t reverse the damage when we are able to catch our breath.
How can our leaders not recognize and resist what is being done here? Have our own leaders drifted so far from America’s traditional love of democracy that they accept this and fall into playing the game?
Elitist Mindset
It seems that our own leaders have fallen into an elitist mindset, which enables them to go along. Persuaded by decades of corporate-funded propaganda, many now believe that the public doesn’t know what is good for them, that the things democracy entitles them to — “entitlements” — will bankrupt the country, that taxing the wealthy and corporations — the “job creators” — will harm the economy. They do not seem to see how much of our wealth is now flowing to a very few at the top of the pyramid. The fact that taxes on the wealthiest have been cut from a top rate of 90% all the way to a rate of only 15% for hedge-fund managers making billions — far lower than many of the rest of us pay — is ignored. And the fact that we did not have budget deficits when the wealthy paid higher taxes is also ignored. In fact, today just 400 people now have more wealth than half of our population, and the trend is accelerating. But many of our leaders believe that the things We, the People do for each other are a problem, and we must be protected from ourselves.
One example of the slow drift away from love of democracy is the recent “Deficit Commission.” This was a commission of elites — there were no teachers or unemployed or plumbers or disabled or poor people in that room — that was assigned to come up with ways to lower our budget deficits. They did not come up with any recommendations, but the leaders of the commissions came up with a plan of their own — to cut taxes on the wealthy while cutting the things that We, the People do for each other.
Again and again our elites try to create bodies like this that act as an external force they have to submit to, allowing them to escape accountability to voters.
These commissions come up with plans that benefit the wealthy few but violate what the vast majority of Americans want. They are designed to come up with recommendations that benefit the wealthy few, and are presented to Congress with “up-or-down-vote” procedures that leave legislators and voters with no recourse – on purpose. Pre-ordained conclusions with non-democratic force-through procedures.
“Super Congress”
Another example of this kind of anti-democratic, elitist drift was a proposal floated over the weekend to establish a “Super-Congress” — a Politburo of elites, that sits above the Congress and is not accountable to the public. The idea is to save the people from themselves by creating a special 12-member panel of lawmakers who come up with proposals that the Congress must vote on, with no changes and an “up-or-down vote” to implement, thus bypassing the established, democratic system and keeping individual members from being held accountable for the results. The idea is to “tie the hands” of Congress, keep them from meddling, and get things done quickly before the public can rally opposition.
That this idea was even floated shows the extend of separation that exists between our elected officials and We, the People.
Public Will Revolt
Regular Americans are not currently following this, and are turned out because it is just one more Chicken Little coming out of DC. But the public will revolt when the final decisions are put in front of them. The public overwhelmingly supports Social Security and Medicare, and overwhelmingly want taxes increased on the wealthy.
So when the results are presented to them there will be trouble. And that is also part of the plan.
In the 2010 election Republicans campaigned on a theme that “Democrats cut $500 billion from Medicare” and won the election. In 2012 the public will be presented with hundreds of millions of dollars spent on campaign ads, crying out that “Democrats cut your Social Security and Medicare, while keeping taxes low for the rich.”
Think I’m kidding? They have already started.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Shock Economics – Arm Yourself With Information

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After a traumatic event people are in shock. And that is when the capitalists push through a series of radical changes to the system, all in their favor, before citizens get a chance to catch their breath, understand what is happening to them, and fight back. For example, since 9/11 how many things have changed here in favor of the big corporations and against the citizens? (The Department of Homeland Security prohibited unions and outsourced all those government workers. The war in Iraq. The Constitution no longer means anything. Oil company profits are beyond belief, etc…)
Watch this short film about Naomi Klein’s book The Shock Doctrine: The Rise of Disaster Capitalism:

This short film concludes that the best defense is to arm yourself with information. To that end I strongly, strongly recommend that you watch the four-part series The Century of the Self.
Here is episode one, but it is so much better to go to the Google Video site and see it in higher resolution.

Go see Episode two
Episode three
Episode four