Austerity doesn’t work. The lesson from Greece is clear.
If the Australian Government, the Opposition, the MSM and the common people cannot learn from events now playing out across Europe and the USA, namely that money itself is worthless, that it is only a means to an end, then our lives and those of our children will not improve.
We need to understand that our responsibilities are to ourselves, not to later generations. What we do here, today, to improve our way of life, will determine the foundations upon which the next generation will build a future for their lives, in their time. We will be judged by them on what we do, not on what we don’t do.
Today we take for granted things like television, motor cars, dishwashers, computers and the technologies that brought them into being. But these innovations were begun by earlier generations.
Our forefathers and mothers built the roads, the bridges, the ports, the hospitals, the transport infrastructure, the household necessities and whatever else was needed to get the country moving and to keep it moving.
They did that for themselves and they paid for it themselves. In doing so, they passed onto us a foundation upon which we could expand and develop further with new innovations, newer technologies. This we are doing for ourselves and which we will pay for, ourselves.
Each generation develops its own technologies and pays for its own way of living for its own benefit.
The technologies we have developed today serve us as we continue to build a better Australia. The next generation will do the same to better their lives. They will pay for it and give generations after them a new foundation to continue that process.
What this means economically, is that we need to continue that process, to provide our people with employment today, to raise our own standard of living today, create new infrastructure for ourselves today and in the process, lay a foundation that will ensure a prosperous future. In doing so, we enable the next generation to do the same.
That doesn’t happen when we engage in austerity measures that restrict the flow of money that put people out of work that inhibit educational opportunities, reduce health services and waste billions on regressive immigration policies.
2016 U.S. Presidential candidate, Bernie Sanders stated recently that The American Society of Civil Engineers estimates that it would cost $3.6 trillion to bring America’s infrastructure to a state of good repair. Spending $1 trillion would create about 13 million new jobs. The choice is clear. “Let’s rebuild America and create jobs here,” he said.
He’s right. It’s not rocket science. From the earliest days of federation the great task of building the infrastructure to get our nation on the move, began. And we did it by creating money.
Creating money without incurring debt and using that money to build infrastructure, to create jobs, to increase the money flow, to create and build wealth. Restricting the money flow by austerity such as the Abbott government is doing is counter-productive; it is foolish.
This is what the European Commission has been forced to acknowledge in its treatment of Greece. It wasn’t the Greek people who got their country into this mess. It was the German banks, the International Monetary Fund, the European Commission and the previous corrupt Greek government. It was “those that lent the money, those that fudged the figures and those who have moved their money into offshore accounts”.
You can read at you leisure, here, where the real blame lies for the current level of Greek debt.
Greek austerity measures have not worked. By contrast, in 2009, in the wake of the GFC the Obama administration in the U.S. embarked upon a program of quantitative easing (creating money), that has worked well enough to get people back to work and the economy moving again, albeit somewhat shakily, but with no sign of inflation.
Australia did this also in 2008 under the Rudd Labor government and avoided a recession; a point that the present government finds difficult to grasp.
IMF managing director, Christine Legard acknowledged in a frank admission recently, that austerity had failed in Greece and the number one priority was to get people back to work.
The IMF itself has now acknowledged this in its own research studies that found, “If the income share of the top 20 per cent increases by 1 percentage point, GDP growth is 0.08 percentage points lower in the following five years, suggesting that the benefits do not “trickle down” to the rest of us. By contrast, if the income share going to the poor (the bottom 20 per cent) increases by 1 percentage point, GDP growth is 0.38 percentage points higher in the following five years.”
There is a clear message here for the present Australian Government, but I doubt they will pay any attention to it. The Abbott Government has neither the skill nor the will to get Australians back to work. It serves a different master. It is no different from the European bankers who want to broaden inequality, or the American super rich who hate Obama with a passion.
The Greek referendum has forced the EU commission and the IMF to face their Rubicon. What they do now will decide the fate of Greece, the Euro and the European Union. What lessons the rest of us learn will determine the economic future for Australia and the world for this and the generation to follow.
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Brilliant article, John. The solutions are pretty simple. What is missing is clarity among our leaders and a genuine desire to work for the good of the majority. What has been lost is the political will to act in the best interests of the people.
I dont understand why polies dont get it, give a tenner to a poor person, to the lowest paid and it gets spent, give it to a rich person and not a ripple.
I certainly agree John, austerity is not the way out of financial ruin, the idea is to stimulate the economy until the private sector has enough confidence to resurrect the economy, we much like Greece need targeted spending not austerity. Abbott’s LNP love austerity because they can punish the people that they loathe under the cover of trying to right the economy. The LNP loathe the working class, though I’m not sure why, we all can’t ‘make it.’ I agree with ‘stuff me’ it is we poorer Aussies who spend money on consumer able items not the rich, perhaps that is why the LNP continue with austerity to punish us for being poor, whatever reason I have had a gutful of their extreme right wing policies and what they are doing to this great country, we need to oust them from the steering wheel as everything they do is a failure.
Complex issues broken down so they are easy to understand- thank you John for another great article. What an indictment in this government that they don’t “get it”. Ditto the Tea Pary politicians who are wreaking havoc on a global scale.
Though the premise of the article is correct Greece is not totally without fault. The report I heard on ABC RN last night stated that Greece’s public service was relativley large and overly generously remunerated and pensioned as compared to most other European nations. It’s defence force is too big and expensive for the size of Greece and it’s GDP. Greece used it’s ongoing angst with Turkey as an excuse. Also it’s productivity was low in comparison to other like nations.
These are things that need reforming and Greece is in the process of doing that, but the punitive actions of imposed austerity does not help these needed reforms in any way.
We did have a great Treasurer who understood the solutions & he implemented them. The rest of the world stood in awe of him while those dunderheads in the opposition (at the time LNP) trashed these principles. Lew Bornmann’s blog in the USA has just written an article on this very subject. It runs in parallel with your article John, saying the same things. People in this country have been blindsided with conservative ideology regarding their past history on how they are the only ones who know how to manage the economy, which of course is not the case.
I grew up in the era of the wonderful achievement of the Snowy River project. So many people who came to this country as immigrants were employed there. My elder brother was able to get work up there as well.
I’m sure that there are so many infrastructure projects (not just roads) that could benefit us all. All we need is a government who is prepared to show us another ‘big picture’ for this country.
Give to the poor, the rich will still prosper the poor will benefit along the way… !
Business is hesitant because demand is down. Demand is down because real wages are down. Wages are down because unemployment is up. Unemployment is up because business is hesitant and the government is cutting spending.
We could inject money by investing in productivity enhancing infrastructure. We could increase Newstart by $50 a week. We could provide a job guarantee. We could incentivise students through scholarships and cadetships.
Fixating on a number on a balance sheet will achieve nothing. The number isn’t the goal and it doesn’t mean anything in real terms. It’s just an accounting entry. As so many here have pointed out before, our spending is only constrained by our productive capacity. A healthy, well-educated, productive, harmonious society is what we should be aiming for.
Mobius Ecko, The Greek people are not without fault anymore than we are not without fault in not wanting tax increases. However, they did not succumb to the German bankers when money was being thrown at them. Their previous government did that and Goldman Sachs helped them conceal it. The people did not even know what was happening.
John ..Governments hiding things sheeesh sounds like ours!
The EU governors should apply the fundamentals of Modern Monetary Theory to the “Greece” problem.
It then becomes clear that the structure of the EU ensures that all less well off quasi-autonomous ‘states’ are destined to default on debt payments to the wealthier ‘states’.
– With no ‘state’ bankruptcy provision there is no penalty for powerful predatory lenders making bad loans.
– With no effective wealth equalisation/compensation arrangements the EU is not properly fulfilling the essential role of a currency issuing (sovereign?) ‘commonwealth’ overseer- i.e. the necessary objective of matching supply to demand in each disparate, incommensurate ‘state’.
Failing the creation/implementation of such a benign regulatory overseer of the EU finance management, Greece (and others will inevitably follow) have no choice but to revert to issuance/adoption of their own ‘state’ currency;
a ‘state’ based currency, to enable investment in re-building a productive viable domestic economy.
A currency, independent of the Euro, that can reflect/match the practical inequalities of Greek industry, labour costs and societal values.
Only then can Greece again become a productive nation, perhaps to fulfill its potential to re-pay at least a portion of its current ‘foreign’ debt.
Accepting liability for more foreign debt is no solution to Greece’s (or the EU’s) problem.
In Urban Geography the concepts of “push” and “pull” are regularly used to describe migration etc. Really the concept can be used to describe any movement involving humans. Abbott and co. are endeavouring, and failing, to use “push” factors to get more people in the workforce and by their simplistic ideology increase overall wealth. They think by making unemployment and retirement difficult people will be forced to work. Eg Eric Abetz if they can’t find a job they will have to look harder. So uncomprehending this government is completely incapable of applying “pull” factors. In fact they have done their best to destroy jobs rather than create them. They believe, following trickle down ideology, that by allowing the wealthy greater profit margins this will somehow mean they will employ more people? Even the not so wealthy as exemplified by Hockey’s foolish suggestion that if you buy a new Cappucino machine you will magically get more customers! Their simplistic ideology would be better called idiotology!
Not to give the current government any excuses but maybe if Costello and Howard had not fed the kiddies fairy floss in endless quantities and instead bought a new car our infrastructure would be better of.
Seriously the Liberal policy of spreading wealth inequitably meant that instead of fixing roads, public transport, public hospitals, facilities etc when they had the surplus they wasted their surplus on “vote for me” handouts to the middle class. Such an enormous waste and created problems that will outlast this government and the next.
Disagree. When a child does not listen to the more mature words then a resort to punishment is needed.
The Greek people needed to be punished and as they still do, as that did not succeed, then bankruptcy to force debt writeoffs would have been preferable to obtaining more loans. They will simply have to undergo hardship until they improve their political systems – just like Australians should be and will be punished down the track for allowing neocon LNP governments to shift wealth to the rich by selling off everything they can..
Sophocles (496 – 406 BC), in Ajax:
Nought from the Greeks towards me hath sped well.
So now I find that ancient proverb true,
Foes’ gifts are no gifts: profit bring they none. (the gifts being IMF and Euro bank loans)
Jimhaz, so you think all Greeks should be punished for voting in the various governments they’ve had since joining the EU? Even those who did not vote for them? Don’t you think the very high rate of unemployment and its flow on effects is already punishment enough? Whose more mature words should they have listened to?
Joseph Stiglitz says Europe is attacking Greek democracy. I wonder if Jimhaz can actually understand this, assuming he bothers to read it.
Unlimited growth and prosperity, even when financed by unlimited debt, doesn’t work. Greece is an example should be a wake up for all of us. There are just way too many Greeks.
We will now see how charitable humanity is. Any currency poured into Greece now will be charity only.
“But, could it be that all the financial circus that we are seeing dancing in and around Greece be just the effect of much deeper causes? The effect of something that gnaws at the very foundations not only of Greece, but of the whole Western World?”
“But it is likely that local collapses would start in the weakest economies of the world; regions with low industrial production capabilities and little or no mineral resources of their own.”
Meanwhile, on the Greek Island of Lesbos, population 86,000 and an area of 1,600 sq km (compared to our 7.7 million),1600 refugees arrived on Saturday. That was after 15,000 arrived in June. They give these people papers that allow them to remain in the country for between one and six months.
More than 1,800 migrants have died so far this year attempting to cross the Mediterranean – a 20-fold increase on the same period in 2014.
EU ministers agreed at the end of last month to relocate some 40,000 migrants who have reached Italy and Greece to other EU states over the next two years.
It puts our situation and response into some perspective when a tiny island belonging to a country who is broke can offer temporary safe haven to thousands of people. What are we doing to help?
“Unlimited growth and prosperity, even when financed by unlimited debt, doesn’t work. Greece is an example should be a wake up for all of us.”
Harquebus, you’re like a broken record. Over the last 30 years the birth rate has been decreasing and the mortality rate has been increasing. Greece is not an example of unlimited growth.As for unlimited debt, part of the EU treaty mandates that member nations are required to keep their budget deficits below 3% GDP. Even Germany hasn’t done that well. They just look good when compared to those nations who have fared the worst. In 2010, agriculture contributed about 3.8% to Greece’s GDP. Agriculture in Australia accounts for about 3% of our GDP. Shipping and tourism contributes far more to their GDP. Shortage of labour isn’t a problem either. Greece has a high rate of unemployment and it is due to the senseless and failed economic policies that have killed jobs.
I am willing to let coming events speak for themselves. My track record is pretty good and that is not a good thing.
Budgets and GDP do not factor resource depletion and is why economists and such continually get it wrong.
“More than 1,800 migrants have died so far this year attempting to cross the Mediterranean – a 20-fold increase on the same period in 2014.”
Abbott’s rationale for stopping the boats was to save lives. He clearly hasn’t stopped the boats from departing their homeland and he isn’t saving lives. He is only stopping the boats from arriving in Australia.
Thank you jimhaz for your comment.
This website is wonderful for its commentary and interesting articles. I particularly like the comments and to read differing opinions and to learn why people think as they do.
However, Lee, I do not understand why you were so rude. From your comment: “I wonder if Jimhaz can actually understand this, assuming he bothers to read it.”
What does this mean? And why did you say it? This type of attack has no place in this discussion. Was it because his opinion differed from yours?
Harquebus, when you blame absolutely everything on unlimited growth, even when it isn’t true, and you refuse to accept any evidence to the contrary, then of course you’re always right. I suppose unlimited growth and deficits is also to blame for your inability to apply logic too.
Jo, if you read the article, you will find that one of the world’s foremost economists disagrees with Jimhaz on who is to blame, and he’s not the only economist who does. Jimhaz likes to troll this site.
Bill Mitchell’s article from yesterday. http://bilbo.economicoutlook.net/blog/?p=31294#more-31294
“the Greek people voted overwhelmingly NO to reject austerity as a viable policy model for their country. This is a case of democracy coming head to head with the dominant political-economic ideology within which the Greek nation is situated – the Eurozone. It also demonstrates the flaws of the democratic process – the people have voted for an end to austerity but also consistently tell opinion polls they want to remain in the Eurozone, a monetary system that is built on austerity. They voted yesterday to reject the very basis of the monetary system they want to stay in – which tells us they don’t really understand the nature of the system and therefore how informed is the NO vote.”
Mitchell has recently published a book entitled “Eurozone Dystopia – Groupthink and Denial on a Grand Scale”. Details are underneath the above blog post for those who are interested.
Here’s another of his blog posts from last week – European Court of Justice effectively rules that Eurozone is a shambles
Smart Austerity – its just the same dumb austerity
““In its current form, EMU is not viable in the long run”. That quote comes from a Report – Repair and Prepare – Strengthening Europe’s Economies after the Crisis – jointly published by the – Jacques Delors Institut (located in Berlin) – and the Bertelsmann Stiftung – (located in Gütersloh, Germany). The Report purports to lay out a blueprint to prepare Europe for the “next potential threat to its very existence”. It proposes a “path towards renovation” to create an “ever closer union”. They claim that they have taken up this task because there is “extensive ‘crisis fatigue’ and ‘euro area debate fatigue’ in “in governmental circles and the media”. I would call it adherence to ideological Groupthink rather than fatigue. There has been a major failure yet none of those who created the failure have put their hands up to take responsibility. Once they dismissed the problem as being caused by “profligate and fat Greeks (insert vilified nationality as to your preference)”, various policy makers and media commentators resorted to the even more amorphous “structural problems” to explain the on-going crisis. The media has been full of captive writers who just reiterate press releases from neo-liberal politicians and/or mainstream economists. So is this new Report different? Is their plan viable?”
Joseph Stiglitz again http://www.salon.com/2015/02/06/joseph_stiglitz_austerity_failed_greece_partner/.
“We hardly needed another test. Austerity had failed repeatedly, from its early use under US President Herbert Hoover, which turned the stock-market crash into the Great Depression, to the IMF “programs” imposed on East Asia and Latin America in recent decades. And yet when Greece got into trouble, it was tried again.
Greece largely succeeded in following the dictate set by the “troika” (the European Commission the ECB, and the IMF): it converted a primary budget deficit into a primary surplus. But the contraction in government spending has been predictably devastating: 25% unemployment, a 22% fall in GDP since 2009, and a 35% increase in the debt-to-GDP ratio. “
Trickle down economics – the evidence is damning
“The condition known as – Schizophrenia – describes “a mental disorder often characterized by abnormal social behavior and failure to recognize what is real”. Then again, the condition known as – Dissociative identity disorder – describes a condition where a person has “at least two distinct and relatively enduring identities or dissociated personality states that alternately control a person’s behavior”. If these states can be applied to institutions, then the OECD needs urgent medical attention. The OECD released a working paper yesterday (December 9, 2014) – Trends in Income Inequality and its Impact on Economic Growth – by Federico Cingano. It provides evidence that destroys the basic tenets of neo-liberal economics and supports a wider social and economic involvement of government in the provision of public services and infrastructure, particularly to low income groups. The fiscal implication is that deficits need to be higher.
I wonder whether the OECD has bothered to check the message in the paper against its other ideologically-motivated public stances relating to the need for fiscal surpluses, deregulation, structural reform, etc.
As an organisation, the total ‘product’ doesn’t add up.
If you don’t want to read the whole Working Paper, then there is a convenient – Four-Page Summary – which avoids the technicalities but delivers the message.
You can also access the underlying – Tables and Data – for the report.”
Links to the report, summary and tables are contained in the blog post.
“blame absolutely everything on unlimited growth” – mostly true
“even when it isn’t true” – false
“refuse to accept any evidence to the contrary” – not true and same to you.
“then of course you’re always right” – only when I am and I am.
“your inability to apply logic” – my diploma in computer science says otherwise.
The banks will close their doors in this country in the not too distant future. The international fiat monetary ponzi scheme (perpetual economic and population growth) has met physical reality and Greece is an early casualty. Italy, Portugal, Spain and now France and The Netherlands will not be far behind.
Our government members are among the legions which having eyes, see not, having ears, hear not, having brains, fail to use them and are blinded to truth by ideological nonsense.
“..will not be far behind”. Harquebus, you need to give us a time line for your prediction to be falsifiable, you know. Tell us: 20 Years? Maybe 50? I’l put your diploma in CS against my Ph.D.
Before the end of this decade and perhaps as early as next year.
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IMHO our CMOIs are severely handicapped by their master. They believe it is the rich who create jobs, but they only provide some of the capital needed. It is the poor – the bottom 20% who create demand, when and only when they have surplus money to spend on “things” which the rich then decide that it is time to increase production and hence remove more profits from the system. Legrande got it right. Give money to bottom 20% and growth increases for the next 5 years.
The CMOIs are removing surplus money from the bottom 20% and are wondering why the economy won’t grow.
There will be an election sooner than later. And we’d better get it right err left this time to get a government who looks after the bottom 20% – the real lifters in terms of economic growth.
Economic Historian: ‘Germany Was Biggest Debt Transgressor of 20th Century’
Think Greece’s current economic malaise is the worst ever experienced in Europe? Think again. Germany, economic historian Albrecht Ritschl argues in a SPIEGEL ONLINE interview, has been the worst debtor nation of the past century. He warns the country should take a more chaste approach in the euro crisis or it could face renewed demands for World War II reparations.
Measured in each case against the economic performance of the USA, the German debt default in the 1930’s alone was as significant as the costs of the 2008 financial crisis. Compared to that default, today’s Greek payment problems are actually insignificant…..Germany is king when it comes to debt. Calculated based on the amount of losses compared to economic performance, Germany was the biggest debt transgressor of the 20th century.
It is time for Germany to speak a little more quietly to Greece – what goes around comes around.
Memories are often conveniently short when it comes to money.
The EU’s financial management model is fundamentally flawed – with all EU member ‘states’ domestic economy’s using a common foreign regulated currency wealthy nations become ‘rent-seekers’ – those states get richer; while the ‘rent-paying’ poorer nation states get poorer incurring mounting unpayable debt.
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Interesting article. However I can’t see any lessons in the current Greek difficulties with the EU for Australia. The circumstances out of which the Euro crisis have emerged are too far removed from those which apply down under to draw meaningful parallels other than at the most general levels. The Abbott government for its own purposes adopts the facade of fiscal responsibility but it is a fiction. After a half hearted and impossibly clumsy attempt at ‘reining in the spending’ in the idiot Hockey’s first budget they are now generally acknowledged to be economically willing to do whatever they think will buy them another term. No commitment to economic austerity in this rabble. In fact no commitment to anything beyond getting re-elected.
IMHO is “in my honest opinion” but, what does CMOI mean?
A couple of others.
MOTU masters of the universe.
TPTB the powers that be.
I only know a few.
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