It is extraordinary how the economic crisis engulfing much of Europe has been constructed as a failure of nation states to manage their budgets when it was so clearly a consequence of a rapacious US banking and finance sector on a lending binge.
While some institutions in that sector paid the ultimate price – liquidation, fear of systemic failure led governments to protect the industry from itself. Bank guarantees, bailouts, quantitative easing and so much more provided the banking and finance sector with the life raft it needed to avoid sinking without a trace under the weight of its speculative excess.
Meanwhile millions of people are sinking into long-term unemployment and hardship.
The consequences of all of this are playing out in complex and insidious ways as I discovered last month in Britain. Turbo-charged neo-liberal economic policies, from the very same stable of policies that brought you the Great Recession, are being imposed on an unimaginable scale. They are wrapped up in the seductive language of austerity – the notion that we must stop living beyond our means, dramatically reduce debt, cut government spending and create new spaces for corporate profitability unburdened by the heavy weight of government intervention. How can it be that solutions to the crisis so closely mirror the policies that precipitated the crisis? In Britain at least this can be explained by the election of a neo-Thatcherian government that appears determined to dismantle the last vestiges of the British Welfare State including the National Health Service!
A great policy tragedy is unfolding with the hollowing out of the British public service. Nothing is immune from privatisation and outsourcing as the Cameron Government encourages communities to bid for the provision of services that have long been collectively provided. Nothing can be taken for granted anymore as the politics of austerity turbo-charges neo-liberalism in Britain and beyond.
That this situation is unfolding in the wake of the global financial and economic crisis is deeply disturbing but not surprising. Out of crisis sometimes comes reform and radical change but normally only when great community pressure is brought to bare or new political formations emerge to challenge the status quo. Some of this is happening as the protest movements against austerity and corporate excess in some parts of Europe demonstrate but overwhelming power firmly remains in the hands of the advocates of neo-liberal austerity policies. These are in large part the architects of the failed banking and finance sector policies that brought you the Great Recession.
Austerity policies conveniently shift the burden of the Great Recession away from the banking and finance sector to government budgets, socialising corporate losses while cutting public spending on core services like health and education. Burden and risk shifting is taking place on an unprecedented scale as pro-austerity governments socialise corporate failure and create new opportunities for capital accumulation through privatisation and outsourcing of public services. This new wave of privatisation appears to be an endgame for neo-liberal governance, undermining collective provision through systemic marketisation.
While all of this plays out the causes of the global economic crisis remain unresolved and the consequences perpetuated. Austerity programs are undermining recovery by starving economies of the public investment they need to grow. The effects of stimulus packages, where they were introduced, have worn off, exposing the collapse in demand that is fueling business closures and rising unemployment. Budget cuts now reinforce and magnify the crisis – a reality that will ultimately cause some in the business community to question whether austerity measures are in their interests or those of the banking and finance sector.
When the last wave of neo-liberal economic policy swept the United States and Britain during the 1980s, Australian conservatives slavishly followed. They are likely to do so again. There is a close relationship between the British and Australian conservative parties, made closer in recent times by the role that former Australian Liberal Party strategist Lynton Crosby is set to play as an architect of the Cameron Government’s bid for re-election. Crosby helped to steer the Howard Government to successive victories and no doubt will play some role advising Tony Abbott in the lead up to the Australian Federal election next year. Australia would almost certainly join the coalition of austerity adopting countries if there is a change of government next year. If it does then we will begin to feel the full brunt of the global economic crisis in Australia. The current obsession with realising a budget surplus adds fuel to the austerity fire, giving currency to austerity measures as the Labor Government pursues its own program of public expenditure cuts. A Liberal Government can conveniently argue that Labor didn’t go far enough and it will if it is elected. More than this it will pursue the most radical recasting of the role of government in recent Australian history – government of the corporation for the corporation. Sounds far fetched? It is unfolding in Britain and beyond right now.
Associate Professor John Spoehr is the Executive Director of the Australian Workplace Innovation and Social Research Centre at the University of Adelaide