Austerity is a policy used by governments to reduce budget deficits during recessions, and includes spending cuts or tax increases to gain competitiveness and/or reassure creditors. Sweden and Canada attempts in the 1990s were successful because of high external demand and devaluation underpinning households’ and companies’ expenditure in spite of wage flexibility. Not only are these conditions absent today, the inequalities and private debts these policies have wrought are too easily forgotten (Giuli, 2012). The critical success factor is the overall decrease of GDP caused by austerity. If too important, your income falls faster than your spending cuts, and your debt gets bigger. But if your weltanschauung leads you to be skeptical over the ability of budgetary policies to produce wealth, you are likely to underestimate such factor, as the IMF did (NYT’s Editorial Board, 2013). They forgot companies do not simply invest when they pay less welfare taxes. They must expect profit, and will not if there is no foreign demand to compensate pressure on domestic demand triggered by terrible austerity results on employment, public health and education (Stiglitz, 2014). But how can we reimburse this debt if the measures implemented by our creditors to secure it do the opposite? This unsustainable technocratic aporia confronting increasing public discontent reflects what Habermas called an “input” and “output” crisis: governments being unable to achieve legitimation and rationality (Burnham, 2014).
In Europe, the depth of the problem goes beyond mere southern financial slackening. I argue this is also the result of a failing German hegemonic denkverbot. According to Doctor Frankfurt, deficit and inflation are the two greatest poisons in the world, and their only antidotes are budgetary and monetary austerity. All European treaties reflect this particular angst. However, no treaties had mechanism to stop Greek government from squandering cheap money in Olympic Games and armament. After the financial markets decided PIIGS were not as reliable as Germany, only the European Central Bank could help their finance. Germany made sure treaties would not allow that. She eventually accepted reluctantly (the Eurozone really was on the verge of collapse) in exchange of tough structural reforms (the kind of which does not level differences…) (Varoufakis, 2014). Then, should Germany at least enact a stimulus to constrain her commercial surplus and support the Eurozone activity? Maybe. But do not expect that. Really, as the ECB, the Bundesbank was made to combat inflation; the rest has always been optional.
As Marx and Engels said in the German Ideology(!): “the ideas of the ruling class are in every epoch the ruling ideas”. Germany thinks her sonderweg can apply to everyone, and has made Europe believe so hitherto. Not only it cannot, it’s not even a success (Böll et al., 2012). Her growth is weak. Her inequalities are rising. Her aging demography partially explains her low unemployment. Her precariat has never been so important (especially for women) and lacks trade-unions (which are always more divided). Even full-time workers need public assistance for a living! Let’s admit it once for all: there is no German model.
By: Aymeric Vassas
- Giuli, M., 2012. ‘The Fairy Tale of Expansionary Austerity’, on social-europe.eu [accessed on 21/11/2014].
- New York Times’ Editorial Board, 2013. ‘The I.M.F. Admits Mistakes. Will Europe?’, on nytimes.com [accessed on 21/11/2014].
- Stiglitz, J., 2014. ‘Europe’s Austerity Disaster ’, on social-europe.eu [accessed on 21/11/2014].
- Burnham, P., 2014. ‘Depoliticisation: economic crisis and political management’, in Policy & Politics, vol 42, no 2, pp 189-206.
- Varoufakis, Y., 2014. ‘GERMANY’S CHOICE: AUTHORITARIANISM OR HEGEMONY? (*)’ on yanisvaroufakis.eu [accessed on 21/11/2014].
- Lordon, F., 2013. ‘De la domination allemande (ce qu’elle est, et ce qu’elle n’est pas)’ [On German domination (facts and fantasies)], on blog.mondediplo.net (French website)[accessed on 21/11/2014]
- Böll, S, et al., 2012. ‘Millions Left Behind in Boom: The High Cost of Germany’s Economic Success’ on Spiegel.de [accessed on 21/11/2014].