European economic austerity measures:
European capitalism marches – at the moment – to the drumbeat of those favouring ’austerity’, like the British Conservatives and Angela Merkel, the German Chancellor. But the road of austerity will enormously compound the economic crisis. The economic ‘recovery’ was mainly due to restocking. There is now a ’sovereign debt crisis’ because government debt soared due to the state bail-out of the banks and the rise of unemployment and welfare payments.
Peter concurred with American Keynesian economist Paul Krugman, when Krugman said that the crisis would be more like the depression of the late 19th century, which was a drawn-out economic stagnation, than the 1930s crisis . Keynesianism cannot solve the problems of capitalism in the long term because eventually either the working class pays through increased taxes and inflation or the capitalists go on an investment ’strike’, if they are made to pay. One writer in the Guardian newspaper (London) claimed that Keynesianism was ‘dead’ following the G20 summit. But further stimulus packages may be necessary to rescue the system, particularly if there is a tsunami of mass protests.
Neither will the private sector solve the problem. In Britain, 750,000 public sector jobs are to go and as a consequence 600,000 private sector jobs will also disappear, yet the private sector is supposedly to create two million ’new’ jobs! The weakness of Britain’s industrial base will shatter the illusion that it can export its way out of the crisis. Germany has had some increase in exports but the rest of the de-industrialised world, particularly the rest of Europe, will not be as lucky. And China is now facing a slowdown due to overheating and a property collapse. There has been over-investment and massive surplus capacity. China’s decision to revalue its currency, the renminbi, has seen a miserly rise (0.77%) so far and is not having the desired effect of cutting China’s trade surplus with the US.
Even if there is some economic revival in Germany, it will not be noticed by the masses because of the increase in unemployment, accumulated losses in income and the fall in living standards. Millions of workers in Europe now are on worse conditions than existed before crisis, with the general enforcement of neo-liberal policies. The capitalists will push more workers into the less formal and insecure sector, so they are easier to sack.
Britain’s new coalition government leads the way in attacking workers’ conditions. Brutal cuts plans will cut redundancy payments to civil servants and the whole public sector faces a reduction in pension entitlements. There is a European-wide assault on pensions. In France, President Sarkozy wants to raise the pension age to 62 by 2018. Anatole Kaletsky, in the Times newspaper (London), bemoaned the fact that people live too long after retirement.
