So I was quite surprised a week ago to find, tucked away on
page A-11 of the November 30 edition, a piece by the WSJ’s Stephen Fidler that
actually hinted at the identity of the real beneficiaries of the bailouts and debt
crises:
“Despite the complications, this
week's deal on Greece's debt points to an (almost) iron rule of sovereign-debt
crises: Significant losses fall on taxpayers in creditor countries because debt
originally extended by private creditors, one way or another, ends up on the
balance sheet of the public sector.”
This sounds eerily like the searing indictment of the
bailout in a recent book by York University professor David McNally:
“In short, the bad bank debt that
triggered the crisis in 2008 never went away – it was simply shifted on to
governments. Private debt became public debt. And as the dimensions of that
metamorphosis became apparent in early 2010, the bank crisis morphed into a
sovereign debt crisis. Put differently, the economic crisis of 2008-9 did not really
end. It simply changed form. It mutated.
“With that mutation, the focus of
ruling classes shifted toward a war against public services. Concerned to rein
in government debts, they announced an age of austerity—of huge cuts to pensions,
education budgets, social welfare programs, public sector wages, and jobs. In
so doing, they effectively declared that working class people and the poor will
pay the cost of the global bank bailout.” (Global
Slump, p.4)
There
has been much talk of these austerity cuts falling on corporations and workers,
on rich and poor alike. The catch phrase is “shared sacrifice”. But as McNally
explains:
“The
ultimate purpose of all this is to preserve capitalism and the wealth and power
of its elites. And so far the bailouts and their aftermath have decidedly
served that end. As a columnist
with the Times of London observes,
‘The rich have come through the recession with flying colours … The rest of the
country is going to have to face spending cuts, but it has little effect on the
rich because they don’t consume public services.’ The candidness of this statement is to be appreciated. But
there is one error in this passage. These cuts do in fact have an effect on the
rich: they help them. After all, they are essential to the massive transfer of
wealth from the poor to the rich that funded the rescue of the world banking
system, the bailout of corporations, and the salvage of the investment
portfolios of the wealthy.” (Global Slump, p.5)
How big
was this bailout, this “massive transfer of wealth from the poor to the
rich”? Including loans, loan
guarantees and outright handouts, McNally puts it at between $20 and $30
trillion – pretty much in line with other estimates, including last year’s
audit of the U.S. Federal Reserve System.
But
wealth knows no shame: the corporations and the super-rich not only profited
grossly from the huge transfer of wealth, they now blame the resulting swollen
public debt on the victims. For example, they blame the $2 trillion in
cumulative U.S. state and municipal debt on public workers’ wages and pensions
and on the cost of providing essential services to the poor, the disabled, and
the elderly. Politicians of both
the Democratic and Republican parties agree on the need for cuts to all of
these – they only disagree about the size and the pace of those cuts. Meanwhile, in Europe, the Greek,
Spanish, Portuguese, Irish, and Italian working classes are told that they are
to blame for the sovereign debt crises in their respective countries. But as the
Wall Street Journal’s Fidler observed in his previously referenced, and
surprisingly candid, article:
“Lenders
as well as borrowers created the crisis. For a decade after the euro's
creation, investors and banks in Northern Europe financed directly or indirectly
the deficits of governments like Greece, or the mortgages and construction
loans of Spanish homeowners and builders, at very low interest rates. Their
subsequent calculation that those investments were too risky to go on created
the crisis.”
Fidler
goes on to comment on the most recent terms for “settling” the Greek sovereign
debt crisis, and notes that while it won’t alleviate the intense suffering
imposed on the Greek people, it will indeed share the suffering – with the
Northern European workers (Fidler calls them “taxpayers”, but there’s no doubt
which taxpayers will bear the brunt of the burden):
“But now, particularly after the proposed
buyback of some of the remaining private-sector debt, a vast majority of Greece's
debt will be held by the public sector—the euro-zone governments and their
bailout fund—the European Financial Stability Facility—as well as the European
Central Bank and the IMF.
They will thus have the onus to make sure it
is manageable. Costs will fall on the shoulders of taxpayers in Northern
Europe, in spite the past best efforts of their governments to avoid it.
Getting to this point has been a tortuous journey, not to speak of a very
painful one for the people of Greece. And it isn't yet over..”
Shakespeare
observed in the opening scene of Coriolanus, “Our misery is their abundance;
our suffering is a gain to them.” So it was. So it is. And so it will remain.
Until we throw off their yoke.
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