When British Prime Minister David Cameron warned
three years ago that Europe was entering an “Age of Austerity,” he spoke more
truly than he knows, because the fiscal policies he and his allies advocate are
certain to doom the continent to permanent financial retrenchment. In fact, the
Age of Austerity began in tandem with capitalism itself, an economic system
that has been in continual crisis ever since its birth five centuries ago.
Thankfully, the human race has an alternative in the form of distributism,
whose principles can provide us with a more benevolent and workable recipe for
belt-tightening.
The 27 nations that today comprise the European Union
were hit hard by the global financial crash that began in late 2008, which laid
bare numerous errors in the economic strategies and fiscal policies of their
leaders. The painful consequences are still being felt, particularly among the
17 EU members who have joined the Eurozone monetary union and its common
currency, the euro. The headlines have been full of dire warnings of financial
collapse as leading industrialized nations like France, Spain, Italy and Greece
have adopted increasingly stringent yet futile austerity measures. The issue
came to a head in June, when political parties opposed to the government’s
emergency fiscal policies nearly won elections in Greece, prompting speculation
about the potential for a breakup of the euro bloc. When pro-austerity forces
eked out a narrow victory, the markets cheered – but the people of Europe
should have groaned, for the standard method by which their leaders plan to go
about austerity has proven disastrous wherever it has been tried.
The Checkered History of Standard
Austerity Policies
The leaders of Greece and the rest of Europe are
essentially following a standard script for austerity programs developed by
institutions like the International Monetary Fund (IMF) and World Bank, which
were created in the aftermath of World War II to stabilize the postwar international
economy. Unlike the IMF, control of the World Bank is not determined by a
voting system apportioned by the amount of a particular nation’s contributions,
but the leading donors can still refuse to withhold funding – which ultimately
had the same effect of vesting authority over them in a handful of rich Western
nations plus Japan. From the beginning,
American viewpoints on economics colored the thinking of both institutions,
which gradually evolved into a means of financial supervision over the Third
World; by the 1980s, the IMF had even become the de facto credit rating agency
of last resort for all international lending by governments and the private
sector.[1]
The policies adopted by both essentially followed the same lines as
Washington’s own international aid programs and agencies, such as the U.S.
Agency for International Development and the Alliance for Progress, which
promoted a narrow view of capitalist economics that was specifically intended
to make money for Big Business here in America, not help the poorest of the
poor in the Third World. For example, in the ‘60s about 93 percent of the goods
bought with USAID funds had to be bought in the U.S., where producers jacked up
prices to take advantage of both American taxpayers and the recipients of the
aid.[2]
Even food aid, through programs like the PL480 food program, was diverted to
subsidizing American agribusiness at the expense of the Third World producers,
and was even on occasion used as a weapon to change the political allegiance of
starving people, as it was in Guatemala during the 1960s.[3]
Most Americans believe that their government profligately supports the rest of
the world through generous aid programs, but nothing can be further from the
truth; except in rare cases of dramatic famines, most of our aid is given with
the aim of securing specific political and economic advantages, which often
contributes to poverty rather than reducing it. Military aid is our chief form
of assistance and has historically been given to puppet civilian governments
and dictatorships, which use it to impose a precise view of economics on Third
World nations, which drains their wealth to local elites and our own capitalist
class. Naked repression of this sort is only necessary to the capitalist
system, however, when more subtle means fail – such as manipulating foreign
elections, which the CIA began devoting the largest share of its budget to in
the 1980s. Another commonly overlooked cog in this system of neo-imperialism is
financial supervision, which the richest economies demand in return for loans
to keep insolvent nations afloat.
This type of neo-colonial influence was pioneered by
the U.S. to counter the Bolivian Revolution of 1952, whose leaders nationalized
the foreign companies which exploited the country’s tin mines and other sources
of income. Bolivia’s fate is a textbook example of how many nations throughout
the 20th Century essentially lost their independence by agreeing to
foreign aid on skewed terms, including loans. Gradually, in a subtle way,
American officials undermined the Revolution through such means as demanding
that trade debts to the U.S. be cancelled; that Bolivia purchase food and other
goods from America; compensation for the nationalized firms on American terms;
requiring matching funds for grants, but vesting authority over their use
solely in American officials; denying aid to nationalized industries; whittling
away at worker and union control of factories; and worst of all, allowing
American officials to draw up the nation’s investment laws, including its 1955
oil code. As a result, foreign investment flooded the country, depriving
Bolivians of local control of their own resources, while American officials
simultaneously gained control over their national budget and left them no money
for spending that would actually aid the common people.[4]
To compound the problem, the nation was forced to accept an IMF stabilization
program designed by George Jackson Eder, who bragged that it constituted a
“repudiation” of the Revolution. It "...called for the establishment of a
single rate of exchange; a policy of a balanced budget; elimination of price
controls, revertibles and subsidies, including to subsidized commissaries;
termination of deficit financing of autonomous enterprises with central bank
credit; abolition of all restrictions on private imports, exports and exchange
payments; and granting of cost-of-living increases and other compensation to
make up for the anticipated price increases."[5]
It is highly unlikely that our fellow Western nations
will ever meet the extreme fate of Bolivia’s revolutionary government, which
was overthrown in a 1964 coup on American orders, by military officers trained in
the U.S. It is instructive, however, of how tied loans and IMF “aid” in
particular can sap a nation’s financial independence. The same policies
pioneered in Bolivia have not only been refined but extended to much of the
rest of the planet in the half-century since then, so that countless millions
of people have experienced first-hand what journalist Carleton Beals said of
Bolivia long ago: “The government could hardly play dog-catcher without U.S.
permission.”[6]
Our share of international aid has dropped in comparison to other rich nations
and our influence within institutions like the IMF and World Bank has withered,
but America still retains the most direct influence of any single nation over
the global financial system; moreover, our biases about austerity have carried
the day among capitalist economists the world over, who almost universally
subscribe the same ideas. Ideological resistance to the standard script for
austerity is now virtually nil among academia, government and corporate leaders
the world over, but resistance on the streets has only grown more intense among
the common people affected by such programs, with good reason. Wherever this
brand of austerity is applied, national independence and democratic control of
national budgets is deliberately eroded by the IMF, World Bank and the like,
which in turn demand that countries cede control over their economies in return
for more loans. In addition, austerity programs of this kind have taken a
vicious toll on human life, for the simple reason that they are designed to
extract more wealth from the poorest and most vulnerable people, not to make
the profligate elites who exploit them go on a diet. It is no accident that
numerous surveys in the 1980s and 1990s
invariably showed dramatic worsening of infant mortality, caloric
intake, per capita income, real wages and other humanitarian measures in
nations that adopted IMF stabilization programs, such as Peru, Chile, Sri
Lanka, Mexico, Jamaica, Brazil, the Philippines and many Sub-Saharan African
countries. To put it simply, this brand of austerity kills people. The common
people of Third World nations afflicted by them don’t always take it lying
down, which is why such programs are often accompanied by rioting, as Brazil,
Tunisia, Morocco, the Dominican Republic, Peru, Egypt and Sudan all experienced
in the 1980s; in the midst of one anti-IMF riot, Zambian President Kenneth
Kaunda had to make a dramatic escape by helicopter.[7]
The same failed policies were applied with equally disastrous results in the
former Soviet bloc, as the democratic and quasi-fascist governments which
replaced the Communists were suckered into applying “shock therapy” to their
own economies. Most indices of humanitarian well-being fell across the board throughout
Eastern Europe in a dramatic fashion, while kleptocratic officials made
millions overnight by simply stealing entire industries from the public.
It
was already common knowledge that the same policies had repeated failed in country
after country prior to that, the Western economists who carried out “shock
therapy” on Eastern Europe simply pretended that there was no alternative to
the pain they knew their programs would bring – just as they pretend today that
the people of Greece, Spain, Italy, France and the rest of the West have no
choice but to tighten their belts in one narrow, specific way. Fortunately,
there are other means of restoring solvency to our financial systems, which
should come as good news to protestors and political parties in places like
Greece who are groping for a more humanitarian means of belt tightening.
Unfortunately, our businessmen, politicians and academicians are willfully
blind to the alternatives, because they fly in the face of the false economic
religion they have succumbed to - which needless to say, also lines their own
pockets. For the last half-century a serious disjunction has emerged between
millions of ordinary human beings the world over who have first-hand experience
with the failure of austerity, but have no solid ideological alternative to
counter their rivals, who are insulated by ivory towers and fat bank accounts
from the consequences of their detailed but entirely false ideology. What the
people of Greece and Zambia need today, and the people of America will need
tomorrow, is an alternative economic ideology that has actually worked in
practice, unlike Marxism, without allowing the few to exploit the many, as
capitalism always has. Distributism is a term virtually unknown outside of
Catholic intellectual circles, but it represents the only remaining ideological
opposition left on the planet to capitalism, now that Communism has been dead
for a generation. Capitalism, in fact, is specifically designed to turn the
sane economic principles of distributism on their head. By turning them
right-side up again, we can discern a better method of belt-tightening that
will save lives and the guarantee the independence of all nations, rather than
deliberately taking both to benefit the rich.
Eternal Crisis, Permanent Austerity
Volumes have been written between about the stark
differences between capitalism and distributism, but it is unlikely that anyone
you’re acquainted with has ever read them. There is no easy way to illustrate
the chasm between the two ideologies, because it is so vast - except perhaps to
explain them in terms of religion, for the entire mindset of capitalism, right
down to each individual economic policy recommended by capitalist economists,
is geared towards one purpose: satisfying the avarice of those who have the
most capital. It springs from an unspoken yet highly detailed faith, as does
its opposite, distributism, which is a summation of a long tradition of
economic thought stretching from Moses, to the economic policies of the
medieval Catholic Church, to the encyclicals of recent popes like Leo XIII
(1878-1903) and Pius XI (1922-1939) and writings of 20th Century
Catholic intellectuals like G.K. Chesterton, Hilaire Belloc and Arnold Lunn. It
was Chesterton who pointed out a crucial contrast between the two: that
capitalism merely uses the language of “private property” and “opportunity,”
when in fact, it exists to destroy both, by transferring property to the upper
class and extinguishing opportunity through monopoly power. Distributism, on
the other hand, preserves private property by making sure it is divided
somewhat equally; as Leo XIII said, in a distributist state the “law,
therefore, should favor ownership, and its policy should be to induce as many
as possible of the people to become owners.” Socialism and Communism (which
have been dead for a generation now, despite the delusions of Rush Limbaugh’s
“dittoheads”) attempt to bring about rough economic equality by sacrificing
political equality and expanding Big Government to encompass all economic life,
whereas in capitalism, Big Government is simply the servant of Big Business. When
capitalists whine about Big Government, they merely despise the parts of it
which still actually serve ordinary people, by protecting them from
exploitation. Distributism has next to nothing in common with either failed
philosophy. It ensures both economic and political equality by using
governmental power only when necessary, primarily to prevent Big Business from
amassing too much wealth and power at everyone’s else expense; progressive
taxation and limited nationalization of key industries (such as oil) can be
used in distributism, but the goal is to foster the development of small businesses.
When the means of production are better distributed, economic freedom (and
ultimately political liberty) are maximized because more workers have direct
control of their own labor as owners, those who do not own have more choices of
employers to work for and consumers have more choices of producers to buy
from. Socialism and Communism denied all
of these principles by the mistaken assumption that the common people are too
stupid or lazy to work efficiently for themselves and must thus be ordered around
by bureaucrats. Capitalism denies the same principles with the condescending attitude
that privileged elite of rich businessmen must direct both the workers and the
bureaucrats alike. When capitalists speak of economic freedom, they merely want
the liberty to pick the pockets of the public without interference; when they
express hatred of Big Government, they merely detest the parts of it that
actually still protect the common man.
Ultimately, capitalism stems from one of the ugliest
and oldest sins of all, class prejudice – which is uncomfortably close to the
first error of Satan, to think that he was above all the other angels simply
because he was the brightest. His followers among us, likewise, use their
material gifts as weapons to separate themselves from the rest of us;
capitalists today decry “class warfare,” but the rich always wage it constantly
against the rest of us and only cry foul when we fight back. Distributism, on
the other hand, stems from the entirely opposite philosophy that all men were
created equal; because they were closer to these original Christian principles,
our Founding Fathers realized this and half-consciously put it into practice
through wise policies that divided up America’s land relatively equally,
thereby laying the groundwork for a great nation. Teddy Roosevelt’s
trust-busting, the early labor movement, the Populist Party and some aspects of
the Progressive movement all put into practice aspects of distributism without
realizing it, because deep down, they believed in equality out of authentic Christian
motives. They were trying to rectify faults in the American system that were
actually laid in England during the Reformation, when the first generation of
Protestants junked the whole medieval system of economics, which had produced
the Renaissance. One by one, they substituted an entirely different moral
system for that of medieval Catholicism, which ultimately stretched back to
Moses. During this vast span of history, the Catholic Church and Old Testament
leaders consistently preached against what can be conveniently grouped together
as the Seven Deadly Economic Sins: theft, fraud, hoarding, usury, speculation,
charging unjust prices and paying unjust wages. In Old Testament times,
Biblical institutions like the Jubilee and gleaning prevented monopolists from
hoarding the means of production and perpetuating inequality, whereas in
medieval times the same principles were kept alive by secular and canon laws
which punished such evils. Guilds protected workers and prevented cut-throat
competition; punishment of usury prevented banks from gaining too much power; businessmen
who tried to corner markets by the same methods as John D. Rockefeller or Bill
Gates were publicly whipped in the town squares in medieval times. The first
generation of Protestants, however, substituted an antithetical system of
economic morality, in which any price a person could get away with was assumed
to be just and any wage an employer could force a worker to accept under duress
was assumed to be deserved. Laws and taboos against usury and speculation
disintegrated, which is precisely why the first economic bubbles in the history
of Western civilization began exactly then, such as Tulipmania in early 17th
Century Holland. Throughout Europe, the Protestants and later wayward
generation of Catholics forcibly destroyed the guilds and repealed laws against
market cornering and hoarding, thereby leading to the logically inevitable
consequences of unregulated, cut-throat competition, once victors emerged:
monopolies and oligopolies in one sector of the economy after another. Contrary
to the twisted thinking of irrational philosophers like Adam Smith, no
“Invisible Hand” emerged as a referee a fair fight in the marketplace, which
had previously been maintained by guilds and governments. Ever since then, the absence of effective
trust-busting legislation has allowed monopolies and oligopolies to proliferate
across the planet and take away economic freedom from workers and consumers alike.
Furthermore, despite all of their rhetoric about the sanctity of private
property, the first capitalists simply stole vast quantities of land and other
assets from various arms of the Catholic Church, including countless hospitals,
monasteries, universities and charitable institutions. After that, they engaged
in what was termed the “enclosure movement,” which was simply a ploy by the
rich to steal all of the common lands that the ordinary peasants depended on
for production. Once they were no longer able to support themselves in their
own small businesses or farms, the common people were forced to go to work in
factories owned by capitalists.
The
result of turning all of the principles of economic justice on their head was
not prosperity but instantaneous poverty; living standards in the original
centers of the capitalist system, such as England, actually plummeted and
didn’t recover for centuries. In the absence of the workfare system the
Catholic Church had maintained for centuries, the first capitalists were forced
to create the very thing they hated the most: public welfare, which began
precisely in the same countries at the same point in the 16th
Century. It is not possible to have a workfare system under capitalism, because
if the poorest people were put to effective work, it would create competition
for existing capitalist monopolies and increase the bargaining power of
workers. That is why it has been with us ever since, to the chagrin of
capitalists everywhere. Ironically, it is they who created the permanent
scourge of unemployment, for a reason so obvious that it is often ignored: the
system is designed to ration work so that only the jobs that the rich want done
can be financed, which are not necessarily those that make economic sense. From
the beginning, the system has been completely unworkable, which is why it can
only be sustained by continually finding new classes of victims to exploit.
Once the property of the Catholic Church and the peasantry had been stolen, the
capitalist system continually expanded to the rest of the planet, bringing
misery wherever it went; it drew new sustenance from international slavery
until the 19th Century, then grew fat on colonialism, in which the
entire Third World was subjugated under the boot of the Western nations and
Japan. And in the 20th Century, it survived by stealing an even more
lucrative source of capital: the resources that were once devoted to feeding
future generations of human beings. It’s simple math: subtract the number of
children that each woman used to have by the number they have now, multiply by
the number of people and the cost per child, and you can see that birth
prevention and abortion have been lucrative to most of the planet for the last
eight decades or so to the tune of many trillions of dollars. Families then use
those savings to buy more consumer goods to keep up with the Jones’ (as
capitalist advertisers command them to) and to mask the gross inefficiency of
the whole system. Of course, this false prosperity has come at the expense of a
new class of victims, the tiny backs of the 1 billion unborn children aborted
worldwide in the last four decades. Every thought and every action of
capitalism is dedicated towards one end, perpetuating inequality, and this is
merely the latest and most grotesque form of exploitation to date. After all
these horrible sacrifices, it doesn’t even deliver the material goods it
promises. Even if you judge capitalism purely on its productive powers, it has
been a failure from the beginning. It brought Protestant Europe more than two
hundred years of misery, not prosperity. Today, if you judge material
prosperity by the number of cell phones or other useless gadgets it makes
available, then it is a success; if you judge it by the fact that our ancestors
were able to afford families four times larger than today’s nuclear family,
without modern technology or education, then it is a catastrophe. It is also a
miserable failure if you judge it by the fact that today, husbands and wives
both have to enter the workforce and stick their kids in daycare in order to
enjoy the economic security that one working parent could provide a half
century ago. It all depends on what statistics you use, and capitalists have
always been masters at fudging theirs, just as they have at concocting an
Orwellian history of past prosperity.
If
capitalism is this unproductive, then more capitalism isn’t going to solve the
problem. The capitalist brand of austerity might temporarily rectify the
emptiness of the public treasury by picking the pockets of the man in the
street in new and creative ways. but it cannot fix the endemic disease of insolvency.
In fact, the very nature of the capitalist system makes economic stability
impossible, for several reasons. First, it is consciously designed to ensure
that everyone is unsatisfied, either by taking away economic security through
the stick or luring people with the carrot of the latest material goods. The
medieval philosophers recognized that avarice was an infinite sin, because one
can never own the entire universe; the love of money is thus a terrible trap to
fall into, which is why Jesus warned that it was a “very great sin.” The current
ruling class is unique in human history in that it is not content merely with futile
dedication to satisfying its own avarice, but seeks to convert us all to a
Gospel of Greed through such means as modern advertising. In such an
atmosphere, it is not surprising that capitalism has always been in a state of
permanent crisis since its birth. Stop and try to think of a time when our
government and business leaders weren’t trying to stave off an economic
calamity of some kind. The latest crisis began when the housing bubble burst in
2008, but this merely came on the heels of the post-9/11 slump and the Dot-Com
crash, which was preceded by the steep recession of 1991, the debt bubbles and
savings and loan crises of the 1980s, then the terrible recession of 1981 and
the oil shocks of the ‘70s before that. Keep tracing it back and you’ll end up
all the way back at Tulipmania in the 17th Century, which was one of
the first fruits of speculation and usury. Both of these sins introduce even
more instability into the system, because market crashes, banking crises and
bubbles are logical, inevitable consequences of both. No economic strategy can
ever rid us of the evils embedded in the sin of charging interest on loans.
Austerity and economic crisis are not exceptions in capitalist history, but the
rule, at all times and in all places where this faulty ideology is put into
practice. The only thing that differs about the present crisis is the locus and
the severity.
Towards a Distributist Version of
Austerity
The standard methods of austerity prescribed by
institutions like the IMF today essentially bring about programmed recessions
by design, which on its face is not conducive to solvency, since declining
revenues make it more difficult for nations to pay their bills. One of the key
goals is to stanch inflation, which erodes the value of the property and money
of the upper class, especially the loans held by banks. In a certain crude
sense, however, inflation is better for the common people and the economy as a
whole than deflation, because employees remain on the job and productive, while
often simultaneously seeing their fixed debt costs shrink as a percentage of
their income. In programmed recessions, however, the inevitable result, by
design, is a wave of layoffs and deep recessions, which only tend to make
bankruptcy more inevitable, not less. In fact, almost all of the conditions the
IMF demands for its “structural adjustment” loans are based on unspoken and
quite false biases about economic theory, which deliberately aid the rich few
by maximizing inequality. Among them are 1) privatization of public
enterprises; 2) reductions in government subsidies, especially for food aid and
social programs; 3) reduction of deficit spending; 4) curtail cost of living allowances;
5) decontrol prices; 6) decontrol exchange rates; 7) devaluation of currencies;
8) an end to other restrictions on profit remittances; 9) raising interest
rates; 10) raising taxes; 11) restriction of credit; 12) restriction of wage
growth and 13) reduced government spending, especially in education and health
care.[8] Reduction in deficit spending might be wise,
but the means by which capitalist economists go about it is grossly unhealthy
and unfair. Instead of hiking taxes on the rich to balance the budget, they
invariably assume that deficits are always the fruit of runaway spending on social
programs and infrastructure. In truth, insolvency is quite often the direct
result of abandonment of progressive taxation policies, which inevitably helps
the rich avoid paying their fair share and places the tax burden and spending
cuts on the backs of the poor and middle class. This is the single most
important reason, for example, why the U.S. went from the world’s leading
creditor to its leading debtor overnight under Ronald Reagan, who inaugurated a
three-decade long trend towards tax cuts for the rich and commensurate tax
hikes and spending cuts for everyone else; as a result, America is now drifting
perilously close to its own bout of austerity; what is happening today in
Greece and the rest of the euro bloc is just a foretaste of the kind of
austerity our own equally stupid leaders will cram down our throats a
generation from now. The spending cuts the right wing preaches almost always
hit the middle class and the poor the hardest, which works to the advantage of
the rich but not to that of long-term national economic health, since it is the
middle class and the poor who perform all of the labor the upper class demands.
There is such a thing as profligate spending on useless infrastructure
projects, but such spending cuts typically target economically useful projects
as well, thereby sapping the ability of nations to pay their bills in the long
run. Cutting education spending has the exact same effect. Deliberate policies
of restricting wages and decontrolling prices violates the core principles of
distributism about just prices and just wages, while also contributing to
long-term insolvency by depriving the productive classes of income. Even
privatization is based on the demonstrably wrong idea that Big Business is more
efficient at running certain functions of Big Government. In fact it is equally
inept but even more undemocratic and unfair, because the public at least has
some crude influence over Big Government through the ballot box, which ensures
that the benefits of publicly-run enterprises aren’t distributed too unequally;
the same is not true of Big Business, which is unelected and distributes its spoils
with unabashed unfairness.
Quite often, privatization is merely a politically
correct term for allowing dirty capitalists to simply steal public resources at
bargain basement prices, then turn them into monopolies and oligopolies that
loot the public. This is one reason why the people of many Third World states
cringe at the thought of privatizing their oil sectors, which are frequently
nationalized, with good reason. To make matters worse, privatization
essentially allows foreign investors to snatch up the most productive and
economically sensitive industries, which badly erodes national independence and
democratic institutions by depriving the common people of a say over national
economic policy. Measures like decontrolling exchange rates, ending
restrictions on profit remittances and devaluing currencies also only serve to
erode the financial independence of nations in the long run, by tying them
ever-more tightly to the fickle fortunes of international trade, where they
become beholden to the dictates of the marketplace, i.e. the rich. This is
precisely why nations which frequently resort to IMF loans, such as Egypt, have
become perpetually addicted to foreign aid, while simultaneously suffering from
increasing extremes of wealth and poverty. In contrast, nations like Iran that
have refused “aid” on such terms have simultaneously maintained their economic
independence, the health and safety of their working class and their solvency
at the same time, precisely because they maintain a measure of separation from
the international economy. The apostles of austerity demand that aid recipients
remove all such barriers, for the same reason that foxes strain to get past the
barbed wire of chicken coops. It is no accident, for example, that in the
currency crisis that swept through East Asia in 1997, the nations affected the
worst were those like Indonesia and Thailand whose economies are not only tied
too closely to the vagaries of the international marketplace, but also
characterized by wide gaps between the rich and poor. Both suffered from the
inevitable result of leaving one’s economy too open to foreign investment in
the midst of financial crises: capital flight. Ending remittances and other
restrictions only serves to allow the leading banking centers, such as the
U.S., to reap profits from insolvent nations as foreign investors and local
elites quickly move their money into safe havens. Germany, for example, has
made a substantial amount of money off of the current European crisis in a like
manner. Nations that bow to IMF demands to allow such capital flight only serve
to bankrupt themselves further, precisely when they can least afford it, in the
midst of financial crises.
Moreover,
austerity policies typically exacerbate one of the leading causes of
insolvency, the unequal terms of trade between nations. For example, much of
the crushing poverty that affects Latin America and Sub-Saharan Africa can be
traced directly to the deliberate fostering of dependence on international
trade. In many such countries, peasants are forced off of their lands, which
elites turn over to the production of luxury goods, such as crops like coffee,
for export to the wealthy nations of the world; as a result, they then have to
import food that they could grow themselves. When the perpetually unstable
prices of their key commodities inevitably crash, they must still import food
and other goods from foreign sources that they could ordinarily produce for
themselves. A similar dynamic is sapping the finances of the leading industrial
nations today, for the simple reason that they cannot compete with China and
the rest of East Asia in the production of high value-added goods.
“Protectionism” has become a dirty word among capitalists because any
restriction on trade is anathema to them, since it prevents them from
exploiting the international economy to the fullest, including by the means of
using foreign competition to break unions and drastically reduce wages rates
among their own countrymen. There is such a thing as unreasonable restriction
of trade, for as capitalists economists are fond of pointing out, the tariff
barriers European states put up in the 1930s merely served to exacerbate the
Great Depression. Being extremists, they cannot see the opposite dangers of an
almost manic worship of so-called “free trade” and an unreasonable lack of
tariff walls, as the sad example of the Ottoman Empire demonstrates. As the
economic power of Europe rose centuries ago, it gradually undermined the
economic supremacy of this powerful Muslim state, first by depriving it of
export markets, then by depriving Ottoman manufacturers of income from their
own countrymen. Eventually the once proud Empire became dependent on foreign
loans in order to pay for goods that it could once produce for itself, before
its leaders foolishly allowed its manufacturing base to be wiped out. At each
step of the process, Ottoman officials assured the public that things would
work out for the best – right up until the time that the European powers pulled
their lines of credit, leading to repeated financial crashes and international
supervision, then rioting in the capital and ultimately, dismemberment of the
entire Empire. Unless Europe and North America face the fact that they can’t
compete with the East and resort to putting up sensible tariff walls that don’t
violate either extreme, then sooner or later we will no longer have the means
to buy the goods that we could once manufacture for ourselves. American
prosperity was built on the basis of protectionist policies and a century and a
half of high tariff walls, while its insolvency began under Nixon and Reagan,
who opened us up to unrestricted foreign trade. Unfortunately, the standard
recipe for austerity that capitalist economists demand prevents nations like
Greece, Spain, France and Italy from maintaining suitably high tariff walls of
their own. What that means, in essence, is that in a generation they will be
even more broke than they are now, for if they cannot compete with East Asian
manufacturers, then sooner or later they will no longer be able to either
produce their own manufactured goods or possess any means to pay to import them
from abroad either.
The capitalist answer to this dilemma is not to allow
sensible tariff walls, but to deliberately drive down the living standards of
Western nations to the levels of the Third World, so that our wages are as low
as theirs. Austerity is just another means of bringing about this treasonous
goal, by removing any remaining protections and advantages that workers still
enjoy over their Third World counterparts. This benefits Big Business by
driving down wage rates across the entire planet and increasing the bargaining
power of the rich, but it is augurs an endless cycle of perpetual belt-tightening
among Western nations (as well as Japan) for much of the 21st Century. The way
austerity is typically done not only fails to address the underlying causes of
the looming insolvency of Europe and America, such as increased competition
from East Asia and repudiation of progressive taxation, but actually aggravates
them badly. The overriding principle of every condition of IMF-style austerity
programs is to enrich the wealthy by squeezing the poor and middle class, to
help those with capital acquire even more of it at everyone else’s expense,
which is actually bad for long-term national economic health. The underlying
causes of most of our economic problems are not excessive spending (although
this sometimes does occur) on the poor and middle class, but excessive spending
on the rich. The underlying root of them all is too much capitalism, which is
not going to be bettered by applying even more capitalism in the future. The
history of austerity in the 20th Century shows that this particular
recipe leads only to a vicious circle of insolvency and increasing dependence
on foreign loans. It is truly Orwellian that the IMF’s “stabilization programs”
routinely make nations foolish enough to agree to their terms more politically and economically
unstable. The sad fact, however, is that this benefits the leading capitalist
nations and the elites who run them. Their prejudices against protectionism,
progressive taxation, nationalization of key industries, price controls and
other sensible laws are demonstrably false, but they remain willfully blind,
because they profit from perpetuating the lie that capitalist austerity – or
indeed, capitalism itself – actually work in practice. It is in their interest
to reduce as much of the world as possible to vassals through perpetual debt
peonage, just as it is in their interest to gain supervisory power over the
national budgets of the entire world, so that they can redesign them for their
own benefit for selfish, anti-democratic reasons. It is in their interest to
keep the world in a state of incessant economic crisis, for the same reason
that it is in the interest of predators to spark panic in their prey. Even the
modern habit of enticing governments to go into debt works to their advantage,
for they gain leverage over policy as a result, while earning interest at the
public’s expense. In a saner system, governments would simply tax the rich as
needed to balance their budgets, not go into debt to them. In fact, they ought
to run surpluses in ordinary years, so that they can save ordinary taxpayers
money in the long run by eliminating interest costs. Today, the costs of
borrowing amount to a growing, substantial share of the budgets of nations like
the U.S., all of which goes directly into the pockets of the rich.
In the end, any distributive version of austerity
must end one scourge that hangs over the whole issue like a pall: usury. All of
constant debt crises that have plagued the planet since the Reformation stem
from one source, the charging of interest by banks, which the Catholic Church
has condemned since its founding as a form of theft. When a bank (or any other
lender) uses its money as a weapon to extract more money from the recipients,
they commit an evil act which they have no right to do. At infallible councils
like Lateran II in 1139, Lateran III in 1179, Vienne in 1311 and Second Council
of Lyons in 1274, the Catholic Church repeatedly affirmed not only that the
taking of any interest whatsoever is not only a grave sin, but that those who
question this teaching are heretics who cannot receive Christian burial.[9]
In this, the Church was merely carrying on an identical teaching found in 13
different passages of the Old Testament. Furthermore, throughout history, all
of the saints who wrote on the subject stated flatly that the taking of any
level of interest whatsoever was sinful.[10]
Despite this, merchants badgered the Church to change its unchangeable teaching
for more than 600 years, prompting Pope Benedict XIV to explicitly condemn
their viewpoint in his encyclical Vix
Pervenit in 1745:
“One cannot condone the sin of
usury by arguing that the gain is not great or excessive, but rather moderate
or small; neither can it be condoned by arguing that the borrower is rich; nor
even by arguing that the money borrowed is not left idle, but is spent
usefully, either to increase one's fortune, to purchase new estates, or to
engage in business transactions. The law governing loans consists necessarily
in the equality of what is given and returned; once the equality has been
established, whoever demands more than that violates the terms of the loan.
Therefore if one receives interest, he must make restitution according to the
commutative bond of justice; its function in human contracts is to assure equality
for each one. This law is to be observed in a holy manner. If not observed
exactly, reparation must be made.”[11]
The last sentence alludes to a corollary added by
several popes over the course of the last millennium, that debtors are under no
moral obligation to repay interest on any loans and that lenders must forgive
this portion of such debts. In defiance of these teachings, the Holy Office at
the Vatican deliberately introduced confusion about the issue in the early 19th
Century by publishing a series of letters which seemed to legitimate the
charging of interest, but their authority is outranked by that of the church councils
and encyclicals like Vix Pervenit, as
well as previous condemnations by men like Pope Alexander III (1159-1181). As a
result, the Vatican Bank was established in the 1970s, Catholic dioceses
routinely charge interest and the clergy no longer tell their parishioners to
confess usury in order to receive Eucharist, but it nevertheless remains a
mortal sin. This is just one of many areas in Catholic teaching that the
present generation of clergy has gradually betrayed, in order to make money and
fit in among respectable society, but it is the moral heresy with the earliest
roots, stretching back to the early 19th Century, long before the clergy
betrayed their commitment to stand against divorce, birth prevention and dozens
of other popular modern sins. As a result, all of the death, starvation,
rioting and misery caused by debt bubbles, austerity programs and
anti-democratic financial supervision can be laid directly at the doorstep of
our rebellious clergy. The history of Western banking since usury became
widespread has been nothing but a long horror story of instability, financial
rape and human misery, all to benefit the rich few, which has repeated itself
in every generation. It would be best to stick to the Catholic roots of
distributism and condemn interest on moral grounds, but it can also be rejected
on the practical and entirely selfish grounds that it has been a disaster in
practice. Any distributist program of austerity must take this into account by
providing loans without charging interest of any kind, which will halt the
perpetual debt peonage of certain nations to institutions like the IMF and
World Bank.
The distributist recipe for austerity essentially
ought to turn all of the standard IMF script on its head, by reversing the
twisted capitalist assumptions that underlie it. The burden for belt-tightening
ought to be placed squarely on the shoulders of those who actually benefit from
periods of prosperity, which is invariably the rich, not the common people, who
shouldn’t have to foot the bill for their wantonness. Therefore, the
cornerstone of austerity ought to be the reintroduction of progressive taxation
and the elimination of all loopholes that the rich typically use to escape it;
this is particularly true in cases like that of the U.S. Treasury, which has
been steadily drained for 30 years by continual erosion of progressive
taxation, which thereby places the burden on the poor and middle class. Spending
ought to be curtailed, but only by eliminating all forms of corporate welfare –
including giving jail time to the officials of any company which blackmails
local, state or federal government agencies into giving them tax breaks with
the implicit threat of moving. Infrastructure projects and education budgets
should only be cut if they are deemed to be unproductive “white elephants”
based on impartial reviews. Reductions in government spending on health care or
subsidies for food aid and social programs should rarely be cut, especially
since they aid the working class that must produce in order to restore the
nation to solvency; furthermore, they have been whittled away for generations
in most Western nations to such an extent that there is little left to cut
anyways. If anything, governments should reorient such aid towards workfare,
such as useful public works, or help the common people establish their own
small businesses (in everything from rooftop gardens that don’t earn cash to
formal shops that do), both of which are politically impossible today because
existing Big Businesses would simply squash them all. That is why as a
condition of our distributist austerity program, nations ought to be required
to implement trust-busting on a scale Teddy Roosevelt was never able to engage
in, by breaking up as many industries as possible into the smallest possible
functional parts. This will maximize economic freedom for workers, consumers
and the new owners while simultaneously maximizing production. It will also
help reduce unemployment, which is a direct product of rationing of labor by
the handful at the top who have capital. Employment and production can also be
increased by eschewing measures which typically result in a programmed
recession, such as raising interest rates and restricting credit. Inflation
might result, but that is a lesser evil than deflation, because it keeps the
working class productive and thereby contributing to the nation’s solvency. It
also erodes the holdings of the banking sector, which distributists will
ultimately want to replace anyways with cooperative banks, zero-interest credit
unions and the like. Price controls ought to be hardened and wage growth
maximized in order to further protect the poor and middle class, who are
responsible for all of the production of any society and therefore are the key
to national solvency. Labor bargaining power ought to be maximized by
encouraging upgrades of unions into full-fledged guilds, under the direct
control of workers. Capital flight ought to be prevented by strengthening
exchange rates and restrictions on profit remittances. Independence from
foreign markets ought to be encouraged above all else, so that nations can make
goods for themselves that they can use to repay their debt and simultaneously
avoid future crises. For example, Third World states that are dependent on
exporting luxury cash crops ought to return the land to the peasantry, so that
they can become self-sufficient in food once again instead of becoming more dependent
on foreign trade to buy food abroad. Likewise, tariff walls ought to be
encouraged within reason, to allow a bankrupt nation to rebuild its own
productive capacities, so that it can then repay its lenders. Simply opening up
nations to foreign trade often makes them less capable of repaying loans, by
exposing their productive sectors to more intense competition that they can’t
survive. Privatization ought to be considered only when Big Government is
running enterprises that are not crucial to national survival (as the oil
sector is) or in cases when there is incontrovertible proof that it is being
run ineptly. Under no circumstances should public enterprises ever be auctioned
off to Big Business, especially foreign investors; instead, privatization ought
to be accomplished by establishing as many small businesses or competing public
enterprises as possible.
The Final Costs of Failure
To accomplish all of this, the political power of
corporations and the wealthy elites they represent must be shattered
decisively, which can be accomplished by breaking up the mass media into the
smallest possible functional parts and placing strict limits on contributions
to political campaigns. This also entails curtailing their ability to stop such
reforms through the Imperial Judiciary, which in the U.S. has always
historically sided with the rich, in direct contravention of numerous
provisions of the Constitution. This is all a tall order, but we at least have
the bare outlines of a coherent and workable alternative to austerity, which is
something opponents of the IMF across the planet have lacked for generations;
instead of protesting against something, we can now act in favor of a rival
philosophy that has proven quite workable throughout human history, distributism.
We should never underestimate the lengths to which capitalist elites are
willing to go when faced with a genuine threat to their interests, for
historically, they have never been averse to severe political repression,
including putting troops on the street, subverting democratic processes and
economic sanctions. Any political coalition that appears to have a sporting
chance of substituting a distributist version of austerity must be prepared to
face political persecution on a level not seen in Western nations since the
1960s. I am not optimistic that modern Americans and Europeans are up to the
task (unlike the people of certain Third World states), but if we fail, the
consequences may eventually threaten our very survival of our nations, or
indeed the whole of Western civilization, later in the 21st Century.
If capitalism continues to carry the day, then the
whole next century will simply to amount to an extension of the Age of
Austerity and permanent economic crisis that began centuries ago, not in 2008
as politicians like David Cameron believe. The value of looking back on history
is that it illuminates the dangers that lay ahead in the future, and if the
history of capitalist austerity is any guide, then we can make certain
predictions about the consequences future generations will face. First of all,
we can expect capitalist governments to welsh on their entitlement payments in
pensions, unemployment, disability insurance and other obligations, which they
continue to tax the people for, without providing commensurate benefits. In
fact, the primary focus of austerity in Greece and other European nations has
been to reduce such payouts, while continuing to make workers pay in; the
question is not whether they’re going to welsh, but how deeply they are willing
to betray their commitments to workers, while steadfastly refusing to betray
their commitments to rich bondholders. It will be awfully tempting for the next
generation of Americans and Europeans to simply resort to euthanasia to rid
itself of pensions and other obligations to the defenseless elderly. One of the
unspoken causes of the current crisis is that abortion and birth prevention
have produced what demographers called an “inverted age pyramid,” in which
there are too few young people to support too many old people. This is a
pattern typically seen only in times of trouble, such as the Black Death of the
1300s; in our case, this disaster has been man-made through such means as the
genocide of abortion. In the short run, abortion and birth prevention made
money for those who practiced them, but in the long run, they are proving to be
quite costly, by reducing the number of workers to take care of the people who
aborted and contracepted them out of existence. Instead of rectifying the
original problem, however, the temptation will be to resort to a further moral
slide by beginning a fresh genocide of a new generation of victims, the elderly
and disabled. This can be accomplished by first legalizing euthanasia, then
promoting it as a wise choice through public service announcements and other
propaganda, then gradually changing moral standards until it becomes expected,
then mandatory. It may take generations to slide all the way down this slippery
slope, but it costs governments nothing to get on it, because all they have to
do is stop punishing euthanizers. At the same time the elderly and disabled can
be squeezed from the other end by continually cutting the benefits of the
programs they paid for, thereby denying them the means of survival. The nations
of the West could fill their coffers with trillions of dollars by ridding
themselves of pensions and medical costs in this thoroughly immoral way. It
will also allow states and greedy relatives to get their hands on the assets of
aged people who still have any assets left. Of course, this won’t satisfy their
avarice for long, since it is an infinite sin, nor will it forestall future
economic instability, for volatility and permanent austerity are built right
into the structure of capitalism. No matter how rich we get or how low we sink
in pursuit of wealth, that defect in the system will never change.
If it gets to this point, then America and Europe
won’t deserve to survive the ultimate consequences of the Age of Austerity. As
we speak, much of Western civilization is losing democratic control over its
critical economic policies to agencies like the IMF, which are taking on a
supervisory role. At present, the West still controls such institutions, but
what happens when our economic power vis-à-vis East Asia and the rest of the
Third World dwindles further? Eventually, control of institutions like the IMF
is doomed to be transferred to nations like China, since they have all of the
financial power and productive industrial assets now. When that happens, the
Western nations who agree to such austerity plans will be dictated to not by
fellow Western states who have common interests, but by foreigners living in an
unfamiliar civilization on the opposite end of the planet. Furthermore, we know
that China fully intends to use its financial and military power to amass even
more power; the mindset of their leadership is geared single-mindedly towards
one goal, avenging the “Hundred Years of Humiliation” that China suffered at
the hands of the Western powers in the 19th and 20th
Centuries. Prior to that short aberration in human history, China had always
been the world’s leading military, industrial and technological power, one that
even rivaled Rome in its heyday. Since the fall of the Soviet Union, the
Chinese military has done little except conduct war-game scenarios against the
U.S. and plan for the days when it can redress ancient territorial grievances
against neighbors like India, Vietnam, Japan and Russia. The Ottoman Empire and
the first Muslim empire established by Mohammed both rivaled the powers of
medieval Europe combined, until the tide turned against them during the
Renaissance. The whole focus of Al-Qaeda, the government of Iran and other
Muslims fundamentalists is to restore an empire of similar scope, which is a
possibility that doesn’t seem as remote as it did back in the 1970s, thanks to
the continual erosion of Western financial and military power. To meet these
rising threats, Western nations will need more resources, but the Age of
Austerity will make them do with less. More than a century ago, Britain was the
preeminent power in the world, with a navy that spanned the globe and
fortifications strung across the planet, but it has gradually retrenched with
each passing budget crunch, to the point where it is an ineffectual force
basically confined to Britain itself (which might even break up in 2014, when
Scotland plans to vote in an independence referendum). In fact, on paper,
Britain’s armed forces aren’t even a credible match for India, which it ruled
just a few decades ago. The rest of Europe’s military budgets have continually
contracted for generations, to the point where France and Britain appeared
incapable even of bombing Libya into submission in 2011, even with rebels doing
most of the fighting on the ground. They simply couldn’t afford it. A few
decades ago, the Greek military was a match for Turkey on paper, but the
current crisis in Athens coupled with Turkey’s explosive economic growth has
quickly altered the balance of power between these two bitter rivals. This is a
microcosm of where Europe and North America are heading, which I discuss in
more detail in The Retreat of the West
and The Falling Away, which address
two global historical trends that have deeply affected Western civilization for
centuries. As long as the Falling Away from orthodox Christianity continues, we
will continue to resort to such evils as abortion, euthanasia, birth prevention
and capitalist economics, all of which are contributing to the Retreat of the
West, which is slowly sapping the raw financial and military power of our
entire civilization. As long as the Age of Austerity is carried out in a way
that exacerbates the roots causes of their insolvency, such retrenchment is
bound to continue for decades to come until there is nothing left. At that
point, we will rue the day that we allowed our manufacturing base to slip
away, or international institutions to
gain supervisory powers over our budgets, or any of the direct consequences of
austerity. Defense requires weapons which must be paid for, as well as soldiers
who must be born and raised by the numbers; thanks to abortion and birth
prevention, we no longer have the numbers and thanks to the loss of our
manufacturing sector, we can no longer afford to buy the guns either. As the
fate of the Ottoman Empire shows, pursuing the same failed policies of
austerity will inevitably undermine the very physical safety of Europe and
North America, if allowed to continue long enough. Finding a sensible
alternative is not a merely a matter of humanitarianism, or justice, or even
national solvency, but of national security itself.
The writer is a former journalist with a Bachelor’s in
journalism and a Master’s in history from the State University of New York at
Brockport, with a focus on American foreign policy and specializations in
U.S.-Latin American relations and counterinsurgency history. He has worked as a
paid foreign policy columnist for several newspapers and has credit towards a doctorate
in Latin America history. He is a convert to Catholicism from atheism and has
been an avid reader of textbooks on topics ranging from particle physics to
psychology to economics since age 9.
[1] p.
54, Mittelman, James H. and Will, Donald, 1987, "The International
Monetary Fund: State Autonomy and Human Rights" pp. 49-69 in Africa
Today, Vol. 54, Nos. 1-2.
[2] p.
156, Hancock, Graham, 1989, Lords of Poverty: The Power, Prestige, and
Corruption of the International Aid Business. The Atlantic Monthly Press:
New York.
[3]
Ibid., pp. 168-170. Hancock cites the U.S. Agency for International
Development, 1987, AID Highlights.
Washington D.C. Winter 1987; also see pp. 110-111, Eberstadt, Nick, 1988,
"The Perversion of Foreign Aid", pp. 107-125 in At Issue: Politics
in the World Arena, Steven L. Spiegel ed. St. Martin's Press: New York.
[4] p.
43-44, 81, Malloy, James M. and Thorn, Richard S., 1971, Beyond the
Revolution: Bolivia Since 1952. University of Pittsburgh Press: Pittsburgh;
110. p. 13, Beals, Carlton, 1963,
Latin America: World in Transition. Albert Schuman: New York; p. 15,
Malloy, James M., 1971, Bolivia's MNR: A Study of a National Popular
Movement. Council on International Studies: Buffalo; p. 21, Wilkie, James
W., 1969, The Bolivian Revolution and U.S. Aid Since 1952. University of
California Press: Los Angeles. pp. 137-138, 141, Blasier, Cole, 1976, The
Hovering Giant: Responses to Revolutionary Change in Latin America. University
of Pittsburgh Press: London; p. 411, Gunther, John, 1966, Inside South America . Harper & Row: New York; p. 286, Burns, E. Bradford, 1986, Latin America : A Concise Interpretive History.
Prentice-Hall: Englewood Cliffs, New Jersey; pp. 103, 140, Kelley, Jonathan and Klein, Herbert, 1981, Revolution
and the Rebirth of Inequality: A Theory Applied to the National Revolution in Bolivia University of California
[5] p.
12, Greene, David G., 1965, "Revolution And the Rationalization of Reform
in Bolivia", pp. 3-25 in Inter-American Economic Affairs, Winter
1965. Vol. 19, No. 3.
[6] p.
75, Beals.
[7] p.
4, Pollin, Robert and Zepeda, Eduardo, 1987, "Latin American Debt: The
Choices Ahead", pp. 1-16 in Monthly Review, Vol. 38, No. 9; p. 18, Bello,
Walden, 1994, "Global Economic Counterrevolution: How Northern Economic
Warfare Devastates the South", pp. 14-19 in Fifty Years is Enough: The
Case Against the World Bank and the International Monetary Fund, Kevin Danaher
ed. South End Press: Boston; p. 49, Mittelman, 1987 and p. 149, Kronsten,
Gregory, 1987, "The IMF in Africa: Factor of Stability or Unrest?",
pp. 149-151 in World Today, August/September 1987, Vol. 43, Nos. 8-9.
[8] p.
61, Hancock, 1989 and p. 4, Pollin, Robert and Zepeda, Eduardo, 1987,
"Latin American Debt: The Choices Ahead", pp. 1-16 in Monthly
Review, Vol. 38, No. 9.
[9] p. 173, Gilchrist, John, 1969,
The Church and Economic Activity in the Middle Ages. St. Martin’s Press:
New York.
[10]
For numerous quotes from the saints, see p. 142-144, Blakey, Robert, 1855, The
History of Political Literature, from the Earliest Times, Volume I. Richard
Bentley: London.
[11] See
Pope Benedict XIV’s 1745 pastoral letter, Vix Pervenit, His Holiness Pope
Benedict XIV On Usury and Other Dishonest Profit, November 1, 1745. Available
at www.newadvent.org/library/docs_be14vp.htm.
