Banker austerity plans forced on Spain and Portugal

Capitalist crisis drags down more workers

By Fred Goldstein

The big picture is that the global profit system of capitalism is in a crisis that is enveloping more and more workers on all continents. The fate of workers everywhere is deeply interconnected.

The crisis of the euro and the $1 trillion bailout of Greece, Portugal and Spain are a prelude to major attack on the workers of southern Europe. This attack, if successful, will not only hurt the workers of Europe but will deepen the crisis for workers in the U.S. as well.

This calls for class solidarity between European and U.S. workers to fight off this coming attack. It also speaks to following the example of the Greek workers, who have already carried out militant general strikes against draconian austerity measures.

Another general strike set for May 20 intends to shut down all public services and disrupt public transport. Schools will close, state hospitals will function on emergency staff and all ferries will remain tied up at port. Journalists will also walk off the job, pulling news broadcasts off the air. But air traffic controllers are not expected to join the strike, leaving the country’s airports open.

Two major demonstrations are planned in Athens against the austerity measures.

The crisis was set off by the prospect that the Greek government would not be able to pay bondholders $11 billion (8.5 billion euros) due on May 19. A default to the bondholders might have set off a string of defaults similar to that of Lehman Bros. in the U.S., threatening the financial system and the economy.

The big bankers of Europe and the U.S., as well as the International Monetary Fund, feared an economic meltdown in Europe that would spread to the U.S. They united to demand that the Greek government attack the Greek workers as the price for a big bailout loan.

Bankers extort Greek workers

To gain loans from other European countries and the IMF, the Greek government “embraced budget austerity. Average pension benefits will be cut 11 percent; wages for government workers will be cut 14 percent; the basic rate for the value-added tax will rise from 21 percent to 23 percent. These measures will plunge Greece into a deep recession. In 2009, unemployment was about 9 percent; some economists expect it to peak near 19 percent.” (Washington Post, May 10)

The Portuguese and the Spanish governments were also talked to by the European powers and by U.S. officials, including Vice President Joe Biden and Treasury Secretary Timothy Geithner. They got the message and have introduced similar austerity attacks on the workers.

Spanish Prime Minister José Luis Rodríguez Zapatero will try to shrink expenditures by another $18.3 billion and will cut 1.5 percentage points off the deficit this year and next by immediately cutting public servants’ salaries by 5 percent and freezing salaries next year. Portuguese Prime Minister José Sócrates imposed a “crisis tax,” most of which will fall on workers through sales taxes and income tax increases.

The austerity measures that the bankers of the U.S. and Europe want to impose on the workers of Greece, Portugal and Spain, as well as Ireland — which has already been subjected to bankers’ austerity demands — will deepen the crisis of unemployment in Europe. European markets will contract. But Europe is the biggest export market for U.S. goods. If U.S. exports shrink, unemployment will rise even further in the U.S. along with rising unemployment in Europe.

This thread connecting the fate of the workers could easily be followed to China, Latin America and the entire globe.

Budget crisis from Greece to California

The current capitalist crisis is taking the form in Europe of a budgetary crisis. A similar crisis is advancing steadily in the U.S., but it has not grabbed headlines yet. For example, the bankers and bondholders are also doing to California what they are doing to Greece.

Gov. Arnold Schwarzenegger of California has acted the role of Greek Prime Minister George Papandreou. His recently unveiled $83.4 billion plan would freeze funding for local schools, further cut state workers’ pay and take away 60 percent of state money for local mental health programs.

Schwarzenegger would eliminate CalWorks, the state’s main welfare program. This would affect 1.3 million people, of whom 1 million are children. The program, which requires recipients to eventually have jobs, provides families an average of $500 a month. Ending those payments would save the state $1.6 billion, the administration said. It would also make California the only state not to offer a welfare-to-work program for low-income families with children.

Families would also lose state-subsidized day care under the governor’s proposal. About 142,000 low-income children would be affected. Local school funding would be frozen and one-third of the budget for in-home health care would be eliminated, among other vital services.

On a federal level, President Barack Obama has appointed a special budget commission to come up with findings and recommendations by the end of the year to cut Social Security, Medicare and other social services in order to keep secure the interest payments to big banks due on government loans and to make sure there is plenty of money for Pentagon wars.

The capitalist media and the economic talking heads never stop promoting the line that workers in Europe are living high on the hog and that workers in the U.S. should stop thinking about social services as an “entitlement.”

That’s not the Marxist view. From the point of view of the working class, the federal, state and city budgets show clearly that the only ones living high on the hog and getting “entitlements” are the bankers, the military-industrial complex and all the corporate interests that feed at the trough of the public treasury.

Treasury belongs to the workers

Money in the government treasury comes from taxes. Those taxes come from either the workers or the corporations. The money that comes directly from the workers consists of deductions from their wages. The taxes that come from business are a deduction from profits. But the profits come from workers, who created the wealth in the first place.

Every dollar or euro or yen that goes out of the public treasury goes in one of two directions. One direction is social wages, that is, using the worker-created wealth for social services or infrastructure that society needs. The other direction is to the bankers and bosses and the military, police and other repressive forces of the state used against the workers.

When the government guarantees and protects the interest paid to the banks and the profits paid to the Pentagon/military-industrial complex, all of which comes from the wealth created by the workers, it is the rich that are getting an “entitlement.” They have done nothing for it, have contributed nothing to society. The bankers’ only claim to the funds is that they are the owners of money.

The workers, on the other hand, have the righteous claim that it is all their money, all the collective creation of their labor. Payments to bankers amount to a transfer of wealth upwards. So the struggle over the budget is a political struggle to determine how much of the budget will be spent on social wages and how much will go to parasitic financiers in the form of profit.

Every budget cut in social services is, in effect, a cut in social wages.

So the capitalists, on top of cutting wages and benefits on the job for those who are still working during this economic crisis, are cutting wages further in the form of budget cuts.

That is what the Greek workers are fighting against. That is what teachers in California fought against when they went on strike.

That is what the heroic students of California did when they sat in and demonstrated against the cuts in public funds for the state university. That is what 19,000 high school students did recently in New Jersey when they walked out around the state protesting school budget cuts. That is what the students at the University of Puerto Rico are doing in fighting cutbacks there.

They all were and are defending the class interests of the workers and the oppressed in the long run.

Workers shouldn’t pay for capitalist deficits

The capitalist pundits all claim that they have to cut the budget to reduce deficits because the deficits will interfere with an economic recovery. They refuse to acknowledge that they have it backwards.

The deficits are not the problem, but a symptom of the deeper problem of capitalism. The fact is that capitalism can no longer grow in a significant way that would put tens and hundreds of millions of workers worldwide back to work.

A capitalist economy must expand; otherwise it goes into crisis. And capitalist expansion is the only way for workers to get jobs under this system. But the system is approaching a dead end. The future of capitalism is slow growth and stagnation at best, with full-scale collapse on the agenda.

It is worth recalling that after World War II the government in the U.S. had a huge deficit. It is usually calculated to have risen to 120 percent of the gross domestic product. That is the highest in history and far higher as a percentage than it is now.

But U.S. capitalism overcame the deficit in short order because it grew economically by rebuilding Europe and parts of Asia, which had been destroyed in the war. Out of the ashes of war it emerged as the world’s most powerful imperialist country and extended its exploitation to every corner of the globe. And it stimulated its economic growth by constant militarization during the Cold War against the Soviet Union, China and the socialist camp, as well as two long wars against the Democratic People’s Republic of Korea and Vietnam.

It went through a period of half a century of economic expansion on a vast scale, bringing in wealth looted from the peoples of the world as well as amassing vast profits from exploiting the workers at home.

This economic expansion is how U.S. and world capitalism overcame vast deficits. Massive surplus value was created in the process of production and in the process of plundering the underdeveloped post-colonial world.

Since the present crisis began, the capitalist state has put $10.5 trillion into holding up the system. Europe has now followed suit with a $1 trillion bailout. In the recent period Japan has committed to pump $20 billion a day into the economy. There will be further bailouts and stimulus packages to come.

The deficits incurred by the U.S. capitalist government during and after World War II were incurred in the process of creating a whole new era of expansion for capitalism, which had come out of the Great Depression through war.

The present deficits being amassed by the governments of the capitalist world, however, are not capable of generating an expansion. They are desperate measures to stave off a great contraction — a collapse.

The bosses are trying to get the workers to pay for these attempts to save the system. Meanwhile, they cannot stop growing mass unemployment, poverty, cutbacks and the grinding down of the workers. Here in the U.S. that means especially Black, Latino/a, Asian, Native and immigrant workers.

So the workers, instead of helping the bosses save their system by paying for their deficits, should turn the tables and push the payment of any deficits back where they belong — on the shoulders of the rich, who have been living on the public dole for generations.

Instead of saving the rotten system that got us into this crisis, the best course would be to get rid of the capitalist profit system altogether. It is time for the wealth created by the workers to be socially owned and used by all of society, in a planned way, and not for profit.

The writer is author of the book “Low-Wage Capitalism,” a Marxist analysis of globalization and its effects on the U.S. working class. He has also written numerous articles and spoken on the present economic crisis. For more information visit www.lowwagecapitalism.com.

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