Thursday, 1 March 2012

AUSTERITY CRITICS: The case of Joseph Stiglitz

Of course it is true that IMF-EU style austerity is detrimental to most of the European economies, to the social fabric and to democratic institutions. 'Suicide' entails that austerity will fail to serve the intended purpose, mainly finance capital, and that is something I seriously doubt, given that the entire purpose of austerity is to strengthen finance capital, especially in the core countries. Having said that, austerity is and always have been suicidal in terms of causing irreparable damage to institutions, as many EU countries are now discovering.

The prominent US economist Joseph Stiglitz has decided to call attention to the detrimental impact that austerity is having and will be having on the EU. The problem with the statements of Stiglitz, among other such economists who receive a great deal of money as consultants or external advisers to governments or financial firms, is that they leave a record behind them, a record from which they cannot hide. What they say publicly must be carefully scrutinized, and above all one must always investigate to see who writes their paycheck so they can make statements about economic, monetary and fiscal policy. This is not to say that Stieglitz does not come from a liberal (US-Democrat) ideological background, but he is hardly someone disconnected from governments, private institutions and international financial organizations that made policy decisions detrimental to debtor nations.

Most people probably do not know or do not remember that Stiglitz was an adviser to former Greek Prime Minister George Papandreou who was elected in 2009 and believed that IMF-style austerity was the road to salvation. Other than general social, political and economic weakness, what was the result of the advice that Stiglitz provided to Papandreou? Should society not judge Stiglitz the economic adviser by tangible results of his policy advice, instead of rhetoric?

Some may know that Stiglitz worked for the Clinton administration in the mid-1990s, and the World Bank in the late 1990s and he necessarily had to support pro-private market (neo-liberal) fiscal austerity among debtor nations; poor nations where austerity entailed drop in living standards. After he left the World Bank, he was critical of IMF-style austerity, but he continued to play a role within mainstream institutions and 'respected mainstream economist' who presented himself both as a government insider and a liberal critic.

While theoretically opposing austerity without stimulative measures for economic growth now that he is interested in advocating for a weaker euro and a stronger stimulus for markets, Stiglitz was an advocate of EU supporting the deficit countries so they could make it through their difficult debt problems in the past two years. Having worked at the World Bank, he knew that austerity is a prescription that entailed very deep cuts in social programs, social security and wages, all amounting to the massive decline in living standards for middle class and working people. He also knew that there were genuinely democratic alternatives to austerity, but that would have meant going against the pro-market position that Stiglitz embraces.

When he was advising the Greek government, Stiglitz knew that the advice he was giving was tantamount to reducing the country into an EU (German) economic satellite, that democracy would be compromised, at least as it existed from 1974 to 2009. When working for the World Bank, Stigltiz knew that his policy advice affecting Latin America and Asia was intended to better integrate those markets into the core of the world economic system where capital is concentrated. Stiglitz now knows that 'austerity is suicide', but who can take his vacuous rhetoric seriously when measured against his long record as a pro-market economist who like to play the critic as well?


Karen Schousboe said...

Austerity is nut just a question of economics - it is also a cultural issue. See


Yes,I do agree with Stiglitz that austerity is suiside.