Some Brief Remarks On The Use Of The Word “Austerity”

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SOME WORDS ENJOY a second lease on political life. Although, it’s almost never the case that a political term retains its original meaning the second time around. The word “austerity” is a good example.

Originally, the word was used to characterise the period in British history immediately after World War II. The Age of Austerity is remembered as a time of economic stringency when food was rationed, luxuries unheard of outside all but the most exclusive circles, and housing was in desperately short supply.

There was, of course, a very good reason for all this. Great Britain had just emerged from a six year war in which, for a few crucial months, the very existence of the British nation hung in the balance. Britain had come through, but not before hundreds-of-thousands of her citizens had been killed or injured, and tens-of-thousands of her houses, factories, ports and other key pieces of infrastructure had been destroyed. To win, the British had been forced to engage in a prolonged period of unprecedented military and economic effort. In attempting to pay for the war, Britain had liquidated nearly all of her financial assets and borrowed heavily from the Americans. By 1945 the cupboard was very bare indeed.

What this meant was that Britain had to manage what meagre resources it still possessed (or could borrow) extremely frugally. Consumer demand was tightly constrained – both by rationing and by continuing the tight wartime economic controls. It was not a joyous time. Life was hard. Indeed, in the fat years that followed, many British people looked back on the Age of Austerity and shuddered.

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If you think all these measures sound a lot like the so-called “austerity” policies implemented by the British Chancellor of the Exchequer, George Osborne, between 2010 and 2015, then you really need to think again. Because, historically-speaking, the two periods could not be more different.

In 1945 the British Labour Party was elected in a landslide to implement what they openly described as a “socialist” manifesto. The immediate effect of Labour’s election was that, from the very outset, the “peace” – at least in its early years – was to be a time of social equality. Inherited wealth was targeted quite ruthlessly and the near confiscatory taxes on high incomes that had been levied during the war persisted. The distribution of goods and services was organised not by “market forces” but according to need. For the upper and middle classes this over-ruling of the market was utterly unacceptable. For centuries, the ownership of wealth had conferred all manner of advantages: social, economic and political. But for the first 5 years after the war the upper classes ability to vail themselves of their customary advantages was severely constrained.

There may, therefore, be an element of cruel historical irony in the Conservative Party’s political appropriation of the word “austerity”. Because Osborne’s response to the Global Financial Crisis and the huge debts it had forced the British Government to incur was very different to that of Clement Attlee’s socialists. Rather than sharing the burden of recovery equally, Osborne piled virtually all of it onto the shoulders of the poor and the young. This was achieved by imposing swingeing cuts on public expenditure – especially spending on the unemployed, beneficiaries, students and even, unconscionably, the disabled.

The original Age of Austerity was a time of enforced social equality, Osborne’s austerity was an exercise in looking after the interests of the well-to-do at the expense of the poor. Unlike Labour’s post-war Britain, market forces were in no way restrained and all the advantages of wealth were taken by those fortunate enough to possess them.

The other significant difference between the late 1940s and the post-GFC years is that, in 1945, the world’s great creditor nation, the USA, had to exercise a measure of common sense in recovering the money it had lent during the war. The Red Army loomed over Europe just waiting for poverty and starvation to drive the peoples of the West into the arms of soviet-style socialism. The Americans were careful ensure that the anticipated social and economic collapse did not eventuate.

How different it was after the crises of 2008-09. Governments had been forced to borrow the money needed to keep capitalism afloat and the financial institutions who had purchased the instruments of their own rescue demanded the full repayment of every Pound and/or Euro that they were owed. And this time there was no Soviet threat to moderate the financiers’ greed, or to convince them that unregulated market forces are, politically, their own worst enemy.

Austerity, then, possesses a very different meaning, depending on whether it is being used to describe the enforced social equality of the post-war years, or the punitive imposition of the costs of rescuing capitalism upon those sectors of British and European society least able to bear them.

Greece, according to Radio New Zealand has been issued with an “austere” set of economic demands. Seldom has the true meaning of a word been so carelessly traduced. What is being asked of Greece bears little resemblance to anything “plain and unadorned” unless it is plain and unadorned cruelty.

Between 1945 and 1951 the British learned to live “without unnecessary things”, but they were not forced to starve on their knees so that their creditors could stay on their feet.

 

25 COMMENTS

    • That video was comedy gold. Once National get their new flag, we can use this song as our national anthem. It’s depressingly appropriate.

  1. Good summary Chris,

    As we speak Richard Quest (CNN) is announcing Greece has defaulted.

    They will rise again with collective strength as others have after default, such as Argentina and Germany,

    I arrived to work as a contracted tradesman in Rhodesia in 1970 when Britain had placed a harsher embargo on Rhodesia than EU/USA has put on Russia, and the British Navy was also blockading the ports around the coast stopping goods coming or leaving this nation as Germany tried to do to Britain during the second world war.

    Rhodesia is a similar size and population as Greece is today.

    But under Rhodesia’s gritty and highly talented and respected PM Ian Smith’s call for unity within the open mixed black and white unsegregated society his social plan of “Unilateral declaration of Independence” (UDI) benefited like I could not believe.

    Subsequently this little country actually learned to survive and become self reliant to become so much stronger while I was there.

    It was the most profound leaning curve for me in my life that even today I wonder if we in NZ should have also taken this step to become self reliant also.

    Greece was the worlds “birthplace of Democracy” and we look forward to helping Greece show the world Oligarch’s that they shall not own our heart and souls as well as our countries.

  2. Sound analysis, Chris. Greece’s “bail out” loans from the IMF are now barely sufficient t meet the interest on their previous bailout loans. This is nothing less than the looting and subjugation of a sovereign nation.

    Judging by how much NZ owes to foreign lenders, we may not be far behind Greece. Unfortunatelty instead of electing a left-wing government to resist the rapacious money-men, NZers are thick enough to keep voting back National who is seen as a “prudent fiscal manager” though god only knows why. Re-electing the Nats in such circumstances is like letting the burglar back into your home to safeguard your valuables.

  3. Spot on as usual, Chris.
    My mother turned seven the year WW2 ended. Those post-war austerity years in the UK gave her a good start in life:
    * Govt support for home gardeners (seed, fertiliser, info pamphlets) meant plenty of fresh veges.
    * Lollies were rationed. One small bag of dolly mixtures per week, and that was it.
    * Grammar schools were opened up to any kid who could pass the entrance exam, so she got a top-notch secondary education, free.
    Etc, etc.

  4. Bien sur Monsiuer Trottoir!

    For some time now I have been feeling the misuse of English (the proper one, not the American outrage also called English) by the forces of neo-liberalism and money to be as bad as what they are doing in the world of real people.

    To my dying breath austerity will always refer to the war and postwar period and Mr Atlee’s breath of socialist fresh air. After five years of war the last thing the British public wanted was a Tory government still hankering for the pre WWI bliss of moneyed and landed aristocracy ruling by privilege and everyone else knowing their place.

    Today’s austerity is not austerity; it is rule by banks/money. It offends my ears greatly to hear that heroic term used by such greedy parsimonious fuckwits. Please desist…

  5. … Like slave‑masters of olden times,
    they drive the people to work harder and longer,
    with the beating of burst drums and the sounds of broken trumpets, with one aim in mind:
    to increase their own wealth.

    Kim Chi Ha

  6. How true on the costs of rescuing capitalism and the lengths gone to to rescue bankers and the wealthy. For Greece there are were some interesting growth predictions from 2010 by the IMF.

    In the 2 years from 2010 the IMF predicted negative growth of just over 4% in 2010 and improving in 2011 but by 2012 turning a corner to modest growth further increasing in 2013. However the truth was that Greece’s economy shrank by upwards of 7% per year or in the least around 4% so year on year Greece went backwards hugely and the country’s economy ended up shrinking by 25% over four years.

    The stats the IMF used were either inept or far more likely a downright lie to fool the Greek people into accepting a bail out for foreign banks and private lenders.

    Did the IMF or the Euro zone really think a country that was being crucified with mass unemployment and financial ruin was simply going to carry on like that for the sake of some fat bankers bonuses? Do they want anarchy? Because that is exactly what happened when the world did this to Germany post WW1. And that’s ironic really given Germany is now a major player in this shambles.

    The whole handling of this matter by the IMF and the Euro zone is a disgrace.

    • Iv’e never subscribed to these things been done in a vacuum…we would have to be naive if we thought they were….and that there isn’t an alternative motive…

      Those who could didn’t and those that thought they could did.

      Meaning the parceling of rotten debt in a Ponzi scheme ensured that there would be a property bubble and an eventual realignment of wealth.

      The 1987 share-market crash shook off all the small investors releasing those shares to be picked up for rock bottom prices so the big players could buy them out and create monopoly’s…

      Two totally different scenarios but just remember the creditor has the power of recall – always.

      Thus you the debtor are now controlled by the creditor.

      Same goes for country’s as individuals.

      People are playing games with Greece – ruthless games. And they are not doing it for funzies.

      They’ve got a motive , and it isn’t ‘money ‘ …its power politics with a goal in mind.

  7. Forgive me, but I dare to say, NZ could DO with some firm “austerity”, in all honesty!

    That may finally get some lazy minded “sleepy hobbits” thinking, it may get them refocus, on what is really important in life.

    We have a dumbed down society, in large quarters at least, I suspect. And there is much mental laziness, there is political apathy, and most switch off, too easily, to not bother thinking about their country, their society, the future of their nation.

    I see and hear it everyday, the nonsense people are pre-occupied with, the drivel they exchange, the dumbness of mindlessness, where the “fourth estate” gets away with “murder”, with misinforming, not informing, with presenting nothing but dumb me down further kind of information.

    We are one of the most obese populations on earth now, and I see it also, that does not say all are well fed, to the contrary, but a dumb government, a lazy government, an irresponsible government, chooses to let people eat crap, devour endless amounts of sugar, fats and crap food, as long as it is “cheap” and gets the hormone drive metabolism “kicking”.

    We have people too busy with chit chat, with online teasing and bullying, with showing off, with tweeting nonsense, and so politicians from both sides of the political spectrum try to become “fashionable” and also tweet idiocy all over, trying to get a “following”.

    A lazy minded, dumbed down, a misinformed, manipulated, purely consumerist, indifferent, future hating, self focused, nasty, competing and infighting population, not all, but too many, is the rule now.

    So as long as Key and his liars, his consent buying, corrupt government get away with this, they can shy from “austerity”, I tell you, necessary “austerity” is just around the corner, not the Greek style, but it will be coming, as the days of living at the expense of the future, the natural environment, your kids and grand-kids, is coming to a harsh end.

    Time will soon be over, for frivolous, silly game shows, for getting away with lies and sticking the head in the sand, time will come, to force people to wake up, and concentrate on the harsh future realities, which will mean significant climate change, sea level rise, shortage of resources, waves of refugees all over the world, fighting, wars and suppression, by the elite, to get their hands at the last resources this wasteful human species seems to think it has and endless “right” to.

    Humble yourselves, let us humble ourselves, perhaps, and wake up, and face the future, which can only be formed in a collective gigantic effort, or we may as well call it “game over”.

    P.S.: People may finally start voting again, and vote more “sensibly” again, once we face and have “austerity”?!

  8. Yes, times of more equality, came usually after disastrous events, like wars, natural or not so natural catastrophies, but sadly humans are “human” and forget, and become very, very selfish and also short sighted again. We live in such times, and it is time for a rethink. Chris deserves credit for this section of his post:

    “In 1945 the British Labour Party was elected in a landslide to implement what they openly described as a “socialist” manifesto. The immediate effect of Labour’s election was that, from the very outset, the “peace” – at least in its early years – was to be a time of social equality. Inherited wealth was targeted quite ruthlessly and the near confiscatory taxes on high incomes that had been levied during the war persisted. The distribution of goods and services was organised not by “market forces” but according to need. For the upper and middle classes this over-ruling of the market was utterly unacceptable. For centuries, the ownership of wealth had conferred all manner of advantages: social, economic and political. But for the first 5 years after the war the upper classes ability to vail themselves of their customary advantages was severely constrained.”

    People tend to re-discover themselves and each other, as a “SOCIETY”, after harsh times. So let it roll on, the Post Key Era, thank you!

    As for Greece, the ones asking for too much “sacrifice”, they will soon pay the price for their arrogance.

  9. They’re all at it – and for why? Who will actually prosper?

    Please note that, according to this piece, the UK has only recently finally cleared its debt to the US from the FIRST WW.

    http://www.cnbc.com/id/102512154

    It’s the same sort of punitive mindset that hurrahs for death penalties and gathers round for lynchings. Beggar my neighbour is a game best played with cards, not lives and futures.

  10. I wish that I could believe that when we are faced with poverty, the people will wake up and boot out the government. But I dont believe it. Although NZ is actually performing badly economically, and we hear time and again about people living in poverty, the ordinary citizens continue to support the government.
    How can this be? Because in their unthinking minds they see us being assailed by dark forces from outside; they see Bill English as defending the country heroically against disaster; they will continue to think this until the evidence is incontravertible that he is the cause and not the saviour. We get the same emotional buzz out of watching this titanic duel as by watching our favourite sports team. When we lose we will blame the ref. Thats how we are built. The prisomer gets to love his chains.

  11. During the war years and immediately after, austerity was seen by all as temporary, a few hard times, but there will be light at the end of the tunnel.

    From where I am sitting, the agenda is for austerity to be permanent.

    • Andrew – the moral of that story is that a modern society requires taxes to function. Secondly, high levels of debt eventually undermine and damage a country’s economy.

      According to that article (if true), the Greek deficit is $30 billion euros.

      New Zealanders household (private – not government) is nearly NZ$160 billion – nearly 101 billion euros. (http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2014/2014oct77_4.pdf )

      Our sovereign debt is around NZ$60 billion – around 36.25 billion euros. (http://www.stuff.co.nz/national/politics/9380846/Public-debt-climbs-by-27m-a-day )

      All up, we owe approximately $136 billion euros.

      So I wouldn’t be getting too smug if I were you. Especially considering that much of the household debt is in mortgages – we are inflating the price of houses, and financing it through overseas borrowing. And instead of paying our way through taxation for state/social services, this government is borrowing hand over fist to finance activities.

      Meanwhile, Key gave away $4 billion in tax cuts in 2009 and 2010.

      We’re hardly better than the Greeks. We just do it differently.

      • Frank, it’s amazing what you’re blind to.

        It is a story of Greek citizens endlessly stealing from the state. They have plundered their own country for all its worth and then borrowed, only to plundered some more.

        Having been eventually found out, they’re now blaming the lender rather like a rapist blames his victim.

        Democracy: The system of government where you get the one you deserve.

        • Frank, it’s amazing what you’re blind to.

          Derision is not an answer to what I posted. It implies you have no intelligent response to what I’ve pointed out.

    • Who do you “blame”?

      The drug dealer (merchant bankers and finance companies) offering dodgy financial instruments, or the tempted person, thinking that these may offer some relatively low risk opportunity?

      It seems you would blame the “addict”, the victim, rather than the ones that brought all this upon us.

      Not only were some economies like Greece hit harshly by the GFC, also some local bodies all over Europe, who suddenly discovered that their “investments” in dodgy papers (many from the US) were not worth the paper they were printed on.

      While there has been tax evasion, while there has been corruption in Greece, it was and still is also widespread in other places, even in New Zealand.

      Over recent years Greek government did a fair bit to meet the expectations of creditors, to tidy up their tax system and so forth, but while being choked to near death, no matter what they tried, it would be unmanageable for them to pay all the debt back, which grew immensely after “investments” had to be written off, and after interest was added.

      A bad credit rating and so forth did the rest, so they have ended up where they are, in a vicious cycle.

      And this tale about the early pension, that is long past, no longer applicable. Also many pensioners there support family, as Greece does otherwise not have much in the way of a welfare system. So pensioners support their unemployed kids there, who would have NO own incomes or accommodation.

      But keep it up, beat and bash the victim, while he is on the ground.

  12. This is something Bernard Hickey wrote, and is worth reprinting here, in full;

    The last fortnight’s dramas on financial markets is really just the sound of investors waking up to some fundamental problems in the global economy.

    It is now dawning on the world’s biggest fund managers that there is too much debt weighing on households and governments in the developed world.

    More importantly, they realise there will not be enough economic growth and income to repay those debts over the next 10-20 years.

    That means governments might default or print money to repay the debt. Bank shareholders and bondholders may have to realise enormous losses or face high inflation. Growth will be much slower and for longer than expected. Slower economic growth might mean lower corporate profits and lower share prices.

    After nearly four years of urgent fixes, emergency measures, bank bail-outs, debt shuffles and government pump priming without any real improvement, there is a dawning realisation that something is broken at the heart of the global economy.

    It’s surprising to hear where some of these doubts about the future of capitalism are coming from. Some of the world’s biggest capitalists are now asking some fundamental questions about whether the type of globalised, free market-driven capitalism we have now is sustainable.

    Bill Gross is the world’s most important fund manager. He runs Pimco, which is the world’s biggest bond fund with US$1.3 trillion ($1.5 trillion) in assets.

    He commented this week that the hollowing out of the United States’ free-spending middle classes was at the heart of the problem. He pointed out that for several decades the engine room of the US consumer economy had been starved of income as high-paid manufacturing jobs were exported to lower-paid factories in China and technological innovation replaced workers with machines.

    For 20 years, the middle classes had made up the gap by borrowing more and governments had also borrowed more in recent years to supplement their incomes.

    Meanwhile, the extra profits made because of these lower labour costs were shuffled up to those on higher incomes and increasingly to an ageing group of capital owners. Increasingly, wealth and income is being concentrated in the hands of those who can’t or won’t spend it. This is starving the consumer economy of oxygen it needs to keep growing.

    Hedge-fund manager Jeremy Grantham also picked up on this structural problem this week.

    He points out that the share of American income that goes to the top 1 per cent of earners has doubled to 20 per cent in the last 30 years. That richest group are now hoarding that cash in the safest things they can get their hands on. Increasingly that means gold and, ironically, US Treasury bonds, despite their credit-rating downgrade this month.

    Grantham has put his finger on the core problem with unfettered capitalism. It works to shift wealth to the richest but can eventually topple over under the weight of itself when that wealth is hoarded and not reinvested or spent.

    Grantham should know about how the rich work. His firm manages more than US$100 billion worth of funds and doesn’t accept any amounts less than US$10m. Yet even he is saying it is now time to reset capitalism.

    He wants to see mortgage debt for the US’ overburdened middle classes forgiven. That means forcing bank shareholders and bondholders to take big losses. He wants to see tax rates on the wealthiest rise back to the levels seen in the 1950s and 60s.

    He is harking back to a time when America’s middle classes powered the growth of the world’s biggest economy. They earned enough to buy the consumer goods their factories produced. Even Henry Ford, one of the most aggressive capitalists of the 20th century, increased his workers’ wages so they could buy his Model T cars.

    In New Zealand, the share of income going to the top 1 per cent also more than doubled after the mid-1980s to nearly 14 per cent of income by the early 2000s. Last year’s tax cuts will have worsened that.

    The trickle-down theory will not be enough to save capitalism. Even the biggest capitalists are realising that now.

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10744940

    That was published in 2011. Hickey (and others) have foreseen the future.

    • The global system as it is, with some “free trade” between larger economies of scale, with corporations and their larger share-holders shifting production to the cheapest labour and least restrictive countries, to produce mass produced consumer products to supply the increasingly struggling “middle class” citizens in the “developed” countries, is bound to run out of steam.

      It is simply unsustainable, same as the ever increasing plundering of the oceans of fish and other sea-food is not sustainable.

      Those that run around, preach about “new markets”, about hundreds of millions more Chinese and Indians, Brazilians and Indonesians moving up into the “middle class”, all consuming ever more consumer goods and with that food from New Zealand and elsewhere, they are high on the drug called “economic positivism”.

      They have in their majority still not got it, that resources are FINITE.

      If the global free trade, capitalist system was as successful as they preach, why do we have billions of under nourished, billions of people living in poverty, not even having enough water and basic foodstuffs to survive on, let alone have decent housing and work?

      The abject poverty that we still have, the relative poverty we also have in developed economies, it proves that the system is not working.

      With the global climate change, with the continued pollution and CO2 making the oceans more acidic, we will soon have vast stretches of seas without many fish at all. With the extreme droughts and floods, the so far used agricultural land will become more wastelands, we will have a return to mass starvation.

      But who cares, not our government, not most brainwashed, short-sighted people, every morning they still turn the ignition keys, and drive, drive and drive, and keep polluting.

      I see some major calamities also heading our way soon, better wake up, dear people, the “good times” are over. We are fast racing towards the cliff, the refugee boats are still relatively few in numbers, more despair will bring tens of millions on their ways soon, all over the globe, the planet can no longer handle being plundered anymore.

      Species are becoming extinct by the hundreds each year. Eventually it will be our turn.

  13. Just because of the fact that Britain under Osborne and his austerity measures is more luxurious than the period after the war, doesn’t mean that Britain cannot go back to a real austerity period. The solution is not easy but it certainly doesn’t include cutting funding to the Armed Forces because this leaves Britain exposed to its enemies. We have seen in recent years that such enemies may not be as far away as what some people may think. Take Scotland, for example, and its attempt to gain independence from the UK as part of a plan to claim for itself the rights to North Sea oil deposits.

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