BREXIT

UPDATE: After an extraordinary series of machinations among the Tory Party's leadership, Theresa May, who was Home Secretary in David Cameron's second cabinet, has emerged as the new Prime Minister of the United Kingdom. She is the second woman PM in British history, and faces the difficult task of unwinding the country from the European Union, even though she publicly, if quietly, supported the Remain camp. 

She won the post after Tory Secretary of State for Justice Michael Gove appeared to turn against his Leave ally, Boris Johnson, challenging him for the vote. That knocked Johnson out, leaving May, Gove, and Andrea Leadsom, another Eurosceptic Tory who was further to the right than either of her two opponents. She made heteronormative comments about motherhood that were considered insensitive to May, and also is alleged to have inflated her record, so she removed herself from the race, leaving May as the sole candidate. 

May has begun to clear out Cameron's cabinet, in the process making bizarre moves that include appointing the known racist and xenophobe Boris Johnson as Foreign Secretary. Also out has been one of the UK's major champions of austerity, George Osborne, who has stepped down after a six-year run as the Chancellor of the Exchequer. 

Both the Labour and Liberal Democratic Parties have called for a general election soon, to certify May's position as head of Parliament. Neither opposition party looks ready to offer an alternative to the Brexit vote, nor does either one have an answer for Scotland's push to become independent, so in addition to leaving the EU, the likelihood of a shrunken UK seems increasingly likely.

ALSO: I corrected the typos in the post below!
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(Image © BBC.com)

Heckuva job! Yesterday the British people faced a major vote on their future, and chose by a 52% to 48% margin to have the United Kingdom leave the European Union. The "Leave" vote dominated in most of England outside the major cities, particularly the capital, London, and in Wales, achieving a goal that UK Eurosceptics had pressed for since Britain joined the EU in 1973. On the other hand, Scotland, which nearly two years ago voted to remain part of Great Britain, voted overwhelmingly to remain part of the EU, as did the heavily Roman Catholic western counties of Northern Ireland. Only months ago, polls showed the "Remain" position in the lead, but last night's vote was decisive, with a 72% turnout and 17,410,742 votes in favor of withdrawing vs. 16,141,241 against. (Strangely enough, the UK's leave vote total was almost identical to its 1975 vote, at 17.3 million, to stay in the EU.)

The vote spells the end of David Cameron's six-year tenure as Prime Minister and head of the Conservative Party, since he had called the national referendum partially to decisively quell an intraparty struggle between the Conservatives' dominant, elite neoliberal faction and its vocally Eurosceptic, far-right flank, and to consolidate his power as PM after having been reelected just 13 months ago with an increased Parliamentary majority. Now he's out of a job, and his party is in disarray. The successful leave vote also may endanger the position of main opposition Labour Party leader Jeremy Corbyn, who unenthusiastically supported staying in the EU, which was also the stance of the Liberal Democratic Party, led by Tim Faron.

(Image © BBC.com)

The main political beneficiaries of the vote appear to be former London mayor Boris Johnson, a controversial MP, known racist and xenophobe, and longtime rival of Cameron's, as well as the United Kingdom Independence Party (UKIP), led by Nigel Farage, who lost his UK parliamentary seat but ironically currently holds one in the European Parliament in Brussels. Tussles over the UK's EU membership had created problems for Cameron's two Tory predecessors, Margaret Thatcher and John Major, and have now brought Cameron down as well. He has announced he will resign once the Conservatives have chosen a new leader, by this coming October. Corbyn's battle to retain his post will like ensue as well; he already has faced stiff challenges from the neoliberal wing of the Labour Party over his strongly Leftist positions and statements.

The "Little England" voters, particularly hit hard by globalization, the global financial crisis, and just as importantly, Conservative austerity under Cameron and his Treasurer and Chancellor of the Exchequer, George Osborne, chose the path emphasized by UKIP, which was to blame immigrants and decry directives from and treaty obligations to Brussels. Many issues, such as the EU's mishandling of the economic downturns in members states like Greece, Spain and Portugal; its central policy ensuring the free flow of EU member state citizens to wealthier countries like Germany and Britain; and its inability to provide a viable program to address the continent's influx of refugees and immigrants from outside the EU all combined to produce a potent brew that "Leave" voters swallowed wholesale. Despite the EU's stumbles, younger voters on the whole supported staying in, while voters above 50 supported the "Vote Leave" position, and ethnic, racial and religious minority voters unsurprisingly supported continued EU membership, while a sizable Britain's still overwhelmingly white electorate did not. This "populist" nationalism, which has clear parallels with Donald Trump's success in the GOP primaries, bodes ill for the stability of the UK as we know it. Queen Anne and her Stuart predecessors might not be the last British monarchs to hold a personal, rather than governmental, reign over the UK's constituent parts.

As predicted, the markets reacted with shock, with non-US exchanges suffering huge losses and the Dow plummeting 600 points. The leaders of the "Vote Leave" have already begun to backtrack somewhat on their claims about the financial benefits of Britain's independence, but they also face a more shocking scenario in that the UK itself could splinter, with Scotland once again holding a referendum to become an independent country, and, contrary to decades of tension, Northern Ireland, or at least parts of it, merging with the Republic of Ireland, an EU member state, to the South. While full Scottish devolution would probably mostly entail major administrative and bureaucratic challenges, any sharp changes in the sovereign status of Northern Ireland could reignite sectarian violence of the kind that marked the country for decades. Britain's vote could also spur a push by Eurosceptic and ultraconservative parties in other member states, like France and the Netherlands, to quit the Union. Whether Scotland can block the referendum's results is unclear. Also, calls for a new referendum have gained 2 million votes so far, and it's also unclear whether a popular referendum can override the will of Britain's elected Parliament. Unlike the the US, the UK has no written constitution (time for one!), and lawyers, legislators and historians will have to hit the books to figure out whether the referendum is binding or not. (Imagine if it turns out that it isn't!)

(Image © BBC.com)

The risks to Britain's economy and society are real. It has benefited from maintaining its own currency, which fell by 11% the day after the BREXIT vote, but its links to and avoidance of trade barriers non-EU states and across the globe face have helped its economy tremendously over the last 40 years. EU membership has also helped London become one of the world's global financial capitals; as an EU state with less regulation and a strong national currency, it has become a major spot to park money and speculate, all of which could change if the EU assumes a harsh stance on trade policy.

Withdrawal from the EU may also exacerbate xenophobic and racist elements in the UK, particularly given the putative leaders of the Conservatives and UKIP; neither Johnson nor Farage has hesitated to use overtly racist rhetoric and discourse to further their aims. Once Cameron's successor takes over, she, he or they will have a set timetable to follow, with roughly two full years expiring as the UK unwinds itself from Brussels' embrace, and renegotiates all manner of relationships with the EU's constituent states.

At the same time, the European Union must figure out a way to resolve its internal economic and social problems lest it too begin to splinter. The euro--and Eurozone--remains a major issue. Britain had avoided the euro debacle of the last few years, but it now enters very dangerous territory. How it and the EU's leaders respond in the near and long term will determine its fate.

Whom Does Economic Austerity Benefit?

French President Nicolas Sarkozy
and German Chancellor Angela Merkel
(Philippe Wojazer, AFP/Getty Images)

Why do so many European leaders, both within the Eurozone and outside it keep pushing economic austerity despite its apparent failures historically (under Hoover, FDR in 1937, Latin America in the late 1980s and early 1990s, etc.), and, as a host of current economic indicators show, in real time, in Greece, Ireland, Spain, Portugal, Italy, Latvia, and now even France and Germany? Why is so hard for the political opposition in the United Kingdom to make an argument for the failure of that country's coalition government's policies, which have proved a disaster, stalling economic growth and creating social havoc? In fact, were the UK following an equally tight monetary policy, like the European Common Bank under Jean-Claude Trichet and now Mario Draghi, instead of the expansionary approach the Bank of England head Mervyn King has adopted, its jobless rate and slowdown might be as severe as Spain's, which tops out the European Community.  Even here in the USA, after the country experienced the most severe economic shock since the Great Global Depression of the 1930s and early 1940s, and in the face of an inadequate but still necessary stimulus bill and the Federal Reserve's successful monetary policies, the call for austerity, budget-cutting, and fiscal retraction remains strong. In fact, it is already underway at the state and local level, and may be one of the major causes of the slow and tenuous growth rate the country is now experiencing.

I'm aware that Naomi Klein and many others have written entire books about why economic and political leaders would and continue to push such policies; Klein's arguments concerning "disaster capitalism's" effects, via "shock doctrine" policies, praised but with caveats by the likes of Nobel laureate economist Joseph Stiglitz and Indian MP and former United Nations Under-Secretary Shashi Tharoor, are incredibly persuasive and resonate with critiques articulated by generations of people on the political Left as they do with many participating in the Occupy movement.  Moreover, as Michael Moore's Capitalism: A Love Story (2009), Charles Ferguson's Inside Job (2010), and the documentary film version of Klein's book, to give but three examples also illustrated, the "disaster capitalism complex" is just that, complex series of interlocking systems, institutions, discourses, attributable to no single person, firm (though Goldman Sachs's name would pop up in amost every account), conspiracy or aim, though the goal of funneling economic and political capital into the hands of a very few (the upper reaches of the 1%).

So, knowing all of this, why would I ask "What is Economic Austerity For?" or, to put it another way, why do political leaders and their plutocratic backers and friends keep pushing economic austerity? Why do brilliant economists like Paul Krugman bemoan the depredations of austerity, as he regularly does, predicting its destructiveness and calling out its agents, but always with the query of why the people behind it are doing it? Surely he knows better. Why do online commentators resort to a form of near-Manicheanism when discussing austerity, labeling those behind it "evil,"or suggesting that they are sadists--and perhaps some are, who knows--rather than trying to divine who benefits from such policies? As I said, we know who benefits, but when I consider the public discourse about austerity, whether in the US or beyond our shores, particularly in the mainstream media, I note that no one begins to put the various strands together. So here's an attempt, using a simple list format, to note who benefits from such policies.

European Common Bank President Mario Draghi
(Macrobusiness.com.au)

This is what I see:

In the EUROZONE countries

1) for the creditor nations and the global banks, austerity coupled with bailouts of the creditors (but not the governments themselves through the purchase of sovereign debt) represents the chief alternate to default because because under a default the creditor nations could incur massive losses and the banks, both in terms of debt obligations and in terms of bond holdings, could lose everything. Thus creditors benefit by imposing austerity and dragging this out as long as possible, with feints, false promises, anything, because with each bailout the creditors are getting something, as opposed to nothing, which also benefits the private bond market, while the austerity policies place the sovereign entities in an even more weakened position;

2) for the sovereign governments in severe fiscal crisis with no monetary policy options, agreeing to austerity policies appears to be a good option in lieu of default because they fear the inability to borrow money at a reasonable cost, which is already happening, so their governments, whether run by people ostensibly on the left, right, or technocratically "centrist," go along with the creditors' program, though, as many have argued, in Greece's case, where the country to default, though it would cause a severe temporary shock, Greece would again have control its currency, devalue it to make itself radically more competitive, thus lowering its cost of living,  increasing exports, and making itself more attractive to tourists. It probably would not be able to borrow money anytime soon, however, so political and economic restructuring would have to occur, but that is already happening without any of the benefits of having its own currency.

MOREOVER:

3) the global banks and shadow banks, which caused the economic collapse, as well as private creditors, have placed bets on rising European debt and are benefitting as austerity drives these bets up;

AND, THE FOLLOWING APPLIES TO NON-EUROZONE ECONOMIES LIKE THE UK AND THE US:

4) austerity allows political policymakers, abetting global corporations, banks, and the very wealthy to drive down public sector wages, dismantle unions or force radical cuts in any agreements they've made, hack away large numbers of government employees and any agreements public sector unions have made, making it more difficult to reenact those agreements at a later date;

5) austerity allows political policymakers, abetting global corporations, banks, and the very wealthy to drive down private sector wages because of increased competition and wage and salary deflation; dismantle private sector unions or force radical cuts in any agreements they've made, and thus drive up corporate profits, which accrue to corporate executives and shareholders;

6) once these policymakers and actors have effected such cuts, they then can also reduce or eliminate direct government services, through privatization, benefiting private corporations and often wealthy individuals; reduce government subsidies for particular private services that benefit middle-class and poor people, unless these subsidized private services directly benefit political and economic patrons, or undermine direct government programs; and to the extent possible, they seek to destroy or severely undermine safety nets, turning them both into privatized systems that the banks and wealthy can then plunder on the one hand, and into social welfare programs that are politically weakened and eventually be eliminated on the other.  One major discursive effect of such an approach is to underline the narrative that "government" doesn't work and that the safety net comprises entitlements as opposed to benefits people pay into and support, and which benefit the entire society; the attack on government power reinforces these empowered government and private political and economic actors' capital and power;

7) with austerity in place, the decreased public sector costs and social services mean that federal, state and capital gains taxes on the wealthy can remain low or, if raised (as in the UK, for example) can be pegged to floating economic targets upon which they can be returned to lower levels; the wealthy, imagining they will need only minimal government support of any kind, can afford to pay for private services, including higher municipal taxes benefitting the places they live; or they imagine they can move to secure enclaves protected from social unrest;

8) with austerity policies in place, the increased economic stress makes private and public sector workers more fearful of joining unions, challenging management, of speaking out, of requesting raises, of striking (this has not stopped either Europeans or Americans from doing so, yet), or of aiding fellow workers and organizing;

9) with austerity policies in place, the increased economic stress breeds social, economic and thus emotional and psychological strife and makes it easier to pit those under stress against each other, and in the absence of a strong Left party or parties, or a class-based or group-based consciousness grounded in theories of resistance and opposition, including the historical trends (Marxism-Leninism, Socialism, Progressivism, etc.) it opens the way for right-leaning parties to come to the fore, to write into law and then justify through adjudication the new state of affairs;

10) austerity policies in place also advantage the wealthy in multiple other ways, not least in elminating competition in corporate terms, while increasing access to political, social and economic actors and systems; augments their buying power (cf. real estate, retail, etc.) as well as their social and political power; affords their children less competition in terms of education, social and political access, etc.;

11) and finally, with austerity policies in place and the social, political and economic transformations these create, it makes it considerably more difficult to enact policies to turn things around, in the absence of revolution or another economic collapse, both because of the increased concentration of power and wealth in the hands of a few and because economically and psychologically stressed civic actors are less able if not less likely to participate, organize or challenge the increased power of the elites, allowing those possessing it to control whoever or whatever entities are "democratically" elected or, in the absence even of the figment of democracy, they can control through authoritarian means, thus extending social and economic inequality and the policymakers' power and control.

Now every element of this list, and especially numbers 4-11, do really represent "shock doctrine" policies in action to varying degrees, which is to say, neoliberal capitalism in conjuction with laissez-faire and libertarian economics.  They also do suggest a conspiracy, if not linkable to one source then to particular ideologies, actors, institutions and systems. Again, whereas some might label this behavior evil, and others, like economist Duncan Black (Atrios) have on more than one occasion pondered whether the people with and in power are just stupid, it's clear that there are numerous benefits, at least to a very few, of austerity policies in the face of the sorts of economic downturns we're seeing nowadays.

Now, how can we get some of this information across to more people?  The Occupy movement, blogs and other online social media, and certainly many grassroots organizations and institutions, as well as some political parties across the globe, have begun to do so, but I do think that one of the best way to get such information across to people is via media that touch them affectively, as well as intellectually, that entertain while also educating and enlightening. How, without resorting to propaganda and eluding the censors, can we do this? That is the major challenge.