From Corporate Bailouts To Austerity Measures: Shifting Further The Burden Of Crisis To The People

US corporate profits correspondingly increased by 7.7% in 2009 and then by a massive 56.5% in the first quarter of 2010 to US$1.6 trillion (from US$1.2 trillion in the first quarter of 2009). Yet the US working class is suffering its deepest and most prolonged jobs crisis since the Great Depression. Fifteen million workers were officially reported as jobless in May 2010, at a 9.7% unemployment rate, apart from 1.1 million discouraged workers and 8.8 million involuntary part-time workers. Their prospects remain dire and dismal with house prices falling again, looming cutbacks in state and local budgets, and European troubles cutting further into exports. These will mean less jobs, more people losing their unemployment benefits, health insurance and homes, and greater poverty and misery.

The jobs crisis is likewise severe in the other imperialist countries. Growth resumed in the 27 countries of the European Union in the third quarter of 2009 but by May 2010 some 23.1 million were still unemployed, a 1.8 million increase from the year before and reaching a record 9.6% jobless rate. The Japanese economy has contracted by more than 5% in 2009 and is being dragged back down to deep recession by deflation and weak domestic demand. As officially reported, unemployment reached 3.5 million in May 2010, at a rate of 5.2 %.

The raging global jobs crisis worsens even as profits have risen and the rich keep getting richer. The richest one percent of the world’s households have even increased their wealth from US$36 trillion in 2008 to US$44 trillion in 2009, with the super-rich top 0.1 % increasing their wealth from US$19 trillion to US$23 trillion. Taxpayer-funded bailouts and so-called stimulus programs for the banks, financial institutions and firms, which have been speciously justified as good for the economy and the people, have in the main preserved and enlarged the wealth of the monopoly bourgeoisie, especially the finance oligarchy.

In the backward and dependent countries, incomes from trade, remittances, investments and development remain stagnant and are likely to decrease as the global depression deepens. Decreasing demand from the imperialist countries for primary commodities, migrant labor and low value-added semi-manufactures has led to shut downs and job losses. Trade and budgetary deficits and unpayable debt burdens afflict all the underdeveloped countries.

These countries are being compelled to pay a growing amount of debt service and to bargain away their agricultural land and mineral resources to the multinational corporations. The are being pushed further down to ever deepening levels of chronic depression as the imperialist countries adopt austerity measures in their home ground and push other countries to do the same, with the notable exception of China which the imperialists have been pushing to revalue its currency, import and consume more and draw down its export surpluses and foreign exchange reserves.

Sovereign Debt Crisis

The hyped global recovery is not just false by not being productively beneficial to the people but also artificial by being unsustainable. The enormous state-funded bailouts have grossly inflated public deficits and debt and generated the sovereign debt bubble in the imperialist countries and client states. The public debt bubble has in fact begun to burst in certain countries, threatening to precipitate another financial and economic collapse even deeper and more far-reaching than the meltdown triggered in 2008.

The US government deficit increased four-fold from being equivalent to 2.5% of GDP in 2007 to 10.9% in 2009, reaching US$1.6 trillion. This caused US gross federal debt to rise to US$12.9 trillion in 2009, or equivalent to 90.4% of GDP. In turn the general government deficit of the EU-27 countries increased nine-fold from 0.8% of GDP in 2007 to 6.8% in 2009, reaching 801.9 billion euros. Over that period Germany’s fiscal situation deteriorated from a 0.2% of GDP surplus to a deficit of 3.3%, the United Kingdom’s deficit increased from 2.8% to 11.5%, and France’s deficit from 2.7% to 7.5 %. EU-27 debt correspondingly rose to 8.7 trillion euros, equivalent to 73.6% of GDP.

These levels are unprecedented and clearly unsustainable. In the advanced economies, gross general government debt averaged around 60% in the years before the crisis, reached 75% in 2007, and are certain to breach 110% by 2014 at the latest even if the temporary so-called stimulus measures are withdrawn. Group of Seven (G-7) debt-to-GDP ratios are already near 100% which approaches levels immediately after the Second World War yet without the prospect of a post-war reconstruction boom to drive recovery.

The recent 110 billion euro bailout of Greece by the EU and IMF marks the entry into the next phase of the global crisis into sovereign debt difficulties. In 2009, Greece among the weaker European countries had the worst combination of a deficit equivalent to 13.6% of GDP (second worst) and of debt equivalent to 115.1% of GDP (second worst). The bailout requires harsh austerity measures: freezing public sector pay until 2014, increasing the VAT from 19% to 23%, a 10% increase in taxes on fuel, alcohol and tobacco, and increasing the retirement age from 61 to 63. As it is the EU has also already agreed on a 750 billion euro rescue package for other possible bankruptcies in the Eurozone. The number of those in the PIIGS category (Portugal, Ireland, Italy, Greece and Spain) is bound to increase.

Share This Post