Austerity Around the World
When things are going well, people vote for the status quo.
When they aren’t going so well, they move farther out on the political spectrum. In France, a couple of years ago, both Melenchon on the far left and Le Pen on the far right were considered “politically dead.” Now, a few years of crisis have brought them both back to life.
From “France 24/7”:
Far-right National Front candidate Marine Le Pen obtained a surprising 18% of the vote in the first-round of France’s presidential election Sunday night…
“Tonight is historic,” Le Pen gushed to her supporters gathered in the 15th district of Paris on Sunday. “We are the only opposition to the ultra-liberal, libertarian left-wing.”
A seasoned National Front loyalist, 42-year-old Jean-Christophe, explained his reasons for supporting the candidate. “I’m against legalising immigrants without papers, no exceptions… We’re not able to welcome them properly, so we should offer them aid in their own countries,” he said.
Marine ran a campaign tightly focused on economic protectionism and an exit from the Eurozone.
It was a ‘backlash against austerity,’ says The Financial Times.
If you’re in power…you tell people that the status quo is great and getting better. If you’re out of power, you tell them that things are going to hell in a hand basket, unless they vote for a change.
In France, as in America, left and right have more in common than in dispute. Both want to use the power of the state — the force of government — to get what they want. Protect one industry. Punish another. Reward one group. Tax another.
But the most important thing they want is to get elected — to get into the driver’s seat and turn the wheel in the direction they want to go.
Generally, the lefties want more spending. The righties steer towards more austerity. The lefties go with Krugman and Keynes. The righties prefer Friedman (Milton) and Schauble.
Right now, the Germans have the money. They don’t want to give it to free-spending Greeks and Spaniards. So, the “olive countries” promise to straighten up…and the fix is in. Trouble is, except for the elite bankers, bureaucrats and politicians, the fix isn’t working for anybody. In Spain, the real unemployment rate is nearly 25% — close to Great Depression levels. Of the country’s 10 biggest companies, 8 are now priced below liquidation value.
It’s “suicide by austerity,” says Paul Krugman.
And while the elite want to stick with Europe…and the euro…more and more voters seem to want to make a break. Colleague Justice Litle:
Europe’s real problem is a long-brewing and dangerous one: Political backlash in the streets. At some point, angry Spaniards, Frenchmen, Portuguese et al may join their compatriot Greeks, stand up to their cowed leaders, and collectively shout in unison: “To hell with your austerity.”
And guess what country the anti-austerity crowd looks to for an example?
Argentina!
Yes, the Argentines were stuck in a somewhat similar situation. Their economy was tied to the US dollar. They owed the rest of the world — primarily large foreign banks — a fortune. And the more they tried to keep up with their bills the more the economy seemed to suffer.
That was at the end of the 1990s.
What did they do? They simply walked away from their solemn promises, reneged on their debt, and dumped the dollar…
It was the biggest default in history.
And oh yes, the Argentine government not only stiffed its foreign creditors, it stiffed millions of its own citizens too. It froze bank accounts and forcibly converted dollar deposits to peso deposits, giving savers a 2/3rds haircut.
Did it work? Depends on what you mean by ‘work.’ The government ripped off lenders and its own citizens. People lost their life savings. Businesses went broke. Unemployment hit new highs.
But it was fairly quick. The economy was able to get back on its feet after a few years. And the leaders of the Peronist party, still in control even after the debacle, were able to get back on the job of ruining it. They seemed to learn nothing from the experience…except that they are able to get away with practically anything. Peso inflation is running at about 25% per year. The Argentine government just expropriated the largest oil company in the nation. And most observers expect another crisis within 24 months.
Is that success? Depends on what you compare it to…
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