What is Austerity? A Short History of the Failed Experiment in Free-Market Capitalism


As the 1990’s began and the Soviet Union faded away, capitalism reigned triumphant (except in China) and the human race had reached the End of History. It turned out that all the rest of the world really wanted was to be more like America and with this new found confidence, the capitalist nations began a process of economic liberalization which became known as the ‘Washington Consensus.’ A small group of wealthy, middle-aged, white men decided that what would really make people happy was the removal of their public services and the transfer of authority from the democratically elected governments to private businesses; businesses which coincidentally were owned by rich white middle-aged men.

Naturally, opposition to this ideology arose and, freed from the burden of having to make excuses for the failures of the Soviet Union, this distributed, decentralized and international movement fought back against the religious devotion to the cult of the free market. Organizations like the Zapatista’s in Mexico or the World Social Forum began to actively resist the encroachment of private interests on public goods and spawned events such as the Battle of Seattle, or the 2001 riots in Genoa. With a defiant cry of ¡Ya Basta! (Enough!) the anti-globalization movement, as it came to be known, gradually found its true calling as the response to a much more significant threat: climate change. The ideas of economic justice and social equality still remained but increasingly found themselves taking second place to environmental concerns.

As fewer and fewer activists called attention to it, the neo-liberal experiment gradually continued. That is until 2007, when it turned out that economic growth purely for the sake of economic growth was unsustainable. The ‘Market Correction’ (depression) in which we now find ourselves is an inevitable part of capitalism and just as our grandparents and great-grandparents discovered in the 1930s, the more free the market, the harder the fall.

So what were the neo-liberals to do? As people’s wages and public services had gradually been eroded, it turned out consumers no longer had the disposable income required to sustain the economy. Yet, these wealthy men had invested so much time in funding free market think-tanks to churn out support for their position, and they had already made so much money, how could the turn back now? A solution had to be found: How could the erosion of the public sector and the transfer of government funds continue without being exposed as the product of greed and exploitation?

The answer was deceptively simple: re-brand the Washington Consensus as ‘austerity.’ Persuade people that further liberalization was the cost of their demand for trivialities such as ‘education’ or ‘healthcare.’ In fact, it was their pathetic demands for ‘unemployment insurance’ and ‘retirement’ which had caused capitalism to fail in the first place. When hard-line Soviet ideologues were challenged with shortages or corruption they argued the problem was not with communism, rather communism had been corrupted by capitalist traitors working against the system. And so, austerity and economic liberalization are the solutions because we have not yet experienced a ‘pure’ form of capitalism, free from the meddlesome demands of the electorate.

But this week, Europeans stood up. Elections in Britain, France and Greece decisively declared that no party whether ‘right’ or ‘left’ would be excused when it came to the endorsement of austerity. International Worker’s Day saw a wave of activism across the continent and it seems clear that the tide is turning against the austerians.

The Europeans have nailed their colours to the mast and it now remains to be seen if America will follow. Waiting in the wings is the terrifying possibility of the Republican’s Ryan Budget. Neither of the parties in the U.S. can be expected to reverse the tide of privatization but at least its worst depravations can be curtailed. If David Graeber is to be believed, the Occupy movement is in the process of freeing itself from the traditional power structure and presenting true opposition. Even the Tea Party doesn’t oppose the removal of all welfare, just welfare that goes to people they believe are undeserving (immigrants).

America, like Europe, stands at an ideological crossroads. Do we capitulate and allow those wealthy, white men to continue their dominance of our lives? Or, do we stand together, cast our vote, make our voices heard and with one voice yell ¡Ya Basta!