Making austerity work in Britain for Dummies (Anti-statist version)

!Quelle Surprise! Like Greece and Spain before it, the UK finds austerity can only result in more austerity:

The cuts to the benefits budget will go ahead as long as they meet safeguards sought by Work and Pensions Secretary Iain Duncan Smith, who has clashed with Chancellor of the Exchequer George Osborne on the issue since the party came to office in 2010. Duncan Smith and Osborne published a letter today saying the differences had been resolved.

“We are both satisfied that this is possible and we will work together to find savings of this scale,” the ministers said, according to excerpts released by Osborne’s office.

Osborne will address activists at the Conservatives’ annual conference in Birmingham, central England, later today, seeking to assure voters that his party will spread the pain of austerity across society. He’ll accuse the opposition Labour Party of focusing too much of that effort on the rich.

“There’s unfairness if people listening to this show are about to go out to work and they look across the street at their next door neighbour with blinds pulled down, living off a life on benefits,” Osborne said in an interview with BBC Radio 5 today. “Is it fair that a young person straight from school who has never worked can find themselves getting housing benefit to live in a flat when people who are working, perhaps listening to this program, are still living with their parents” because they can’t afford to move out, he asked.

…

Osborne is seeking to extend spending reductions across government departments as a 2010 effort to rid Britain of its budget deficit by 2015 is pushed back a further two years. Britain spends more than 200 billion pounds a year on welfare, accounting for 30 percent of total government spending. The Treasury said in March that welfare cuts of 10 billion pounds are needed by the fiscal year that runs through March 2017 on top of the 18 billion pounds of savings already announced.

See this is the problem with austerity — the more you cut, the more you must cut. Folks, if the fascist state is subsidizing capitalism by accumulating debt, cutting fascist state deficits only weakens capitalism.Since the fascist state is propping up profits through its accumulation of debt, if this debt accumulation is reduced, it sets off a vicious cycle which can only end in each round of cuts making necessary the next round of cuts.

Plan B for dummies

If we are at the point where the only thing holding off collapse is fascist state debt, we can pretty much figure out who goes first:

Everyone without a reserve currency, raise your hand.

Okay. Now everyone without a massive current account surplus, raise your hand.

Finally, everyone without both a reserve currency AND a current account surplus raise your hand — Anyone? Anyone?

HINT: I’m looking at you Britain!

Depending on where you are in this chain of potential sovereign default risk, it is increasingly likely everything you try to do that is consistent with the continuation of wage slavery is going to end up pushing you further into a deepening hole of risk. If you have a reserve currency, you are least at risk; if you have a large trade deficit, you are at moderate risk; but if you don’t have either …?

Well, let’s just say if you don’t have a reserve currency or a trade surplus it is time for Plan B:

Okay, so first off anyone who does not have a reserve currency as its national currency should adopt one pronto — fuck national pride. And fuck your Welfare Queen too! Moreover, for what we are about to do next, you will want the most liquid and most important reserve currency available on the world market — the American Dollar. You know:

“In God We Trust, All Others Pay Cash”.

Don’t leave traditional fascist state economic policy without it. So even if you use euros, you’ll probably want to allow the dollar to circulate freely and legally as money in your economy as well.

This will mean you no longer can have fiscal or monetary policy, but you don’t have it now anyways — so no loss, right? Every dime of deficit spending you have is already denominated in some reserve currency you do not control. Since this cannot be sustained in the long run, we are going to do is substitute reduced hours of work policies for the loss of fiscal and monetary policies. The aim is to transfer as much of state spending to the private economy as possible, ensuring there is no loss of income for working folks. Gone are the defense budget, foreign interventions, and the bloated civil service sector.

Which is to say, our aim is to squeeze the fuck out of domestic capital and force it to be more productive.

Reducing the unproductive state sector has the added benefit of reducing the domestic trade deficit as well, since state deficit spending is basically responsible for trade deficits. This will, of course, leave the state unable to service its debt — pushing it into bankruptcy – which is perfectly fine. The only people profiting from state sector debt is Wall Street. Let the state sector go bankrupt, since you have now insulated the population from the effects of such bankruptcy by drastically reducing hours of labor.

What we have done now is imposed a reverse-austerity — one that hits capital and the state instead of labor. We have done this by getting rid of the trade deficit and forcing Wall Street to accept the losses on the public debt. We have also removed the currency risk of such a move by adopting a reserve currency. And, finally, we have removed the risk to the working class, by eliminating unemployment from the equation completely.

Without currency risk, capital flight is no longer an option — there is no currency arbitrage. With a severely reduced state sector, the cost of unnecessary labor is squeezed out of the economy and it becomes “more competitive”. Since the state has defaulted on its debt and is under severe spending constraint, no one in their right mind will lend to it.

Moreover, every time there is a state or trade deficit or unemployment, we will just cut hours of labor still further to address these deficits.

There is no better way to kill the accumulation of debts and trade deficits or unemployment — which are all just forms of fictitious capital — than reducing hours of labor. Moreover, by doing this we are only doing proactively what the world market is doing naturally with unemployment: reducing unnecessary labor costs. The world market is already stripping nation states of their capacity to run fiscal and trade deficits through monetary and fiscal policies. However, it is doing this by forcing these nations into austerity regimes that place costs of this labor rationalization on the working population

All we are doing is displacing this impact with one that hits fictitious capital instead. Essentially, instead of rationalizing on the basis of money wages, we are rationalizing on the basis of labor time.

Marx’s theory suggests this works, because the value paid in wages must equal socially necessary labor time in both its simple commodity and its capitalistic forms. It should, therefore, be more effective than trying to subsidize profits as the fascist state does through economic policy.

Whereas capitalist austerity is inherently depressionary, reverse-austerity, as I outlined it, has no depressionary effect at all.