Stop the Austerity Craze! Massive Budget Slashing Can Lead to Economic Disaster, Violence and Repression
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That should have sealed the coffin on “austerity” and “Austrian Economics,” but somehow von Hayek and his fellow Austrian aristocrats who were forced to flee from the fruits of their economic programs, did a complete revision of history. Once they were safely in England and America, sponsored and funded by oligarch grants, hacks like von Mises and von Hayek started pushing a revisionist history of the collapse of Weimar Germany, blaming not their austerity measures, but rather big-spending liberals who were allegedly in charge of Germany’s last government.
Somehow, von Hayek looked at Chancellor Bruning’s policies of massive budget cuts combined with pegging the currency to the gold standard, the policies that led to Weimar Germany’s collapse, policies that became the cornerstone of Hayek’s cult — and decided that Bruning hadn’t existed. That instead Hitler came to power because Germany’s government grew too fat even as Bruning enacted massive spending cuts, its currency a mere paper currency even though Bruning kept it tied to gold, the German people a bunch of spoiled welfare queens living too high on the socialist hog when in fact they were starving in the streets suffering from unbearable pay cuts, and that these profligate German fat-cat pensioners and unemployment-insurance-queens were so hellbent on enjoying their government handouts that they elected a Nazi.
Austerity programs and gold-backed currencies were the cause of enormous pain, violence and disaster throughout the West in the early 1930s: In England, austerity measures led to one of the biggest mutinies in Britain’s military history since the time of the French Revolution; the Invergordon Mutiny of 1931, when up to half the Royal Navy rose up against austerity cuts, took over ships and sent fears of a Bolshevik revolution throughout the country. The mutiny and strikes worked somewhat: Britain was finally forced to abandon the gold standard, and wage cuts were softened.
As a counter-example, Sweden, just about the only country that adopted a “mixed economy” model, suffered far less from the Great Depression that affected the whole world; unlike the austerity-dosing countries, Sweden was already back on its feet and booming by 1932.
Take a look at just about any austerity program over the past century, and the record is always the same: economic destruction, political destruction and violence. Take Venezuela; ever wonder why Venezuelans chose Hugo Chavez? What made Venezuelans so radicalized that they’d to turn to a Fidel Castro groupie to save them?
Austerity is what happened, cooked up in Washington by the same financial elite we’re facing today. In February 1989, Venezuela elected as president a candidate, Carlos Andres Perez, who campaigned as a populist-liberal promising voters he would fight against the IMF and World Bank, which were trying to force an austerity program on the country. They believed Perez because the last time he was president, in the 1970s, he’d nationalized the oil industry as well as American iron ore interests.
But Perez was a fraud, a fake-liberal who’d secretly sold himself to bankster oligarchs and conned the voters. Three weeks after winning the election, President Perez rammed through an austerity program written by the IMF that sparked immediate mass protests. Perez did what all austerity-lovers do: he declared a state of emergency and suspended the Constitution, and called out the security forces, who massacred at least 1,000 and perhaps as many as 3,000 Venezuelan protesters. While everyone in the West knows about the comparatively smaller massacre in Tiananmen Square that same year, few have heard about this massacre, which Venezuelans call " the Caracazo." Naturally, this con-job and massacre was an example of “courage" -- that’s how IMF’s Michel Camdessus described Perez’s decision to massacre protesters. Here’s an New York Times article from 1989: