As these oppressive measures led to the transfer of nine percent of gross domestic product (euphemistically called "national savings") from domestic needs to debt collectors, they also further aggravated the economic crisis: "Unemployment jumped to a high of 14 percent, from single digits -- and an already wobbly economy shrank 15 percent last year" [Ibid.].
In Latvia, another victim of the predatory global finance, the recessionary consequences of creditor-imposed austerity measures have been even more devastating: "Latvia has experienced the worst two-year economic downturn on record, losing more than 25% of GDP. It is projected to shrink further during the first half of this year. . . . With 22% unemployment . . . and cuts to education funding that will cause long-term damage, the social costs of this trajectory are also high" [5].
While the debt crises of the weaker European economies such as Greece, Latvia, Lithuania, Spain, Portugal and Ireland have reached critical stages of sustainability, the relatively stronger economies of Germany, France, and UK are also in danger of debt and deficit crises. Indeed, according to a recent IMF estimate, even in the more advanced economies of Europe the debt-to-GDP ratio will soon rise to an average of 100% [6].
Of course, the United States is also burdened by a mountain of debt that is fast approaching the size of its gross domestic product (of nearly $13.5 trillion). A major difference between the United States and other indebted nations is that the US is not as much at the mercy of its creditors or the IMF as are other debtor nations. Therefore, it can reasonably be argued that, on the basis of national or public interests, it could embark on an expansive fiscal policy, that is, a more aggressive stimulus package, that would take advantage of the power of "government as the employer of last resort," more or less as FDR did, thereby creating jobs, incomes and economic growth. This would also add to government's tax collection and reduce its debt and deficit.
Judging by the record, as well the budgetary projections, of the Obama administration and the lobby-infested Congress, however, such an expansionary fiscal policy seems very unlikely. Not only has the bulk of the government's anti-recession assistance been devoted to the rescue of the Wall Street gamblers, but also the relatively small stimulus spending has largely been funneled into the pockets of the private/financial sector--through wasteful and ineffectual programs such as "cash for clunkers," tax credit for new homebuyers, tax incentives for employers to hire, and the like. This stands in sharp contrast to what FDR did in the earlier years of the Great Depression: creating jobs and incomes directly and immediately by the government itself.
Not only is the administration's feeble stimulus package soon coming to an end, but the government also recently imposed a three-year spending freeze on all public outlays except for military spending and the so-called entitlements. As their tax revenues, along with their traditional shares of federal assistance, are dwindling many states (especially California, Florida, New York, Arizona, Nevada and New Jersey) are facing serious financial difficulties. And as they curtail or shut down essential services at the libraries, museums, parks, schools, art centers, and hospitals, and give pink slips to their employees, the recessionary conditions are bound to exacerbate.
The wrenching economic hardship in the debt-ridden countries is not so much due to insufficient or lack of resources as it is the result of the lopsided and cruel distribution of those resources. It is increasingly becoming clear that the working majority around the world face a common enemy: an unproductive financial oligarchy that, like parasites, sucks the economic blood out of the working people, simply by trading and/or betting on claims of ownership.
Rectification of this unsavory situation poses stark alternatives: either the powerful financial interests, using the state power, succeed in collecting their debt claims by impoverishing the public; or the public will get tired of the vicious cycle of debt and depression, and will rise in protest--akin to the "IMF riots" in Argentina--to repudiate the largely fictitious and illegitimate debt. This is of course a class war. The real question is when the working people and other victims of the unjust debt burden will grasp the gravity of this challenge, and rise to the critical task of breaking free from the shackles of debt and depression.
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