Saturday, April 11, 2015

Scapegoat Economics

In the wake of the economic crisis of 2008 the United States has repeatedly participated in the blame game with immigrants and with ethnic minorities. Now it is extending domestic scapegoating to still others. Governors in the US now increasingly attack state employees, their unions and pensions as if they, rather than the crisis, had suddenly become the economic problem. Mayors across the country do the same to municipal workers. Of course, both state and municipal budget problems since 2008 are primarily the results of high unemployment and reduced consumer spending. In short, it was and remains the crisis since 2008 that played and plays the key role in cutting governments' tax revenues and hurting government budgets. Growing and more effective tax-evasion strategies of business and the rich have had the same effect. Responding to lowered tax collections, politicians fearful of damage to their careers refuse to raise tax rates. Instead they embrace spending cuts that they justify by means of scapegoat economics. 

Thus they demonize public employees as lazy, greedy, overpaid, underworked, over-pensioned, etc. - all remarkably similar to the German depictions of Greeks. Governors practice scapegoat economics by promising to protect "the public" from tax increases by "not pandering to" public employees and their unions, by "reining in" their pensions, etc. Those politicians act as if public employees and their pensions were suddenly the problem rather than a dysfunctional economic system. They similarly miss the stark reality of the dysfunctional political system they operate: It cuts government help to people in economic crises just when they need it most. Instead, US political leaders use scapegoat economics to justify their selective spending cuts.

Capitalism's relocation deepens economic inequality at both poles.

Scapegoat economics also serves capitalism's global relocation. For decades, existing factories, offices and stores have been moving from old capitalist growth centers (western Europe, north America, and Japan) to new centers (China, India, Brazil, etc.). Similarly, enterprises are growing more in the new rather than the old centers. Headquarters sometimes remain in the old centers even as enterprise facilities locate elsewhere. Jet travel, computers and telecommunications make all this manageable. The capitalist competition that impels this relocation also means that the old centers lose many well-paid occupations with ample benefits and job security. Workers in places like the US are increasingly forced to settle for lower-paid, insecure jobs with fewer benefits. While jobs and wages grow more quickly in the new centers, wages there remain so low that huge profits reinforce capitalism's global relocation.

As capitalists relocate, populations everywhere must adjust to and accommodate all the usually attendant frictions, sufferings and costs. In the old centers, unemployment and lower-paid jobs undermine governments' tax revenues. Given resistance to tax increases, governments turn increasingly to expenditure cuts in their accommodation to capitalism's relocation. This often worsens unemployment and wage rates. More importantly it further depresses mass standards of living. Consumption, household finances and relationships, marriage and career decisions: All are caught up painfully in the adjustment process. The same applies, likely more traumatically, to capitalism's new centers. There, formerly agricultural and rural people are transformed quickly into industrial and urban populations living in extremely overcrowded and poorly provisioned slums.

A new politics organized around scapegoat economics appeals to voters by promising to "protect" them from austerity policies.

Capitalism's relocation is socially disruptive in yet another basic way. It deepens economic inequality at both poles. Profits rise and wages stagnate in the old centers. Employers distribute the rising profits chiefly to shareholders and top executives and secondarily to upper management and professionals helping them operate corporations. An often spectacular growth in income and wealth inequalities afflicts the old centers. In the new centers, arriving capital needs and makes partnerships with local capitalists and government officials. The latter become extremely wealthy more quickly than local wages rise, and so inequalities of wealth and income deepen in the new centers too.

The gains and losses of relocating capitalism are very unequally distributed in both its old and new centers. This only aggravates the social tensions already emerging from the many adjustments and accommodations people are forced to make. Suffering from personal, financial and community losses, individuals and groups often feel betrayed by "their" political and economic organizations. In the US, for example, many working people believe that the Democratic Party and labor unions had promised to "protect" them but failed to do so, especially in the crisis and debt-funded bailouts since 2008. They have come to fear that now they will be required to absorb the costs of dealing with those debts by being subjected to austerity policies while "others" get protected from those policies. Feeling betrayed or abandoned by their traditional political representatives, many become susceptible to a new politics organized around scapegoat economics.

As exemplified by new Republican governors in the upper mid-West sensing electoral opportunity, this politics appeals to voters by promising to "protect" them from austerity policies (in the US, unlike Europe, "austerity" is not the name used). This means, first and foremost, that voters will be spared tax increases. These are demonized as always and necessarily "bad" economics for everyone. But the Republican Governors now go further and promise to protect voters also from spending cuts by making sure that those cuts focus on "others." Enter scapegoat economics. The governors find "others" to be scapegoated in response to crisis-driven and capitalist relocation-driven declines in tax revenues. First of all, those others are - you guessed it - the traditional targets: those on welfare, in inner cities, immigrants, etc. The often-racist overtones of such appeals are only too well known. Nowadays, the second set of those "others" has come to include public employees, their unions, salaries, pensions, etc. To secure their careers, politicians promise voters to protect them by cutting government spending on both sets of scapegoated others. 

When it works, such politics sets one part of the population suffering from capitalist relocation, crisis and austerity policy against another part. This permits big banks, large corporations and the rich, who own and direct them - those with the most responsibility for causing the crisis - to escape paying for it. They escape in part because their wealth and power made sure that they benefited first and most from the government bailouts in 2008 to 2010. They also escape because scapegoat economics enables them and their political friends to shift the burden of paying for the crisis onto certain of its victims while "protecting" other victims from further victimization. Perhaps capitalism inherited scapegoat economics from prior economic systems, but capitalism's crises keep renewing that ugly injustice.

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