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Bob Pollin Pt5: Main objective of austerity is to demolish the welfare state and public ownership

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to Real News Network. I’m Paul Jay in Washington. As the debt debate continues, one thing that is emerged: a policy that began two and a half years ago of stimulating the economies to deal with the crisis, particularly the unemployment crisis, has now turned into a global policy of austerity. Why? Now joining us to talk about all this is Bob Pollin, codirector of the PERI institute in Amherst, Massachusetts. Thanks for joining us again, Bob.


JAY: Alright. So, you know, we’ve done a series of interviews and we’ve talked about the current crisis is quite a bit manufactured, given how low interest rates on American debt is and what the real servicing costs are. So, then, why? If it’s clear that unemployment is still high and has barely moved, the economy is still not growing at any rate that people thought it should be by now, why this turn to global austerity?

POLLIN: Well, in part I think there is the argument that’s out there that the stimulus failed, that the US stimulus failed, in Europe they failed, and now we’re stuck with all this debt. My response to that is, well, the stimulus succeeded to some extent. It was not big enough relative to the magnitude of the problem. We do have a lot of debt, but we have–we’re paying low interest. That’s one answer. The other answer, which is the clear agenda of the right wing now, is to demolish the welfare state, both in Europe and in the United States. They see this as an opportunity. They’ve seized on this issue of debt. It is real. The debt is real, though at least in the US the interest rates are low. They’ve manufactured the crisis. And their solution to the crisis is: let’s get rid of all this stuff we never liked in the first place. Let’s get rid of public education. Let’s get rid of Social Security. Do you know how much they think they can make? If you don’t have Social Security, imagine what they could do in the private sector, taking over Social Security. I mean, they see trillions of dollars there. They’ve been looking at them ever since Social Security got created in the ’30s. And so this is–they see it as the opportunity. They have captured the terms of the debate. They’re not necessarily winning on all the details, but the terms of the debate are how much are we cutting back the welfare state. So, so far they’re winning that argument.

JAY: The other issue seems to be an opportunity to privatize.

POLLIN: Yeah. I mean, essentially the same point is: let’s cut back the public sector, way back. You know, what happened for two generations after the Depression and World War II was there was a broad consensus over the notion that government is a big part of the economy. Government spending, if you add up state, local, and federal, you know, is 35 percent of the economy. It–maybe it should be bigger or smaller, but there is a broad consensus that we’re in the right range. That consensus has broken down, and the right is setting the terms of the debate, which says that we shouldn’t spend so much on public schools, we shouldn’t spend so much on health care, we shouldn’t spend so much on old-age pensions.

JAY: And so what do you make, then, of President Obama’s role in all of this?

POLLIN: President Obama is trying to hew to the center. You know, he thinks that’s what you need to do to get elected, and he’s probably right. He just isn’t participating in how you define the center. So the Republicans are defining the center. The center’s saying we need to do these cuts, and the debate is over how much and how quickly, instead of saying the real question that Obama should put forward is to say the crisis is unemployment. And the crisis is the notion that we are challenging the idea of some kind of social wage, some kind of social contract. We need to strengthen public schools. We need to improve health care. And instead of letting that be the driving force of the debate, he has collapsed and accepted the Republican terms of the debate, as have the Democrats in general.

JAY: And some people make the argument, because that’s–when you go out to raise money for an election campaign, you go where the money is, and where the money is is–that’s what they want. They don’t want these things saved. They want essentially this austerity plan.

POLLIN: They think they want it. They think they want it. I–from–unless you’re a pure ideologue, you know, opposed to government and all that, which, you know, some people are, no matter what, this is not going to get [incompr.] not going to get a recovery. It is not going to establish a stable growth path. It is going to even make it harder to create a new financial bubble, because the economy is going to keep getting dragged down. So even from the standpoint of rational capitalist building a foundation for growth in which they profit a lot but there’s decent wages, there’s a stable foundation through public-sector involvement in education, health care, public safety, that–it certainly isn’t good for growth. That can all be good for growth. That would be good for capitalists. But the capitalists are too greedy to see that.

JAY: I guess for those that are–have some rationality, they’re being swamped by those that really do believe apres moi la deluge. There doesn’t seem to be a concern of what comes next. It’s how can we make sure we’re milking this for everything we can in the moment.

POLLIN: Yeah, that’s certain. I mean, you know, that’s what the Koch brothers have, you know, funded, this ALEC and all this right-wing activity I know that you’ve covered. And what is the premise? You know, what happened in Wisconsin? And Minnesota shut down. The premise is we don’t want to have public schools anymore. You know, we’re going to just cut it way back. We’re going to–you know, not around the edges. I mean, the debate between Republicans and the Democrats coming out of the Depression and into the ’50s, ’60s, and mid ’70s through Nixon was really a debate around the edges that, you know, there was a general consensus on the role of the public sector. And that–now consensus has broken down, and the Republicans are trying to squeeze that point like mad, and they’ve enabled us to forget that what caused the crisis was free-market capitalism on speed, on steroids, which was the financial crisis through unregulated Wall Street.

JAY: Alright. Thanks for joining us, Bob.

POLLIN: Okay. Thank you very much.

JAY: And thank you for joining us on The Real News Network.

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Robert Pollin is Professor of Economics at the University of Massachusetts in Amherst. He is the founding co-Director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include: A Measure of Fairness: the Economics of Living Wages and Minimum Wages in the United States, and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.