The problem with austerity

Austerity doesn’t work – it’s official. An American bankers’ think tank, the Institute of International Finance, has just come out with a report which concludes the bleeding obvious: that the all-out pursuit of debt reduction at the expense of economic stimulus has made the Greek situation worse.

The Institute’s chairman Charles Dallara, who worked for the US Treasury and for the International Monetary Fund during the administrations of Ronald Reagan and George HW Bush, blames European policy-makers.

A bit rich, you might think, since the world financial crisis unquestionably began in the US, and is being perpetuated by its policies of propping up the banking sector and printing paper money – sorry, “quantitative easing”. But it’s hard to argue with his description of the world economy as “stuck at the crossroads, being pushed in one direction by easier monetary policy, and pulled in another by fiscal austerity”.

Dallara’s report expresses particular concern about Greece, and he has added his voice to those saying the country needs more time to reduce its budget deficit.


German Chancellor Angela Merkel arrives in Athens tomorrow, Tuesday, for one of the toughest visits of the present round of European shuttle diplomacy. On Friday Greek Prime Minister Antonis Samaras gave the gravest warning yet of the dangers facing his country. He told the German newspaper Handelsblatt that Greek society is “on the verge of collapse” unless financial assistance is forthcoming. He knows that his government, already deeply unpopular because of the cuts it has imposed, will run out of cash next month unless the EU bails it out.

The Samaras government was shaken last Thursday when hundreds of angry dockworkers stormed the Defence Ministry in the latest of the rolling strikes and protests against the bankers’ austerity measures.

Merkel can expect to be met by further demonstrations. “Greek society will welcome her with mass protests,” said a spokesman for the main opposition party Syriza.


One who hasn’t been listening to the austerity-doesn’t-work message is Queensland Premier Campbell Newman. Since he came in on a landslide in March, he’s been cutting a swathe through the public sector – 14,000 jobs gone already, and $300m cut from the health budget. Queenslanders are reeling. And this is the state that gave birth to Australian trade unionism and the Labor Party. When the mining boom falters, as it will, they’ll have to dig deep to resurrect that fighting spirit.

We came home just three weeks ago to a welcome pile of Australian publications that had accumulated while we were away. The Australian Book Review, Overland and Meanjin are full of stimulating reading – the best antidote to the cultural and philosophical wasteland of the commercial mainstream media.

And talking of Queensland, there among the reading matter was a booklet I’d picked up at the Townsville Writers’ Festival in June, just before we left. It’s The Radical Tradition by that insightful writer Michael Wilding – three lectures on Henry Lawson, Joseph Furphy and Christina Stead given in 1993 at James Cook University and published by the Townsville Foundation for Australian Literary Studies.

The lectures are brilliant. Wilding puts Lawson’s writing in its historical context, and gives the lie to academic efforts to separate his best writing from his politics. With Furphy, he analyses the radical tradition in the bush and also shows how the passages on socialism were excised from the original publication. And in discussing Stead, one of the greatest Australian writers of the 20th century, he brings out the universality in her portrait of Sydney, the extremes of class society and the conflicts and uncertainties within the left.

I take my hat off to Wilding and to the Townsville Foundation – one of a handful of under-funded local organisations that contribute to keeping our literary heritage alive.

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