Austerity: A Marxist Analysis with a Little Help from Sigmund Freud


    Sigmund Freud, the founder of psychoanalysis, famously defined a neurotic as someone who spends his time, energy, and resources digging  out of holes of his own making only to make other holes and do the same thing over and over again.  The neurotic never examines what he had really done to get into the hole in the first place and how to change his actions to prevent putting himself in the hole in the future.

    Freud was no social revolutionary theorist or even a materialist, since he stressed individuals’ understanding and overcoming their own irrational acts, adjusting their thought and action to social situations   rather than transforming material conditions.  Class relations, political economy, had no place in his theory, since individual health and happiness was based on “coping” with society, not changing society.

    But Freud’s definition of neurotic behavior has some value in understanding the present “austerity “policies of advanced capitalist countries, once it is  combined with Marxism as historical and dialectical materialism and a Marxist  analysis of capitalism as a system/mode of production     “Austerity,” that is reducing state spending, taxes, as a way to get out of the holes of stock market crashes, high unemployment, mounting debt, is comparable to the panic response of the neurotic at the government and mass level.  

It makes a certain sense if one believes that “we” individuals, governments, etc., have created the crisis by “spending too much.”  If “we” spend much less, “balance budgets,” then things will revive, return to “normal.”  

It is much easier to think in those terms, even to passively accept the contentions of academic and media pundits that we are living in a “new normal,” then to understand that under capitalism nothing is “normal” to capitalists with wealth and power and/or the governments that serve and protect capitalists except the drive of the capitalist class to protect and expand wealth, to profit from both booms and busts.

It is easier to think in those terms than to understand that “we” don’t exist concretely outside of the social classes we belong to; that “we” are not now nor have we ever been a “we”  until we become class conscious as non owners, non investors---class conscious as  workers whose incomes both derive from our labor and are themselves( labor) commodities, bought and sold, by  employers for their profit, along with   our debts, our mortgages, car payments, credit card payments,etc.  This ensures  that “we” will collectively  bein bondage as banks, real estate firms,  insurance companies,  gain huge extra profits from us in interest payments, making it impossible for most of us to do anything more than live from paycheck to paycheck.

     These are the systemic reasons why  the working class finds itself the “hole” in “good times” and bad, although the “hole” merely produces anxiety in “good times” not panic.

“Austerity” means that there will be more “bad times” since there will be less in reality in paychecks, as wages and benefits are cut until “recovery.”  Also, “recovery” if and when it comes will put more wealth in the hands of large corporations and upper income groups as the panic is relieved and the “good times roll for finance capital.  

Austerity will not alleviate the debt crisis for the working class in either the short-run or the long run. It will not alleviate the government debt crisis either, but only make it worse, if the experiences of the U.S. government in the Great Depression of  the 1930s is any example.

The Great Depression and the Crisis Today

The more public spending is reduced, the more public jobs are lost, public support for private contractors is reduced and private jobs are lost,  the more income tax revenues to federal and state governments will decline and   deficits will rise,

This will, as Andrew Mellon, leading finance capitalist and Treasury Secretary under Harding, Coolidge and Hoover, stated at the beginning of the Great Depression, permit “assets” to return to their “owners”(meaning the banks and brokerage houses) once the price of everything, especially labor, had been cheapened, and large capital can in effect turn much of the economy into a foreclosure auction.

    But you don’t have to be a Marxist or even a progressive of any kind to understand that austerity means less mass purchasing power and less mass purchasing power means less production and more unemployment, less revenue for both working people and government, and higher debts for all. This is all that it can mean.

Those who contend that reduced spending will in itself produce an economic revival are essentially saying what Herbert Hoover said in the early 1930s—“the economy is fundamentally sound,” and the depression was just a business cycle crisis that would go away—the old normal that those capitalists tell us is today’s “new normal.”

The economy wasn’t sound and the depression didn’t go away even partially until there was extensive positive  government intervention by the New Deal  and fully until much greater government intervention in  World War II.  

What New Deal policies did as they developed was to alleviate the suffering of the masses of people and help put money back into the economy.  This was called “pump priming” at the time—it is called stimulus today.  

Later, it came to be associated with the general theory of the economist John Maynard Keynes, who saw business cycle downturns deepening with the development of large corporate industrial capitalis.

Keynes stressed the necessity of government intervention and public spending to sustain “aggregate demand” (meaning the mass purchasing power necessary to sustain high employment and bring about a revival of investment).

Marxists at the time and since  rejected Keynes theory that capitalism could be sustained indefinitely and also that capitalism was worth saving---but Communists particularly did not reject the social and regulatory legislation that Keynesian theory justified.   The difference was that those Marxists associated with the CPUSA saw these policies and legislation as strengthening the working class so that it would in the long run abolish capitalism and replace it with socialism, not as Keynes and his supporters saw—policies that would save capitalism and allow it continue indefinitely albeit a more humane form of capitalism in its relationship to the working class.

In the 1930s and afterwards, the more intelligent defenders of large capital, who one might call real conservatives  (those who were not denouncing Roosevelt as a Communist dictator advancing programs like Social Security and minimum wages to destroy freedom) blamed the New Deal’s attacks on monopoly and to a lesser extent public works/jobs programs as undermining “business confidence” which in turn prevented the “re-investment” of private capital necessary to bring about full recovery.  

Progressives, especially the many influenced  then by popular front Communists, were critical of the administration for its failure to expand public works/jobs programs, extend its hugely successful public energy program (TVA) to other parts of the country  and develop  its pilot programs for federally supported public housing.  Also, Communists and progressive were critical of the limited extent of the support the New Deal gave the rapidly growing labor movement—support one should note that was far greater than any administration had given before or since.

But no one, including at the time  most conservative Republicans, however they denounced administration labor and jobs legislation and called the President “Franklin Deficit Roosevelt, really believed that “austerity” offered any solution to economic crisis.  

When a sharp recession hit in 1937-1938, for example,  even many conservative coalition politicians voted to expand the jobs programs that they routinely condemned (although, they, following gains in the 1938 elections, established something new—the debt ceiling which we have lived under since 1939—as a weapon to use against New Deal social legislation and public spending in the interest of labor and the people, not as economic policy).

In the 1930s, all major non fascist capitalist governments except  the U.S. pursued “austerity” policies through most of the great depression, with the exception of the French Popular Front government, which attempted to advance pro labor and social welfare policies in the few years that it was in power in the late 1930s.

In Germany of course, the Hitler Fascist regime combined a policy of wage repression with massive state intervention in the economy in the interests of large capital, overcoming mass unemployment through “rearmament” (building the first “modern military industrial complex” in the war) which greatly strengthened its position in Germany and preparing to solve all economic and political problems by brutal conquests and the establishment of a German colonial empire throughout Europe.  

Eventually, the growing interdependence of the major capitalist countries along with the hoarding of capital by finance capitalists meant that the great depression was not overcome until World War II.  For some including many Marxist-Leninists this was proof of capitalism’s general crisis—which it would seek to overcome through imperialist expansion and war, policies which would lead anti-imperialist and socialist revolutions.  

We can debate among ourselves what the course of 1930s history might have been if German Social Democrats and Communists had formed an alliance not only to fight the Nazis but to come forward with an anti-depression program, similar to what the New Deal government advanced in the U.S.  Or If Britain and France had followed such policies through the period.  

We can also debate what the course of history would have been if the New Deal government had carried forward its policies on employment, taxation, public sector expansion, and the anti-monopoly policies which the administration’s Temporary National Economic Commission (TNEC) provided a foundation for through its research into the U.S. corporate economy.  Or if the administration had been able to continue after WWII and turn the huge wartime expansion into the full employment national policies recommended by its National Resources Planning Board.

But no one can seriously argue that the austerity policies advanced under Herbert Hoover in the U.S. or similar policies by various European governments through the period did anything but intensify the crisis. No one can argue that they had anything to do with any kind of economic revival—the limited revival in terms of employment  and incomes which New Deal depression policies fostered or the extensive expansion that New Deal wartime policies brought about—policies one should remember of unprecedented national economic planning, national price controls, a huge increase in income and corporate taxes, and for that matter a large increase in deficits to fund the expansion.

The Situation Today

    While the situation is in important respects different today, the historical amnesia about the disasters of  past austerity policies  in the developed capitalist countries is widespread. If such policies failed when the interdependence of major capitalist countries was far less than it is today, and productive capacity much lower, how can they possibly succeed now?

Although U.S. policies under the Obama administration in its “stimulus” orientation and its recent Jobs proposal may be objectively better than the policy of “Eurozone” conservative governments in France, Germany and Britain, it has so far failed to address what was the central question during the great depression and what is the central question today--- the question of jobs.

If “conservative” Keynesianism  means  subsidies for capital, direct loans and grants, tax exemptions, and “progressive” Keynesian fiscal policy means subsidies for workers, public works construction, public transportation, energy, education, and housing as “social investments,” then the administration has so far pursued conservative Keynesian fiscal policies in the main.   

It has not established an updated version of the Works Progress administration to renovate and upgrade the transportation infrastructure, schools, and other public facilities.  

A new updated WPA, along with  the  debt forgiveness for student loans and other educational subsidies to keep working people in school and outside of the labor market,  might cut unemployment in half with far less funding than the finance capital “bailouts” and pay for itself in increased tax revenues. The President’s jobs legislation  by itself simply can’t do the job, although it has positive aspects, especially the reduction of regressive payroll taxes which have risen over the last thirty years as progressive income and corporate taxes have dropped sharply.

The administration’s  health  care legislation, while a significant advance over what currently exists, does not even come close as public health care to the Wagner-Murray-Dingell bill supported by the industrial labor movement and New Dealers  at the end of WWII.

A serious national health care system in the U.S., one without private insurance companies and one with  government acting as a “single payer” for pharmaceutical prescription drugs, would given the experiences of other nations would  cut the cost of health care to workers, employers, and tax payers by half,  would be a powerful  “progressive Keynesian” force to increase mass purchasing power ---which is the engine of “economic growth,” not savings to reduce deficits, which only intensifies stagnation and decline.  

A serious national health care system would also of course provide greatly improved health care for the majority of people, not only those without insurance and those under-insured in the present system.  While this has little meaning for capitalists or most economists, it would also see the development of a more productive force.

These are sadly facts, not “talking points” for the administration’s opponents on the left for whom it will always be a Trojan horse for Wall Street.  They can neitherbe simply wished away by ritualistic condemnations of the “ultra-left” or proclaimed smugly as reasons to attack the Obama administration from the left while the right continues to advance politically.

Lessons From History

So what can we as Marxists learn from the history of the struggles of the great depression?  First, the policy of critical support for the Obama administration, similar to the critical support given to the Roosevelt administration, continues to make sense, given the political balance of forces in the country, but it is necessary to emphasize much more the constructively critical today , since the anxiety and disillusionment with the administration among progressive mass organizations and especially within the trade union movement is great.  

Although this is very difficult in our media saturated fragmented society, we must begin to understand that the only serious criticism that working people will understand and accept is constructive criticism, although it is much more difficult to get that message out through mainstream media than pointed and pointless putdowns.

So far, the administration’s failure to advance in policy its 2008 promises has  produced the political defeat of 2010.  That defeat can be reversed and as I see it transformed into a major victory if Obama and  the Democrats  campaign on an anti-austerity program based on “progressive” not “conservative” Keynesianism—using from the past concepts like “full employment,”  a “balanced” economy of public and private sectors, and economic recovery based on increased  mass purchasing power and progressive tax reform.  

Working people can understand that these policies will  benefit them  through higher incomes, much less out of pocket expenses for health care and education, and much less consumer debt. The administration can then seriously challenge conventional wisdoms that higher taxes on corporations and the wealthy mean less income for all, and that the only way to create jobs is to give capital everything it wants on its own terms.

Also the administration can and must  begin to address the role of state governments that seek to undermine its initiatives and also the crippling debt in many states, which has fueled rightwing “tax revolt”  and extreme austerity policies.

Austerity hits most working people at the state and local level, in lost jobs for public sector workers, reduced police and firefighter forces, and teachers, and higher regressive property taxes to pay for less services provided workers.  These  policies do nothing to benefit  private sector workers; it increases the number of unemployed to compete for their jobs reduces state contracts to private contractors which costs them jobs, and finally increases the regressive property taxes that they pay even though the Republican right sells these policies to them as a way to prevent property tax increases!

    While some may point to the Republican right danger as a reason to support the administration uncritically, this policy, like that of attacking the administration from the left uncritically, simply doesn’t work.  The only way to defeat the Republican right is to bring working people to the polls in unprecedented numbers—the only way to do that is to give them reason to believe that the administration will change its policies to reflect both its promises and their class interests.  

If Roosevelt for example had not embraced labor and social legislation in 1935(and of course enacted such legislation) he might have been re-elected in 1936  out of fear of the Republicans, but it would have mattered as little as Clinton’s re-election in 1996— nothing would have changed, although one can only speculate what a role a stronger left(with the CPUSA acting as the force to both educate the people as widely as possible and organize and coordinate mass  actions) might have played in subsequent struggles.

If Obama is re-elected with the present economic and political status quo, austerity policies will inevitably be carried forward by the Republican right and those Democrats who will collaborate with them.  While this is not as great a danger as the election of a Republican bogeyman or bogeywoman  president, it is the most likely danger today.

Austerity policies must be confronted and defeated in the U.S.  They must be recognized for what they are—a prescription for more unemployment, lower incomes, greater real debt.  They must be fought in the U.S. by seriously restructuring the relationship between the federal and state governments, since it is at the state level that working people are feeling the effects of austerity.  The state debts can be at least partially absorbed by the federal government as part of a serious tax reform policy that will increase employment and the real incomes of the great majority of people.

At the national level, we must fight to have the administration move away from its conservative Keynesian “bailouts” of finance capital to progressive Keynesian policies of the kind carried forward in the 1930s,  jobs programs, and enhancing rather than restricting labor’s rights and social welfare policies—what some on the left are call “bailouts of the people.”   

    Those who say that this cannot be done should be reminded that it was done in the past, under different circumstances, but circumstances that were no less desperate. Also, such policies in the U.S. would play a positive role in challenging the austerity programs in “Eurozone” countries, which are undermining the living standards of Europeans and negatively impacting the U.S. economy.

    This is our challenge.  To fight austerity with constructive alternatives—which is what the Center-Left New Deal coalition, with all of its zig zags, limitations, and defeats, did in the the 1930s, establishing the labor, regulatory and social legislation which reactionaries have fought to eliminate and/or undermine ever since.

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  • A perspicacious article hitting a note which, thanks to globalization, resounds worldwide.

    The neurotic behaviour described by Freud is not only symptomatic of the capitalist, but, alas, of the modern man who seeks instant gratification to his problems.

    Whereas the neurotic capitalist might be acting neurotically while conscious, most people manage to unconsciously imitate his behaviour by choosing an instant solution to their problems which, more often than note, gives rise to even bigger problems in the long-run.

    Posted by Kenneth Curmi, 11/17/2011 12:07pm (5 years ago)

  • A perspicacious article hitting a note which, thanks to globalization, resounds worldwide.

    The neurotic behaviour described by Freud is not only symptomatic of the capitalist, but, alas, of the modern man who seeks instant gratification to his problems.

    Whereas the neurotic capitalist might be acting neurotically while conscious, most people manage to unconsciously imitate his behaviour by choosing an instant solution to their problems which, more often than note, gives rise to even bigger problems in the long-run.

    Posted by Kenneth Curmi, 11/17/2011 11:12am (5 years ago)

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