"Be Outraged!" Some big names in development take on the Austerians

May 25, 2012

     By Duncan Green     

Be Outraged’, an angry and eloquent broadside from some big names in the development magnificent-sevenscene, including Richard Jolly, Carlos Fortin, Giovanni Andrea Cornia, Diane Elson, Ruth Pearson, Frances Stewart and Stephany Griffith Jones. Many of them led the fightback in the late 1980s against the excesses of the Washington Consensus, working out of UNICEF and producing the hugely influential critique, Adjustment with a Human Face. A generation later, they’re back, vaguely reminiscent of a more gender-balanced version of the Magnificent Seven – battle-weary gunslingers returning for one last shoot-out (over to you, photoshoppers – Richard Jolly as Yul Brynner has to be worth a go). The targets of their wrath are the TINA Austerians – ‘there is no alternative to austerity’. They critique each aspect of the austerity agenda, then contrast it with inspirational examples of more constructive approaches. Here are some highlights: “Pushed to extremes, austerity is bad economics, bad arithmetic, and ignores the lessons of history. We, an international group of economists and social scientists, are outraged at the narrow range of austerity policies which are bringing so many people around the world to their knees, especially in Europe. Austerity and cutbacks are reducing growth and worsening poverty. In our professional opinions, there are alternatives – for Britain, Europe and all countries that currently imagine that government cutbacks are the only way out of debt. Be outraged coverUnemployment: A waste for economies and a tragedy for people. Stimulus can increase employment and economic growth. The first phase of stimulus in 2009 and recovery did have positive effects, which should not be ignored. But the stimulus was not maintained – the first failure. It was not backed up with measures to overhaul bank regulation and control – a second failure. And only limited actions were taken to tackle the dangerous trends of financial globalisation, growing inequality and ‘precarisation’ in the labour market – a third failure. The fact that women and care were hardly considered, if at all, constituted a fourth failure. Examples for Inspiration: In response to the 1997-2000 East Asian crisis, countries such as Korea, Indonesia, Thailand and China vowed “never again!” They strengthened regional institutions and built up reserves. Their response to the current crisis has been to maintain growth and invest heavily in education and in programs for unemployed youth, in contrast to Europe which is often cutting back on opportunities for youth. The Financial Sector must change from Bad Master to Good Servant. The sector, both national and international, has two main functions. Firstly it should serve the needs of the real economy. Secondly, it should help manage and mitigate risk. In the last two decades it has done neither. Countries need a far smaller, simpler, more transparent and accountable financial sector, focussed on lending to the real economy, not on making exorbitant profits and salaries for outrageously overpaid bankers and banksters. Examples for Inspiration: In post-World War II USA and Europe, and many developing countries like Brazil and India today, the financial sector has been well regulated and controlled. Well-run public banks have played an important role. It is clear that finance can support and not undermine the real economy, but strong and clear regulation is required. Extremes of Inequality can be reduced. Levels of poverty and inequality today are staggering. In 2011, salaries, benefits and bonuses of top directors in the FTSE 100 companies increased by an average of 49%, “despite minimal growth in their companies”. The richest 1% (61 million individuals) earn the same amount as the poorest 3.5 billion (56% of the world’s population). Examples for Inspiration: In the last decade Brazil, Thailand, Malawi, Argentina, Chile, Malaysia, Venezuela and Bolivia have all reduced inequality, through: • Fiscal policy that aims to balance the budget along with expansionary expenditure • Minimum wage legislation • Increasing access by all social groups to secondary and higher education • Increased taxation and rising tax/GDP ratios, especially from oil and mineral exportscare economy • Social protection measures involving cash transfers to poor people The care economy and equality for women. The care economy and social infrastructure needs support and investment. Cuts usually leave women to pick up the pieces and children to bear the brunt. Women’s work and support for care can strengthen both society and the economy, if combined with more equality for women. It is counterproductive to sacrifice women’s and children’s rights and support in the name of credibility in financial markets. Examples for Inspiration: The Nordic countries lead the world in government support for child care and pre-primary education services, including good wages for public pre-school teachers. [And the final peroration] Leaders of the world need to regain the vision and determination to strengthen the international system and prevent future crises. State action is also needed to help sustain more dynamic national economies and a more stable and balanced global economy, especially when backed by decisive global and regional action. The key priorities for economic recovery are support for employment, for the poorest people, and for women and children, while avoiding environmental destruction. The crisis will only become more serious as positive action is delayed. There are alternatives People are suffering unnecessarily We can make a difference Action is needed now!”]]>