Tag Archives: austerity cuts

Local Currency Update: Opting Out of the Bankster Money System

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According to the Guardian, renewable energy provider Good Energy has agreed to accept the Bristol pound in payment for electricity and gas bills. The company claims to be the first in the world to accept payments in local currency. Bristol residents already use the Bristol pound to pay for groceries, bus fares and council tax (ie real estate taxes).

The Bristol Pound is an alternative currency launched in 2012 to help keep cash in the local community, as opposed to the deep pockets of multinational corporations.

Run as a not-for-profit partnership with Bristol Credit Union, the Bristol pound is the first city-wide local currency in the UK and the largest alternative to Britain’s national currency (pounds sterling). There are approximately 750,000 Bristol pounds in circulation.

Local or complementary currencies are an ideal way for communities to opt out of the corporate money system. Their use has expanded exponentially since the 2008 downturn, especially in European countries like Greece, Italy and Spain. Devastating austerity cuts have left millions in southern Europe with no access to euros, the official currency.

My town New Plymouth has their own local currency, the New Plymouth talent, though it’s not as widely circulated as the Bristol pound. We also have a Time Bank (which I’ve just joined), which allows members to earn time credits providing services for other members. They can use these credits (instead of money) to purchase services from other members. It’s a great alternative for unemployed, retired and disabled residents who are short on cash due to the economic downturn.

Giving Capitalism a Feminine Face

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lagarde

Historically the IMF and World Bank, like the WTO, have been characterized by “faceless” leadership. Prior to the mid-nineties, only a handful of liberal intellectuals knew these powerful international institutions existed. Even after the 1999 Battle of Seattle effectively launched the antiglobalization movement, the leaders of these august institutions remained anonymous. When the IMF issued warnings against countries with excessive public spending, they originated from the agency itself, rather than IMF officials.

Prior to his June 2011 arrest for alleged sexual assault, no one outside of France had heard of Dominique Strauss-Kahn, who ran the IMF between 2007 and 2011.

The Historic Role of the IMF

The IMF was founded at the end of World War II at Bretton Woods. The British delegation, led by economist Maynard Keynes, wanted the IMF to be a cooperative fund member states could draw on to maintain economic activity and employment through the periodic economic crises that are characteristic of capitalist economies. The US delegation saw the IMF as more of a bank serving the needs of private lenders by ensuring borrowing states repaid their debts on time (see IMF History).

The US prevailed, and IMF loans came to be known as “structural adjustment” loans because they forced borrowing governments to adjust the structure of their economic activity. In most cases, this involved extreme austerity measures favorable to multinational corporations seeking access to cheap resources and labor markets. Such measures included privatizing publicly owned assets (airlines, telecoms, railroads, health systems, etc); liberalizing trade and financial markets; increasing incentives (corporate and individual tax cuts and waivers of environmental/labor regulations) for foreign investment; and supporting commercial export crops at the expense of food production.

Developing countries that blindly followed these policies, especially in South America and Africa, found their countries mired in debt and huge social inequalities. Russia was one of the most extreme cases: its economy shrank by 55% before President Vladimir Putin set the country on an alternative path to recovery.

Repackaging the IMF’s Image

Given the historic anonymity of the IMF leadership, you have to wonder about all the publicity being lavished on Christine Lagarde, the current IMF managing director. Although global economics is a low priority in the US media, she receives near daily attention in the British and international media. At sixty, Lagarde is still a strikingly attractive woman. Presumably, however, there is some political agenda behind the decision to promote this “rock star of the economic world,” as several media outlets have branded her

Lagarde’s Mission

Besides her carefully cultivated public persona, Lagarde is also unique in her willingness to lay out the IMF’s economic and political agenda. The policies she advocates include

  • Stronger economic growth (allegedly to promote global re-employment)
  • Deeper “integration” of European economies (translation: creation of a centralized fiscal body capable of making budgetary decisions for the entire Eurozone)
  • Improved “fiscal consolidation” for the US and Japan (translation: less deficit spending)
  • More domestic consumption and less reliance on foreign investment and exports in emerging economies (especially China)
  • A stronger firewall against debt contagion (translation: no bailouts) around weaker Eurozone nations like Greece, Italy and Spain
  • “Structural reform” (translation: anti-union legislation and reduced public spending) to improve the “competitiveness” of the industrial north.

Rebranding Structural Adjustment

Lagarde gives double messages about structural adjustment and austerity cuts. After warning that budget cuts lead to “recessionary tendencies,” she states that some countries (which, like Greece, are on the verge of economic collapse) need to cut their public budgets immediately. She feels others can stretch their cuts out over time.

Among specific “structural reforms” Lagarde favors are pension reform, with an optimal retirement age of 67, “wage restraint” (i.e. abandoning the expectation that wages will keep pace with inflation), and social service reforms in which “recipients of social assistance are expected to improve their situation.”*

The Fox Guarding the Henhouse

LaGarde isn’t without her critics. Former IMF chief economist Simon Johnson refers to her appointment as “the fox guarding the henhouse.” Johnson, like former World Bank economist Joseph Stiglitz, has been highly critical of the extreme concentration of financial power and it threat it poses to the global economy. This is the subject of Johnson’s recent book, Thirteen Bankers.

His criticism.of Lagarde centers mainly around her proposal to solve the Eurozone crisis by issuing additional loans to the debt-ridden “peripheral” countries (Greece, Spain, Italy, Portugal and Belgium). He maintains all these countries are looking at a default scenario, no matter how much money she throws at them. He accuses her of allowing EU leaders to use the IMF to conceal flaws in the Eurozone structure from voters.

*A questionable objective in countries with double digit unemployment

photo credit: Adam Tinworth via photopin cc

Income Inequality: The Real Cause of Poor Health

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epigenetics

Contrary to popular belief, the primary determinant of your lifelong health status and life expectancy has nothing to do with your weight, fitness level and whether you smoke. According UW epidemiologist Dr Stephen Bezruchka, the most important determinant of your adult health status is your mother’s income level when you were born. Lifestyle factors (including smoking) only account for 10% of illness.

More than fifty years of epidemiological research bear this out. Yet it’s only in the last decade scientists have learned why this is – thanks to the new science of epigenetics. The term refers to changes in gene expression caused by external influences.

The stress of poverty causes an increase in maternal stress hormones, which causes variations in the way genetic code is transcripted into proteins and enzymes. These, in turn, can predispose the fetus to insulin resistance, obesity and immune problems, as well as emotional instability and mental illnesses.

The Link Between Income Inequality and Poor Health

The most important research finding, according to Bezruchka, is a more pronounced effect in societies plagued by income inequality. Study after study bears this out. In other words, a poor person’s health will be worse in a society with a wide gap between its rich and poor residents.

The US, which has the most extreme inequality, is near the bottom of the charts for indicators that measure a nation’s overall health. In life expectancy (according to the CIA), the US ranks 50th, just behind Guam. In infant mortality, it ranks 174th, between Croatia and the Faroe Islands.

A Mindset Driven By Social Service Cuts

In Sick and Sicker, Dr Susan Rosenthal notes a 30 year trend for policy makers – both conservative and liberal – to make sick people “take responsibility” for their illnesses. Epidemiological studies – as long as scientists have been doing them – have always shown a correlation between poverty and poor health. Even in Dicken’s time, it was taken for granted that the undernourished poor people living in cold, damp, overcrowded tenements were far more prone to illness than their middle class counterparts.

Rosenthal believes this shift to a “blame the victim” mentality has been deliberate – to justify aggressive social service cutbacks (by both Republicans and neoliberal Democrats like Clinton and Obama) that came into fashion with Ronald Reagan’s election in 1980.

The Role of Oppression and Exploitation in Illness

Although the link between poverty and inequality is unequivocal, epidemiologists have yet to explain why the effect is poor pronounced with extreme income inequality. Bezruchka puts it down to people in egalitarian societies looking after one another. I like Rosenthal’s explanation better. She relates it to high levels of oppression and exploitation in societies with extreme income disparity.

She points out that minimum wage workers aren’t just poor. They also work in exploitive, arbitrary and often punitive job settings which they feel powerless to change. Enduring this massive stress on a daily basis takes an enormous toll on the human body and psyche.

photo credit: AJC1 via photopin cc