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Intro: "Wall Street billionaire Pete Peterson, through his many groups and allies, has pushed a dangerous austerity agenda."

Black: 'It does not matter how many times austerity makes the crisis worsen; the austerians are a one-trick pony.' (photo: unknown)
Black: 'It does not matter how many times austerity makes the crisis worsen; the austerians are a one-trick pony.' (photo: unknown)



The Plan to Enrich the World's Wealthy

By Bill Black, New Economic Perspectives

20 February 13

 

ohn Williamson, a Peterson Institute "senior fellow" coined the term "the Washington Consensus" at a conference in 1989. Williamson joined the Institute in 1981 when it was founded by Pete Peterson, the Republican billionaire from Wall Street who has dedicated his life to proselytizing for lower taxes on the wealthy, stringent spending cuts in social programs, and privatizing Social Security – the unholy grail of Wall Street that would provide our largest banks with hundreds of billions of dollars in additional investment fees.  Peterson has funded many groups to evangelize for these neo-liberal dogmas.

Williamson’s statement of the "ten" "principles" of what he chose to label "the Washington consensus" parallels Pete Peterson’s policies.  Williamson, the Reagan administration and the IMF did not see these principles as being of equal importance.  A paper by Williamson makes clear that the focus of the Washington Consensus was on Latin America.

Here is Williamson’s introductory paragraph, in full.

"No statement about how to deal with the debt crisis in Latin America would be complete without a call for the debtors to fulfill their part of the proposed bargain by "setting their houses in order," "undertaking policy reforms," or "submitting to strong conditionality." The question posed in this paper is what such phrases mean, and especially what they are generally interpreted as meaning in Washington. Thus the paper aims to set out what would be regarded in Washington as constituting a desirable set of economic policy reforms. An important purpose in doing this is to establish a baseline against which to measure the extent to which various countries have implemented the reforms being urged on them."

The paragraph is critical to understanding the context of the creation of the Washington Consensus.  It was all about the Latin American "debt crisis." It was all about a quid pro quo.  The Washington Consensus was a consensus of creditors about how to deal with their debtors.  Latin American debtor nations would be allowed to delay the repayment of their debts, but only if they "submit[ed]" to "strong conditionality" dictated by the Washington creditors.  The creditors – the U.S. Treasury, the Federal Reserve, the IMF, and the largest U.S. banks – needed to develop a coordinated position on what to demand as their quid pro quofrom the Latin American debtors.   The number one thing on their list from the beginning was austerity ("setting their houses in order").

The Washington Creditors were not willing to accept mere promises from the Latin America debtors.  Williamson emphasized that a key purpose of creating an explicit Washington Consensus was to be able to use it as a scorecard to ensure that the Latin American debtor Nations were "submitting" fully to the Consensus’ requirements imposed by the Washington Creditors ("strong conditionality").  "An important purpose in doing this is to establish a baseline against which to measure the extent to which various countries have implemented the reforms being urged on them."

Williamson then (implicitly) acknowledged that the Washington Creditors’ ten principles bore three equivalents to an Achilles’ heel.  First, he agreed that corruption could pervert the plan so that it would cause great harm.  He admitted that the Washington Creditors had "at least some awareness" of this danger – a classic example of damning with faint praise.  Williamson acknowledged that the Creditors who shared the Consensus believed that corruption in Latin America was "pervasive."  Williamson was implicitly admitting that the Creditors had committed the classic economics error (and the defining joke of the economics profession) by "assuming the can opener."  The Creditors implicitly assumed that privatization, deregulation, and the protection of private property (Consensus principles 8-10) would not be perverted by "pervasive" corruption (and I would add, private "control fraud").

Second, Williamson acknowledged that there were many matters that Latin Americans considered to be vital to their well-being that the Washington Creditors deliberately ignored – even though Latin Americans correctly viewed them to be essential if the Patricians’ ten principles were not to cause harm.

"For better or worse, however, these broader objectives play little role in determining Washington’s attitude toward the economic policies it urges on Latin America. Limited sums of money may be offered to countries in return for specific acts to combat drugs, to save tropical forests, or (at least prior to the Reagan administration) to promote birth control, and sanctions may occasionally be imposed in support of democracy or human rights, but there is little perception that the policies discussed below have important implications for any of those objectives."

Third, Williamson grudgingly acknowledged that the Washington Creditors who created the fauxConsensus had disabling conflicts of interest because they were creditors of Latin American governments and were strongly motivated by their desire to impose policies that would maximize the repayment of their debts.

"Political Washington is also, of course, concerned about the strategic and commercial interests of the United States, but the general belief is that these are best furthered by prosperity in the Latin countries. The most obvious possible exception to this perceived harmony of interests concerns the US national interest in continued receipt of debt service from Latin America. Some (but not all) believe this consideration to have been important in motivating Washington’s support for policies of austerity in Latin America during the 1980s."

I want to know which Washington Creditors told Williamson that debtors and creditors have a "harmony of interests."  They have a wonderfully droll sense of humor.  The powerful love to take the position that "what’s good for GM is good for America, so it is no surprise that the Washington Creditors were sure that the positions they forcing Latin American Nations to "submit" to "best furthered … prosperity in the Latin countries."  We have centuries of history proving that Washington Creditors are the people who know best the needs of Latin Americans and are passionately committed to serving the poor.  Austerity is frequently the enemy of "prosperity."

Williamson then set out his ten principles.  His first was austerity and he called it the "central" policy that the Washington Creditors had long insisted that Latin American Nations "submit" to through "high-conditionality programs."  That phrase is code for harsh austerity likely to throw the Nation into receivership and emasculate the Nation’s sovereignty by agreeing to "submit" to its creditors’ demands.

Fiscal Deficits

"Washington believes in fiscal discipline. The International Monetary Fund (IMF) has long made the restoration of fiscal discipline a central element of the high-conditionality programs it negotiates with its members that wish to borrow.  Left-wing believers in "Keynesian" stimulation via large budget deficits are almost an extinct species."

Williamson is an ultra-hawk on austerity.  Even running a budget surplus may not suffice for Williamson:

"Unless the excess is being used to finance productive infrastructure investment, an operational budget deficit in excess of around 1 to 2 percent of GNP1 is prima facie evidence of policy failure. Moreover, a smaller deficit, or even a surplus, is not necessarily evidence of fiscal discipline: its adequacy needs to be examined in the light of the strength of demand and the availability of private savings."

Williamson did not distinguish between Nations with sovereign currencies that they allow to freely float and who borrow in their own currency and Nations without fully sovereign currencies.  He and the Washington Creditors shared this lack of understanding of sovereign currencies, which led them to demand that Latin American Nations "submit" to austerity when that policy would be economics malpractice analogous to the medical malpractice of bleeding patients.

The Washington Creditors’ succeeded in getting most of Latin America to "submit" to austerity, deregulation, and privatization.  The resultant scandals enraged tens of millions of Latin Americans and led to the election of many national leaders running on the promise to refuse to "submit" to the Washington Consensus.

Neo-liberal economists and politicians, however, are prisoners of their pro-austerity dogmas.  They repeatedly force nations back into recession or even depression.  It does not matter how many times austerity makes the crisis worsen; the austerians are a one-trick pony.  I believe that within five years we will see a series of political leaders elected in Europe on anti-austerity planks.  The Washington Creditors’ Consensus is a leading cause of financial crises and human misery because of it self-destructive austerity and anti-regulatory principles.  Austerity is the leading cause of the election of national leaders who promise that if elected they will stop "submitting" to creditors’ demands that they inflict austerity on their people.

 

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+11 # Depressionborn 2013-02-20 11:41
"We must not let our rulers load us with perpetual debt." --Thomas Jefferson
 
 
+52 # brux 2013-02-20 14:49
Enough with the Founding Father's platitudes ... it's clear they compromised far too much from the start and what they put together is not going to outlast the corruption of corporations. Great drama and history, useless to solve our current problems.
 
 
+36 # Vardoz 2013-02-20 16:40
We should expect another great depression. Alan Simpson and Erskine Bowles are back with a new plan, and it's even worse than the first one.
 
 
+11 # leedeegirl 2013-02-20 18:30
Quoting brux:
Enough with the Founding Father's platitudes ... it's clear they compromised far too much from the start and what they put together is not going to outlast the corruption of corporations. Great drama and history, useless to solve our current problems.


Thank you, brux ... I, too, an kind of sick of hearing the "founders'" archaic answers to the problems of the modern-day US ...
 
 
+33 # cafetomo 2013-02-20 14:59
Austerity for US, maybe. How'd that work out for Africa?
 
 
+33 # cmp 2013-02-20 15:35
Any Candidate who isn't standing on a very stout plank of AntiTrust, will never get my VOTE.
 
 
+7 # wantrealdemocracy 2013-02-20 18:53
well, I hope you remember this at the next election. You must not vote for any corporately funded candidate. That means NO D and NO R. Get it? D = R. R = D. They are one and the same.
 
 
+7 # cmp 2013-02-20 23:31
I'm with you Brother!
I can tell you this, I ain't never voted an R in my life. And, highly doubt that I ever will.
But, I can also tell you, I stopped taking D lies personal, around 1980. Shortly, after Buckley vs Valeo and the modern era of "money laundered" speech.
No, I believe in Leftist values all the way and especially those individuals who will act on them. But, long ago I learned that blind faith in a modern Institution, usually equals and a lot of really good people getting hurt. Really bad.
Thanks!
 
 
+10 # MindDoc 2013-02-20 16:01
Yes, it's true we can compare our own 'experiments' with those of other countries, and either learn or not. Although one might argue we have a unique set of rulers and factors impacting our daily lives as consumers, citizens, taxpayers...

I'd just like to share this link again (I added it to the tail of a recent story, and suppose not many saw it, though a few did, and agreed with me- this is wonderful!) This is not about specific 'hot button' issues (guns, religion, partisanship, etc.) but a basic primer of how our economic 'culture' has evolved (towards plutocracy) right here in the U.S. of A.

From actor/producer/ humanitarian Ed Asner. Short, concise, educational. Hoping that this gets widely circulated:

http://bit.ly/XsxLrI

Simply a tale of economics, not party politics, but the story of America thus far.We're still a young country, but have managed to get to this! Because we *are* a land of opportunity ....

Please give a look:
http://bit.ly/XsxLrI

Like it or hate it, this is very clearly stated - and reality, too! Facts. Context.
 
 
+3 # Lowflyin Lolana 2013-02-20 21:06
Thank you for that great Ed Asner piece.
I really like him. He also narrated the video for Remember Building 7, and did a very powerful job on that.
 
 
+1 # cmp 2013-02-20 22:22
Thanks MindDoc!
Great little clip!
This is so perfectly timed by you to post it now. But, I have the feeling you knew that and that's why...
Yeah, in this whole charade we're going through right now with taxes on the wealthy few people see how badly we are really being burned. Again.
Starting the bar at the Clinton levels.. Useless. The mega rich are praying that we fall for no substantial increases on the marginal rates.. They can't escape those.. They can only re-invest it, to avoid the penalty. God forbid that... Which of course, is where the rest of us really get torched. When they don't reinvest or they, even take flight..
Closing loopholes gives them plenty of shadows to continue to hide in. Or, they just Omnibus in 6 months with something even worse.
Yeah, for all the pomp we're getting right now to quiet us down, it sure don't look like it will be amounting to much in the bigger picture.
Great Clip & Thanks so much!
 
 
0 # MindDoc 2013-02-25 16:46
You're welcome! Please 'share it out'! @cmp: Your observations on "big picture" - reality vs. 'pomp' - ring true. "Follow the money". Along the way, would-be 'leaders', please notice & respond to the real needs of "We the People". All of us. "Imagine... it's easy if you try..."
 
 
+5 # Constant Voter 2013-02-20 22:31
This is very good - all true and clearly presented, even if the venom does drip from Ed Asner's voice. I agree with every tone of his voice, every allegory, all of it. Hope it gets wide play. I understand it's already driven Fox News crazy.
 
 
0 # Walter J Smith 2013-02-23 17:51
Excelent!

Help it go viral X 10!

And sharpen yuour pitchfork while sitting on your front porch.
 
 
+55 # MendoChuck 2013-02-20 16:10
My solution would be "Austerity for The One Percent."
Then after 20 years or so if we find that it works than the rest of us can try it out.

There I solved that problem . . . .
 
 
+22 # Michael Lee Bugg 2013-02-20 18:17
Mendo, good idea! Sometimes I think our 1% need some of what the Czars of Russia got in 1917!
 
 
+9 # RLF 2013-02-21 04:58
Or the French bourgeois in the 18th century!
 
 
+1 # Smokey 2013-02-21 19:21
Quoting RLF:
Or the French bourgeois in the 18th century!


"Let them eat cake." Queen Marie wasn't exactly bourgeois - although she like to pretend that she was a commoner, while playing her silly games - but she was the orginal "limousine liberal."

Marie had all sorts of odd suggestions on how to improve life for the peasants. And there were some Tolstoy-types in old Russia who also had some unusual social plans.
 
 
+1 # Small Family Farmer 2013-02-23 14:12
Smokey, what is it with you and "limousine liberals"? You seem to be trying to sell the idea that they are the "root of all evil." Nonsense, they're just a group of rich people TRYING to make themselves feel better about themselves and their impact on our society. At least they try, compared to the entrenched "aristocrats" who make no bones about their disdain for you, me, and everybody else they perceive as being below them in station.

Point of information. ,most historians believe that Marie never made that statement. Apparently there was a major effort to attack and slander her and it is believed that the phrase originated from that movement. One thing is for sure no one would ever call her a liberal of any sort. She was a fully vested member of the aristocracy. The same one that believed then, as it does now, that they have a right to amass, horde, and deprive the resources that the 90+% of us need access to in order to obtain life, liberty, and the pursuit of happiness in our lives.

While I commend your outrage at the lack of social justice in the world I would suggest that your choice of targets is less than appropriate.
 
 
-2 # Mannstein 2013-02-24 14:50
And after the Czar and his family got their Lenin, Trotsky, Uncle Joe, Mao, Pol Pot and the rest of the criminal Communist conspirators made sure 100,000,000 got theirs big time. Check out "The Black Book of Communism" by Stephane Curtois et al himself an ex communist and read to educate yourself.
 
 
+22 # DPM 2013-02-20 16:12
This government (those in it) and their supporters (corporate and most super wealthy)have outlived their usefulness. It is time to change the "crappy diapers". They must go.
 
 
+5 # RMDC 2013-02-21 04:08
Thanks, good article. The creditors of the world are rapacious. They want everything. Debt -- which they forced on Latin American and now on Europe -- was always a trap designed to give creditors access to the GDP thorouh taxes and austerity. National governments become collection agencies for the big banks of the US and Europe. That's what Greece and Spain now are.

The answer is default. All loans are a risk. This time the risk the banks took was too great and they should lose their investment. Most loans from private banks are insured by the IMF, WB and finally the US regime. Let the insurers pay.

Argentina and Iceland defaulted and are much better off now.
 
 
+21 # tuandon 2013-02-21 04:20
I have always "admired" the way the corporations and superrich have divested themselves of any responsibility to society, all the well manipulating it, sucking it dry, and profiting mightily from it. Confiscate their property and make them all work for $7.25/hr with no benefits, medical insurance...See how THEY like it. To hell with the Rich.
 
 
+16 # jjj 2013-02-21 07:47
I have worked for 25 years for the same small company. At first there were 15 employees- now 75 more or less. In that time the owner of the company has become a very wealthy man. I (and I am a hard and honest worker) will have to work til I'm 66 and will not have much to retire on. (Yes I should have left years ago.) I've raised a child and lived a very thrifty-but-hap py life working here but this is profoundly wrong. The owner genuinely believes he is a different class of human being and that there is nothing wrong with this. I think he's a different class of human too but not a good one....
 
 
+6 # Smokey 2013-02-21 19:31
[quote name="jjj"]I have worked for 25 years for the same small company. At first there were 15 employees- now 75 more or less. In that time the owner of the company has become a very wealthy man. I (and I am a hard and honest worker) will have to work til I'm 66 and will not have much to retire on. (Yes I should have left years ago.) I've raised a child and lived a very thrifty-but-hap py life working here but this is profoundly wrong...

I know your story, cousin. My own story is much the same.

My father's parents and my mother's parents worked very hard but they never earned much money. Yet, they were all retired and living with good pensions by age 65.

I've been working for most of my adult life, except for some periods of unemployment. I'll be lucky if I can retire at age 70 and I won't have a secure pension at any age, beyond Social Security.

If I get into my 80s and beyond, by some miracle, I expect that some nursing home will get my last dollars. Like many Americans, I'll probably die in bankruptcy.
 
 
+5 # SOF 2013-02-21 15:52
Back to the article. The article alludes to fixing infrastructure. For those who don't remember, part of these austerity agreements for loans included the requirement to use US contractors for infrastructure repairs. So countries didn't benefit by jobs. (I think it was 'Confessions of an Economic Hit Man' that detailed the scheme.) And the School of the Americas was in full swing. Hugo Chavez, among others, was the result of these hated, abusive and imperial tactics.
 
 
+2 # Mannstein 2013-02-24 14:56
The rich in America hate Chavez because he donates heating oil to poor Americans during winter. How dare he manipulate our free market the rich claim.
 
 
+4 # seeuingoa 2013-02-22 03:49
NO BREAD FOR THE POOR,
NO PEACE FOR THE RICH
 
 
+3 # ballerina 2013-02-22 05:09
how about austerity for the banks?..just because they make money out electrons and send it off to needy countries who then have to pay the loan back with real goods and services doesn't mean they shouldn't be subject to the same conditionalitie s that they impose on others..they fact that they are not should be proof positive that they have taken over the world and need to be stopped before it's too late..that's if it isn't already
 
 
0 # Mannstein 2013-02-24 14:57
Actually the banks make money the old fashion way. They steal it.
 
 
0 # Walter J Smith 2013-02-23 17:32
"Austerity is the leading cause of the election of national leaders who promise that if elected they will stop "submitting" to creditors’ demands that they inflict austerity on their people."

We can help this idea take root in the USA!

Why not?

We have a government owned by the world's ugliest's credit cult; we have a credit cult that is totally devoted to elevating ungoverned greed to a divine principle; and we have an election culture that assures that cult will always winn, no matter who we elect.
 

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