Greece Is Just The Beginning Of The Great Austerity Backlash

WASHINGTON — The global politics of austerity seeped into the press room of the White House on Monday, the day after the Greeks voted overwhelmingly to reject a harsh bailout deal with Europe.

Reporters pressed Josh Earnest, President Barack Obama’s spokesman, for details of what his boss thought of the vote and of the bailout deal, and whether he agreed with 2016 Democratic presidential candidate Bernie Sanders that the latter was outrageous. Earnest answered with streams of polite words that added up to … nothing. Obama was staying out of the issue, as he apparently had promised German Chancellor Angela Merkel he would when they met at the G-7 summit recently.

Obama favors “a package of relief and reform,” was all Earnest would say.

Nevertheless, the exchange with reporters in Washington was another of the many signs that the debate over the power that should accrue to money — and what those who wield it can fairly demand — is spreading around the world.

It’s a new echo on a global scale of the politics of a much earlier, but in some ways remarkably similar, era in the U.S. As the U.S. became a continental economy in the late 19th century, with vast new hordes of wealth built in railroads, coal, electricity and communications, a political backlash arose. The new “money power” was judged too big and uncontrollable: an engine not of prosperity, but of inequality and corruption. The backlash launched America’s Progressive movement, which among other reforms pushed laws to rein in the power of big corporations in the interests of ordinary people.

Now that the planet’s economies have essentially become one, and the world’s top dozen banks control $30 trillion in assets, the callous demands of a new and even larger “money power” is starting to spark a worldwide backlash.

Even the ever-cautious Obama has alluded to it. This past winter, he defended Greece, saying that “you can’t keep squeezing countries that are in the midst of depression” to pay off debt and warning that “eventually the political system, the society can’t sustain it.”

Around the same time, he sent the U.S. Congress a budget proposal with many new spending plans, declaring that it was time to end the “mindless austerity” of his Republican foes. They responded by proposing their stingiest budget plan in years.

This fall, Obama will again be battling the Republican Party over cutting spending to reduce debt — even as he declines to get involved in the more intense version of the same debate going on in Europe.

Europe, meanwhile, is likely to see the Greek anti-austerity sentiment spread — in the first instance to Portugal and Spain, which have national elections this fall and winter, respectively. Governments in both countries are responding to heavy borrowing and debt with controversial austerity measures sure to be at issue with the voters. French and Italian national elections are much further away, but the leftist parties in each nation have been invigorated by the fight in Athens. Representatives of parties and movements in all four countries were on the scene in Greece this week, cheering on the Syriza party and trying to learn from its victories and mistakes.

The leftists face long odds despite growing evidence that what British economist John Maynard Keynes warned during the Great Depression (and what Obama said this winter) remains true: You can’t “squeeze” a country into prosperity. Just the opposite, in fact.

This was something the founders of the International Monetary Fund understood. Their original aim was to provide guidance to national governments in economic distress but also to feed in more money where needed, not cut it back. Today the IMF has become something akin to a collection agency, insisting on harsh measures that guarantee the repayment of loans made to vulnerable countries by private global banks.

Something has to change, as the Greeks declared with their vote this weekend.

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