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The New York Times' Coverage of EU Austerity Remains Pathetic

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I have explained in depth why the New York Times’ coverage of the EU troika’s infliction of austerity on the eurozone is dishonest and routinely indifferent to the suffering of the peoples of much of the periphery who have been forced into a second Great Depression.  The latest travesty was in an article entitled “French Premier’s Push Toward Center Opens Rift on the Left.”

The article focuses on the betrayal of the people of France and his own Party by President Hollande, but you won’t learn that by reading the article.  Instead, you’ll learn that Hollande is following the pattern of Tony Blair.  Of course, the article doesn’t mention four things about Hollande’s copying Blair’s neo-liberalism, slavish devotion to big finance, his view of even the most helpful and desirable budget deficits as undesirable, and his betrayal of labor. 

“In the cabinet reshuffle last month, Mr. Hollande ousted Arnaud Montebourg, a populist economy minister, and replaced him with Emmanuel Macron, a wealthy former banker at Rothschild who is seen as more friendly to business.

The moves left the traditional base of the Socialist Party feeling angry and betrayed.”

First, Blair was copying Bill Clinton.  Second, Clinton and Blair’s embrace of these policies ended in economic catastrophe.  Third, Blair and Gordon Brown devastated the Labor Party. 

Fourth, Clinton and Blair had the immense luck of governing during bubbles that collapsed under their successors.  This meant that their devotion to austerity bit their successors.  Brown and Hollande’s refusal to fight for essential stimulus has prevented any meaningful economic recovery and discredited their Parties.  Hollande promised in his campaign to fight against austerity, but when push came to shove he purged the members of his cabinet pushing for stimulus.  He did so at the insistence of Prime Minister Manuel Valls, the greatest advocate of inflicting austerity in France, the de facto leader of France on economic matters.

The NYT article description of the purge is inaccurate, but revealing.

“Hours after President François Hollande purged leftist members of his government last month for opposing his economic policies, Manuel Valls, France’s combative prime minister, climbed a stage before hundreds of cheering French executives and called for a new relationship with business to lift France from its malaise.

He admonished the left wing of the French Socialist Party to stop posturing against capitalism, then launched into a lengthy pro-business discourse that drew a standing ovation.”

Actually, the “leftist members of his government” were purged for supporting Hollande’s stated economic policies that got him elected by a decisive margin.  Hollande, correctly, pronounced the troika’s infliction of austerity to be the problem and promised to stand up to the troika and demand an end to their self-destructive policies.  Valls was the leading opponent of Hollande’s stated policies.  He demanded the purge.  Hollande, who everyone considers a weak leader, capitulated to Valls’ threat to resign if the economically literate members of the government were not purged.

It is the right, which dominates the entire troika; that is insisting on self-destructive economic policies that have indisputably failed – catastrophically.  Austerity forced a second, gratuitous Great Recession upon the eurozone, forced much of the periphery into a second Great Depression, and has now thrown Italy back into a third recession.  As Paul Krugman (and we, and many others) try endlessly to explain, austerity as a response to a Great Recession makes as much sense as bleeding a patient to “cure” him of disease.  One might think that the fact that economists overwhelmingly agree that that austerity in such circumstances is criminally incompetent and the fact that the results of the “natural experiment” between (very modest) stimulus in the U.S. and the troika’s infliction of austerity are obvious would lead the NYT reporters covering the EU to at least consider the possibility in their articles that austerity was the problem rather than the solution for the eurozone.

Unfortunately, the NYT reporters on the eurozone beat are made of sterner stuff – they have proved immune to the facts, sound economic theory, and ridicule.  There are two obvious truths to these reporters – the crisis is caused by leftist policies and the solution is to embrace neo-liberal economic policies plus a good stiff dose of austerity.  If that dose of austerity makes things worse the answer is to double the dose.

The article about Hollande faithfully follows this fantasy script.  It contains one phrase about the idiocy of the troika inflicting austerity on the eurozone – and even that passage is logically incoherent.      

“‘The problem is that Hollande and Valls don’t embody anything at all,’ said the French economist Thomas Piketty, whose book ‘Capital in the Twenty-First Century’ explores social inequality in France and elsewhere. ‘They are trying to make people believe that Germany is the only country responsible for the catastrophic austerity policy which has plunged the eurozone into stagnation.’

‘But in truth,’ he added, ‘the problem is that they are scared of any progress in terms of policy and budgetary union at the eurozone level, which would yet be the only solution to get out of the crisis,’ but was likely to require future trimming of the state to meet the European Union’s requirements.”

So, austerity is “catastrophic.”  One would think that would be a rather important point.  Logically, it would lead to a discussion of the critical need for Hollande to lead the struggle to end the troika’s “catastrophic austerity policy which has plunged the eurozone into stagnation.”  Actually, austerity plunged the eurozone into a second, gratuitous Great Recession, parts of the periphery into a second Great Depression, and Italy into a third Great Recession – not “stagnation.” 

The NYT proceeds to ignore the troika’s austerity policies that have caused “catastrophic” harm to the eurozone and the victims of those economically illiterate policies of the right.  Instead, we have Piketty ascribing the real problem to Hollande and Valls’ unwillingness to support a eurozone “budgetary union.”  French support for a budgetary union would not produce a budgetary union.  Germany has no interest in a budgetary union.  But that is the smaller of the logic problems with Piketty’s statement, for “trimming … the state to meet the European Union’s [budgetary] requirements” would constitute austerity.  Piketty has just said that austerity caused “catastrophic” damage. 

As bad as the passage quoted above – and the reporters’ failure to consider the catastrophic damage of austerity – the rest of the story is even worse.   It creates a myth that the eurozone is in crisis because of spending on social programs.

“Not just in France, but across Europe, the enduring economic malaise has convulsed governments and sent the political left into a[n] existential crisis.

Even as momentum builds against the austerity policies that Germany has pushed on the eurozone, the question remains whether Europe can afford the welfare systems that have defined the left for generations and that critics blame for ushering in the debt crisis in the first place. But if the left now backs away from its ideological touchstones, then what does it stand for?”

Anonymous “critics” falsely claim (without any cited factual support) that “welfare systems” created a “debt crisis” in an unstated nation or nations – presumably Greece, the only nation that even remotely comes close to that description.  Austerity, by contrast, is the product of the right wing of eurozone and it sent the entire region into a second Great Recession, parts of the periphery into a second Great Depression, and Italy into a third Great Recession.  So, why is the “existential crisis” not the crisis of the “right?”  Yes, if “the left” renounces the exceptionally effective programs that produced a superb quality of life and made their policies immensely popular, what would “it stand for?”  It would, like Clinton, Blair, Brown, and Hollande, stand for the neo-liberal practices that caused catastrophic damage to the economy, massive inequality, rewarded the most venal and corrupt members of our society, betrayed all of the left’s principles, led to crony capitalism, and caused their parties to suffer severe losses at the polls. 

If, instead, the “left” held to its principles and refused to agree to austerity the existential, economic, and political crises would be occurring in the nations run by the right.  Valls and Hollande are joining the long line of neo-liberal leaders (Clinton, Blair, Brown, and Obama) that cause the existential crises by betraying their supposed principles. 

The NYT journalists, cite, without any explanation to the reader, an ode to austerity by the Peterson Institute. 

“To shore up his Socialist credentials, Mr. Valls has taken pains to address ‘the French who are suffering.’ But Mr. Valls is also limited in how much he can go beyond the policies already outlined by Mr. Hollande. For now, the two men are, perhaps uncomfortably, joined at the hip.

While Mr. Hollande has made clear he will not impose new austerity measures, Mr. Valls must still persuade left-leaning members of their Socialist Party to sign off on cuts of 50 billion euros, or about $65 billion, already pledged through 2017 — something that will remain a hurdle even if the confidence vote passes on Tuesday.

‘It’s politically tough to do when you have a left wing of the Socialist Party that want no cuts of any kind in the social welfare state,’” Mr. Kirkegaard said. ‘That’s where Valls’s main political fight will be.’”

The incoherence of these paragraphs is total.  The journalists claim that Valls has taken “pains” (unintentional humor is the best) to “address” “the French who are suffering.”  Valls has thrown the French poor to the wolves and his purpose in demanding the purge of rival ministers was to be able to do far worse to the poor.  “Address[ing]” the poor is cheap talk – providing stimulus is what is needed and Valls is a fierce opponent of stimulus. 

Why “must” Valls “persuade left-leaning members of [the] Socialist Party to sign off on cuts of … $65 billion”?  Those cuts represent “catastrophic” austerity.  It is insane for France to inflict that austerity on those “who are suffering.”  They are the ones suffering the real “pains.”  There should be a substantial expansion of spending on social welfare programs to relieve those real “pains.”  There should be substantial increases of spending on infrastructure, health, and education in France.  Such spending would simultaneously directly reduce the pains of those who are suffering and stimulate the general economy in a manner that would help the entire nation.   In short, Valls is the problem that is harming France and his Party. 

The NYT article identifies Kirkegaard’s employer, but not the nature of his employer:  “Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics in Washington.”  Readers deserve to be informed that Pete Peterson is the Wall Street billionaire whose institute is dedicated to spreading the claim that austerity must be the world’s paramount policy.  Peterson thinks austerity should lead to the privatization of Social Security so that Wall Street can “earn” hundreds of billions of additional dollars annually.  As Krugman (and my colleagues and hundreds of other economists) keeping attempting to explain, there is an overwhelming economic consensus that inflicting austerity in response to a Great Recession is a “catastrophic” policy.  Peterson, of course, hires those with unassailable faith in austerity.     

<i> <p> Bill Black is the author of <a href="http://www.amazon.com/Best-Way-Rob-Bank-Own/dp/0292706383">The Best Way to Rob a Bank is to Own One</a> and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.</i> </p>

<p> <i> Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his <a href="http://papers.ssrn.com/sol3/cf_dez/AbsByAuth.cfm?per_id=658251">Social Science Research Network author page</a> and at the blog <a href="http://neweconomicperspectives.blogspot.com/">New Economic Perspectives</a>.</i>

Follow him on Twitter:   @WilliamKBlack

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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