“Neither austerity nor government stimulus will ever be able to address the debt crises and recessions of the twenty-first century because what we’re dealing with here is an inherent contradiction of capitalism.”
The issue of austerity versus stimulus is often framed as the entire debate - if you don’t support one, you must support the other, because there are no alternatives. This is the same binary debate that has been going on for more than 100 years between the state versus the market. Yet, these dichotomies distract people from thinking about what’s really important - the goal of these policies, which is to grow the economy.The “inherent contradiction of capitalism,” Hinton writes:
… comes from the surplus of the system (profit) being taken out of the real economy (the economy of physical goods and services) and put into the financial sector to generate more wealth for people who are already wealthy. This requires the economy to continually grow to compensate for the extraction of profit, which is essentially the extraction of the economy’s surplus. However, this extraction of profit is the same mechanism at the root of soaring levels of inequality. A recent Oxfam report estimates that, by 2016, the richest 1% of the world’s population will own more than the other 99%. If the average person is making relatively less every year, or struggling just to maintain the same financial state, they can’t afford to buy ever more products and services, so the economy can’t grow as it did when we had more financial equality. Thus capitalism has always carried the seed of its own demise. We are seeing this self-destruction in Greece. The current Syriza government wants to go back to the negotiating table and create a new bailout agreement that will cut the debt to a more manageable size and reform the public sector in ways that won’t affect the most vulnerable. This would still be austerity, albeit a much milder version than that of the past five years. Yanis Varoufakis resigned from his post as Greek finance minister to allow for smoother negotiations between Greece and its European partners in the hope of reaching such an agreement.Read more, including about “steps [Greece] could take to start paving a new path to prosperity for its people,” here.