Spending cuts and the threat to democracy

What America should learn from Europe and the Middle East.

The "sequester", which began on 1 March, is the American form of austerity, or cut-backs in government spending during a recession. Austerity, or stingy government in Europe has kept employment extremely depressed compared to what it would have been with government stimulus, as Paul Krugman argues.

On Saturday, there were massive protests throughout Portugal against Scrooge policies by the government, which have so destroyed the country’s economy that 2 per cent of the population has fled abroad for jobs in the past 2 years alone. On Friday, Greek workers staged a huge general strike. In Italy, anti-austerity feeling made grumpy comedian Beppe Grillo and his party the swing vote in the new parliament. Grillo may single-handedly destroy the eurozone. European newspapers rather amusingly demanded that Grillo now "take responsibility" and "tell us what he wants". He is a contrarian comedian. It would be like having Robin Williams or Tracy Morgan as the swing vote in Congress, with the press hounding them for their agricultural policy and asking them about the dangers of deflation. But Grillo's ascendancy, while less alarming than the resurgence of the Greek far right, is a manifestation of the rejection by the Italian public of the long dreary road prescribed by the "troika", (The International Monetary Fund, the European Union, the Central Bank), of further government cut-backs, reductions in minimum wage, high unemployment, no hope.

While for some odd reason the Middle East does not usually get analysed with the same social science tools as Europe, the political crisis in Egypt is related to the Muslim Brotherhood government’s austerity program. The latter, as Samuel Knight argues, is being pursued under pressure from the International Monetary Fund. Secretary of State John Kerry is in Cairo, also urging acceptance of the austerity program. Austerity is estimated to have reduced Egyptians’ real income by 3 per cent in January alone. Tunisia is doing better than Egypt economically, but the parliament, dominated by the religious Right, is also tempted by austerity measures, seeking to trim a point off the budget deficit this year while seeking 4.5 per cent growth. While letting the value of the Tunisian dinar fall would hurt consumers with regard to imported goods, it would make Tunisian textiles and tourism more affordable for those abroad. Tunisia's exports are hurt by European economic problems, and the country would do well to develop more Asian customers (Brazil has had success reorienting exports to the Pacific Rim). Likewise, although Yemen's economy improved in 2012 after a 10 per cent drop in the revolutionary year of 2011, if anything the government budget deficit of 5.5 per cent is not big enough to stimulate the economy properly.

Reducing the state budget at a time of economic contraction is the opposite of what the great economist John Maynard Keynes prescribed. When the economy is in the doldrums, the businesses are skittish about investing their money, and so keep it in the bank. The only force, Keynes argued, that can and will risk putting a lot of money into the economy during a deep recession is the government. Of course, the government has less money at that point, too, since tax receipts are reduced. So it will simply have to spend money it doesn't technically have, i.e. go into deficit and print extra paper money. The extra paper will, obviously, lose some of its value. But that loss can have benefits, too, since it will make the goods produced by the country less expensive abroad, and spur exports.

This argument is straightforward for most countries, and it is mysterious why European and some Middle Eastern governments reject it. It is complicated in the US by the position of the dollar as a reserve currency and by the fall of manufacturing to only 20 per cent of the US economy. The former means that large budget deficits don't necessarily reduce the dollar's value significantly, because the US only holds about a third of the world's dollars and there is a lot of confidence in its value. The latter means that even when the dollar falls against the yen or euro, the jump in exports is limited to a fifth of the economy and domestic services don’t get much of a boost. But actually these peculiarities of the US economy are not arguments for austerity; on the contrary, the reserve dollar allows the US to do stimulus without as much pain as one would otherwise expect.

Instead, the Tea Party has forced the US into an artificial crisis with the "sequester", taking $100bn a year out of the economy for the next ten years, which will cut half a point of economic growth and harm workers, keeping unemployment high – not to mention the harm it likely will do to medical research, higher education, etc. That this austerity is being pursued by the GOP in part in hopes of disillusioning voters with President Obama in his second term is fairly obvious, but it is also in order to protect the 2003 Bush tax cuts for the wealthy, 80 per cent of which have been retained. Sequester, as usual with these things in the US, is actually a tax on the middle classes to benefit the wealthy, since it preserves undeserved tax cuts for the latter by reducing government services for the former.

That austerity does not work economically should be clear. But that it creates populist discontents that are shaking southern Europe and could derail Middle East democratisation is even more alarming. The world needs stimulus, not Scrooge government if it is to pull out of the crisis kicked off by corrupt bankers in 2008.

This is a cross-post from Juan Cole's blog Informed Comment

Barack Obama holds a cabinet meeting at the White House on 4 March. (Photo: Getty.)
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Beyond terror: how are the Paris attack survivors healing their “invisible wounds”?

For many who were present at the attacks in Paris last November, the psychological scars from that night have yet to heal.

Caroline Langlade sips on a coffee on the patio of a Paris cafe. She is smiling but visibly a little nervous, hands shaking as she raises the cup to her lips. She's startled by the low rumble of a passing motorbike and she spins round in her chair to make sure the source of the noise is nothing sinister.

Just a few minutes' walk away is the Bataclan concert hall where, on 13 November last year, gunmen shot dead 90 people in the deadliest of a string of attacks across the French capital that claimed a total of 130 lives.

Caroline could have been among them had she not been on the first floor balcony at the time the gunmen entered the music venue and opened fire.

She managed to take refuge with others in a locked side room.

"Someone, one of the terrorists, tried to get in but couldn't," says the 29-year-old media worker. "I was trembling the whole time. I'm trembling now just talking about it. We were there for three-and-a-half hours before the police let us out."

She escaped physically uninjured but, two-and-a-half months later, the psychological scars from that night have yet to heal. She hasn't been able to return to work since and says she finds it difficult to read a book, watch films or do anything that involves "letting herself go" mentally.


Caroline Langlade. Photo: Sam Ball

Crowds in the street, along with sudden noises like the aforementioned motorbike, make her nervous. Wherever she is, the first thing she does is look around for possible hiding places.

"We have invisible wounds, we were injured in the attacks but they're mental injuries," she says of survivors like herself.

Sometimes, those wounds can remain hidden even for those who bear them.

On the morning of 14 November, Laure Dumont (not her real name) woke up, went to buy groceries at her local market in northern Paris where she lives and then went to a bookshop – a fairly typical Saturday morning.

The evening before, she had been lying motionless on the patio of a bar targeted that night, Le Carillon, trying to play dead in the hope of avoiding the attention of the gunmen spraying the bar with bullets.

"I hadn't been hurt. I didn't really even cry," she says of the day after the attack. "I had things planned so I just continued life as normal."

Some of what Laure saw at Le Carillon, where she had been drinking with friends on the night of 13 November, was horrific.

She recounts how she was shocked at the strong smell of blood from the dead and injured that filled the bar; how she, along with another woman, tried to administer first aid to a girl who had been shot in the chest.

"I tried to help her but there was nothing I could do. She died," she says.

But it wasn't until some time later that she began to realise that what had happened to her had left a bigger mark than she had first suspected.

"As time passed, it started to affect me," says the 29-year-old administrative assistant for a concert production company. "Now it makes me nervous when I drink on the terrace at a bar or a cafe. I have moments of paranoia, like on the metro, for example. I ask myself where would I hide or run if something happened."

Sometimes the psychological wounds manifest themselves in unexpected ways. Laure says she can't stand the smell of alcohol spilled onto the floor, because it is strangely reminiscent of the smell of blood.

Both Laure and Caroline both make regular visits to the psychologist, part of the free services provided to victims of terror attacks by the state.

But for Caroline, it was the discovery of an online victim support group named "Life for Paris", founded by a 28-year-old childcare worker and Bataclan survivor named Maureen Roussel, which has proved to be the biggest aid to her rehabilitation.

The Facebook group, which now also has an accompanying website, was created on 1 December. Caroline joined the next day and soon became close friends with Maureen. Now, she is the group's vice president and effectively runs it alongside her.

"The idea was to create a group by and for the victims," says Caroline. It provides a platform for survivors to come together to provide each other with emotional support, find people they may have met on the night of the attacks or simply share their experiences.

They also help one another with practical tasks, such as accessing the free healthcare and other services on offer for every survivor of the attack – something that can prove particularly challenging for those from outside France who may not be aware that such help exists at all.

There has been an overwhelming response: the Facebook group has more than 500 members at last count, including some from as far away as the UK, Brazil, the US and Venezuela.

Members' experiences and the impact they have had on their lives are wide-ranging. While some have been able to return to normal life relatively quickly, others, says Caroline, have been unable to leave their homes since the attacks.

But one recurring theme is the phenomenon of survivors' guilt, something Caroline personally struggled with in the weeks following the attacks. She found solace in talking to other people in the group who lost loved ones on 13 November.

"They told me 'it's not your fault, no one deserves to die', and that really helped me a lot."

Above all though, the group has allowed her simply just to "make sense of things". For example, just swapping stories with other Bataclan survivors, she says, allows her to fill in holes in her memory about what happened that night.

"It helps to piece together the puzzle: there might be a person who will remember something you don't and that helps you to understand better, to put together the story so that you can digest it and put it aside."

Laure is also searching for missing pieces of the puzzle. Shortly after the attacks she returned to Le Carillon. "I just wanted to see the layout of the bar, the physical distances," she says. "After the attacks, I remember running for what to me seemed a long time. When I went back, I realised it had only been for three metres."

Like Caroline, she has found that connecting with other survivors has helped her come to terms with what happened.

She managed to get in touch with the woman who had helped her administer first aid to the injured girl, something that eased the guilt she was feeling about not being able to do more to save her.

"We exchanged some messages. She helped me remember what had happened. It was good to talk," she says.

For Caroline, the most important thing now is focussing on what can be done for those who escaped with their lives, but who will forever be touched by what happened.

"People died, but others are alive today and suffering – the families of those who lost their lives, victims with visible injuries, victims with invisible ones," she says. "All these people need to heal and it's important that we do it together, united."