It’s not uncommon to read news stories that quite explicitly identify economic mismanagement. For example, news reports on the hyperinflation in Zimbabwe routinely (and correctly) attribute the cause to the poor economic management by its leaders. We will see similar attributions of mismanagement to a wide range of developing countries.
One place we will never see the term mismanagement or any equivalent term applied is in reference to the austerity imposed on the euro zone countries by the European Commission, acting largely at the direction of the German government. In fact, major news outlets, like the New York Times, seem to go out of their way to deny the incredible harm done to euro zone economies, and to the lives of tens of millions of people in these countries, as a result of needless austerity.
A decade ago, it would at least have been an arguable point as to whether austerity, meaning budget cuts, in the wake of the Great Recession, was reasonable policy. There was some research suggesting that the boost to confidence from lower budget deficits could spur enough investment and consumption to offset the impact on demand of reductions in government spending.
Since then, however, we have far more evidence on the impact of deficit reduction in the context of an economy coming out of recession. There have been numerous studies, most importantly several from the International Monetary Fund’s research department, which show that lower deficits in this context slow growth and raise unemployment.
Furthermore, they show that periods of high unemployment have a lasting impact as a result of workers losing skills, and companies and governments in a downturn foregoing investment that they would have undertaken if the economy were closer to its potential level of output. This means that insistence on deficit reduction not only led to one-time drops in output and employment, but could reduce potential output by trillions of dollars over subsequent years.
At this point, the advocates of fiscal austerity, in the context of economies that are operating well below potential GDP, are ignoring a large body of evidence in favor of personal prejudices. These people should be viewed like global warming deniers or creationists. They are not credible people, and their policies have inflicted enormous damage where they have been put in place.
The New York Times (2/14/19) reports that seems that the shrinking of the middle class “should not be happening” in Spain, because “the country was feted by European policymakers as a model for the recovery, having tightened its belt to exit a deep recession.”
Incredibly, instead of pointing out that the advocates of austerity have been shown wrong, most reporting continues to treat their policies as being credible, and in fact often works to hide evidence of its failure. The New York Times (2/14/19) gave us a great example of this practice in an article on the decline of the middle class across Europe, with a focus on Spain.
Spain has been especially hard hit by the demands for austerity. In contrast to Greece and Italy, Spain had actually been running budget surpluses in the years leading up to the crisis. Its debt to GDP ratio was just 22.3 percent when the crisis hit, less than half of Germany’s, so there was no story of profligate government spending.
What Spain did have was a massive housing bubble, fueled largely by German banks, who apparently were not very good at their business. When the bubbles burst in Spain and elsewhere, the economy in Spain was especially hard hit, with the unemployment rate crossing 26 percent in 2013. While the unemployment rate has come down in the last five years, the number of people employed is still more than 1 million less than before the crisis.
Spain is a country that could have benefited enormously from a large-scale stimulus program, both domestically and the across the eurozone, since much of its GDP is exported. Instead, the great minds in charge of the euro zone’s economic policy insisted that Spain had to reduce its budget deficits to comply with the euro’s rules.
Given this history, the cause of the decline of the middle class in Spain seems about as clear as the causes of a person’s mobility problems after they have been run over by a truck. Instead, the New York Times made it all seem very mysterious, telling readers:
Spain’s economy, like the rest of Europe’s, is growing faster than before the 2008 financial crisis and creating jobs. But the work they could find pays a fraction of the combined 80,000-euro annual income they once earned. By summer, they figure they will no longer be able to pay their mortgage. [The “they” refers to a formerly middle-class couple who lost jobs in the downturn, and had to find new jobs at far lower pay.]
It is a precarious situation felt by millions of Europeans.
Since the recession of the late 2000s, the middle class has shrunk in over two-thirds of the European Union, echoing a similar decline in the United States and reversing two decades of expansion. While middle-class households are more prevalent in Europe than in the United States — around 60 percent, compared with just over 50 percent in America — they face unprecedented levels of vulnerability….
The hurdles to keeping their status, or recovering lost ground, are higher, given post-recession labor dynamics. The loss of middle-income jobs, weakened social protections and skill mismatches have reduced economic mobility and widened income inequality. Automation and globalization are deepening the divides.
Just about every part of this story is wrong. Spain and most other European countries are not growing faster than before the recession. According to the IMF, Spain’s economy grew at a 2.7 percent rate in 2018 and is projected to grow 2.2 percent this year. By comparison, it grew at an average rate of more than 3.9 percent in 2006 and 2007, the last two years before the recession.
But more importantly, the immediately relevant factor is cumulative growth, not a single year. As a result of its sharp downturn and weak recovery, Spain’s per capita GDP was just 3.0 percent higher in 2018 than it was in 2007. By comparison, coming out of the Great Depression in the United States, per capita income in 1940 was more than 8.0 percent higher than in 1929.
Given these basic growth numbers, it would be surprising if Spain’s middle class had not taken a big hit. While other factors, like the weakening of labor market protections, have made its plight worse, the dismal story on growth goes a very long way in explaining the decline in Spain and Europe’s middle class.
In the New York Times‘ framing (12/11/18), increasing the income of workers is at odds with a “push to revive economy.”
Unfortunately, this sort of story in the New York Times is not an exception. The paper has repeatedly told readers that policies that undermined the welfare state and redistributed money upward, were being done for the purpose of revitalizing the economy. This was especially the case with Emanuel Macron in France (here, here and here). In these and other cases, the media took at face value the claims of politicians that the reason for the measures was to help workers, not to reduce their bargaining power, which is their immediate effect.
To be clear, labor market regulations can be excessive, and there are certainly contexts in which streamlining them would end up benefiting most of the labor force, even if such streamlining could hurt narrow groups of workers. But the idea that excessive labor market regulation, rather than inept macroeconomic policy, is the main problem limiting growth and reducing employment in France, Spain and elsewhere in Europe does not have any evidence to support it.
David Howell, Andrew Glyn, John Schmitt and I did a study showing the limited impact of labor market protections on employment more than a decade ago. Based on our work, the OECD did its own analysis, and reached similar conclusions.
In short, the New York Times and other media outlets have been engaged in a great exercise in misdirection. While the blame for Europe’s economic problems over the last decade can very clearly be laid at the doorstep of its leaders who have insisted on austerity, the media consistently ignore evidence that is as clear as day. They instead treat the problems facing Europe’s workers as being mysterious in origin, or due primarily to an overly generous welfare state and excessive regulations that protect workers. This is some seriously biased and/or misinformed reporting.
A version of this post appeared on CEPR’s blog Beat the Press (2/22/19).
You can send a message to the New York Times at letters@nytimes.com (Twitter:@NYTimes). Please remember that respectful communication is the most effective.
In an understandable mistaken attempt to regain their losses after the great recession hopeful Democrats voted the Trojan Horse Austerity Crank Obama Administration into office. The entire outfit was filled to the brim with these men that had all the answers. They be like, “I have a great idea, let’s cut Social Security!”
They still believe they have all the answers and will not entertain the possibility that they might not be entirely correct. That’s where we are right now. They rely on the NYT for all the answers contrary to all evidence to the contrary.
Did you even read this article?
It’s about SPAIN.
You’re blaming the austerity of Spain on the Obama Administration?
And while I can’t argue with you about Obama, if one were to be fair and objective, they would have to include Trump in the same.
Rather than “fighting” the Elite, Trump is continuing the policies that help to further enrich and empower them.
But beyond the mindless, empty-rhetoric of “partisan” politics, dig deeper.
Look to organizations like the World Economic Forum.
The World’s Oligarchs are pushing for global policies of austerity.
Organizations like the WEF transcend “partisan” politics.
It’s a place where the true ruling Elite meet to discuss how best to push their policy initiatives.
Despite the fadish, propagandist-rhetoric if the “nationalist” movements, globalism is rising quickly.
“Nationalism” is just a propagandist spin on globalism.
As the WTID wealth inequality indes continues it’s second largest rise , on a near global basis, more billionaire Oligarchs from each nation are calling for more austerity.
(https://history.stackexchange.com/questions/21136/income-distribution-of-major-combatants-before-and-after-wwii)
National “leaders” are NOT sovereign individuals.
Jean-Jacques Rousseau noted that:
“”Man is born free, and everywhere he is in chains. One man thinks himself the master of others, but remains more of a slave than they are.” (The Social Contract).
This holds true for national “leaders”.
They answer to people above them.
And money IS power.
Too much is not enough.
The Oligarchs are taking away from everyone else, and diverting more towards themselves.
I can’t speak of Europe, but the same occurred in the U.S. in the 1920’s.
Then, as now, the WTID wealth inequality index was peaking.
Yet the wealthiest individuals were calling for tax cuts for the highest incomes, and their corporations.
Read this piece in the May 29, 1927 NYT calling for such, fron then Sen D.A. Read.
(https://timesmachine.nytimes.com/timesmachine/1927/05/29/issue.html)
Those tax cuts occurred in both 1927, and again in 1928.
Then, like now, the Oligarchs were faulting taxation and government spending for stiffling economic growth.
Yet the ultra-wealthy at the top were accumulating and hoarding MASSIVE amounts of wealth & capital (likely the TRUE inhibitor of economic growth).
What’s the difference between a neoliberal and a New Deal Democrat.
Best to arm yourself with facts first.
As long as I can recall, the MSM has touted the conservative ‘company line’ in their economic coverages, blatantly in their editorials and tacitly in their regular columns. This orientation makes economic sense for them because — as FAIR and others have noted —- their primary customers are advertisers, who typically make-up something like 75% of their revenue in the print media, and 90-100% in electronic media, and advertisers are NOT looking for thoughtful readers/viewers. They’re almost always looking for emotionally oriented consumers who make more impulsive buys and are more susceptible.
So what’s my point? Well, conversely with non-ad subsidized media, there’s a heavy reliance on subscriptions and/or donations for operational revenue, so predictably they’re going to stay within a POV-range acceptable to their subscribers/donors (and yes, this site as well as other progressive sites do the same, since I and other readers don’t come here to read neo-Nazi views, or supply-side economics, to name just a couple of examples). It appears that the NYT long-ago decided their customer was the neo-liberal/conservative Democrat who is OK with lightly regulated capitalism, unfettered globalization & US militarism, but is not as domestically as crass/selfish as the Republicans. This POV also gives the NYT easy-access to current power-brokers in DC, making it cheaper than sending reporters on-location. Hence, they end-up printing some of these non-fact based articles which are just cursory pieces which are little more than propaganda.
If you haven’t, consider reading the book “The New Media Monopoly” by the late Ben Bagdikian.
In it, he outlines how the corporate media (often mislabled as the “msm”) work collaboratively, like a cartel.
They set narratives.
Their primary goal is entertainment. Catering to the biases & prejudices of their primary readers (or viewers), via this entertainment, they garner higher ratings, thus larger ad revenue.
Media (aka “news”) will ALWAYS be tied to advertising, and propaganda.
Ben Franklin had much insight on this issue in his “Apology for Printers” (10 June 1731).
(https://founders.archives.gov/documents/Franklin/01-01-02-0061)
The “Father of Spin”, Edward Bernays, also wrote about this in his 1928 book “Propaganda”.
While Bagdikian does a decent job outlining the cartel-like relationship of the media, he fails to outline the underlying ownership of that media.
The media has become highly consolidated, into the hands of billionaires.
The NYT is largely owned by Mexican billionaire Carlos Slim, and by the largest money-management and investment firms, which themselves are largely owned by the .001 percent.
(http://investors.morningstar.com/ownership/shareholders-major.html?t=nyt)
Franklin also wrote that “Historians relate, not so much what is done, as to what they would have believed”.
Meaning, “Historians” serve mainly as propagandists.
They are those with the power and resources to set narratives, to define and promulgate “facts” and “history” as such.
The corporate media, via their billionaire owners, are setting that current narrative for calls for austerity.
Take a look at the underlying ownership of the NYT, Fox News, CNN, MSNBC, even media outlets like Huff Post.
(http://investors.morningstar.com/ownership/shareholders-major.html?t=nyt).
This goes WAY beyond “neo-liberal/conservative Democrat”.
Neo-“conservatives” are doing the exact same.
In fact, take a look at the largest campaign donors and the investment portfolios of the most senior and ranking Politicians from the “Dems”, “GOP”, the “Progs” and the “Libertarians”.
You’ll see each is funded by, and invested with the largest corporations that are largely owned, & thus controlled, by the same .001 percent.
The political system has been completed corrupted.
Global Oligarchs are taking control of politics and government.
They are directing the parties of both the “left” and “right”.
But they are keeping mindless follower of each busily distracted, blaming & fighting each other over which sides “leaders” are most corrupt, as the elite themselves remain largely under cover, and held unaccountable.
It’s the propagandist technique of diversion & distraction, aks “divide & conquer”.
This is how truly effective propaganda works.
Centuries of truly popular citizens uprisings & revolutions have taught the ultra-wealthy Oligarchs how to better control the populations.
If you just control the “left”, you only control a third to a half the population.
Similarly, if you just control the “right”, you only control a third to a half the population.
By controlling both, you more effectively control the population as a whole.
Read about manufactured dissent.
The media, like political parties, increasingly exist most solely as emotional outlets for biases and prejudices for their audiences.
Yet true governmental public-policy is determined by the global Elite.
“This is some seriously biased and/or misinformed reporting.”
I’m not sure why Baker is mincing around the word ‘Propaganda’. The corporate media is the unofficial ‘Pravda’ of the ruling economic elites (which is why we don’t have an RFE equivalent in the U.S.) whose manta is Chicago School neolibaralism (enforced with NeoCon militarism) . NYT (nor WaPo or WSJ) is not ‘misinformed’ and is clearly ‘biased’ and when bias informs the media it’s called “Propaganda”. And obfuscating the causes for the ongoing loss of Americans’ standard of living is their job in order to stand as a bulwark against the dreaded “Socialism”.
IT seems every decade or so, that America seems to have an economic crash—-maybe the current crop of politicos should read U.S. History. With FDR, it was recognized that when an economy crashes, it’s necessary to retool with new jobs——-there’s plenty of work to be done now with infrastructure and GREEN jobs. We also to reinstate banking laws like Glass-Stegall which worked until Clinton and the banks erased that law. The 2008 recession was good for the banks—bad for the homeowners and therefore—bad for the nation. The chant became “Banks are too BIG to fail,” but sadly not too BIG to lie and cheat their fellow citizens. Here we go again, but this time , let’s make the cry ,”Nations are too big to fail—make the banks wail~”
FYI- I recall seeing a mainstream economist on a PBS show explaining how —prior to the New Deal banking regulations being instituted — the US economy experienced a depression roughly every 20 years. And those were ‘the good old days’ when if a bank failed, all the depositors in that bank lost their entire deposits, period.
“But the work they could find pays a fraction of the combined 80,000-euro annual income they once earned.”
Well, I doubt that couple is representative of the Spanish middle class, an annual income of 80000 euros is really high here.