“We live in very difficult times, and what happened ten years ago is a key part of that story.”
10 years ago, the European debt crisis was unfolding with shocking results. Following the crash of 2008-2009, Spain, Italy, Greece, and other European countries were unable to pay off the incredible debts they had accumulated during what they previously had thought was a period of prosperity. The terrified leaders of Germany and France came to the rescue, understanding that if the debts couldn't be paid the banks would go bankrupt and they would take down with them the entire European capitalist system.
As Prof Wolff explains in a new Economic Update 10th Anniversary video, both the events leading up to this crash and the resulting solutions to address the crisis offer critical lessons that we must pay attention to today.
The solution to save the banks came at a high price, one that Greece is still paying for today.
“Greece was made the sacrificial lamb. The growth of Greek output wasn't used for Greek income, but instead (like the wealth of Greece) moved to pay off the debts to those public authorities.” The resulting austerity on the Greek economy resulted in cut social services, high unemployment, and social upheaval.
But equally as important to note, is the fact that today we once again see the rapid accumulation of debt, just like we did leading up to the crash of 2008-2009. As Prof Wolff argues, the outcome is likely to be similar: inability to pay debts.
“Governmental debt in the United States, and corporate debt, are at unheard of unprecedented levels, threatening the viability of the entire rest of the economic system that sits on the foundations of those debts… Accumulating debt was not and is not a solution. It presents the United States now with this staggering problem. If you spend vast amounts of money to get out of the crisis, where are you going to get it from?... The corporations and the rich, because they're the only ones you can borrow from. Thereby deepening your debt to this small, powerful part of this society.”
Will this destructive pattern continue? How can we learn from this history?
10 years ago, Economic Update with Richard Wolff was the first program produced by Democracy at Work, and it has brought you analysis of questions like these every week for a decade.
Producing Economic Update has always depended on audience donations. To help us grow for another 10 years, please consider donating to Democracy at Work with a monthly gift. Our monthly supporters are invaluable to us, in that they allow us to plan for the future, and commit to bringing you more Economic Update. Thank you.