Austerity Isn’t Irrational

In Greece and elsewhere, austerity is nothing more than capitalists imposing their class interests.

by John Milios

After the outbreak of the 2008 global economic crisis, extreme austerity policies prevailed in many parts of the developed capitalist world, especially in the European Union (EU) and the eurozone. Austerity has been criticized as an irrational policy, which further deepens the economic crisis by creating a vicious cycle of falling effective demand, recession, and over-indebtedness. However, these criticisms can hardly explain why this “irrational” or “wrong” policy persists, despite its “failures.”

In reality, economic crises express themselves not only in a lack of effective demand, but above all in a reduction of profitability of the capitalist class. Austerity constitutes a strategy for raising capital’s profit rate.