On the sequester as austerity policy (Blog)

Over the centuries, lenders eventually figured out that if they punished borrowers unable to repay that would only further undermine their capacity to repay. So poorhouses and debtors prisons were abandoned (after countless millions were destroyed in the process) and bankruptcy procedures developed.
Over the 3 centuries of modern capitalism, employers finally figured out that if they pressed wages down too low, the masses could not buy what the capitalists had to sell. So profit considerations required all sorts of income and/or wealth transfers in "welfare" and other schemes.
Today's "austerity policies" represent a moment in which the above lessons have been forgotten so the system rushes toward another set of catastrophes which will teach, yet again, why mashing down the bottom 2/3 of the economy is counterproductive for lenders and capitalists. And once again, millions will suffer and vast resources will be wasted as this teaching occurs. And this time it may be stretched out even further as capitalists imagine they can substitute cheap workers abroad for costly workers in Europe and the US without encountering the same old contradictions.

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