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Austerity is a political-economic programme consisting of public spending cuts, privatization, and increased taxes. It is not a neutral economic policy; rather, austerity is a policy that transfers wealth and resources from the working class to the bourgeoisie, specifically the financial oligarchy. In its simplest form, it aims to increase profitability for the ruling class by reducing necessary social programs.[1]
Austerity emerges from capitalism’s tendency for the rate of profit to fall. When profits decline, the system responds by attempting to stabilize itself through cuts in health, education, pensions, and welfare. It typically consists of the privatization of state assets and services, limiting wage growth and collective bargaining, reducing corporate taxes while increasing consumer taxes, and implementing deregulation to maximize profits.[1]
Since austerity deepens inequality, reduces living standards, increases unemployment, and worsens public services, it fuels reactionary parties, which typically scapegoat minorities within society for the deteriorating conditions, diverting attention from the austerity measures driven by capitalist crises.[1]
History[edit | edit source]
The Washington Consensus[edit | edit source]
The Washington Consensus was a continent-wide austerity program imposed by the imperial core on Latin America in the 1980s. State-led industrial strategies were dismantled, public employment and social spending were cut, and millions became unemployed. These policies created mass impoverishment and fostered the political conditions that enabled Hugo Chávez to rise. The Washington Consensus continues to affect Latin America today, leaving behind weakened social safety nets and widened income gaps.[2]
Argentina’s Déficit Cero[edit | edit source]
As the Argentine economy entered a deep crisis in 1998, it was suffering from the consequences of neoliberal policies such as privatization, financialization, and dependence on the IMF. The government of Fernando de la Rúa pursued austerity to service debt and appease international creditors by attacking wages and pensions, which increased unemployment and poverty.[3]
The Deficit Cero Plan culminated in December 2001, when the government prevented people from withdrawing their money from banks. This event, known as the “corralito,” involved draconian cuts to public services and triggered a mass insurrection. Unemployed people, workers, students, and some members of the petty bourgeoisie looted supermarkets, occupied public spaces, and forced the resignation of President Fernando de la Rúa, who fled the presidential palace in a helicopter.[4]