The Real News Network has the video titled  Who Benefits from Austerity?

The interview gives a very strong defense of the reason why austerity is a bad plan and has no merit in economic turns, but it still does not completely answer the question of who benefits.

I have developed my own analysis of who benefits.

If it is true, and there probably is some truth to it, that the wage rates in this country have become uncompetitive in the world, there are a couple of ways to solve that problem. Which one you choose shifts the burden of the adjustment from one place in society to another.

If we get the dollar to decline in value with respect to the world, then our wage rates will decline relative to the world, but won’t have to drop much, if at all, in dollar terms. It will make the cost of imported goods rise, but the cost of locally produced goods and assets won’t change much. In other words, assets and debt will stay in synch in dollar terms, and will fall together in world terms.

If instead, we try to preserve the value of the dollar, then wage rates must fall in dollar terms. Many of the assets that the not rich have borrowed to purchase will fall in dollar terms, but the debt they owe on these assets will not fall in dollar terms. It seems like the cost is borne only by the not rich because the debt owed to the rich is preserved in dollar terms and in world terms. If the not rich default on their debt burden which is rising relative to their wages in dollar terms, then the rich can buy these assets at fire-sale prices.

The other benefit to the rich is that the wages, in dollar terms, of the people they hire drops precipitously relative the the value of the assets, in dollar terms, that the rich own.

Maintaining the value of the dollar then becomes a way of transferring to the rich whatever wealth the rich do not already own. The burden is shifted onto the backs of only the not rich. I can see why some of the rich, or people who think they are rich, would prefer the austerity plan.

In a micro view of how the economy works, it might even seem that the austerity plan is a prudent plan. That is surely why some people who are not rich think it is good. However, if you can look at the big picture, you can see that an austerity plan is an unfair way to get the most vulnerable to bear all the costs of adjusting to changes in the world economy. Only the rich are exempted from the adjustment. From this point of view it looks good to the rich no matter what it does to the domestic economy. Or it may even look good to the rich exactly because of what it does to the domestic economy.