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Austeridade: Demolição do Estado Social e Ascensão da Economia Zombie

O discurso e a narrativa da “austeridade” são completamente demolidas por Kerry-anne Mendoza em “Austerity: The demolition of the welfare state and the rise of the zombie economy” e, estabelecendo a relação entre “austeridade” e “democracia, mostra como o que se esconde atrás da cultura que apela à austeridade é “the rise of corporate fascism”…



Austerity:  The demolition of the welfare state and the rise of the zombie economy

Kerry-anne Mendoza




1 The road to Austerity

2 The rise of the zombie economy

3 The destruction of the NHS

4 Privatizing education

5 The assault on social security

6 Austerity in Britain: some conclusions


7 Creating the culture that invites Austerity

8 The rise of corporate fascism

9 Attacking employment rights

10 Outsourcing the justice system

11 Civil liberties, human rights and democracy

12 The endgame of Austerity



In July 1944, the soon-to-be victorious powers of the Second World War met in Bretton Woods, New Hampshire. Their mission: to lay down the architecture of the post-War global political and economic systems. They stated that their aim was to free the world from fascism forever. In reality, they built the foundations for a new fascism – corporate fascism – and modern Austerity is merely a vehicle to deliver it.

Austerity is not a short-term disruption to balance the books. It is the demolition of the welfare state – transferring the UK from social democracy to corporate power. We are witnessing the end and not the beginning of a process, set in train at the close of the Second World War, at Bretton Woods.

Austerity has been presented as necessary, constructive and temporary by governments across the world, the UK included. By the end of this book, it will be clear to the reader that Austerity is unnecessary, destructive and intended as a permanent break with the traditions of social democracy.

This book explores the methods by which the pillars of social democracy – law and justice, employment rights, civil liberties and human rights, and the welfare state – have been bulldozed, one after the other, under the guise of Austerity.

This destruction has happened so cynically and quickly in Britain that, without having kept a constant eye on the issues at hand, many people still believe they live in a social democracy and that they hold rights that were confiscated long ago. Sadly, they will not realize that those once-cherished rights are now defunct until they try, for the first time in their lives, to claim them.

Kerry-anne Mendoza



The road to Austerity

The birth of the neoliberal project

Austerity did not start in the UK in 2010 or Greece in 2009. It has been a tactic used to deliver the goals of the neoliberal project throughout the latter half of the 20th century. Most of the economic policies and institutions delivering Austerity today were set up in the final months of the Second World War.

In 1944, before the end of World War Two, a conference took place in Bretton Woods, New Hampshire. It was at this conference that the US, now with the world’s largest standing army and the only functioning economy in the West, set out the framework for the neoliberal project. The International Monetary and Financial Conference of the United and Associated Nations1 was led by US Secretary of the Treasury Henry Morgenthau, his chief economic advisor Harry Dexter White, and leading British economist John Maynard Keynes – although Keynes and White had been working on plans for post-War economic co-operation since at least 1941.2

The conference took place at the Mount Washington Hotel in Bretton Woods, from 1 to 22 July 1944. Delegations from 44 nations attended, including a 30-member delegation from China (second only to the US in size), and no fewer than seven future prime ministers and presidents.

The representatives were keen to establish a stable post-War economy, concerned to avoid the economic warfare, hyper-inflation and market instabilities of the inter-war period. But there were other motives. The major colonial powers of Europe – Austria, Hungary, the UK, France and Germany – were stricken. Their economies were no longer fully functioning and each country had sustained enormous damage to its infrastructure. What would become of the colonies, and their supply of free or cheap labour and natural resources to the Great Powers? These questions were of great importance to the delegates at Bretton Woods. As in 1884, when the colonial powers had met at the Berlin Conference to carve up between them what King Leopold of Belgium described as ‘this magnificent African cake’ – so too, the powers of 1944 were motivated by empire, albeit a transformed version of the idea. 

Unlike in 1884, there was a new and powerful negotiator at the table: the United States of America.

An insight into the thinking of Britain at this time comes from a speech Winston Churchill made to Parliament on ‘Empire and Commonwealth Unity’ on 21 April 1944.

‘A great number of these questions concern our future, and they have been raised directly or indirectly. What changes are to be made in the political, economic and defence structure of the British Commonwealth and Empire? In what way will an ever more closely knitted British Commonwealth and Empire become also, at the same time, more closely associated with the United States? How will this vast bloc of States and Nations, which will walk along together, speaking, to a large extent, the same language, reposing on the same body of common law, be merged in the supreme council for the maintenance of world peace? Should we draw closer to Europe – there is another question – and aim at creating, under the Supreme World Council, a living union, an entity in Europe, a United States of Europe? Or, again, should we concentrate upon our own Imperial and Commonwealth organization, or upon our fraternal association with the United States, and put our trust in the English Channel, in air power, and in sea power?

‘Other more familiar topics than these – because it is easy to see, from the recurrence of these topics in so many speeches, the way in which the modern mind of the House is moving – have been raised, like Free Trade versus Protection, Imperial Preference versus greater development of international trade, and international currency in relation to the policy of the United States and the existence of a vast sterling area. One even sees the gold standard peering around the corner, and, of course, British agriculture close at hand.’3

This section of the speech captures the dilemmas Churchill was wrestling with: the real need for US financial and political support; the question (which remains today) of whether to ally primarily with Europe or the US; and the fate of the British Empire. Churchill refers to ‘Imperial Preference’ – this was the system of preferential trade tariffs, effectively free-trade agreements allowing goods and services to be traded within the empire at a lower cost than outside of it.

Remember this concept of ‘Imperial Preference’, when considering if Empire ever ended, or simply evolved.

As the new predominant military and economic power, the US laid down the agenda for the international political economy, and pushed forward the so-called ‘liberal and free trade’ economic policies it desired.4 Despite Churchill’s protestations to maintain ‘the fullest possible rights and liberties over the question of Imperial Preference’, the Bretton Woods conference established:


  • The International Monetary Fund (IMF) – ostensibly to manage interest rates between member states.
  • The International Bank for Reconstruction and Development (the World Bank) – to provide loans to countries devastated by the Second World War.
  • The General Agreement on Trade and Tariffs (GATT – later to become the World Trade Organization) – to ensure free-trade economic policies were implemented by member states.
  • Fixed Exchange Rates – all currencies would be valued in US dollars and the dollar value would be set by gold. The US promised to convert dollars into gold on demand. This was commonly referred to as ‘the gold standard’. At this time the US held 75 per cent of the world’s gold reserves.5

By 1971, the Bretton Woods system had contributed to the successful reinvigoration of Western economies devastated by World War Two, but there had not been enough gold made available to account for this growth and the value of US stocks had dropped from $25 billion to $10 billion.6 President Nixon announced that the US would no longer convert dollars into gold, and interest rates were set to float against each other once more.

The rest of the Bretton Woods infrastructure remains intact, and continues to set the roadmap for domestic and international economic policy to this day.

These institutions would ultimately transform empire from the colonial statist model to an internationalized corporate model – with the structural power of the state used to enforce the corporate empire. In short, they have overseen the transfer of power from the State to private institutions and corporations.

This is the endgame of the neoliberal project – whether the key players know and intend it or not.


The rise of the IMF – keeping the benefits of empire


The International Monetary Fund (IMF) invented Austerity. The IMF rose in prominence amidst decolonization, touted as a means of providing monetary assistance to fund the conversion of post-colonial societies into neoliberal democracies.

In reality, the IMF has used predatory lending (often to tyrannical regimes) in order to retain control of the assets, national resources, cheap labour and corporate monopoly that the colonial powers held before decolonization. The colonial powers replaced the shackles of slavery and state colonialism with the Debt Trap.

To understand the profligate lending practices that resulted in the Debt Trap, we need to shift our attention to the 1970s. In 1973, the Organization of Petroleum Exporting Countries (OPEC) was established. OPEC states deposited their oil wealth in Western banks, and high inflation in the West at the time meant that this stored money was losing value.

To make this money work for them, the banks began a lending spree across what was then called the Third World – mostly funding undemocratic regimes and unworkable projects. As far as the Western banks were concerned, the end results of the loans were irrelevant; the purpose was to cash in on the oil money rather than let it devalue in the vaults.

The decade then witnessed a series of oil shocks, which saw the price of oil rise by more than 500 per cent.7

The first oil shock took place in 1973. The Organization of Arab Petroleum Exporting Countries (OAPEC) announced an embargo on oil supply to Western nations after the US backed Israel in the Six Day War. This was OAPEC using its role as chief energy supplier to the world to exert political sway and isolate Israel, which it considered a belligerent state of questionable legality.

The price of crude oil soared from $3 to $12 a barrel.8 The impact on the UK economy was significant. The rise in petrol prices made all transport, including industrial, vastly more expensive – which made almost everything more expensive.

Inflation soared to 24%.9 The global reverberations of this economic chaos persuaded US Secretary of State Henry Kissinger to negotiate Israeli withdrawal from parts of the Sinai in Egypt and promise a negotiated settlement between Israel and Syria. These measures secured the end of the embargo in 1974.

Despite the serious global economic impacts of the oil shock, the Western banks continued their feckless lending binge.

The second oil shock took place in 1979, with the fall of the Shah of Iran. It is perhaps hard to imagine now, but at this time Iran was the US’s key ally in the Middle East and had been so for a decade. According to a now-declassified report by the US National Security Agency:

‘The US had provided material assistance, political and moral support, and Iran had, under a carte blanche policy, purchased some of the most up-to-date US weapons systems. Little was said of the Shah’s repressive regime.’10

During the fall of the Shah, Iranian oil workers took part in national strikes. The result of the strikes was a dramatic fall in oil production and another wave of economic shocks across the industrialized world. There came a domino effect of economic disaster – the US saw trade and budget deficits, most Western economies went into recession, and so demand for exports from the poorer countries fell. As countries’ earnings fell, their debt obligations rose, and almost overnight pretty much the entire African and Latin American continents were on the verge of bankruptcy.11

This all presented something of a problem for the banks, and the wealthy economies that were benefiting from their profits – what to do?

The IMF became the lender of last resort – and was used to issue bridging loans to these crumbling economies in order that, rather than default on their debts and allow their economies to recover (impacting the West negatively both economically and geopolitically), they would continue to pay back the original loans.

The IMF created a mechanism called the Structural Adjustment Programme (SAP) which meant that emergency loans (to pay off the existing and now unaffordable loans) were granted to ‘developing’ nations provided the debtor nation subscribed to a range of conditions.12

So what do SAPs do? They:


  • • enforce the selling off of national industries and resources (mostly to foreign-owned corporations and governments)
  • • remove all capital controls on money flowing in and out of the country
  • • dictate the level of public spending
  • • prioritize debt repayments and corporate welfare over infrastructure investment and human welfare, and
  • • Demand suppression of wages and restrictions on labour unions.13

Through the IMF, the creditor nations found a way to impose neoliberal economic policies on foreign populations and sidestep the democratic process in doing so. It was a win-win for the West: there would be no negative repercussions from their lending binge, and the liberalization of the economies guaranteed by the SAPs would have been unthinkable within any democratic context.

The results of the Structural Adjustment Programmes speak for themselves. They have allowed external corporations to make enormous profits by buying up state-owned industries and exploitation rights to natural resources at a low price, while keeping living standards, wages, civil liberties and employment rights low so as to maintain a cheap domestic labour force.14 The human cost has been felt most painfully in public health. The stipulations to cut spending on health, sanitation and the development of water systems created a public-health catastrophe in the ‘Third World’.

According to the World Health Organization:

‘In health, SAPs affect both the supply of health services (by insisting on cuts in health spending) and the demand for health services (by reducing household income, thus leaving people with less money for health). Studies have shown that SAPs policies have slowed down improvements in, or worsened, the health status of people in countries implementing them. The results reported include worse nutritional status of children, increased incidence of infectious diseases, and higher infant and maternal mortality rates.’15

While crippling the economies of at least two continents, this process has been extraordinarily profitable for the creditor nations and institutions.

The Western creditor nations have consistently resisted the idea of debt forgiveness, arguing that failing to honour debts would encourage further lending and reckless spending by poor states. What they fail to address is that over-borrowing is also over-lending – both sides of this exchange bear responsibility. Yet nothing is being done to prevent the over-lending of these creditor nations.

This comment from Martin Griffiths summarizes the issue perfectly:

‘Between 1982 and 1990, $927 billion was advanced to debtor states, but $1,345 billion were remitted in debt service alone. The debtor states began the 1990s 60 per cent more in debt than they were in 1982. Sub-Saharan Africa’s debt more than doubled in this period.

‘By 1997 Third World debt totalled over $2.2 trillion. The same year, $250 billion was repaid in interest and loan principal. The debt trap represents a continuing humanitarian disaster for some 700 million of the world’s poorest people.’

For all ‘developing’ countries, total external debt owed in 2011 was $4.9 trillion and over the course of that one year they paid $620 billion servicing these debts.16 In the same year, the total foreign aid supplied to the ‘developing world’ through the Development Assistance Committee of the OECD was just $133.5 billion.17

This means that, in 2011 alone, for every $1 the creditor nations gave the so-called ‘developing world’ in foreign aid, the debtor nations gave almost $5 back in debt repayments.

The whole premise of international development is called into question when the nations involved are giving with one hand while taking five times as much with the other. Rather than the mainstream narrative – of advanced industrial nations helping to ‘develop’ inexplicably backward Third World nations, the mask is off.

There is no ‘developing’ world. Instead, there are a host of countries being deliberately decivilized, in order that corporatized states benefit economically and geopolitically. The Debt Trap has been used to reorientate national economies to the service of unsustainable and unethical debt burden, in order to transfer wealth to the creditor institutions and nations.


The financial crisis of 2007/8

It is worth reflecting on the way in which Africa and Latin America were sucked into the Debt Trap when studying the financial crisis of 2007/8.

The decades preceding the crisis had seen long-term collusion between government and the financial-services industry aimed at avoiding proper regulation of financial services in general, and the derivatives market in particular.18 There was intense lobbying in the US and the UK to maintain this position, with senior government figures on both sides of the Atlantic stepping in directly to prevent the Commodity Futures Trading Commission (in the US) and the Financial Services Authority in the UK from ever coming close to putting the appropriate safeguards in place around these products.19 This left banks, brokers and insurance companies free to expand their balance sheets rapidly by leveraging debt to almost infinite ratios.

High-street banks and mortgage providers, credit-card companies and other debt merchants chased the custom of individuals with little or no regard for their ability to pay back the loans. They did this to sell on the debts to investment banks as ‘collateral debt obligations’. These products were then, with the support of the cartel’s gatekeepers, the credit ratings agencies, declared Triple A for their credit worthiness – the same rating as a government bond.

The banks then took these investment products and sold them to the likes of pension companies, which bought them on the basis that they were now deemed perfectly safe.

The same investment banks then insured themselves against the very product that they had just sold the pension firm going toxic. These insurance policies are called ‘credit default swaps’ (CDS). There was no limit on who could set up a CDS either.

So banks could inject greater risk into the market by betting not only on their own toxic sell-offs, but also on those of other banks.

This is the equivalent of an estate agent selling you a house, knowing he had set a fire under the floorboards, then taking out an insurance policy on the house being burned down – and then every estate agent in the country doing exactly the same thing.

At every point of these exchanges, significant fees were being handed over, generating paper profits and making balance sheets look amazingly positive, with no actual product or service underpinning them.

Finally, in 2007, all those over-leveraged consumers around the world started to find it impossible to repay their loans. Then came the 2007/8 version of the debt trap domino effect. As CDS claims went in, insurers couldn’t cope with the financial hit and started to fold; the brokers’ balance sheets couldn’t take the strain; and the high-street banks, unable to claim from broker, bank or insurer, began to implode too.

However, instead of these corporations simply collapsing, this extraordinary mountain of toxic private debt was converted into public debt by the Bank Bailout.

According to the National Audit Office, The UK National Debt rose by £850 billion as a result of the Bank Bailout.20 This is almost twice the nation’s total annual budget. For this amount, the UK could have funded the entire NHS (£106.7 billion a year) for 8 years, its whole education system for 20 years (£42 billion a year) or provided 200 years of Job Seekers’ Allowance (£4.9 billion a year).21

Structural Adjustment Programmes are now being rolled out across Europe, disguised as ‘Austerity programmes’ – to reorientate European economies toward servicing the debt economy. Central banks are lending to stabilize national economies that have been broken by the cost of bailing out other banks. The central banks make these funds contingent upon the national government imposing an Austerity programme.

First published in 2015 by

New Internationalist Publications Ltd

The Old Music Hall

106-108 Cowley Road

Oxford OX4 1JE, UK

© Kerry-anne Mendoza


Customer Reviews


Most Helpful Customer Reviews

2 of 2 people found the following review helpful

5.0 out of 5 stars Excellent well researched book. A must read! 5 Feb. 2015

By Ken Evans

Format: Kindle Edition|Verified Purchase

This well researched book provides solid evidence of the truth of the author’s claims such as:
Our NHS has been privatized by political stealth.
Our education system is going the same way.

This book explains how the public institutions that the British people have funded are being gobbled up by private financiers aided and abetted by many politicians.

The book makes it clear that in the future, the British people will have to pay more and more to private companies for their essential services. This is just wrong – and its not necessary!

Read this book right away.
Tell your friends to read it as well!
Then vote the culprits out at the general election.


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8 of 9 people found the following review helpful

5.0 out of 5 stars brilliant piece of work 31 Jan. 2015

By Epaphras

Format:Kindle Edition

This book is described as ‘As a scathing critique of Austerity’ and it certainly is that. In twelve well written chapters Kerry-Anne exposes neoliberal economics as a project for enriching the wealthy at the expense of the poor and ruining public services and institutions for the sake of profit. She shows how many facets of national life are being eroded by this approach; the NHS, education, justice, civil liberties and rights etc… This reviewer has always been puzzled that the bankers clearly caused the recent financial crash but seem to have got away with it relatively unscathed at our expense. Kerry-Anne shows how this happened and how attention has been shifted from them to scapegoat, among others, the poor, the disabled and immigrants. She well and truly debunks and refutes the myths claiming that immigrants are flooding the nation and grabbing its resources. The book is well argued and exceptionally well documented to make a compelling case against Austerity. There are a few suggestions for what to do about it but a further book is promised and after reading this penetrating diagnosis I hope that it will soon be published.


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7 of 8 people found the following review helpful

5.0 out of 5 stars Excellent book. 31 Jan. 2015

By Louise Marnell

Format:Kindle Edition|Verified Purchase

An excellent read. Very informative , well written.
A must read for anybody who questions what is really going on in this country and why.
Very easy to read and understand . Author has done a brilliant job of giving the reader the information to understand the bigger picture.


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4 of 5 people found the following review helpful

5.0 out of 5 stars I have just finished reading this brilliant book! Even for an elderly person such as … 2 Feb. 2015

By J. I. Lloyd

Format:Paperback|Verified Purchase

I have just finished reading this brilliant book ! Even for an elderly person such as myself it was easy to grasp exactly how our once great country has got into such a mess led by greed for the few and “Austerity ” for the rest .I know changes are not going to happen in whatever time I have left but I can see it will have to happen in the future to get “Decency and fairness” for all ! I very much look forward to the authors next book . From Mrs. J. Lloyd


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