Greece and Wisconsin: Two case studies in capital's 'divide and conquer' strategy

Scarcity is a real thing. There's only so much wood or gasoline or laptops or health care to go around, so we cooked up markets to figure out who should get how much of what. But within the real limits imposed by scarcity, there's also artificial scarcity: want imposed by distribution rather than the raw lack of something.

When it's imposed artificially, scarcity can be a power play. Enforce it long and hard enough, and it begins to seem like inescapable reality — the way things just are. At which point, everyone suffering from scarcity becomes convinced they have to fight with each other over the scraps, rather than band together to take on whomever is inflicting the scarcity in the first place.

Take Dan Kaufman's long dive in The New York Times into Wisconsin Gov. (and pending presidential candidate) Scott Walker's multiyear drive to break up the unions in his state. Talking to local union workers and representatives, Kaufman lays out how Walker used a "divide and conquer" strategy to first strip public unions of much of their bargaining power. Then more recently, Walker helped push through right-to-work laws, hamstringing private unions in Wisconsin as well.

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One of the general knocks on public sector unions is that they cost taxpayers money in the form of higher wages for public workers. But if Walker's crusade has freed up his state's budget, it hasn't helped workers or the poor in other ways. Walker cut $541 million in tax revenue — a move that will mostly go to help the state's business and more well-to-do families — creating budget deficits that he's trying close by cutting education funding.

Public workers participate in local economies as much as private ones, and higher wages for the former would equal more money pumping into Wisconsin's economy at the ground level — not to mention a way to secure better infrastructure and public services for the state, since you get the quality of labor you pay for.

The dynamic is the same in private firms, where unions empower workers to claim a larger share of the revenue flowing through a company, instead of it being claimed by shareholders or upper management. Against that, the logic of the "Walmart effect" — that labor costs must be cut so companies can provide cheaper goods and services, which will then make the poor better off — creates a never-ending downward ratchet of lower wages and thus the need for even cheaper goods. Round and round it goes.

By convincing the public- and private-sector unions they'd have to throw one another under the bus to protect their own share, Walker has been able to take the overall flow of income through the Wisconsin economy, and increase how much of it reaches the pockets of the upper echelons of the economic ladder.

For another example of this strategy, take the ongoing debt negotiations between the Greek government and its eurozone creditors, which appear to be running into the ditch once again after a deal failed to coalesce on Sunday.

In Greece, genuine financial malfeasance on the part of a prior Greek government combined with the hit from the 2008 collapse to send the country's debt into the stratosphere, and its economy into the dirt. But the terms of the bailout offered by Germany, the European Central Bank (ECB), and the IMF required Greece to hike taxes and cut spending to such a degree that it was actually sucking money out of the economy. Greece has essentially become a pass-through entity for the bailout funds: they come in and go right out again to pay Greece's creditors, along with something extra out of the country's own economy.

Meanwhile, without the infusion of money it needs to get back on its feet, Greece's economy continues to grind along with Great Depression-levels of unemployment.

The sad part is that some of the poorer European countries lined up against Greece — Slovakia, Latvia, Lithuania, Spain, etc. — also severely cut their social safety nets and public services after getting smacked by the 2008 collapse. So now they're hardly inclined to see Greece get a sweeter deal. Greece "is demanding that Europeans poorer than Greeks help them avoid painful reforms," a decidedly unsympathetic Marc Champion wrote in Bloomberg View.

What Champion fails to deal with is that all of these "painful reforms" could have been avoided for everyone, had the richer areas of Europe been willing to move money into these other countries in real terms — as opposed to just the "performance" of moving money around, a la the Greek debacle. That would have prevented the massive unemployment levels and sputtering economic performance we've seen.

But it would also have required massive money printing by the ECB, or the creation of a kind of supranational European fiscal policy to continually shift money from the richer parts of the continent to the smaller ones. One of the big reasons individual states here in America never get so economically out of whack with each other is that our federal government's massive spending budget acts as a kind of ballast: it ensures money is going to all parts of the economy, keeping things on an even keel. As Derek Thompson at The Atlantic once quipped, what the Germans call a "permanent bailout" is simply what Americans call "Missouri."

The problem is, money-printing would allow the poorer countries in Europe to reinvigorate their economies by shifting capital flows. Which would mean closing Germany's trade surplus, making its goods less competitive vis-a-vis other parts of Europe. As for the supranational fiscal policy, that would mean Germany and others permanently losing some portion of their wealth production in tax-and-transfer policies to other countries. Rich American states like New York accept this state of affairs, but no such cultural agreement exists in Europe.

Both the fights in Wisconsin and Europe offer examples of how turning the less powerful on one another can allow the more powerful to solidify or even increase their grip on the fruits from everyone's collective wealth production.