Austerity constitutes the cornerstone of neoliberal policies. On the
surface, it works as a strategy of reducing entrepreneurial cost.
Austerity reduces labour costs of the private sector, increases profit
per (labour) unit cost and thus boosts the profit rate. It is
complemented by economizing in the use of “material capital” (alas,
another demand curtailing strategy!); and also by institutional changes
that, on the one hand, enhance capital mobility and competition and, on
the other, strengthen the power of managers in the enterprise and share
and bondholders in society. As regards fiscal consolidation, austerity
gives priority to budget cuts over public revenue, reducing taxes on
capital and high incomes, and downsizing the welfare state.
