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	Europe"s unfair austerity by Jeff Sparrow Overland   In the UK, the government has just handed down a belt-tightening budget that cuts a staggering £10 billion from pensions.   At the same time, it"s delivered a £10,000 tax cut to the 300,000 richest people in the country.   That"s merely the most recent example of how the austerity measures imposed across Europe provide a devastating rebuttal to the fairytales we repeat about the ethics of capitalism.   Insofar as the fundamentals of our economic system are ever discussed (rather than simply assumed), it"s as a kind of morality tale, a comforting story about virtue rewarded and wickedness chastised. We all know the script. It"s the market as competing lemonade stands, where success and failure corresponds with enterprise and sloth - the fable of the ant and the grasshopper, played out with soft drinks. The righteous man, reliably plying his customers with lemony goodness, shall prosper, just as the invisible hand will clip less honest retailers over their ears.   No good deed goes unrewarded; no wickedness escapes punishment.   What we"re seeing in practice is, of course, the complete reverse. All across Europe, it"s those least responsible for the economic decisions of the past who are most savagely impacted by the austerity that the markets demand.   In Greece, for instance, the pain planned for ordinary people defies belief. The bankers signing off on the most recent bailout have demanded cuts in private sector wages amounting to some 22 per cent, as well as massive reductions in pensions, rent subsidies, unemployment payments and the like. Even more remarkably, the salary cutbacks for contract workers in the public service have been made retrospective. The result? According to the Press Project:   "Up to 64.000 people will work without salary this month, or even be asked to return money."   This is in a context where unemployment sits at more than 20 per cent, with nearly half of all young people without jobs. In other words, we are witnessing a degree of immiseration previously associated with the Third World now taking place in the heart of Europe, with the government even switching off traffic lights at night in order to save money.   Yes, there"s been a half-hearted attempt to provide an ethical narrative about Greece"s despoliation, usually in the form of a diagnosis of social psychology. Greeks, you see, are lazy; they must be taught a lesson, to get their lemonade stand functioning as well as everyone else"s.   The business magazine High Net World puts it like this:   The word "austerity" in non-financial terms means "severity" or "sternness". Rather like the eventual behaviour of a parent when a child goes one tantrum too far. It"s a course correction to establish boundaries, make clear the rules of life, and a measuring stick by which future behaviour can be, well, measured. So much for the parenting tips, but the term "austerity" has become a mantra for driving change in the Eurozone. And like parenting an unruly child it"s both long overdue and a last resort.   Yet you can only think of austerity as a kind of parenting if you"re happy with Mum and Dad flogging their weakest kids mercilessly even as they cosset and spoil the local bully. For in Greece, as in Britain, the "rules of life" apply not to the political class but to the everyday citizens who played no role whatsoever in the economic decisions of the past. Yes, the government has introduced a tax on luxury yachts. But, in northern Greece, the national electricity provider has been shutting off power to people living in frozen areas, because they"ve been unable to pay their bills.   Losing your boat might be upsetting but it doesn"t compare to freezing to death.   The whole logic of the bailout is based on a notion that big business cannot be allowed to fail, because the results would be too disastrous. In order to prevent that happening, the little people must be squeezed.   You can describe that in many ways. But what you can"t call it is fair.
	Endless Jackpots for Hedge Fund Managers by Sam Pizzigati Institute for Policy Studies USA   At what point will our world wake up to the fantastically rewarding scam that our hedge fund masters of the universe have been running?   No single individual in the United States had a more lucrative year at the office in 2011 than Raymond Dalio. Working out of his Bridgewater Associates headquarters in Westport, Connecticut, the 63-year-old hedge fund manager pulled down a sweet $3.9 billion.   The typical American worker, by contrast, ended 2011 earning just under $40,000. That typical worker would have had to labor over 97,000 years to equal what Dalio made in just one.   The irony here: By the hedge fund yardstick, the United States actually became a little more equal in 2011. The year before, in 2010, the typical U.S. worker would have had to labor over 120,000 years to make as much in compensation as the year’s top-earning hedge fund manager.   For these stunning hedge fund compensation totals, we can thank the AR financial trade journal. AR has been tallying up hedge fund pay ever since the start of the 21st century, and the magazine’s new figures for 2011 appeared just over a week ago.   Hedge fund managers, AR informs us, experienced a bit of a downshift in 2011. The top 25 hedge fund only collected a combined $14.4 billion for the year. That total does run higher than the $11.6 billion the top 25 collected in 2008. But last year that top 25 amassed nearly $22.1 billion.   By any rational benchmark, of course, hedge fund manager rewards remain positively stratospheric. Back in 2002, a hedge fund manager needed to earn $30 million to enter the hedge fund industry’s top 25. In 2011, a downer of a year for hedge fund managers, that entry level stood at $100 million.   How do hedge fund industry movers and shakers justify such incredible windfalls? Top hedge fund managers make hundreds of millions of dollars.   Hedge funds operate almost entirely behind closed doors that average American never get to enter beyond. You can’t, after all, just walk off the street into a stockbroker’s office and invest in a hedge fund. To enter hedge fund land, you either have to be a person of means — with at least $1 million available to invest.   Hedge funds, at base, amount to mutual funds for deep pockets. Normal mutual funds face all sorts of federal regulations designed to protect the general investing public. Hedge funds don’t serve the general investing public and face precious little regulation.   This regulatory hands-off leaves hedge fund managers almost totally free to invest anyway and in anything they want. They can buy new-fangled speculative assets. They can also “hedge” their bets, by laying down financial wagers that a particular asset’s value is going to sag.   Hedge fund managers demand majestic levels of compensation. They typically charge clients by a “2 and 20” formula. Investors pay the hedge fund wizards who manage their money an annual fee that equals 2 percent of the total money they invest, plus 20 percent of any profits that selling their invested assets might bring. But hedge fund managers, in real life, have no secret wisdom. And they don’t reliably deliver serious returns. Most hedge funds have been coming up short.   Over the last five years, the New York Times revealed last week, the ten public employee pension funds with the highest share of their dollars invested in hedge funds and other “alternative investments” only gained an average 4.1 percent a year on their money. The ten pension funds with the least share of their dollars plowed into hedge funds returned an average 5.3 percent.   The only consistent gainers from the billions that institutional investors have dumped into hedge funds: is surprise, surprise hedge fund managers. The ten pension funds most invested in hedge funds paid almost four times more in investment management fees than the ten pension funds with the least hedge fund exposure.   But these titans continue to pull in hundreds of millions year after year. Why? The assets they manage have become so big, the financial journal AR points out, that the income that their 2 percent management fees generate has become a “huge profit center” in and of itself.   And if hedge fund manager investing labors should actually produce “performance” gains, the 20 percent chunk of these gains they grab gets preferential treatment in the tax code, the notorious “carried interest” loophole.   On the bulk of their earnings, the nation’s top-paid hedge fund managers pay federal income tax at just the 15 percent “carried interest” rate, not the 35 percent that applies to ordinary income in the top tax bracket.   Congress has so far done nothing to stop this preferential treatment. In fact, Congress is moving in the wrong direction. A bipartisan majority has just passed legislation — the Jump-start Our Business Start-ups Act, or JOBS Act — that will free hedge funds in the future to more aggressively market their wares.   This new marketing flexibility will likely add to the over $2 trillion in assets now under hedge fund management — and add even more to the paydays of hedge fund managers.   In the third quarter of 2011 alone, notes the AR financial trade journal, hedge fund manager Kenneth Griffin and his spouse deposited $300,000 into the super PAC that conservative political strategist Karl Rove runs.   * Sam Pizzigati edits Too Much, an online weekly on excess and inequality.
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