We are seeing two sharply contrasting approaches to the stubbornly-persisting global economic crisis.

One is being applied in Europe, beginning in Greece, and is rooted in a strategy of bone-crunching austerity. It won’t work, but despite the mild protestations on the Washington Post editorial pages this week, it will continue to buoy the fragile financial system on the backs of the poor, of Greece and after that the rest of the continent.

The problem with this approach is that there is no way out. It becomes a self-feeding problem. Austerity begets austerity. Buying power and productivity are eroded by this approach in a grotesque form of self-cannibalism of capital, human capital, that is.

Of course, it is fashionable to dismiss the Greeks as spoiled, overly pampered people who get too much government assistance too early in life. But that ignores the reality of poverty there, just as poverty is ignored by the captains of finance in the U.S.

But there are only two eventual outcomes to the approach of austerity. The first is that people simply start dropping dead. The second is that at some point they rebel and fight back. In that case, it would take the form of a new government that will call off whatever temporary deal it has made with the European powers that be.

That would blow up the fragile financial house-of-cards in which the U.S. financial markets are also too highly invested and leveraged.

It tends to be overlooked that the Greek and European crises are nothing more but the next stages in the global financial meltdown that began in 2008 and since has been mitigated by nothing more than high-speed currency printing presses, on the one hand, and systematic caloric reduction among the people, on the other.

In addition to unrest, the other major impending stumbling block for this sort of recovery has to do with scarcity and rising costs of raw materials, most importantly oil. Gas at $5 a gallon or higher in the U.S. this summer will not only steal food from the mouths of children, it will pressure commerce and, again, become a self-fulfilling spiral of high prices and scarcity.

There is only one way out, and it is signaled in what President Obama introduced yesterday for a reform of the U.S. business tax system. The plan essentially does these five things:

1. Eliminates dozens of tax loopholes and subsidies, broadens the base and cuts the corporate tax rate to spur growth in America,
2. Strengthens American manufacturing and innovation,
3. Strengthens the international tax system, including establishing a new minimum tax on foreign earnings to encourage domestic investment,
4. Simplifies and cuts taxes for America’s small businesses, and,
5. Restores fiscal responsibility while not adding a dime to the deficit.

Operative in this list of reforms is one essential idea: The recognition of the distinction between manufacturing and innovation (and programs, like education, associated with them) on the one hand, and financial investing and speculation on the other.

This is why Obama’s plan lowers the corporate tax rate for the former, and through eliminating loopholes and other means, raises taxes on the latter.
This is a tried and true formula for spurring real economic growth, for adding substantial wealth to the public through greater incentives and innovations in what fundamentally converts raw materials into useful forms for human beings.

This is how to “do” growth, as opposed to austerity, and its roots in America go all the way back to the time of the Revolution. It was the nation’s first Treasury Secretary, Alexander Hamilton, who spelled it out in his famous “Report on Manufactures” and by forming the Bank of the U.S. on such principles, spurred a century of American growth, expansion and prosperity.

Financier practitioners of usury, seeking to suck value out of production and human lives without restraint, have tried to obscure this notion of “growth” by arguing the growth of their portfolios is every bit as valid as the growth of productivity on an assembly line.

That poison is what Obama’s new initiative hopes to begin letting from our sorry, shaky economy to really get it going. Expect Wall Street to howl.