Last week, Democratic governors in New York and Connecticut repeated the austerity politics of Greece's Prime Minister Pappandreou and Portugal's former Prime Minister Socrates. In doing so, they likewise imitated the austerity politics of their Republican and Democratic counterparts across virtually all 50 states.

Austerity for labour and the public is everywhere capitalism's Plan B. Even capitalists now see that capitalism's Plan A failed.

You will recall that Plan A entailed a crisis-response programme of bailing out the banks, insurance companies, large corporations and stock markets to achieve "recovery". The theory behind Plan A – we used to call it "trickle-down economics" – was that recovery would spread from financial markets and financiers to everyone else. It never did. So now the same servants of capitalism who imposed Plan A are dishing out Plan B.

Governors Cuomo in New York and Malloy in Connecticut had very similar Plan Bs. They threatened the public employee unions and the people of their states in nearly identical ways. Either the unions accept new contracts with wage freezes and raised contributions to their health insurance plans (and other declines in their basic remuneration) – or the governors would fire tens of thousands of unionised state workers. In Connecticut, the state workers first voted to reject and then re-voted to accept that contract. In New York, the state workers accepted on the first vote.

Let's be really clear on what the two governors were doing. They were forcing a very painful "either/or" onto the mass of people who elected them. Each governor said: I will either fire many thousands of state workers and thereby impose drastic cuts in public services on the entire citizenry, or I will subject tens of thousands of state employees to significant cuts in their wages and benefits.

Each governor spoke and acted as if those were the only two choices – even though that is blatantly untrue. Each governor refused to even consider an obvious alternative Plan C: increasing taxes on corporations and the rich enough to avoid either public service cuts or wage cuts. Instead, each governor snubbed his nose at the public by forcing unions to choose between two awful options.

The public employees unions voted to accept serious cuts in pay and benefits. That was in the face of the latest government figures showing US consumer price inflation now running at 3.5-4% per year. The contracts that state employees accepted in New York and Connecticut give them 0% wage increases in the first two years and less than 2% per year increases in the last years of their contracts. In addition, New York workers accepted unpaid furlough days, while both states' contracts involved higher health insurance premiums and co-pays to be charged to state workers. These are serious reductions in state workers' standards of living. They will thus reduce their expenditures, thereby hurting communities, businesses and other workers.

The states will thus learn the same lessons learned in Greece and Portugal and wherever austerities are governments' Plan Bs. Austerities make difficult, painful and unjust capitalist crises more so.

Corporations and the rich bankroll the parties and governors who design and impose Plans A and B, while avoiding Plan C. And so matters will remain unless and until corporations' profits are no longer available to their boards of directors to enrich themselves and major shareholders and to buy politicians' servitude. The best response to capitalism's crisis, to its failed Plan A and to its unjust Plan B would be a Plan D: to change how we organise productive enterprises in our society. Profits should be distributed by the democratic decision-making of all those who produce and depend on them, the workers and affected communities.

The twists and turns of this global capitalism system, painful as they are to endure, nonetheless also move it toward a confrontation with the alternative Plan D. The real question is whether the advocates and supporters of Plan D can be organised, mobilised and focused on achieving their goals in that confrontation.

• This article was originally published on Richard Wolff's blog and is crossposted by kind permission