It began in September with the battle on the bailout plan in the House of Representatives. Right-wing Republicans like Jeb Hensarling from Texas declared the bailout to be the “slippery slope to socialism.” Not to be outdone, Senator Jim Bunning declared: “It is financial socialism and it’s un-American.”
Then, in the waning weeks of the presidential election, McCain and his surrogates began to attack Obama’s policies as “socialist” and even “Marxist”! This was linked continually to a comment by Obama to Joe the Plumber about “spreading the wealth around.”
McCain’s charge was absurd, since both he and Obama supported the $700 billion bailout. Ordinary Americans correctly saw the bailout as a giant handout to the banks, whose bottomless lust for profits created this crisis. It is of course no coincidence that both of their campaigns received massive financial support from Wall Street.
In the wake of the election, new heights of absurdity were reached on right-wing radio, with one shock jock saying that Obama “wants to turn our country into the Socialist Republic of America” and a caller to Rush Limbaugh ranting about the “500,000 Bolsheviks” in Grant Park, Chicago at Obama’s victory rally. Of course, there has been plenty of fodder for comedy, like the website that called Palin a “Nieman Marxist” for her $150,000 clothes shopping spree on the Republican tab.
There probably have not been so many references to socialism since the collapse of the Stalinist regimes in the early 1990s. But if you were to take most of this at face value, you would probably conclude that socialists support handouts for the hyper-rich or higher taxes for plumbers.
As actual socialists, we opposed the bailout from the start and called instead for a bailout for working people, including a massive public works program to create millions of jobs rebuilding the nation’s infrastructure, developing alternative energy, and addressing other social needs.
And, unlike the Democrats, we call for a serious redistribution of wealth to end the massive concentration of wealth among the super-rich. The top 5% of Americans own 58.9% of all wealth in this country (http://www.levy.org/pubs/wp_502.pdf), and one hedge fund manager, John Paulson (no relation to the Treasury secretary), “earned” $3.74 billion in 2007, which works out to approximately $1.7 million per hour!
We call for a $12.50 per hour national minimum wage or a guaranteed minimum income of $500 per week, and raising taxes on the mega-rich and the corporations to pay for social programs.
A Bankrupt System
This crisis brings home, in a way that hasn’t been so crystal clear in a long time, the bankruptcy of capitalism and its inability to offer a decent future to young people and working people here and around the world. As in every previous economic downturn, the bosses and the politicians who serve them will seek to make working people pay for the crisis of their system.
In the U.S., millions will lose their homes and millions more their jobs. Meanwhile, the ranks of those without health insurance or a decent pension continue to grow. 401Ks have become 101Ks. Globally, it is projected that unemployment could rise by 20 million by the end of 2009. This is in the wake of a year where massive inflation in food prices led to riots in many parts of the world.
As socialists, we intend to seize this opportunity to explain that there is an alternative to the irrational destructiveness and parasitism of the market – an alternative based on democratic planning of key sectors of the economy for people’s needs, not profit.
Of course, it is not just the current economic crisis that illustrates the need for a democratically-planned economy. The environmental crisis that threatens to become a global catastrophe requires urgent and coordinated international action. Currently, all serious measures aimed at reducing carbon emissions are blocked by corporate interests who fear the impact on their profits.
Nationalization for Whom?
As the accompanying article, “Economic crisis and the role of the state,” explains, the implosion of the many bubbles in the financial markets and the threat of a Depression-type collapse of the economy have forced governments to intervene in a dramatic way. One of the measures taken has been a partial nationalization of the banking system both here and in Europe.
But in return for putting $250 billion of taxpayers’ money into the banks, the public in the U.S. gets neither a controlling interest nor even a seat on the board. So without any effective oversight, what are the banks doing with the money? Early evidence suggests they’re using it to finance mergers rather than helping to restart the real economy.
While socialists also call for nationalization, what we are talking about is fundamentally different from nationalization undertaken by pro-capitalist governments. In both cases, the government takes over, but the question is, who controls the government and for what purposes?
The goal of Treasury Secretary Henry Paulson, as a representative of the ruling class, is to shore up the banks so they can be privatized again at a later stage. Then the whole casino of capitalist finance can be relaunched, although doubtlessly with more regulation.
Government today is controlled in the last analysis by the corporations. Paulson himself is the former CEO of the investment bank Goldman Sachs, a key beneficiary of the bailout. He’s brought in other Goldman Sachs people to help administer the bailout.
We call instead for the full nationalization of the banks under democratic workers’ control. This would mean compensation for small investors and shareholders only on the basis of proven need. Crucially, the financial sector would no longer be run on a for-profit basis.
Mortgages, and not just subprime mortgages, could be restructured to allow people to stay in their homes, reduce their payments, and thereby put money directly in their pocket. The banks would promote the production and development of goods and services needed by the majority of the population, instead of handing over money to rich CEOs who have driven their companies into the ground. The boards of directors would be replaced by governing bodies made up of elected representatives of the workers at these companies as well as the broader public, i.e. all the people whose lives are so drastically affected by the workings of the banks. Finally, the real balance sheets (not the cooked ones) of the financial institutions should be opened for public inspection.
And why should we stop with the banks? The oil and energy sectors should also be brought into public ownership. Given the role these corporations play around the globe, their resources should come under the control of representatives of working people internationally with the aim of rapidly and drastically reducing greenhouse gases and switching to alternative and clean sources of energy. The auto industry should likewise be nationalized.
Of course, the most popular measure of nationalization would be to bring the health insurance and pharmaceutical industries into public ownership and create a true universal healthcare system. As it stands, all the proposals for healthcare “reform” coming from the Democrats would basically amount to bringing more people into the massively inefficient private, for-profit system.
The Role of the Working Class
To create an economic order where the key decisions are based on the democratically-agreed priorities of society rather than the blind drive for profit, the working class needs to become clearly aware of its role and potential power and to take the lead in getting society out of the blind alley called capitalism.
As socialists, we fight for every real reform within the framework of capitalism, no matter how basic. This is not just because of the immediate benefit to working people’s lives of any tangible gain, but because the struggle for reforms helps to develop the confidence and understanding of workers and young people of what can be achieved through collective action.
But we always point out the limits of fighting for reforms. There is no way of reforming capitalism into being anything other than a boom-and-bust system where what is granted today can be taken away tomorrow. And as this system heads deeper into decline, the space for reforms narrows.
Socialism of course is not just a goal; it’s a movement. And though genuine socialism is certainly a very weak political current today in the U.S., this was not always the case. Socialists played a key role in the building of the labor movement, in the fight for the 8-hour day, and in the civil rights movement.
The first step needed now is to mobilize against foreclosures, mass layoffs, cutbacks of basic services, and all the other attacks that are raining down on us. But today, there is clearly a lack of belief that social struggle can change things, a belief that comes out of a long period of defeats and setbacks.
And where are the trade union leaders, the people who are supposed to represent workers when we are under attack? This is what John Sweeney, the head of the AFL-CIO, said in a September 19 press release: “Congress must absolutely insure that the administration’s plan is not just bailing out Wall Street but also responds to the real pain on Main Street…permanent answers can be found in the economic program of Barack Obama.”
This is a total abdication of responsibility. The unions pour hundreds of millions into the Democrats, and in return what have we gotten from them this year? A $600 stimulus check and a giant handout to the financiers.
It is clear that there is massive anger among working people against the lords of Wall Street and their political enablers who helped create the bubble economy. This was reflected in the outpouring of phone calls and e-mails to people in Congress against the bailout. The huge rallies and turnout for Obama, despite the fact that he is a solid representative of the establishment, also reflect the profound desire for change, especially among young people.
Nor should we forget the massive demonstrations and strike action in 2006 by immigrant workers, which showed the potential for the revitalization of the labor movement. It is no accident that over the past couple of years there have been savage raids and mass deportations in immigrant communities where union organizing drives were underway.
Of course, a period of mass layoffs is not an easy time for workers to go on the offensive and take strike action, but there are other forms of struggle. We can anticipate that in the next period there will be local struggles against foreclosures and cutbacks in public services.
In a striking development, the Cook County Sheriff (Cook County embraces the city of Chicago) said his officers would no longer evict residents from foreclosed properties. In many cases, people who were on time paying their rent were being evicted without notice because the owner of the building was facing foreclosure and never told them. Sheriff Dart cited the emotional toll on the officers. Undoubtedly, this is part of the reason, but the more important, unstated reason must be the fear that if such manifestly unjust evictions continued it could lead to social unrest.
It is high time for the unions, community organizations, and antiwar groups to take the lead in calling massive demonstration in cities across the country against the bailout of the banks and call for a bailout of working people. The message must be loud and clear: “You must not solve your crisis on our backs.”
When working people and young people begin to stand up in defense of their rights and what remains of past gains, they will be taking the first step on the road to creating a movement for real change.
They will need to renew the unions and turn them once again into fighting organizations. And they will need to create a new political party to represent their interests, a party that will truly represent all the oppressed and excluded sections of American society. In order to win the battle against the entrenched interests of the corporate elite, this party will need to adopt a genuine socialist program. When that day comes, the reactionaries who shout about “socialism” today will really have something to worry about.
Economic Crisis and the Role of the State
The grain of truth in all the talk of “socialism” is that the U.S. government and other governments around the world have been forced to intervene in the functioning of the markets to an extent not seen for a whole historical period. This of course is not socialism, but it is an implicit admission by capitalist governments that, left to its own devices, the “free market” will lead society right off a cliff.
In fact, it is the collapse of a model of capitalism – sometimes called either the “Washington consensus” or neo-liberalism – that dominated the world for the past 30 years and justified the privatization and deregulation of everything, reducing the role of government and letting the market rip.
Neo-liberal policies helped fuel the massive casino in the financial markets and inflation of assets that kept corporate profits high but was ultimately largely fictitious. Meanwhile, with real wages stagnating, massive indebtedness and extension of credit were used to maintain consumption, especially in the U.S.
Take one example of how quickly policy has changed. On September 22, as Paulson was trying to sell the bailout in Congress, he said that the idea of nationalizing or part-nationalizing the banks was out of the question.
Instead, he insisted on his plan to buy up mortgage-backed assets from the banks, the toxic waste produced by the financial crisis. Of course, this was already a massive government intervention in the markets. But Paulson stuck to his free-market principles, insisting that the government would buy assets but not stakes in the institutions.
At the time, many economists raised serious doubts about whether the bailout would work to get the markets going again and said that some form of nationalization was necessary.
So Congress passed his bailout (with a few modifications and a lot of pork), and then the markets really tanked. The British government then announced it was partially nationalizing its banks, and shortly afterward Paulson announced – guess what? – the partial nationalization of the U.S. banks!
With the implosion of the housing bubble and the other bubbles in the financial markets, we are facing the first simultaneous recession in all the key areas of the “advanced” economies since the mid-’70s.
There is now no clear way for capitalism, here or internationally, to return to the era of credit- and debt-fueled growth of the past 30 years. What is opening up, even if a complete Depression-type collapse is averted, is a deep recession followed by a long period of stagnation, with huge suffering for tens of millions in the U.S. and hundreds of millions around the world.
We are therefore likely to see the implementation of what have been called “neo-Keynesian” policies in the next period. Keynes was an early 20th Century economist who advocated government intervention in crises to maintain demand/consumption – these polices are also referred to as “pump priming.” Classic examples were the Depression-era programs to put people to work building infrastructure. But the real heyday of Keynesian policy was during the post-war boom of the ‘50s and ‘60s.
The basic idea of the liberal left in this country is to return to a more regulated capitalism with massive government investment in infrastructure, alternative energy, education, etc., as well as progressive taxation. Obviously, as socialists we also call for this type of government investment and for taxing the rich to pay for it.
But we also look at history, and the truth is that while the Keynesian measures of the Roosevelt administration in the ‘30s somewhat cushioned the effects of the economic crisis on workers, it did not pull the country out of the Great Depression. It was World War II that did that.
More importantly, it is utopian to believe that we can return to the allegedly kinder, fairer capitalism of the post-war period when workers’ living standards steadily improved and private sector companies provided real pensions and healthcare plans. The whole period of neo-liberalism and globalization that we’ve been through was the result of the catastrophic crisis of profitability of the system in the early ‘70s, i.e. at the end of 25-plus years of Keynesian policy.
This was due centrally to massive overproduction of wealth and capitalism’s inability to put that wealth to productive uses. Capitalism is not based on matching resources to human needs. It’s based on profits: no profit, no economic activity.
With the end of the financialization/bubble era upon us, the crisis of profitability is back with a vengeance. At most, Keynesian measures can alleviate the situation by preventing the crisis from getting worse, but they won’t stop the bosses attacking the working class and they won’t stop a deep recession.