Saturday, September 20, 2008

Private profits, Public losses

From an excerpt from a recent SW editorial, which is in turn excerpted from a piece written by The Financial Times' Willem Buiter:

If financial behemoths like AIG are too large and/or too interconnected to fail, but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?

Is the reality of the modern, transactions-oriented model of financial capitalism indeed that large private firms make enormous private profits when the going is good, and get bailed out and taken into temporary public ownership when the going gets bad, with the taxpayer taking the risk and the losses?

If so, then why not keep these activities in permanent public ownership? There is a longstanding argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer.

Seriously. Why doesn't the self-described party of 'progressive change' in control of both chambers of congress, make a more concerted push to consider these 'longstanding arguments'? We've seen the Congress bow to Bush on every major battle since 2006 (from Iraq funding, to FISA, to the Patriot Act, etc.), we've seen them tip-tow about and claim a few pieces of low-hanging fruit (raising the minimum wage, for instance). Why aren't we seeing any assertiveness from the party billing itself as a serious alternative to the Republicans? The difference between the parties right now, seems more or less that the Democrats are more likely to be pulled with the changing tides (partly against their will) into some modest reform to our financial regulatory apparatus and other modest changes. They will be far more likely to take a pragmatic position with regard to the crisis, as FDR did, which puts options on the table for the Democrats that Republicans wouldn't even consider. Thus, the choice in this election appears to be: either the possibility of tepid/modest progressive reform, or certainty that nothing will really change. Both parties, however, feel most comfortable more or less retaining their seats atop the quickly crumbling edifice of neoliberalism.

Finally, we are beginning to see serious cracks in the neoliberal dogma that has reigned over nearly all discussions of social/economic policy for at least 30 years. The extent to which this will enable previously occluded alternatives to enter into the discussion remains to be seen.

I could be wrong about this, but I've heard next to nothing from either of the major presidential candidates about the recent bank nationalizations. It's not as though these aren't unprecedented, enormous shifts in economic policy. It's not as though the biggest, most hard-Right capitalist government in the West has resorted to taking MASSIVE financial institutions into public ownership, when only a 10 months ago Bush was claiming that he was vetoing the S-CHIP public health measure because he "disagreed with it on philosophical grounds" (which is to say, his government was so beholden to neoliberal orthodoxy that he felt that infants and children must not receive subsidized health care in the richest nation on earth).

I know that Obama and the Democrats are trying to skewer McCain on the economy, a massive area where his campaign (and his Grand Old Party) have virtually nothing constructive to offer in the way of diagnosis or solutions. But Obama is keeping a pretty conservative tack on the crisis, relative to the space opened to make more progressive attacks on the bankruptcy of neoliberalism-gone-wild. Perhaps he's keeping in line with his Party, whose Senate Majority Leader recently said that the reason that Congress hasn't acted is because "no one knows what to do". Indeed, from the perspective of ruling orthodoxy that posit markets and deregulation as solutions to all problems (which presently has no solutions to our current crisis,) it is difficult to see what needs to be done. Certainly, more waves of tax breaks, more deregulation and massive cuts in public expenditure aren't going to do much.

But, and the SW editorial makes this point well, are we seriously to believe that "no one knows what to do"? Has the experience of the Great Depression been completely erased from all public consciousness? Is it even relevant that for a large part of this century, ultra-liberal laissez-faire orthodoxies were thoroughly rejected by nearly every single major Western capitalist government (including all of those ruled by Gaullists, Christian Democrats, Conservatives and Republicans)? This isn't to say that all our answers are to be found in the poswar Keynesian policies of yesteryear, but in the same way that the causes of the current crisis have historical roots so ought the approaches to dealing with it. Deeper than 1980, for sure.

In a country where the critical language (i.e. anti-capitalist, even full-throated social-democratic angles) necessary to articulate the unfreedom of our present situation simply does not exist, the only logical reaction to the present crisis (within the coordinates of neoliberal capitalism) does seem to be disbelief and confusion.

Of course, there are plenty of neoliberal apologists who seem to actually have bought into all that bullshit about 'free markets', the invisible hand, 'small government', etc. However, the joke is on these idiots. The investing classes who would gripe, moan and create all sorts of havoc if a public spending initiative of this magnitude was directed at the needs of the vast majority of people, are perfectly happy to be bailed out and have their profits subsidized by massive 'government interventions'. Their lack of regulation and 'freedom' to operate without democratic checks, is what produced this crisis... what we should therefore be discussing is whether or not these assholes should be in charge of these massive financial instutitions, whose health unfortunately has wide-ranging effects for everyone else. Letting them crumble would be to take everyone else down with them. The arguments we should be having about the massive bailouts and interventions have nothing to do with the absurd "free-market vs. government intervention" dichotomy. We should be arguing about what sort of 'intervention' we should take, in whose class interests tax-payer's money should be spent, who should be in charge of running these huge financial institutions and what role democratic procedures (not the unilateral whims of financial elites) should play in the process.

Why aren't 'progressives' seizing on this large puncture in neoliberal orthodoxy to push for other wide-scale public projects (i.e. fully-funded education, single-payer health care)? Why isn't the so-called 'center-Left' alternative in this election cycle, the man advocating (at least, in rhetoric) a return to the modest reformism of New Deal liberalism, seizing this opportunity to decisively slam the doddering, confused Rightists (of both parties, but especially from the GOP) who've ruled unchallenged for the last 40 years? At least in part, because Obama is one of them.

Its objectively true that the crisis will make it difficult to make an argument for massively increased social spending for projects like education, infrastructure and health-care. But, the scale of public spending and initiative that the government has taken in recent weeks has, in one fell swoop, totally destroyed the strangle-hold of neoliberal explanations which have incessantly informed us that large public spending initiatives, nationalizations and economic 'intervention' are the opposite of sound economic policy. This is not some business-as-usual event in government policy, this is a profound vote of no-confidence by the powers that be on the question of neoliberalism as the answer to everything. What these events have brought to the light of day is the obvious fact that our society has surpluses large enough to provide massive sums of money at the drop of the hat... money that could've been mobilized long ago in the way of erecting important public institutions like national health insurance, fully-funded education K-university, etc.

One thing is clear, however. Although the Democrats at least have a legacy of modest reformism, and are demonstrably less rigid (and less militant) in their adherence to bare-knuckles neoliberalism, 'progressives' would make a serious mistake if they merely assume that the Party 'will do the right thing'. Contrary to what most modern-day left-liberals usually assume, the Democratic Party didn't occupy its historically reformist role wholly of its own accord. The New Deal was an ideological mish-mash of pragmatism meant to deal with a serious crisis facing the capitalist system. The landmark pro-labor legislation of that era (the Wagner Act, minimum wage, social security) were the result of hard-fought battles by labor, the result of militancy and large-scale strikes and radical organization. The Democratic Party co-opted part of this movement, furnished it with unprecedented (by US standards) political access and compromises, and in return got loyal political foot soldiers for two generations. But let us not forget that so much of the 'progressive gains' of the 30s and 40s were won as the result of extra-electoral struggle combined with an economic/political conjuncture in which ruling orthodoxies were crumbling.

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