A time of transition to a new presidency is always a period of reflection on our national future and a time to consider the sources of the problems that come from our past. The “yes we can” slogan of the Obama campaign and the enthusiasm for a history that supposedly will begin as soon as he takes the oath of office is as ritualistic and predictable as our New Year’s resolutions to begin our lives anew. The notorious inability for people to follow through on those resolutions is symptomatic, I think, of a flaw in our thinking about making better lives for ourselves, individually or collectively. That is, we focus on the symptoms of our present malaise: I ignore my friends and family too often, I spend too much money, smoke or drink too much, I’m too fat, too thin, too subject to illnesses, etc. etc. What to do about it? Obviously, make resolutions to eat, smoke or drink less, spend more quality time with friends and family, tear up the credit cards and put myself on a budget…you know the drill. And you know the futility as well of these dealings with a problem by a willful attack on the symptoms thereof. We hardly ever focus on why we have these problems, we only think incorrectly that we can deal directly with the symptoms.
So it is with our dealing with our collective problems, and so it appears to be the case that the “new” administration that is inaugurated in Washington in January 2009 will come with little more than an attempt once again to deal with the same problems in the same futile ways. In this and some following installments of this essay, I want to deal with a number of the problems which the “new” government will inherit from the “old” one:
I begin with the current financial meltdown: Lenders have made loans, especially in the housing market but also in the credit card industry and elsewhere, that borrowers cannot repay; and defaulting debtors mean failing lending agencies and a cascade of collapse of supporting businesses like the insurance agencies that guarantee those loans. What to do, what to do? There are only two ideas that seem to occur with any regularity to the financial experts (like those from the Clinton administration) whose fiscal policies helped create the crisis and who are now set to become the financial “fixers” of the Obama administration. The first of course is the bailout transfer of funds to banks, insurance companies and “failing” industries like the Big Three automotive makers: “emergency” measures that, we are told (and both the Congress and the leadership of both parties bought it) must be undertaken lest the whole credit system collapse. Of course no sooner had the $700 billion bailout to purchase “bad assets” of investment companies been shown to be futile, partly because these “bailee” firms tended to pocket these proceeds as a hedge against their own corporate insolvency, than Treasury Secretary Paulson had to admit “this isn’t working,” so let’s try buying directly into the ownership of some of these companies. This too hasn’t worked (yet).
So let’s go to an alternative approach that was almost the first impulse and is still prominent in the thinking of our financial gurus and, frankly, also more appealing to me as a reasonable solution. Here the diagnosis does go back a bit in history, at least to the
Reagan and Clinton administrations’ projects of “de-regulation” of the actions of investment firms. Both Obama and McCain jumped on the “need for regulation of Wall Street” bandwagon, and Congress chimed in and, between Monday and Friday of the same week, added to the bill that failed on Monday a number of “regulations” of how the bailout money was to be spent and accounted for, so that essentially the same bill could pass on Friday. Because of popular resentment against CEO’s of financially stressed companies getting multi-million dollar salaries as they drove their companies into bankruptcy and golden parachutes for them as they jumped as rats from the sinking ship (to mix some metaphors), sweeteners to the bailout deal made its passage possible in the House (along with a stock market swoon between Monday and Friday) as the proposal became slightly more palatable to a generally-disgusted public. Beyond these cosmetic reforms, little was done actually to introduce elements of everyday regulation of investment firms’ policies when they make loans; one type of regulatory solution that does make sense to me.
After all is said and done about “infusing money” into the credit system or “regulating” the way these companies do business, they fail really to go to the root of the economic crisis in the U.S. and the world. As the neo-liberal icons of the Clinton administration prepare to be re-cycled into the Obama one, it is little wonder that there is no real sense of urgency or even sincerity about tracing the source of this crisis into the effects of the corporate globalization of the world economy. One sees this indifference to such analysis when Obama chooses as his Secretary of Commerce New Mexico’s Bill Richardson, and hardly a word is said in the media about Richardson’s crucial role in the congressional enactment of NAFTA. When Obama was competing with Clinton in blue collar states like Ohio and Pennsylvania, he came across as a severe critic of NAFTA’s effects on American worker’s jobs and wages, leaving it to an aide (Austin Goolsbee, slated for an advisory role in his administration) to reassure Canadian officials that Obama was not serious about this opposition, that it was simply a matter of “campaign rhetoric.” The choice of pro-NAFTA Richardson to the Commerce post seems to verify Goolsbee’s reassurance about Obama’s real views.
The connection of the corporate globalization to the world financial crisis can be seen if I glance up from my computer at the Doctors Without Borders map that sits above it. The “shock doctrine” of “Chicago school” (Milton Friedman et al) policy makers have used such international financial institutions as the World Bank and the International Monetary Fund to force countries on every continent of the world into “structural adjustments” as a condition of the loans without which these countries could not survive in the globalized world economic order. Privatization of nearly all formerly public institutions and a “starved beast” of governments with fastly reduced social services and safety nets for the poor are hallmarks of these adjustments. And the results are there to see: from South Africa to India to Russia to…the United States. In these and most other world countries the gap in the income levels and life styles between the corporate elite with its immensely profitable operations and that of the mass of ordinary people has grown to a yawning chasm of inequality. The globalized world economy has gotten to the point of “dilemma” noted by Henry Ford when he observed that, if his workers had no money to buy his cars, he could not sell them, and took the revolutionary step of providing a wage for his workers at an unheard-of level: a far cry from the situation today in which Ford along with the other two largest U.S. auto makers, will almost certainly have to make a “structural adjustment” of reducing its labor costs as a condition of getting bail-out funds from Chicago school economists who have dominated Bush’s administration and (perhaps even more so) will dominate that of Obama.
If not bailouts (at all) or regulation (as a total panacea), then what? Well, root causes again. The steps that need to be taken now for economic “recovery” need to be those which address the inequalities of income associated with globalization and its discontents. Worker unionization should be encouraged by the Employee Choice Act and maybe another right to organize protection bill that does not put so much power in the hands of the oligarchy of union leaders. Living wage enactments? Of course. Investments in infrastructure, improved education, affordable (single payer) health care? Check. A progressive tax structure that increases disposable income for those of lower income as taxes falls more on the wealthy who can afford them, even if they have to give up their fourth home or their third yacht? Yes. These are all “Democratic platform” type promises that have been given precious little support from the Chicago school type economists who dominated the Clinton and seem set to dominate the Obama administration. A few people are saying things like: “well maybe Larry Summers (chief White House economic adviser) is not as bad as he was as Clinton’s Secretary of the Treasury,” he has mellowed and begun talking more like a New Deal Democrat than a Reagan one. Let us hope and let us hope and let us hope; Obama gives us little more to do—except to raise some objections—as the nature of his economic “team” emerges day by day.
Jerry D. Rose – Editor, The Sun State Activist
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