Obama and Rescuing Capitalism
By
Carl Bloice
BlackCommentator.com Editorial Board
March 5, 2009
Black Commentator.com
Back
in December, when it was obvious that the economy was in bad shape
and before we knew how precarious it could get, Fareed Zakaria,
editor of Newsweek International and columnist for Newsweek and
the Washington Post, wrote, 'For Obama to be remembered as a great
president, he has to do nothing less than rescue capitalism.' When
I first read those words my first thought was: that's a lot of weight
to put on a brother. I suppose Zakaria has had second thoughts about
this as it is becoming increasingly obvious that in either the medium
or the long term, it will take a lot more than the President to
rescue the system. Set aside for the moment the question of the
possibility or even desirability of saving capitalism; right now,
most people are entrusting the President to do something about the
present catastrophe.
The fact is, capitalism is bankrupt. It's run out of capital. 'I
think we just have to admit we're broke,' says House Minority Leader
John A. Boehner. A system that is supposed to be self-perpetuating
- albeit with ups and downs - has come up short. It's not that the
banks are just stubborn about lending out money. It will soon become
clear that many of their vaults are stuffed with near worthless
paper. And so to keep going, the system must turn to the public.
Funds
collected through taxation to 'protect the general welfare' of the
country are being siphoned off into the tanks of banks, financial
speculation operations and insurance companies. The government is
propping them up by buying up their assets. Regrettably, the Feds
are not acquiring much control over how the injected funds are used.
But
it's not just the banks that have run out of capital. The bigger
crisis is in the core of the 'real economy.' 'The destructive global
power of the financial crisis became clear last year,' The Economist
said in an editorial last month. 'The immensity of the manufacturing
crisis is still sinking in, largely because it is seen in national
terms - indeed, often nationalistic ones. In fact manufacturing
is also
caught up in a global whirlwind. Having bailed out the financial
system, governments are now being called on to save industry, too.
Next to scheming bankers, factory workers look positively deserving.
Manufacturing is still a big employer and it tends to be a very
visible one, concentrated in places like Detroit, Stuttgart and
Guangzhou. The failure of a famous manufacturer like General Motors
(GM) would be a severe blow to people's faith in their own prospects
when a lack of confidence is already dragging down the economy.
So surely it is right to give industry special support?'
The
magazine went on to argue against bailing out individual sectors
or industries. But that doesn't mean it won't happen. Although some
influential voices in the world of capital are for allowing the
auto industry to go quickly into bankruptcy, the likelihood is that
more public funds will start pouring in to prop up GM, Chrysler
and Ford just as Japan, Canada, Germany, Italy and France pour public
funds into the coffers of their local car and truck manufactories.
And as things stand now there is no reason to believe the assistance
will be limited to a single industry. Here too the government will
be buying up assets and doling out guaranteed loans. Here too, the
Feds are unlikely to demand much control over how the injected funds
are used.
Last
Sunday, in a CNN discussion with the Canadian Prime Minister, Zakaria
opined, 'We don't have to reinvent capitalism.' Perhaps not. But
clearly there is going to have to be some reconfiguration. Without
some structural changes in the way the system operates worldwide,
things could easily go from the current bad to worse.
'It
would be fairly easy to dismiss the gleeful boast by President Nicolas
Sarkozy of France that American-style capitalism is over, to file
it with French critiques of fast food and American pop culture,
the New York Times said editorially back in October, before the
election. 'Except that the United States government now owns stakes
in the nation's biggest banks. It controls one of the biggest
insurance companies in the world. It guarantees more than half the
mortgages in the country. Finance - the lifeblood of capitalism
- has to a substantial degree been taken over by the state. Yet
much more will be needed than just putting the
bridle back on American banks,' said the paper.
'The
question is what new direction capitalism should take,' said the
Times. 'In a globally interconnected world, the United States cannot
simply march back to the gray flannel capitalism of the 1950s and
1960s when regulations were tough and coddled monopolies dominated
the corporate world. Still, the next president will have a chance,
not to be missed, to re-evaluate some tenets of the freewheeling,
deregulated version of a market economy that has dominated America
since
the Reagan administration.'
'The
next government must re-establish some notion of equity of opportunity,'
said the Times. 'Investment is desperately needed in health care,
education, infrastructure. The social contract and the government's
role in it should be examined anew. Addressing these challenges
will be an enormous task -
especially amid the bitter recession that most economists expect
over the next year or so. But they must be faced. Fixing finance
is merely the start.'
If that
is indeed the case, imagine where we would be if Obama had lost
the election. Can you imagine John McCain even admitted the existence
of a 'social contract'? And keep that in mind next time you hear
mention of Governor Bobby Jindel.
A few
weeks ago I made the suggestion here that the government simply
acquire the sinking auto companies, run them and reorient them toward
'green' production of high speed rail cars, wind turbines and implements
needed for the
massive infrastructure projects now contemplated. I used the dreaded
'n' word (nationalization) and drew some negative responses. Some
argued for new public-private enterprises with partial worker ownership
and voting power. Sounds good to me as long as public funds are
used for public good and the objective is socially useful and ecologically
sound production.
There
are a lot of useful things that we can begin now that would not
require funneling taxpayer money through the near-comatose banking
system and would stave off ghastly rising unemployment. The government
could simply set up shop and start building things we need and providing
needed services. As with the eventual nationalization of the banks
- now an almost a foregone conclusion - the people in Washington
could pledge to return the new facility assets to private
enterprise as soon as they become going concerns. That way they
could avoid being tagged with the 's' word (socialism) which some
people consider a bad thing. Of course, along the way we just might
decide democratically that an only-
marginally profitable enterprise serving a public need well might
just as well stay in public hands.
While
not all would agree with assigning Obama the responsibility for
saving capitalism, few observers shrink from asserting that what
his administration is able to accomplish amid this crisis will affect
the entire world. Neanderthal Russ Limbaugh and the screaming meanies
might hope Obama fails, but most of the rest of the planet seems
to be praying he does not.
'Pity
President Barack Obama,' wrote Martin Wolf, associate editor and
chief economics commentator at the Financial Times as the year began.
'He won power partly because of the global economic crisis. He himself,
most of his fellow citizens and much of the rest of the world agree
that the US broke the world economy and now has the duty to fix
it. Unhappily, this consensus is false. The crisis is a product
of the global economy. It cannot be cured by the US alone.'
'Happily, Mr. Obama has the authority needed to lead the world towards
a resolution: his hands are clean, and his lack of desire to exculpate
his country is evident,' Wolf continued. 'It is also in the interest
of his country and the world that the world economy be put on a
sounder footing. Should this effort fail, I fear a resurgence of
protectionism will be the outcome.'
'Now
think what will happen if, after two or more years of monstrous
fiscal deficits, the US is still mired in unemployment and slow
growth,' Wolf continued. 'People will ask why the country is exporting
so much of its demand to sustain jobs abroad. They will want their
demand back. The last time this sort of thing happened - in the
1930s – the outcome was a devastating round of beggar-my-neighbor
devaluations, plus protectionism. Can we be confident we can avoid
such dangers? On the contrary, the danger is extreme. Once the integration
of the world economy starts to reverse and unemployment soars, the
demons of our past - above all, nationalism - will return. Achievements
of decades may collapse almost overnight.
Welcome
to 2009. This is a year in which the fate of the world economy will
be determined, maybe for generations. Some entertain hopes that
we can restore the globally unbalanced economic growth of the middle
years of this decade. They are wrong. Our choice is only over what
will replace it. It is between a better balanced world economy and
disintegration. That choice cannot be postponed. It must be made
this year.'
When
people in the business and financial media rue the possibility of
'protectionism' - which they do with increased frequency and shrillness
these days - they mean something quite specific.
'Let
us be clear about what is at stake,' writes Wolf. 'It is essential
to clean up the huge current mess. But it is also evident that an
open world economy will be unsustainable if it remains dependent
on bubbles. Collapse of globalization is
now no small risk.'
Well,
there's globalization and then there's globalization. The transnational
capitalists may want to keep it going but much of the planet recognizes
that the neo-liberal policies global capitalism has fostered have
resulted to gross
inequities and are partly responsible for the current crisis.
There
are many indications that the world economic situation is a lot
worse than we're being told. It's probably enough to note that billionaire
Warren Buffett says the U.S. economy is in 'shambles' and will remain
so for a least the rest of this
year. 'The crisis today is spreading even faster (than the Great
Depression) and affects more countries at the same time,' Pascal
Lamy, the head of the World Trade Organization (WTO) said recently.
The
current situation is what German Chancellor Angela Merkel calls
terms an 'extraordinary international crisis.' As the Financial
Times put it last week, 'All of Europe is heading towards its worst
economic crisis since the 1930s.' On Sunday
The Independent (UK) said editorially, 'Collapsing global demand
has hammered the exports of the emerging economies of Central and
Eastern Europe. Investors are frantically pulling out their money,
pushing down the value of national
currencies. Almost all of these former darlings of global capitalism
are likely to see their economies contract sharply in 2009. The
quicker you rise the harder you can fall, and these former Soviet
satellites are falling hard indeed. Unemployment is rising and borrowers
are being cruelly squeezed.' The Japanese economy is in a tailspin.
Industrial collapse is driving millions of Chinese workers back
into rural poverty.
One
government change is worth noticing, The Central Intelligence Agency
now gives the President daily briefing on the world economic situation
and its implications for international security.
British
Prime Minister Gordon Brown is in Washington this week where he
says he and President Obama will discuss 'a global new deal' the
impact of which 'can stretch from the villages of Africa to reforming
the financial institutions of London and New York - and giving security
to the hard-working families in every country.'
'I see
this global new deal as an agreement that every continent injects
resources into its economy,' says Brown. 'I believe that central
to this new investment is that every country backs a green recovery
for the future, that every country that wishes to participate in
the international financial system agrees common principles for
financial regulation, coordinated internationally, and changes to
their own banking system that will bring us shared prosperity once
again. And that, together, we must agree to reform the mandate and
governance of global institutions to recognize the changing shape
of the world economy and the emergence of new players.'
That's a tall order. Assuming it's possible, it won't be accomplished
by the 'special relationship' between Washington and London. It
will require the collaboration of the nations of the European Union
(the governments of which Brown is at frequent loggerheads) and
the Chinese, the Russians, and the
Brazilians, and the South Africans and others. The problem is that
capitalism as it currently operates is an impediment to such international
cooperation - just as it is to dealing with climate change, AIDs,
and world hunger.
'Mr. Obama is present at the re-creation of the global economic
system.' writes Wolf of the Financial Times. 'It is a challenge
he has to take up,' Like I said, that's a lot of weight.
[BlackCommentator.com
Editorial Board member Carl Bloice is a writer in San Francisco,
a member of the National Coordinating Committee of the Committees
of Correspondence for Democracy and Socialism and formerly worked
for a healthcare union.]
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