The Bailout Negotiation Breakdown

by Dollars and Sense

This posting is from D&S collective member and frequent blogger Larry Peterson. To see more of his posts, click here.

Beyond the Elite Reality Principle?

The failure of Congress to pass the Treasury’s plan to bail out the shadow banking system may portend nothing less than a fundamental shift in the American—even global—economic development, akin to that which ushered in the deregulatory, neoliberal regime after the crisis of corporate profitability and labor/social unrest of the ‘seventies. Combined with apparently considerable opposition from constituents throughout the country, lawmakers’ resistance (even discounting both grandstanding, election year politicking, and the tendency, in times of crisis, to take refuge in wacky ideologies—like Republicans who complain about the United States becoming socialist, etc.) indicates that a central force that held both Democratic and Republican coalitions together for over a generation, namely, wildly pro-business, and especially financial sector, policies that massively enrich increasingly globalized elites, largely by setting constituencies of working people worldwide against each other, and arbitraging the difference, is no longer sustainable.

That conservative lawmakers/politicians, even for purely political reasons (John McCain perhaps being the best case in point) have rejected this bill, which was seen as being almost certain to pass only yesterday afternoon, shows this clearly: and our foreign creditors will just have to get used to the fact that, at least temporarily, and surely intermittently in future, even if/when a new bill is passed, the old consensus is a thing of the past. Today should be quite a wild ride on the New York and Chicago markets (foreign markets fell on the news of the breakdown), and this morning’s revelation that Washington Mutual has finally gone down in the largest bank seizure in American history, will only increase the agony. And, lest we forget, a batch of negative economic indicators were released yesterday: the overhang of unsold houses back about its highest levels for the year, durable goods crashing after the export boom of the last few months, initial claims for unemployment rising. The fact that is, despite all this turmoil, and despite the understanding amongst those of elite opinion that this crisis demanded a drastic cure that would be “better than the alternative,” ordinary people—and their representatives, long infinitely more responsive to lobbyists, often from the financial industry, and all too often to foreign ones at that—than their constituents, are just not going to accept this “responsible” bill as it stands now. Even the extraordinary silly spectacle of Secretary Paulson kneeling in front of Speaker Pelosi, and all the shouting in the White House behind closed doors won’t change that.

But there is a huge danger. The thing that has ultimately held the world financial order together through thick and thin for the last generation is the unrelenting willingness (some would call it stupidity) of the American taxpayer to fork out money. This has held despite the fact that ordinary workers have had to pay for more and more, despite stagnant incomes and falling (especially state-provided) benefits, as tax rates for the wealthy and corporations have both declined, and been diverted by hugely increasing incidences and opportunities for (not to mention highly profitable, for legal and financial “wealth managers”) dodges to tax shelters throughout the world. And it has held in spite of the fact that the money has been spent on phony wars, tax cuts for the already wealthy that do nothing to provide—and may even hinder—new jobs or rising incomes, as the latter’s ideologues claimed for so long, or was increasingly used for obviously politicized activities or dissipated in a kind of conspicuous corruption that would have engaged the great Veblen himself. Foreigners have come to see this as a kind of galvanic response on the part of Americans: perhaps until now. Are we ready to hold to our rejection of the elite reality principle, and attempt, under extraordinarily difficult conditions, to create, or at least articulate, a true alternative to the health-indicator-destroying, pollution-spewing, warmongering, mind-numbing regimen most of us seem to have finally acknowledged having serious reservations about now?

I wonder; and that’s why I’m signing this post. Perhaps unlike some of my comrades at Dollars & Sense, I fear that the effects of turmoil in global markets will cause the majority of even those who stood up to the bailout package and forced legislators to bend to our will at last to falter; and that eventually, either lack of political will or desperation will allow for a temporary (and it’s not sustainable, but whether or not we can take advantage of the creation of the political void to insert something better I very much doubt) resuscitation of the elite consensus, and the passage of a new, perhaps even worse package. If so, it will be a huge irony: the quest for the unrealistic maintenance of a lifestyle characterized by our addiction to cheap imports, and fueled by the debt that was profitably foisted on us by the financial industry, will trump a political will for meaningful change (please don’t confuse this with Obama’s pitiful slogan) that hasn’t found similar expression, even, in my opinion, after September 11th, for over a generation. Looking at the faces of people around me, unconcerned and bored, worries me. But then again, the bailout package failed. Aux armes, comrades!

—Larry Peterson

Labels: bailout, Henry Paulson, john mccain, Larry Peterson, Treasury Department

 

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9/26/2008 10:40:00 AM