Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Obama's Junk Economics (Michael Hudson)From Counterpunch:Obama's Junk Economics Democrats Say "Bye" to Populist Option In a dress rehearsal for this November’s mid-term election, Democrats and Republicans vied last week for who could denounce the banks and blame the other party the most for the giveaways to Wall Street that have swollen the public debt since September 2008, pushing the federal budget into deficit and the economy into a slump. The Republicans are winning the populist war. On the weekend before his State of the Union address on Wednesday, Obama strong-armed Democratic senators to re-appoint Ben Bernanke as Federal Reserve Chairman. His Wednesday speech did not mention this act (happily applauded by Wall Street). The President sought to defuse voter opposition by acknowledging that nobody likes the banks. But he claimed that unemployment would be much higher if they hadn’t been bailed out. So the giveaway of public funds was all for the workers. The $13 trillion that has created a new power elite was just an incidental byproduct. Unpleasant, perhaps, as American democracy slips into oligarchy. But the least bad option. People might not like it, but Main Street simply cannot prosper without creating hundreds of Wall Street billionaires—without enabling them to increase their bonuses and capital gains as bank stock prices quadruple. It’s all to get credit flowing again (at 30 percent for credit card users, to be sure.) So the rest of us must wait for wealth to trickle down. The cover story is that, like it or not, this is how the world works. At least this is the argument of the lobbyists who are drafting and censoring laws and signing off on just who is acceptable to run the Federal Reserve, Treasury and other public-subsidy agencies. The working assumption is that the economy cannot recover without enriching Wall Street. In fact what the economy needs is to recover from the Bush-Obama supposed cure, i.e., from the mushrooming debt overhead. It needs to recover from the enrichment of Wall Street. It doesn’t need more credit, but a write-down for the unpayably high debts that the banks have imposed on American families, businesses, states and localities, real estate, and the federal government itself. Instead of helping debtors, Obama has moved to heal the creditors, at public expense. If debtors cannot pay, the Treasury and Fed will take their IOUs and bad casino gambles onto the public sector’s balance sheet. The financial winners must come first—and it seems second and third, too. The rationale is that unless the government gives the large financial institutions what they want and saves them from taking a loss, their “incentive” to protect the economy from devastation will be gone. Read the rest of the article. Labels: bailout, Barack Obama, Counterpunch, debtors, Michael Hudson, populism Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Populist MomentThis is the first in a series of blog posts by former D&S collective member Thad Williamson, who is teaching a course on social movements at the University of Richmond, where he teaches at the Jepson School of Leadership Studies. His first post, on Laurence Goodwyn's classic The Populist Moment, which is well worth reading if you haven't already. —CSOver thirty years after its publication, Lawrence Goodwyn's The Populist Moment remains not only gripping history but a powerful statement about the meaning of democracy. The story Goodwyn tells is by equal measures uplifting (as we consider the audacity of what the Populists tried to achieve) and dis-spiriting (as we consider the comparative narrowness of our conventional discussions about reform). The continuing relevance of the book however lies not primarily in our emotional reactions to Goodwyn's account, but in what we can learn from it about what a serious movement to challenge the fundamental structure of the American political economy would need to entail. Goodwyn—an emeritus professor of history at Duke University—issued The Populist Moment in 1978 as an abridged version (merely 349 pages) of his study Democratic Promise: The Populist Movement in America, which originally appeared in 1976 with a length of 718 pages. The shorter edition consists of nine chapters culled from the full-length book, shorn of footnotes, photographs, and appendices. Even in reduced form, however, the abridged version effectively presents an epic story about the efforts of "plain people" to overcome enormous cultural and political obstacles and create a political economy that worked in their interests. The Populist movement set out to abolish the structural arrangements reproducing and exacerbating rural poverty in the United States. The most promising of these features consisted of the "crop lien" system whereby cashless farmers (whether or not they owned land) found themselves continually indebted to local merchants and other lenders. Without cash on hand to obtain goods, goods were borrowed at marked-up prices for merchants, who collected in the form of crops at harvest time. Typically, poor farmers ended up still in debt to "the man" at the end of this annual ritual. This situation amounted to a system of de facto serfdom. Exacerbating the difficulty was the national currency policy pursued after the Civil War, which saw the gradual contraction of the effective money supply and a return to the gold standard in 1879. The scarcity of currency helped creditors while damaging debtors, in two ways: as money got more valuable, the real value of loans owed increased over time; and the high value of money in turn meant that agricultural prices would trend downward over time. Farmers in debt were thus compelled to pay back loans worth more than the initial dollar amount, and to do so through the sale of crops that got steadily lower prices over time. In addition, farmers faced a variety of shipping fees and related costs imposed by railroad monopolies and grain elevator companies, making it essentially impossible for farmers to do more than (at best) tread water. Creating a social movement to respond to this reality required accomplishing the seemingly impossible: undertaking a radical, independent economic analysis of American capitalism and then articulating that analysis and organizing for it in a language with cultural resonance with farmers. Simply organizing voters or electing better politicians would not do the trick, as the dominant parties (Democrats and Republicans) competed on the basis of sectional loyalties, not class politics, and were dominated by vested economic interests. Indeed, once the Populist movement moved into its explicitly political phase, it would need to convince farmers and allies to make a decisive break with the reigning politics of the post-Civil War period. But before the Populists could begin contemplating challenging the two-party system, much preliminary work needed to be accomplished: a movement culture needed to be established. The essence of the movement culture was the assertion of political and intellectual independence—what Goodwyn terms "self-respect"—from the predominant political culture that rationalized continued hierarchy. In contrast, the Populists began to create an indigenous egalitarian ethos, premised on the idea that (as Goodwyn puts it) by acting together, farmers (and allies) could enhance individual freedom and self-respect. This "self-respect" was actualized through both the act of political organizing itself and the vast mass meetings of the Farmers' Alliance beginning the late 1880s, through the self-education campaigns undertaken by thousands of lecturers in county after county, and through the establishment of a variety of cooperative enterprises, most notably the very ambitious Texas Exchange. The hope of the cooperative strategy was that by combining economic forces, farmers could collectively get around the restrictions of the crop lien system, by selling their crops at more favorable prices and by acquiring goods and supplies on a cheaper basis. The fatal problem this strategy encountered was lack of credit. Farmers were simply too cash-starved to provide the capital the Texas Exchange required to work as intended, and the Exchange was not able to get credit from private banks, who were hostile to the cooperative's aims. Charles Macune, the Texas populist who had championed the Exchange idea, responded to this difficulty not by giving up but by hatching the signature idea of the Populist Movement: the Sub-Treasury Plan. The aim of the sub-treasury plan was to use the power of the federal government to help farmers escape the crop lien system and to infuse the economy as a whole with a dramatic increase in currency. Under the plan, the government would establish warehouses in agricultural counties to store farmers' crops (for a variety of specified commodities). When depositing their crops, farmers would be issued paper money equivalent to 80% of the cash price of their crops, repayable within one year at a 1% interest rate. This system would free farmers from the need to pay for goods from local merchants in kind (by giving them cash) and also free them from the imperative to sell their crops at unfavorable prices (the storage system would allow them to wait until prices were relatively high rather than at the lower prices associated with harvest time). The sub-treasury plan also would have allowed farmers to obtain low-interest cash borrowed against the value of their land (if they owned it). This plan, along with associated demands culminating in the "Omaha Platform" of 1892, provided Populism with a substantive agenda, rooted in an independent analysis of the economy from the standpoint of poor farmers. Translating the plan into a politically viable demand first required that Populists draw on and expand their networks of communication and education, including the lecturers and (increasingly significant) the emergence of thousands of reform periodicals nationwide. But it also required confronting America's broken political system and challenging the limits of the two-party system. Ironically, Macune himself hesitated at this last step, the formation of the Populist Party, and found himself displaced by politically bolder leaders. What followed next was a high-water mark of political success for the movement—election of numerous Populist politicians to state and national office from a variety of states in 1892 and 1894, and the near destruction of the Democratic Party as a viable institution nationwide. In many southern states, Democrats held on to power only by literally stealing elections. In North Carolina, a Populst-Republican coalition actually gained control of the state legislature in 1894. For a brief moment, the Solid South appeared to be in serious jeopardy. But in Goodwyn's account, the Populist movement had a fatal flaw—namely, that its new political party was not sufficiently democratic in organization and left too much power in the hands of its leadership. After 1894, party chairman H.E. Taubeneck, an Illinois politician who had become chairman despite not being involved with the original wave of Populist organizing, steered the party away from the Omaha platform and towards the embrace of "free silver" as the singular demand of Populists. In Goodwyn's account, Taubeneck was one of a number of politicians—encouraged amply by silver mining interests-- who saw a tactical advantage in getting themselves elected through the "free silver" cause—and were willing to abandon the long-term goals of restructuring the political economy to achieve this. This move was angrily opposed by the reform press, but the "fusionists" used their organizational advantages (and no small measure of deceit) to maneuver the Party into endorsing Nebraska Democrat William Jennings Bryan for President in 1896 on a "free silver" platform, effectively ending Populism as an independent political force. Goodwyn argues that in terms of confronting the fundamental nature of the political economy, Populism was the most significant social movement in American history, and that subsequently the horizons of reform have narrowed dramatically. Socialists have remained politically marginal in America, while liberalism confines itself to reforms that do not fundamentally challenge who has economic power, the distribution of wealth, or the corporate state. Very few Americans understand the financial system we live our lives under or the manner in which the Federal Reserve System codifies the control of money by banking interests. One political result of this situation is that the financial industry can cause the American and world economy nearly to fall into a cataclysm, receive a bailout of a magnitude far beyond that dreamed by the most ambitious proponent of new liberal social programs, all without any fundamental effort or even discussion about re-structuring the financial industry or the financial system, carried out under the imprimatur of a president widely regarded as the most liberal in one if not two generations. Those convinced that there is something fundamentally wrong about a political-economic system in which the top 1% hold over one-third of the wealth, and in which for over thirty years living standards and poverty rates have stagnated at the same time total economic product has grown dramatically, have two choices. They can remain respectable and work within the narrow confines of socially acceptable political norms, one of which is that the fundamental premise of a corporate-dominated economy is not to be questioned. (To pass universal health care, it seems, we have to first placate the private insurers—or such is the apparent belief of the current administration.) The alternative path is far more difficult. It involves undertaking an independent economic analysis; setting a goal of changing the economy in its fundamentals; envisioning practical steps both short-term (the equivalent of forming a cooperative) and long-term (using the power of government to support such development) in support of such goals; joining with other Americans to engage in the self-education needed to refine, publicize, and advance this vision; and eventually forming an independent political capacity to act. Perhaps most fundamentally, this means setting the goal of creating a politics in which "the people" actively shape and create the agenda. This is an enormously ambitious goal, but refusing to even try represents both a constriction of democratic vision and an acceptance that one will be pursuing politics on terms set by the corporate state and its institutionalized backers—forever. Twenty-first century populism, if it ever emerges, will no doubt entail cultural formations quite different from those that animated the late nineteenth century version. But as Goodwyn's account helps illustrate, both the bold assertion of collective self-respect and a boldness of economic analysis and vision must be the central ingredients of any serious movement to reclaim democracy's deepest meaning (rule by the people). —Thad Williamson Labels: Lawrence Goodwyn, populism, Thad Williamson, The Populist Moment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Virtues of Public Anger, and Need for More Great piece by Glenn Greenwald at Salon.com; hat-tip to Ben C. Ben wrote me: "This article is pretty damn good. I predict that your proposed new title for D&S, 'Jump You Fuckers,' will be conventional wisdom by Sept/Oct." The virtues of public anger and the need for more Glenn Greenwald | Salon | Saturday March 21, 2009 09:08 EDT With lightning speed and lockstep unanimity, opinion-making elites jointly embraced and are now delivering the same message about the public rage triggered this week by the AIG bonus scandal: This scandal is insignificant. It's just a distraction. And, most important of all, public anger is unhelpful and must be contained or, failing that, ignored. This anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing. It makes perfect sense that those who are satisfied with the prevailing order -- because it rewards them in numerous ways -- are desperate to pacify public fury. Thus we find unanimous decrees that public calm (i.e., quiet) be restored. It's a universal dynamic that elites want to keep the masses in a state of silent, disengaged submission, all the better if the masses stay convinced that the elites have their best interests at heart and their welfare is therefore advanced by allowing elites -- the Experts -- to work in peace on our pressing problems, undisrupted and "undistracted" by the need to placate primitive public sentiments. While that framework is arguably reasonable where the establishment class is competent, honest, and restrained, what we have had -- and have -- is exactly the opposite: a political class and financial elite that is rotted to the core and running amok. We've had far too little public rage given the magnitude of this rot, not an excess of rage. What has been missing more than anything else is this: fear on the part of the political and financial class of the public which they have been systematically defrauding and destroying. * * * * * These endless lectures from sober, rational pundits about the relative quantitative insignificance of the AIG bonuses are condescending straw men. Nobody thinks that $165 million in bonuses for the people who destroyed AIG is what has caused the financial crisis. Nobody thinks that recouping those bonuses or having prevented them in the first place would solve or even mitigate systemic collapse. The amounts are miniscule in the context of the broader economic issues. Everyone is aware of that; nobody needs to have that pointed out. As Armando astutely observed, the attempt now to dismiss the anger over the AIG bonuses as the by-product of simple-minded ignorance and/or ideological rigidity (class warfare! crass populism!) is quite similar to how anti-war arguments were stigmatized before the attack on Iraq : ignore the screeching pacifists and let the sober Experts make the decisions, for they know best. The AIG scandal is significant and has resonated so powerfully because it is a microscope that enables the public to see what and who has wreaked the destruction that threatens their security and future and, most important of all, to realize that these practices haven't ended and the perpetrators haven't been punished. The opposite is true: those who caused the crisis continue to exert control over what happens and continue to have huge amounts of public money transferred in order to enrich them. Eliot Spitzer is absolutely right that, even at AIG, there are far larger scandals than the bonuses, such as the undiscounted compensation of AIG's counter-parties such as Goldman Sachs (and just by the way: it is indescribably symbolic that Spitzer has been punished and disgraced for his acts of consensual adult sex while the targets of his prescient Wall St. investigations, who basically destroyed the world economy, remain protected and empowered). But the bonus scandal is illustrative of why the crisis happened, who caused it to happen, and the ongoing political dominance of the perpetrators. It is, as Robert Reich put it, "a nightmarish metaphor for the Obama Administration's problems administering the bailout of Wall Street." The financial crisis has merely unmasked the corruption and rot in our establishment institutions that are staggering in magnitude and reach. Just as the Iraq War was not the by-product of wrongdoing by a few stray bad political and media actors but instead was reflective of our broken institutions generally, the financial crisis is a fundamental indictment on the way the country functions and of its ruling class. What would be unhealthy is if there weren't substantial amounts of public rage in the face of these revelations. Read the rest of the article. Labels: AIG, anger, bailout, financial crisis, Glenn Greenwald, populism, ruling class, Timothy Geithner, Wall Street, Wall Street bonuses Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
