Adapted from a presentation to the Detroit Workers' Voice Discussion Group
on April 19, 2009.
(CV #43, June 2009)
The return of Herbert Hooverism
The Wall Street bailouts -- trying to reinflate the bubble economy
The search for market solutions
The tax rebate
Relief for the unemployed and those losing their homes
How it differs from socialism
. The present depression is not only another result of the capitalist boom-bust cycle, but it also represents the bankruptcy of market-fundamentalism or neo-liberalism. The decades of deregulation, privatization, unrestrained financial profit-taking, degradation of social programs, and ignoring of environmental concerns have taken their toll. Many establishment economists are worried that some of the policies of the past will have to be changed if the economic crisis is to be mitigated, just as changes occurred during the Great Depression of the 1930s. Meanwhile the working class is bearing the brunt of the crisis, as usual. Neo-liberalism will have to give way if there is to be any major relief for the misery being inflicted on the masses.
. The press promotes Obama's programs as a big change, and the Feb 16th issue of Newsweek famously declared that "We're all socialists now". Obama, however, is no socialist, but a man dedicated to making the market system work. His economic stimulus plan provides a tax rebate, a modest extension of unemployment benefits, and some infrastructure spending, and there will be increases in some other programs as well. But it is symbolic of his policy that he demands one cut after another from the auto workers, while allowing the financiers to continue to receive obscene multi-million dollar compensation. It is a policy that serves the interests of the Wall Street, while presenting itself as the defense of Main Street. If it provides a bit more money for the workers than the Bush budgets, it's because the crisis is deeper.
. Meanwhile the Republicans are hearkening back to Herbert Hooverism: it doesn't matter that there's a depression, just let the markets readjust themselves. For them, the crisis is just another opportunity to cut social programs and continue cutting taxes on the rich. They call Obama a socialist, for them a swear word, for making slight adjustments in the market system, and for the government deficits which they themselves promoted under the Bush administration as a way of forcing cuts in social programs.
. It's not the bourgeoisie that's going to deal seriously with the present economic and environmental problems. One part has its eyes zealously looking to the past, while the other part, talking of the future, only wants to tinker with neo-liberalism, to perfect it, to save it from its sins. The working class must put forward its own program, or else it will be squeezed both by unemployment and by the "rescue" measures of the bourgeoisie. It should not be satisfied with the idea that Obama is doing some things differently than Bush. The present crisis requires not just some more funding for this or that program, or the restoration of this or that regulation, but ending the reign of market fundamentalism. It needs, not a return to the old way the social program were run prior to neo-liberalism, but to vastly extend and improve them to deal with the growing mass impoverishment, and -- as far as it can and as long as it can -- to surround them with mass pressure to take account of people's needs.
. As for socialism, it is indeed an issue, but not the way Newsweek says. The working class can't
be satisfied with the view that regulations and big government budgets are socialism, but must
recall that the old mixed capitalism of the past was a system of capitalism exploitation and
domination that was subject to its own crises. Moreover, the old system would be unable to deal
with the challenges of the present such as the looming environmental crisis, the tremendous
growth of the financial sector, and the wretched state in which decades of privatization have left
government programs. Today the working class is faced with a fight for programs that really deal
with mass needs, and don't simply restore profits to banks and companies. But in the course of
this fight, the working class must organize itself and consider whether what is really needed is
the end of capitalist exploitation and the beginning of real socialism -- production controlled by
the working class, and carried out, not for profits, but to satisfy social needs.
The return of Herbert Hooverism
. Obama's program is presented as controversial and bold in the media, because a large section of the bourgeoisie doesn't think the present crisis is very serious. It sees the depression as a mere pause in the accumulation of greater and greater fortunes for the top bankers and CEOs, or even as a good time for restructuring, and it says everything will be fine so long as workers take pay cuts and businesses get more tax cuts. In other words, the conservatives want to continue what they were doing during the Bush years -- rain or shine, boom or bust: cut wages and benefits, cut social programs, and give more subsidies to businesses. This is the program of the Republican conservatives.
. Thus the Republicans answered Obama presentation of his stimulus program with a speech by Bobby Jindal, governor of Louisiana. He didn't think that anything needed to be done to help the increasing masses of unemployed, and he boasted that Louisiana would reject money to extend unemployment insurance benefits. Since then, other Republicans chimed in with their own ideas of things that just didn't belong in a stimulus bill, such as funds for schools, environmental monitoring, contraceptives and family planning, or anything else but tax cuts to businesses.
. This is the return of the heartless program of Herbert Hoover in the early years of the Great Depression that followed the stock market crash of 1929. While millions of people lost their jobs and homes and frantically sought their next meal or a place to sleep, Herbert Hoover believed that fiscal responsibility, voluntarism, and letting the poor starve would cure the crisis. The homeless derisively called their tent cities "Hoovervilles", as the capitalists washed their hands of any responsibility for those from whom they had exploited their profits.
. Hoover's basic approach to the depression was expressed succinctly by the multi-millionaire banker Andrew Mellon, who was Secretary of the Treasury for eleven years, including most of Hoover's presidency. Mellon, used to profiting from the misfortunes of others, coldly declared: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. . . . enterprising people will pick up the wrecks from less competent people." That is, Mellon wanted to let workers, farmers and others lose everything; he opposed any program for relief of the impoverished; and he also looked forward to the smaller financiers being eaten by the larger.
. Today, a number of conservative ideologues have revived the Mellon philosophy. It is
expressed, for example, by Amity Shlaes, whose articles and book, The Forgotten Man: A New
History of the Great Depression, promote the thesis that government interference, relief
programs, unionization, and high wages prolonged the depression of the 30s. For her, even
do-nothing Herbert Hoover interfered too much with business; this isn't just an historical point
for her, as she pontificates against government programs, unionization and high wages today.
Liquidate unions, liquidate wages and benefits, liquidate homes and families -- there's the real
essence of her program, and that of her hero Mellon. Ironically, while calling her book "The
forgotten man", the real heroes of the Depression -- the workers and activists who stood up to
both business and the capitalist parties -- don't appear in her book at all: she's too busy lamenting
over the injustices done by history to the memory of the people she thinks are the real forgotten
men, that is, bankers and businesspeople like Mellon.
The Wall Street bailouts -- trying to reinflate the bubble economy
. Obama, on the contrary, has a program of action for dealing with the crisis. He thus appears as more reasonable and hopeful than the conservatives, and his program is promoted by the media as a major change from the past. And yet, it is nothing but a plan to reinstate the bubble economy of the past. He is not attempting to go beyond neo-liberalism, but to rescue it. And his financial advisers are the major economists and financiers who pushed deregulation and Wall Street interests in the past, such as Secretary of the Treasury Timothy Geithner and Larry Summers, head of Obama's National Economic Council.
. The centerpiece of Obama's plan, the project which has absorbed the most money and to which everything else is mortgaged, is the bailout of the banks and Wall Street financiers. He began by backing Bush's $700 billion Wall Street bailout, and then added his own bailouts. By the end of March, the sum of subsidies and guarantees to the financiers reached close to $12. 8 trillion dollars, which is over four times the size of the 2008 federal budget and steadily reaching closer and closer to the size of the entire GDP for a year.
. Oh yes, Obama would add a few regulations, but no stronger than what existed for many of the earlier years of neo-liberalism. Indeed, some of the regulatory changes being made are what the banks themselves are demanding: they wanted and have achieved a revision of accounting standards to allow them to value their assets at higher than market value. This is not breaking with the old system, but gambling everything on reinflating it.
. But all the bailout has achieved so far is that Wall Street is being rescued from the crisis, while
unemployment and homelessness increase. Some banks and financiers are again reporting major
profits, and Wall Street flaunts its arrogance, demanding that its huge bonuses of the good years
continue into the bad. The Obama administration -- while loudly complaining to the press --
quietly accedes to Wall Street's demands.
The search for market solutions
. Obama's Wall Street bailouts have aroused some discontent, as people see the bankers rewarded
for having created a disastrous mass. But he has an image of searching for new beginnings on
issues like health, education, and the environment, and he has fought the Republicans on
providing some funds for people in trouble due to the crisis. Yet if we look more closely at what
he is proposing, it turns out that his programs stay within the limits of a search for market
The tax rebate
. Obama's economic stimulus programs boasts of a tax rebate for most people. No doubt a little extra cash will be appreciated. But this is the cheapest way to appear to be doing something. As a cash rebate, it doesn't commit the government to provide any specific service to people. The payment isn't large enough to help people avoid foreclosure, or finance daycare for their children, or have an operation, or make up for losing their job. And it won't compensate auto workers for the cuts Obama is demanding of them as a precondition for the auto industry receiving bailout funds.
. In fact, the tax rebate isn't designed to do any of these things. It is simply supposed to get people to buy more. Its size is based not on what people need to keep body and soul together in this crisis, but on what Obama's advisers hope might stimulate the economy a bit. The idea is that the only thing wrong with the economy is that people aren't buying enough, and that a rebate might give shopping a boost.
. This plan is entirely based on hoping the market can recover by itself. It addresses neither the
structural problems in the economy, nor the needs of working people. And it's unlikely to
. Obama claims that his plan can provide universal health insurance, but he would maintain the system of private insurance that is one of the main causes of the health care crisis. The main model in the US for providing universal coverage is Medicare, the federal program that services the elderly. As a good neo-liberal, however, Obama wouldn't think of replacing private insurance with a government program: his idea is that if everyone is required to have private insurance, then this will make health care universal. Thus he would extend private insurance further, with the promise that special help will be given to those who can't afford insurance at present.
. His plan, and that of the Congressional Democrats, is basically the plan that was recently inaugurated in the Commonwealth of Massachusetts. There are fines in Massachusetts for any adult who doesn't have health coverage. In an attempt to ensure that such coverage is affordable, there is a complex system of subsidies for the premiums of poorer adults, and also a system of different levels of private plans that would be regarded as acceptable. To administer this, an agency called the Connector was set up not to provide care for people, but to link people up with private insurance. The Connector, in turn, works through two other agencies, Commonwealth Care and Commonwealth Choice. Commonwealth Care is for those who make less than three times the federal poverty-level and who satisfy various other conditions, including a proper immigration status, and it provides certain subsidies. Commonwealth Choice provides a menu of unsubsidized private insurance options for everyone else: it is a multi-tier plan, with Gold, Silver, and Bronze standards, with people between 19 and 26 also being offered a special, bottom of the barrel "Young Adult" standard.
. The result is a mess, much more complicated than any reasonable system of government health insurance would be. As well, the price for health plans can be quite high, and even so, they are limited in what they cover. For example, a non-subsidized 56-year-old would pay, as of December last year, about $4,800 in premiums, and yet might still have to pay up to $2,000 in deductibles before the insurance covered anything but some basic care, and even then there would still be co-pays and co-insurance charges. So it may not be surprising that while the number of Massachusetts residents with insurance has gone up, a substantial number of the ensured still have problems with health costs or even have to forego some of their health care. The plan also discriminates against undocumented workers. At the same time, the state of Massachusetts has faced escalating costs, and from year to year has increased the cost to residents of their health plans. (1)
. The problems in Massachusetts verify that the market-solution for the health care crisis,
extending private insurance, won't work. Universal coverage can only be obtained by breaking
with neo-liberal economics.
. Global warming is another major crisis facing us. Obama is no doubt more serious than Bush when it comes to global warming. But what he proposes are market-solutions that haven't worked in the past, and won't work now.
. To deal with global warming and other environmental problems, such as the exhaustion of aquifers, the overfishing of the oceans, proper care for farmland and wetlands, etc., would take a system of overall planning. Instead Obama believes that a system of subsidies and financial incentives would orient the market to solve the problem as part of its search for profit. So the centerpiece of Obama's environmental program is the proposal of a cap and trade system for greenhouse gases. Under this a system, an artificial market is set up in pollution permits, and companies are allowed to trade them. This is the system used under Kyoto in Europe, and it hasn't worked there. The cap and trade system in Europe, along with the system of carbon offsets, whereby a company can buy permission to pollute if it finances greenhouse gas reduction elsewhere, have resulted in a complicated system, with many loopholes. Most countries failed to meet their greenhouse gas reduction targets under this system. And moreover, this system was also one of the contributing factors to last year's biofuel crisis. (2)
. The Obama administration does seem to have some worries about whether a cap and trade
program would be sufficient. Therefore it is considering a geoengineering solution -- sending
particles into the atmosphere to cool the earth off. John Holdren, Obama's new science advisor,
said that they were considering making what would in effect be an artificial volcano. He admitted
it might have dangerous side effects but said "we might get desperate enough to want to use it."
In other words, if not a market solution, a Hail Mary play. Even if the alternative is really scary,
Obama won't go to overall environmental planning: no matter what, come hell and high water,
the Obama administration is committed to market solutions.
. Obama promises to provide increased funding for education, including help for the very young and some increased funding for college students. However, the centerpiece of his proposals is continuing the basic drift of Bush's "No Child Left Behind" program. "No Child Left Behind" brought neo-liberalism to the public schools. It promised a good deal of additional funding, which it reneged on, but the main rationale of NCLB denigrated the need for smaller classrooms, school repairs, and programs for the disadvantaged children with the claim that strict accountability, for both students and teachers, was the main thing required. It promoted privatization through the medium of charter schools. And its system of repeated testing, while profitable for various testing companies, resulted in widespread fraud in the educational system as well as harming the instruction that went on in the classrooms.
. Obama wants to maintain this system, and he appointed Arne Duncan, who administered this
system in Chicago, to be his Secretary of Education. Obama claims he can reform the problems
from this system: for example, he promised that he would eliminate the practice of reducing
teaching to preparing students for the NCLB tests. But at the same time, he wants to maintain the
"strict accountability" that is based on these tests. What it amounts to, is that Obama promises to
carry out NCLB better than Bush did.
. Thus on the economic front, as well as on the issue of the wars in Iraq and Afghanistan, Obama doesn't so much depart from Bush's policy as seek to carry out an improved version with a broader consensus. On one front after another, Obama will keep neo-liberalism, but try to reform it, or sugarcoat it, or supplement it with technical solutions.
. As a result, all the festering sores of the economy will continue to fester. Any serious step to
break out of the crises of the past would mean setting aside the illusions in market solutions.
Every serious demand of the workers will bring them into contradiction with neo-liberalism, and
then, further, into struggle with the bourgeoisie over what a more regulated system will look like.
Relief for the unemployed and those losing their homes
. Take relief for the millions being impoverished in this depression, losing their jobs or their homes or the social programs they rely on. What is needed is a commitment to their relief, a commitment whose size is based on their needs. This wouldn't eliminate the depression, but it would shelter the masses from its worst consequences.
. Obama will expand some programs, but not to the extent needed. The tax rebate is a bit of money, but its size is based on what the free-market economists think would be useful in stimulating spending. He put an extension of unemployment insurance into the stimulus bill, but it will leave the long-term unemployed desperate, and it doesn't increase the unemployment payments, which have been falling steadily year by year. He offered a tiny bit of help for those who are facing default on their mortgages. But he aimed not at preventing the mass tragedy, but at reinflating the housing bubble: he wants to keep the income on bad mortgages coming in to the banks, and keep home prices from falling too far.
. Obama says that he gives money to Wall Street, not to help the bankers, but to help Main Street.
It is the other way around. If you examine the extent of his welfare measures, it's clear that he
gives some money to Main Street, but for the sake of propping up Wall Street.
. The health crisis requires eliminating the system of private insurance, which is extremely expensive, both in what it charges people for premiums, and in wasting over a third of health care funds for its own administrative costs and profits. The first step to solving it would be to recognize health care as a right, and not just something for those who can purchase it. And this could be put into practice by starting with a system of single-payer health insurance, whereby government health insurance replaces all private insurance.
. Single-payer health insurance, which is basically the system used in Canada, replaces only private insurance, while leaving the rest of the health system in private hands. It would be a gigantic step forward; it would eliminate people's worry about health care bankrupting them; and there would no longer be a need for a special health system for the poor.
. But it is only a first step. The large pharmaceutical companies, for example, not only charge outrageously for their drugs, but corrupt medical research and intervene in medical practice. Sooner or later health care reform will have to take on big pharma -- both for financial reasons, and to ensure that the quality of health care is improved.
. Moreover, to achieve this, there needs to be more involvement between the medicine and the
people it is supposed to serve. This is not because the activists outside the profession are always
right on every medicine decision. But mass involvement is essential if there is to a real fight
against assembly-line medicine, if there is to be some defense against questionable drugs and
procedures being used too frequently, if privacy rights are to be defended, if life-style issues in
health aren't going to be turned into a new pretext for harassing people with fines and removing
their health coverage, if a flood of new workplace injuries from speedups and new technology are
to dealt with, and if possible new health threats are to be monitored. It should be remembered
that the mass upsurges of the past profoundly influenced medicine, from bringing more women
and minorities into the profession, to causing more attention to sickle-cell anemia and other
. With respect to the environment, there has to be a system of overall environmental regulation to directly control the emission of greenhouse gases. The present market system of dealing with pollution was set up as a reaction to the environmental legislation and regulation of the late 60s and 70s. This market alternative has failed, and it has to be set aside.
. Dealing with the environment requires not bribing the companies, not setting the responsibility for all decisions in their hands, but fighting against the capitalist interests who have fought environmental controls every step of the way. And they still are, even when they pat themselves on the back for their supposed environmental concern in green commercials.
. It also requires that the regulations be made as transparent as possible, to increase the possibility that workers can verify whether the companies are obeying them. The system of cap and trade is so complex that no one could verify it; this is one of the reasons that it failed. The planning and regulatory system that is set up must have sufficient inspection to prevent evasion, and that inspection must be clear enough so that workers in the affected industries can be its eyes and ears.
. As well, planning must immediately start for ensuring the mass welfare under environmental
changes. Today Obama and all the politicians talk about "green jobs" -- supposedly the growth of
green industries will, by themselves, solve the unemployment problem. This is a farce. While
there will be more jobs in green industries, there will be less jobs in the industries being replaced.
The provision of jobs and mass welfare has to be planned in its own right; it is simply
"trickle-down" economics by another name to tell workers to rely on the growth of green
companies as the way of ensuring their welfare.
. The workers have to demand, not just the funding of this or that program, but a change in their
nature. While the politicians talk about funding programs, they ignore that the very nature of
government programs shifted under neo-liberalism. Everything from social work to schools
began to be privatized and contracted out. This subjects these programs to the direct demands of
profit-making; and it profoundly changes the nature of how these programs are carried out. This
has to be reversed.
. The main union leaders and many activists are supporting the EFCA, the Employees Free Choice Act. This act removes a number of legal obstacles to unionization, and that's good. And it's bitterly opposed by business, and that also puts the EFCA in a good light. But the EFCA also specifies that, when a first contract is being negotiated, after six months either the company or the union can ask for compulsory arbitration, and the resulting settlement will be final for two years. This is promoted as allowing a first union contract to be achieved. But it's not just the union that can demand arbitration, but the company. So the result is that the EFCA would eliminate the right to strike for over two years. For a union, giving up the right to strike is like selling one's soul to the devil.
. No doubt many present top union leaders like the fact that strikes would be ruled out. They are in favor of business unionism, which abandons the class struggle of the past, and now they will be able to say, "see, our hands are tied." They back a type of unionism in which the rank-and-file are passive, and a contract is achieved by the union offering to give up the demands of its base.
. But the only way that workers' organizations will grow again is if a new spirit of struggle arises within them. One activist, Prof. Roy J. Adams of McMaster University in Canada, notes that Canadian unions already have most of the protections of the EFCA. And they, too, are losing membership. He says it's the practice of "subservience to management control" that's the problem. Or, we can say, it's the lack of the spirit of class struggle. The current unions are mainly led by pro-capitalist bureaucrats. This is their problem.
. The struggle at the workplace is important in the coming period. But the hopes in the EFCA are
misplaced. What's decisive is whether workers will wage mass struggle in their own defense, and
build organizations infused with the spirit of the class struggle.
How it differs from socialism. The mass media shouts that any departure from neo-liberalism is socialism. But none of the things I have mentioned as immediate issues constitute socialism. Even if all of them were achieved, there would still be a capitalist economy. The capitalists would still be in charge; they would still live off the surplus value extracted from the workers; and private interests would still own the tremendous means of production built up by the workers' labor. As a result, all the reforms achieved by the workers would be subject to be taken back -- just as the long reign of neo-liberalism has ripped the social safety net to threads. Moreover, this economy would still have ups and downs, the business cycle, which will exist as long as capitalism does. And the government would still be the board of directors of the bourgeoisie as a class, while individual government agencies would still be tied with thousands of strings to the interests of the big bourgeoisie.
. But the fight for these things will help provide for the immediate needs of people in the ongoing depression. Moreover, the fight for them will encourage people to see the need for a renewed workers movement, one that is independent of the capitalist parties. When the workers start to organize in their own right, they will also start to question why the economy should be owned by a small handful of tycoons. They will start to consider alternatives, and ponder whether they should not just seek immediate reforms, but a socialist society, where the economy is run in the interests of all. Is it really acceptable to have to fight over and over, after each time an economic bubble breaks, for the most basic means of existence? Is it really acceptable to have the economy owned by private interests, interests who have ravaged the environment for their own profit, when we are facing environmental catastrophe? Or is it time that the working majority of the world unite its forces to save itself and save the planet? Isn't it time that the economy be owned and run by the working class as a whole, so that decisions are made, not in the interests of a handful of privileged millionaires, but of the population as a whole?
, Obama's program is a last-ditch attempt to save neo-liberalism, by carrying out Bush's mandates, from the wars in Iraq and Afghanistan to the economy, in a better way than Bush did. This isn't going to work for the masses, who will be left to bear the brunt of the depression.
. Perhaps some people will say, but what else could Obama do? He couldn't get anything else
past Congress, and even his present program might not make it. But our criticism isn't directed
against Obama as an individual. Things wouldn't have been any better under John Edwards or
Hillary Clinton or the Hooverite John McCain. It's directed at Obama as the political leader of the
ruling class, the bourgeoisie, whose interests and ideas control the government as surely as they
do the big corporations. It's this class which has brought us neo-liberalism. And our only path of
fighting the bourgeoisie is to develop a class force, a renewed workers' movement, that is capable
of standing up to it. <>
(1 ) Massachusetts Plan: A Failed Model for Health Care Reform, Feb, 18, 2009, which is a report by a number of doctors who advocate a single-payer health system. (www.pnhp.org/mass_report/mass_report_Final.pdf) They also point out that Oregon, Minnesota, Tennessee, Vermont, Washington, and Maine had previously tried their own way of making private insurance universal, and had failed. Note that the Massachusetts plan, being very complicated, has different effects on different people. There are some residents who felt that it helped them, but just as many felt that it hurt their ability to get health care. (Return to text)
(2 ) For a discussion of the biofuel fiasco, see "Al Gore's Nobel Peace Prize and the fiascoes of
corporate environmentalism" in the Feb. 2008 issue of "Communist Voice"
Last changed on June 5, 2009.