The economic crisis,
the breakdown of neo-liberalism, &
the outrage of the Wall Street bailouts

(Presentation at the Detroit Workers' Voice Discussion Group meeting
of November 2, 2008, edited for publication)

Who is to blame?
The crisis of the free-market
An overproduction crisis
Down with the Wall Street bail-outs!
The crisis of neo-liberalism
What's to be done?

. The crisis began with a financial crisis and with people losing their homes. But now we see not only tent cities of the homeless, but more and more people losing their jobs, and large firms like Chrysler may collapse. Others have seen the value of their pensions destroyed, and their homes, which may be their chief asset, losing their value. Federal and state financial crises are expected to worsen in the coming year; schools and social services of all types will be cutback. The string of economic disasters is going to continue.

. The US government, and other governments, have poured trillions of dollars into propping up the banks and financial companies. Both Democrats and Republicans told us that we needed to provide $700 billion immediately to the banks and speculators, that we couldn't wait. Both presidential candidates, McCain and Obama, told us that.

. But the bailout didn't stop the crisis. It simply helped save Wall Street from the some of the consequences of the crisis. This is a going to be a long recession and stagnation, if not a depression, and it is going to be an international one.

. We need immediate measures to help people while the stock market declines and the companies cutback or collapse. There must be immediate relief for the homeless, and help for people threatened with being put out of their homes. The social safety net, which has been cut to pieces, must be replaced.

. But to accomplish this, we need to see this as a class struggle. The Bush administration and the Congress didn't prop up the bankers out of a mistaken understanding of economics. They did it because they serve the interests of the large corporations and the banks. And they are proposing giving tens of billions of dollars to auto companies and other large firms.

. Now I would like to go into some of this in more detail.

Who is to blame?

. Who is to blame? Why is the economy collapsing? Who is responsible for the homelessness and the recession that is turning into a depression?

. The politicians and the news media tell us that everyone is to blame. Why, if the banks made bad loans, people took out bad mortgages. This is bull. It's not workers who determine what type of mortgages are offered, or who set interest rates, or who make the decisions about the economy. If workers did make these decisions, do you think we would be cutting our own wages? If auto workers have seen their wages cut in half at company after company, isn't it clear that they don't determine what's going on in the economy? If workers across the country are impoverished by rising health care premiums, isn't it clear that we didn't determine what the insurance companies do?

. No, the blame lies squarely on the capitalists who run the economy. This is a crisis of free-market capitalism.

The crisis of the free-market

. This is first of all a financial crisis. The bankers and speculators invented dozens of fancy new financial instruments to make money off of.

. This process was fostered by deregulation, and what we face now is a crisis of deregulation. For years the conservatives and Reaganites told us that all the problems of life are due to government regulation, and the liberals also took up the same hymns to market-based forces. And so the banks and companies were deregulated and allowed to do anything they want. The various safeguard and regulations put effort during the Great Depression and afterwards, have been dismantled, such as the Glass-Steagall act that forced commercial banks to be separate from investment banks, which was repealed in 1999 under the Democratic Clinton administration.

. This is called "neo-liberalism", and it is based on the belief that the market is always right, and that, except for temporary blips, the stock market always goes up. Supposedly you can always get a better return on your money by putting it in the stock market or giving it over to a the advice of a financial counselor, then in having Social Security or a pension fund with a defined benefit or government benefits of various sources. Even "welfare as we know it" was eliminated under President Clinton, because who needed welfare when supposedly anyone could get a good job from the marketplace?

. Now this is all coming home to roost. As one investment scheme collapses, it takes down many. Local and state governments are also going into financial crisis. Indeed, various agencies that put public funds into neo-liberal investment schemes are not just losing their original funds, but finding themselves on the hook to pay out huge amounts of money to buy up dubious bonds or otherwise pay huge penalties. Thus the New York Times reported on Sunday that Wisconsin school system finds itself on the hook to buy billions of dollars of bonds that no one else wants, and the New York City MTA finds itself on the horns of a variable-interest scheme that may cost it dearly. Earlier reports show that the rapid transit system in Los Angeles is faced with possibly cutting its bus schedule in half to pay for obscure clauses in a neo-liberal financing deal it had taken part in.

. And meanwhile the social safety net had already been torn to shreds over the last few decades. The social safety net had somewhat restricted the consequences of sliding into slump: there was unemployment insurance, welfare, disability, etc. The capitalists had somewhat reconciled themselves to this net for a time, not because it helped workers, but because it poured extra funds into the economy when the business cycle went down. But who needs it, says the neo-liberals, because depression is a supposedly thing of the past

An overproduction crisis

. But the present crisis is not just a financial one. It is also another overproduction crisis of capitalism, with the auto industry, the airlines, and other industries having large excess capacity. And what is an overproduction crisis? The workers produce more and more, and the capitalist system is so corrupt that it impoverishes people because they have built too much and too well.

. Capitalism has always been subject to business cycles, to busts as well as booms, to depression and hard times as well as to good times. For some time now the capitalists have boasted that bad times are a thing of the past: the stock market will always go up, except for temporary reverses; the Federal Reserve will make sure that the economy always grows; innovation will make things better and better.

. But the truth is far different, even during the last couple of decades of good times. They have generally been "good times" for the capitalists but workers' wages have stagnated and declined; the country's working-class neighborhoods, schools, hospitals, bridges, and the country's infrastructure have declined; and life has became more and more insecure. And now there is going to be a general stagnation, a depression.

. This alternation of good and bad times is inevitable under capitalism. When the bourgeoisie claims that trillion dollar bailouts will prevent this, they're lying. What can be done, however, is to provide social programs to protect the workers.

Down with the Wall Street bail-outs!

. But that's not what the Bush administration is doing. That's not what the Democratic-controlled Congress is doing.

. A trillion or so has been given to financiers: including the $700 billion bailout, and separate individual bailouts, and tens of billions are being promised to the auto capitalists and others. This is a crime. The capitalists who are responsible for the crisis, and who benefited from the orgy of profits that paved the way for it, are being rewarded. Those who have money are being reimbursed, while the needs of the workers, the homeless, the health careless, are being put aside.

. With the almost trillion dollars in direct money being poured into the financial firms, the government could have helped millions upon millions of workers facing homelessness and unemployment, could have maintained and improved schools, health care, and social programs despite the financial crisis, and could start recasting the country's infrastructure in a more environmentally-friendly manner. But the money doesn't go for that. It goes to pay off the debts of Wall Street investment houses; indeed , it even goes to paying dividends. For example, an article from last Thursday (Oct. 30) in the Washington Post says that "U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years." People may starve, but nothing must interfere with dividends.

. The amount of money is fabulous. A investment house is bailed out with many times more money than would pay for pre-school and medical care for all the children of the poor in the entire country. For example, AIG was supposed to be bailed out for $20 billion, and it is now up to $144 billion. After all, you have to support these firms in the style in which they are accustomed. Ironically, it's possible AIG may collapse anyway, but all the money poured into it ensures that the capitalists won't suffer that much if it does. The hundreds of millions of dollars poured into the salaries of the top executives isn't going to be refunded if the fund collapses, nor are the dividends, nor are the funds that went to reimburse holders of the various worthless securities that AIG was choking on.

. The politicians tell us that the bail-outs are good for us. They say that they didn't give all this money to the financiers and CEOs in order to help out Wall Street, oh no, supposedly it pains them deeply to see all this money go to Wall Street and the executives. No, they give money to Wall Street, they assure us, in order to help out the common people. If hundreds of billions of dollars are given to investment houses, auto capitalists, and others, then workers will supposedly keep their jobs and benefits -- after they are substantially reduced of course. This is the trickle-down bail-out, and it doesn't work any better than any other trickle-down economics. The bail-outs don't keep the economy going; the jobs are lost anyway; and the huge cost of the bail-outs are used to say that we must cut relief for the workers.

. The bail-outs aren't curing the economy. They prop up the stock market for a day or two, and then the crisis resume. The bailouts are simply looting the country for the sake of bankrupt and incompetent bankers and CEOs and wise-guy investors.

. Most politicians tried to panic people into backing the bail-outs, with the Democrats as responsible as the Republicans. Indeed, right in the middle of the one of the most bitter election battles, with the Democrats spending a billion or so dollars to tell the population that we can't take four more years of Bushism, they took a time out to back Bush on the bail-outs; indeed, to back him even more reliably than the Republicans.

. Now, some conservative Republicans refused to vote for the bail-outs, saying nothing had to be done to deal with the economic crisis. Their view was, let the economic problems work themselves out by themselves -- the free market forever. Semper Fi. That is a crock as well. Letting the economy work itself out by itself, and refusing to deal with the misery it is causing, means letting millions of people suffer for years on end. You can't put off eating for years, so action is needed now. But the self-righteous conservative Republicans can only see action as bailing out the rich, so if they aren't going to do that for the moment, then they are going to sit on their hands.

. The Democrats insisted on some changes in the bailout. And they had the votes to prevent any bail-out from being passed unless they agreed. But they insisted mainly on better ways to prop up the banks and the investment houses, and major measures for the people were left out. Their main concern in revising the bailout was to ensure that the government might eventually get back some money for the companies that were being bailed out. The main concern should have been to ensure that the working people of this country didn't suffer from this crisis. As far as the large companies that are regarded as too big to fail, the issue isn't to get back some of the money lent to them, but to take them over rather than bailout out their present owners.

The crisis of neo-liberalism

. But the rhetoric of the politicians aside, what is going on, and what is going to have to be done because of the crisis?

. All this is first and foremost a crisis of the free-market economy and neo-liberalism. This crisis, plus the environmental crisis where the free-market has raped the planet and threatening it with runaway global warming, the loss of fish from the sea, and the end of abundant fresh water, can't be handled by the free market. Neo-liberalism has led to a dead-end. Regulations will have to be restored, and new ones devised.

. Well, the media, the liberals as well as the conservatives, are telling us that neo-liberalism is already dead, and that the bail-outs are "socialism", albeit perhaps "socialism for the rich". This is a double lie.

. First of all, bailing out investment houses and banks with trillions of dollars may be the last gasp of neo-liberalism, but it is still neo-liberalism: it means desperately trying to preserve neo-liberalism. It means the bourgeoisie is willing to rape the country twice and three times over to preserve the financiers, keep bank dividends going, and to redeem worthless financial paper. It is another crime of the neo-liberal bourgeoisie. And the same politicians, McCain and Obama, who back the bailout, are continuing -- on one front after another -- to push market-based solutions, neo-liberal solutions, for everything, so it just isn't true that the bailout means the end of neo-liberalism.

. And secondly, socialism doesn't mean giving things to the rich, but having the economy run by the working majority. It means, not subsidizing the private ownership of the productive resources of this country, but having the factories and land and resources of this land owned in common, and run for the common good. It means not just putting one or two restrictions on the financial speculators and the corporate CEOs, but eliminating the world of financial privilege and of private ownership of the huge productive resources of this country. And it means that not only should there be regulation, but that the working class, and not the financial experts who work for the rich, should control that regulation.

. True, the bail-outs are "socialism for the rich" in the sense that the rich charge their losses to society as a whole. They want profits to be private, but costs to be social. But as far as Marxists are concerned, "socialism for the rich" is something to mock; it is not socialism at all.

. The bourgeoisie isn't becoming socialist, but is continuing to fiercely defend its profits and privileges and to keep the workers in line. However it is going to have to abandon neo-liberalism and return to a type of "mixed capitalism" or "regulated capitalism", if it wants to deal with the consequences of this economic crisis, and try to limit it. These steps, however, will not tame capitalism nor eliminate the class struggle, but just change its form. There have been crises under the old free-market capitalism; under the mixed capitalism of the first decades after the Second World War; and under the neo-liberal capitalism of the last several decades; and there will continue to be crises and clashes with the working class under the coming regulated capitalism as well.

What's to be done?

. So what does the working class have to do in the meantime? We must find ways to save ourselves from starvation in this crisis; we must not put faith in the regulated capitalism that is to come but strive as hard as possible to ensure that the regulations don't strangle us; and we must work to build up a movement for socialism itself.

. These are not three separate tasks. What workers need to do is get organized in their own class interest. Developing a class movement is central to all these means. We must today do this in the course of defending ourselves and our children from starvation and preserving medical care, disability assistance, schooling, adequate recreation etc. If we want to do this effectively, we must wage it as a class struggle. We must not place our hopes in the rhetoric of the capitalist parties about giving us health care and jobs and so forth. Every four years they promise this, and every four years they betray that promise. We must develop a struggle in deeds.

. First of all, we must denounce the bailouts. Can we stop the crisis by bailing out the banks and stock brokers and the large corporations? That's just another version of trickle-down economics. The wages and benefits of workers have been cut for decades, but that isn't enough for the capitalists. The financiers and the CEOs want trillions of dollars in subsidies.

. They tell us that it pains them so much to bail out the financiers and corporations, but they must do it for the good of the people. Why, if the banks collapse, then there will be no one to make loans. But that's nonsense. The banks could be taken over and run by the government, if necessary. They tell us that manufacturing will collapse if they don't give billions to the corporations. But if necessary manufacturing corporations are bankrupt and unable to live up to their obligations, they could be expropriated by the government. And if the corporations that collapse aren't essential, then the support should go to workers who used to work there. Either way, there's no reason to pay trillions to try to convince the financiers and CEO's to stop being incompetent. The money given to them isn't for the good of the people, but for the good of capitalist shareholders and executives.

. Second, we need measures to allow the working people of this country to survive while the capitalist business cycle goes through another bust. There are going to be fights for moratoriums on foreclosures, for the restoration of social programs, and so forth. We are going to be told that we must be moderate in these demands and take cutbacks, because all the money has gone to bailouts, and we must reject such hypocritical whining of the bourgeoisie. They don't stint on bailing out the financial houses, which is a useless expense, and we shouldn't stint on measures to help the masses, which should be the aim of all rational economy. We must demand that the rich and the large corporations and the bourgeoisie as a whole, which still has fabulous wealth, pay for the necessary measures.

. Third, we must not simply agitate for general measures, but organize at the workplace and in the community. It's true that this is difficult when companies are collapsing. But we can study the history of the Great Depression, where some of the major advances of mass struggle took place, including the decisive breakthrough in the unionization of the mass production industry. The widespread hunger and deprivation of bad times disorganizes the struggle at first, but eventually it can give rise to a determination on the part of the masses to resist.

. Fourth, when the capitalists introduce regulations, we must have no faith in their objectives. We must remember that the capitalists can use regulations, as well as the free market, to help them exploit, and we must examine the new regulations critically. We must not be seduced simply by "regulation" as the answer to "deregulation", and still less regard this as "socialism", but must ask -- these particular regulations accomplish what? benefit who? We must demand that the regulation be as transparent as possible, and that the masses be involved in the regulation of the economy and of the environment. And we must put as much pressure on the bourgeoisie as possible to ensure that the regulations actual provide for mass welfare and protect the environment.

. And finally, in everything that the working class movement does, it should take every opportunity to bring out the clash between the interests of worker and capitalist. The bourgeoisie says that we're all in it together. That's not true, as the bailouts show. Even in the midst of the worst world economic crisis in decades, the bourgeoisie can think of nothing better than to insist on cutbacks for the workers while carrying out bailouts for dividends. We, in turn, must insist on support for the working class, and cutbacks for the rich. The corporate resources, and the huge wealth of the bourgeoisie, must be tapped to pay for the people's needs. And we need to strive to build up organizations of struggle that represent the working class and counterpose the class struggle to the lie that we're all in it together, capitalist and worker alike. <>

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Last changed on November 20, 2008.