(8 am. – promoted by ek hornbeck)
This is last part of a piece I finished right before the the inauguration and am posting at Docudharma in sections. You can catch both Part 1, on the upsurge of mass struggle, and Part 2, on the anti-war movement, here. Or just go read the whole thing over at Fire on the Mountain, where there are a couple interesting comments.
No Detour Past the Collapse of the Economy
I’ve had a little trouble with my roadway metaphors for this one. I thought about the collapsed bridge in Minneapolis (with overtones of The Bridge To Nowhere), Given all the rebuild-the-infrastructure talk, it seemed a natural.
But what the new administration is facing today is a collapsed global financial system and a rapidly crumbling global economy.
In other words, the actual fact is that we are, all of us, sitting on that metaphorical bridge right now while it comes apart beneath us. Furthermore, it is unclear where a rebuilt bridge might (or should) wind up anchored.
The first effort at shoring up the bridge was a failure on an epic scale. Trillions have been spent to bail out the banks and get credit flowing again. Instead, Citibank and Bank of America have just followed AIG back to Uncle Sam’s free money window for seconds. Globally, whole countries are insolvent or facing bankruptcy.
The most intriguing thing about the Obama administration during the transition months was his immediate post-election pledge to create 2 million new jobs (by late December bumped up to 3 million) by 2010. How? “We’ll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”
This is interesting indeed. It suggests that some in the new administration have concluded what most economists and commentators are still eager to deny, at least in public: we are in a depression! That’s the only reason to contemplate adopting a massive industrial policy/public works program like this.
But if the US (along with the rest of the world) is already the early stages of a full-fledged depression, this is desperately insufficient. Employers are sloughing off between half a million and a million jobs every month these days. 3,000,000 jobs won’t stop the hemorraging, let alone reverse the trend. It does, however, set the precedent for further government jobs programs.
However, the other major steps the new administration has announced to deal with the economic meltdown will only deepen it, and place the burden on working people, now and for generations to come.
First, Obama’s people pledge to continue the doomed effort to rescue the banks by throwing more money at them, although this time trying to figure out how to make them start lending. This just won’t work. The reason the banks need more money is to avoid having to admit that they have gone broke. (All of the UK’s banks are “technically insolvent,” the Royal Bank of Scotland reported yesterday.) They are holding, and hiding, so much “bad paper”–unsaleable toxic assets like CDOs and other fancy speculative instruments–that they need to hoard cash. They certainly won’t loan it to other banks they suspect or know are in the same boat, or to consumers who are themselves already up to their ears in debt and at risk of layoff, or to businesses which depend on the spending of those consumers.
Second, Obama’s appointees are trying to jack up consumer spending as the only fast way to break the meltdown’s downward spiral. Any cut or rebate for regular taxpayers (even with its impact boosted by crude oil prices now less than a quarter what they were only months ago) is likely to be used to pay down debt or hoarded as a shield against bad times, not pumped into reviving the cycle of compulsive purchases of unneeded stuff that fueled the credit bubble in the first place.
Third, all of this can only be funded by trillion dollar deficits “for years to come”, as Obama put it. This amounts to putting off the day of reckoning into the future, when all the IOUs the Treasury issues now to finance this “rescue” of the economy have to be paid off by our children and our children’s children. And that’s assuming that buyers can even be found for all the debt the new president is talking about issuing. If you are an investor from China or the United Arab Emirates or the US, for that matter, how enticing does this proposition sound: Loan us trillions so we can throw it at banks which will hoard it to keep staggering around a little bit longer before going belly up?
Obviously government policies can make an enormous difference in how deep the depression goes, how long it lasts and who bears the burden. What it cannot do is bypass the depression.
Look at the last two months. Broke consumers, many with credit cards canceled or limits reduced, sat on their wallets during the holiday shopping seasons. Sales dropped to their lowest since figures were first published, in 1969. Naturally a wave of small store and chain outlet closings is underway, and soon more big chains will be following Circuit City into the boneyard. That means more broke unemployed folks, of course. It also means that the highly leveraged commercial real estate market is tanking fast. That’s the folks who brought you all those malls now starved for customers and covering empty shop windows with brown butcher paper.
And guess what? All the commercial loans and mortgages the developers and management firms took on have long since been bundled, split into tranches, overvalued and sold off to eager banks, hedge funds and speculator–just like residential mortgages. Now there’s another pile of steaming toxic waste which has to be kept hidden in the vaults of the banks. And another turn of the downward spiral takes shape.
From the standpoint of the ruling class, whether they grasp it or not, two things have to happen for this depression to end. First, the global financial system has to be rebuilt from the ground up, and that can only happen on the rubble of the huge, flat-broke banks currently acting as parasites on national economies the world over. Isn’t dread that this will happen the best explanation of why desperate financial firms, bleeding money and with stock prices tanking, opted to become the biggest donors to Obama’s $50 million Inauguration?
Second, the huge overproduction–of consumer goods and of means of production–has to be destroyed. That’s what’s starting to happen in the auto industry right now. It won’t be pretty and it won’t be over soon.
From the point of view of everybody outside the ruling class, this gives us one task, crystal clear. Resist! Every single bid to dump the crisis on ordinary working people must be resisted with determined struggle, preferably of the pitchfork and torch variety. Plant takeovers and organizing drives in the workplace. The pillorying of cut-minded local officials like Philadelphia’s mayor when he tried to close eleven libraries. Campus protests like the coordinated demonstrations in the California higher education system. Hounding Wall Street bigwigs when they dare to appear in public.
The watchword of the Obama campaign was “Hope.” Well, if all we do now is sit back and hope, we are going to find ourselves hoeing one very hard row.
Hope will not make President Barack Hussein Obama and the Democratic Congress (much less Republican congresscritters) turn their backs on the banks and corporations–on their lobbyists, on their campaign donations, on their bought-and-paid-for media, on the think-tanks and “experts” they fund. Only struggle, and the fear it engenders in their hearts, will do that.