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<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>I still say that <st1:PersonName w:st="on">Cynthia McKinney </st1:PersonName>should
seek face time with the heads of ALL labor unions and talk with them honestly,
intelligently and from the heart about the very real problems facing working
Americans today. The labor movement MUST get behind working men and women and
stand up to the corporate powers that be, otherwise we will continue to see the
poor get the shaft, the middle class decimated and the wealthiest among us get
even wealthier.<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>Cynthia did not answer my question the other night about getting in front
of union leaders to my satisfaction. Some of us attended the screening of the
movie, Rethink <st1:country-region w:st="on"><st1:place w:st="on">Afghanistan</st1:place></st1:country-region>
at HIFC and Cynthia took questions after the movie. I mentioned Eugene Debs and
how he joined a union and rallied railway workers and how she might get her
message in front of workers by getting face time with union leaders. Cynthia
said she was shut out of unions because they only support Democrats. I think
she should still try to get in front of union leaders and talk with them. I
really like Cynthia and respect her for walking her talk, but I think she＊s
making a major mistake by not engaging union leaders AND workers of all
stripes. The only way I can see that we are going to get out of this mess we＊re
in is if workers stand up and refuse to continue to support an unjust system
that exploits them on a daily basis and if they demand another type of system
that respects and protects all people and the natural world.<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>I spoke with Cynthia about a mass worker strike and also about some other
scenarios that might change the status quo. If she could get her message in
front of workers and get unions behind that message I think we＊d stand a chance
at changing the system.<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>Cynthia is very intelligent, has been in Congress and knows the ins and
outs of the inner workings of that body and she has the courage of her
convictions and the guts to speak out about the inequality and inhumanity she
sees not only here in the United States but all over the world. I don＊t know of
anyone better to carry the banner for working people and really for all
disenfranchised people than Cynthia McKinney.<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>Please read the article below and comment on it. Also, give me your
thoughts on <st1:PersonName w:st="on">Cynthia McKinney </st1:PersonName>and the
benefit of her getting in front of labor union leaders and workers and having
lengthy discussions about the crisis in our economic, political and social
systems brought on not only by the inherently unfair and unjust system of
capitalism we have but also because of the United States and its imperial
designs on every part of the world that has something it covets (which is
really related to the number 1 problem: CAPITALISM). Capitalism = Greed.<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>Thanks.<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'>Kris<o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><a href="http://dissidentvoice.org/2009/10/is-capitalism-on-the-ropes/">http://dissidentvoice.org/2009/10/is-capitalism-on-the-ropes/</a><o:p></o:p></span></font></b></p>
<p class=MsoNormal><b><font size=2 color=black face="Comic Sans MS"><span
style='font-size:10.0pt;font-family:"Comic Sans MS";color:black;font-weight:
bold'><o:p> </o:p></span></font></b></p>
<h1><b><font size=4 face="Times New Roman"><span style='font-size:14.0pt'>Is
Capitalism on the Ropes?<o:p></o:p></span></font></b></h1>
<p class=subhead><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'>Interview with Michael D. Yates and Fred Magdoff<o:p></o:p></span></font></p>
<p class=byline><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'>by Mike Whitney / October 29th, 2009<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Mike
Whitney</span></font></b></strong>: In your new book, <em><i><font
face="Times New Roman"><a
href="http://www.monthlyreview.org/books/abcsoftheeconomiccrisis.php">The ABCs
of the Economic Crisis: What Working People Need to Know</a></font></i></em>,
you allude to right wing think tanks, like the Heritage Foundation and the
American Enterprise Institute, which promote a ※free market§ ideology. How
successful have these organizations been in shaping public attitudes about
capitalism? Do you think that attitudes are beginning to change now that people
understand the role that Wall Street and the big banks played in creating the
crisis? <o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Michael
Yates</span></font></b></strong>: Corporate <st1:country-region w:st="on">America</st1:country-region>
began to wage what turned out to be a one-sided war against working people in
the mid-to late-1970s, when it became apparent that the post-World War Two
※Golden Age§ of <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
capitalism was over. As profit rates fell, businesses began to develop a
strategy for restoring them. This strategy had many prongs, and one of them was
ideological, that is, a struggle for ※hearts and minds,§ to use a military term
now being applied to <st1:country-region w:st="on"><st1:place w:st="on">Afghanistan</st1:place></st1:country-region>.
The presumed failure of Keynesian economics, marked by the simultaneous
existence of escalating inflation and unemployment, gave the ideological
struggle its foundation. Maybe there had been too many restrictions placed on
the market, and these restrictions (minimum wages, health and safety
regulations, laws facilitating union organizing in labor markets; public
assistance in the form of money grants, housing subsidies, and the like;
restrictions on the flow of money internationally) had led to results opposite
those that liberal Keynesians had thought most likely. If these complex
arguments could be tied to simple clich谷s, like ※get the government off our
backs,§ ※the unions have gotten too powerful§ (with always a hint that they are
too radical thrown into the argument), and ※welfare queens§ (with that always
popular whiff of racism), they could provide ideological cover for what was
really a matter of corporate economics, namely the making of money.<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>This
ideological attack bore fruit quickly. President Carter appointed Paul Volcker
to chair the Federal Reserve Board of Governors, and Volcker, under the guise
of fighting inflation, immediately began to snuff the life out of working class
communities by forcing interest rates up to nearly 20 percent. Today, Volcker
is treated like a hero by Democrats and above reproach (though ignored by
President Obama＊s more right-wing economic advisors), which shows just how far
to the right economic discourse has moved. What Carter began, Reagan completed,
firing the Air Traffic Controllers and putting the nail in labor＊s coffin.
Behind the scenes in all of this and growing in strength for the next twenty
years (funded by wealthy business leaders) or so were the right-wing think
tanks you mention. Just as retired generals go to work for military contractors
and defeated politicians become lobbyists, government economic advisors get
jobs at Heritage or the American Enterprise Institute or the Cato Institute.
The staffs of these ideological centers churn out endless position papers and
studies, which find their way into our newspapers and the offices of our
congresspersons. A gigantic network of professors, journalists, politicians,
lobbyists, and, today, a television network (Fox) bombard us with right-wing
propaganda. That all of this has been successful is seen by the fact that the
shibboleths of neoliberalism〞such as the needs for privatization of public
entities, the free reign of markets, the obviousness of the success of welfare
reform, the evils of raising the minimum wage〞are all commonplaces today.<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>While the
public now knows that something is rotten, I am not sure that neoliberal ideas
are so under attack that they will lose their sway. I think that the tenacity
of these ideas owes something to the lack of an ideological alternative, which,
in turn, is due to the abject failure of organized labor to provide one. For
example, we need universal health care. Labor, however, has not consistently
argued in favor of this or supported it at all. Now Congress is poised to enact
healthcare legislation that might well be worse than the profit-driven system
we have all come to hate. Labor should refuse to support this legislation, but
I doubt it will. Then, when the new healthcare plans fail to deliver the goods,
the right-wing will be lying in wait, ready to pounce and say, ※See, we told
you so. The government always makes things worse.§ In other words, until there
is a radical ideology to replace right-wing thinking, the latter is unlikely to
lose its drawing power.<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Fred
Magdoff</span></font></b></strong>: Although these institutions were very
successful, along with a number of other forces, in shaping public attitudes
toward the economy, the reality of the current severe economic conditions are
causing many, including some economists, to rethink their views of how
※efficiently§ markets function in the real world (as opposed to their
ideological make-believe world) and that some different approaches may be
needed. People seem to understand that the ※big players§ played a major role in
the crisis, but most of the anger has been placed on the outrageous salaries of
the top echelon. Of course, this is just ※chump change§ compared to the massive
amounts at that are transferred to the wealthy through the speculative casino
that our economy has become.<o:p></o:p></p>
<p><font size=3 face="Arial Unicode MS"><span style='font-size:12.0pt;
font-family:"Arial Unicode MS"'>﹛</span></font><br>
<strong><b><font face="Times New Roman">MW</font></b></strong>: Socialism has a
huge public relations problem. Wouldn＊t you agree that socialism has been
effectively discredited in the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
media and that, even now每with unemployment soaring at 10 percent and more than
300,000 foreclosures per month每the average American worker still believes in
the virtues of capitalism? How do you explain this phenomenon?<o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Michael
Yates</span></font></b></strong>: Part of my answer here can be seen in my
response to your first question. Socialism has, indeed, been discredited here,
partly due to its rejection by its natural supporter, namely the labor
movement. The CIO expelled in the late 1940s and early 1950s the left-wing
forces who built the great industrial unions. When it did this, it abandoned
the worker-centered ideology that might have laid the basis for support here
for at least the kind of social democracy we find in the Scandinavian nations.
This left the ideological field to the enemies of social democracy and
socialism. Of course, we cannot ignore the long and inglorious history of
police-state repression of those persons and organizations that championed
socialism. Our government has never hesitated to arrest, imprison, and even
kill the enemies of capitalism. So it has been dangerous to be a radical here,
though not so much today when radical ideas aren＊t taken seriously and there
are no powerful radical organizations left. Suppose that after the Second World
War, the left in the labor movement had grown, and the left-led unions had
continued to successfully organize workers and win good collective bargaining
agreements. Suppose that they had built upon their impressive worker education
programs, made inroads in the South, and fought hard against <st1:country-region
w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
imperialism and the Cold War. We might have a much different political terrain
on which to fight today.<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Two other
factors that must be considered in the attachment of the working class to
capitalism are racism and imperialism. In the past, employers routinely pitted
white workers against black, and one weapon they used was to associate black
workers (and the civil rights movement) with communism (It was interesting to
note in this connection the attempts to make Obama out to be a radical
socialist). The claim that black union supporters were reds helped to solidify
white support for capitalism. By the same token, anti-imperialist struggles in
the poor nations of the world (often former colonies of the rich countries)
were typically led by political radicals. These could be made out to be
anti-American, and then those in the <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region> who allied themselves
with these struggles could also be labeled anti-American, despite the fact that
they might also be supportive of policies that would benefit working people.
The schools and the media could be counted out not to try to set anyone
straight on any of this.<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Now,
having said this, I must also say that to the extent that left forces in the <st1:country-region
w:st="on">United States</st1:country-region> identified themselves uncritically
with the former <st1:place w:st="on">Soviet Union</st1:place> and its extremely
undemocratic political system, they sometimes played into the hands of those
opposed to socialism. And I must also admit that socialist forces were, at
their strongest, never powerful enough here to force their best ideals
permanently into the consciousness of the working class majority. Finally, in
the past, the success of capitalism in the <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region> allowed for some
sharing of the wealth with workers, and this, too, made people less willing to
entertain radical ideas.<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Old and
deeply ingrained ideas die hard, and unless there are forces at work to develop
new ones and unless there is at least widespread experimentation with new ways
to organize production and distribution, little is likely to change, even in
the face of economic catastrophe, such as so may working men and women are
facing right now. Quite the contrary, workers might be persuaded that actions
detrimental to their long-term self-interest need to be taken, such as, for
example, draconian measures against immigrants.<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Fred
Magdoff</span></font></b></strong>: There is no question that the term
socialism has a public relations problem. But while it＊s true that most people
don＊t fully understand the basic workings of the capitalist system nor what
socialism is, there are indications that many people are ready to talk about
alternatives〞and that includes socialism. The positive public response to
Michael Moore＊s movie, <em><i><font face="Times New Roman">Capitalism</font></i></em>,
is one indication. But a Rasmussen poll last spring found that only 58% of
American＊s say that capitalism is better than socialism. For adults under 30,
37% preferred capitalism and 33% preferred socialism. It＊s not clear what the
poll results really mean. But it does indicate that people are willing to hear
about and talk about alternatives to capitalism.<br>
<font face="Arial Unicode MS"><span style='font-family:"Arial Unicode MS"'>﹛</span></font><br>
<strong><b><font face="Times New Roman">MW</font></b></strong>: In a chapter
titled ※Neoliberalism§ you focus on the disparity of wealth in the <st1:place
w:st="on"><st1:country-region w:st="on">US</st1:country-region></st1:place>
today. Here＊s an excerpt:<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>By 2006
the top 1 percent of households received close to a quarter of all income and
the top 10 percent got 50 percent of the income pie. In 2006, the 400 richest
Americans had a collective net wealth of $1.6 trillion, more than the combined
wealth of the bottom 150 million people. This degree of income and wealth
inequality was last seen just before the beginning of the Great Depression. (pg
50)<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Let＊s
ignore the moral issue for now, and focus on the supply/demand question. Is it
possible for an economy to produce sufficient demand when more and more of the
wealth and income goes to the upper 5 or 10 percent of the population? (isn＊t
this proof that capitalism is inherently crisis-prone?)<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Michael
Yates</span></font></b></strong>: If a certain amount of output is produced, an
equal amount of income is generated. So, conceptually, there could be enough
demand to buy the output, no matter that the incomes generated are getting more
unequally distributed. It certainly has been the case that the rich people now
getting such a large share of the pie spend gobs of money. And rich foreigners
spend a great deal of money in the <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region> as well. However, the
rich also save a lot of money (the more they get, the more they save), and this
money does not enter immediately into the spending flow. Working people, on the
other hand, can be counted on, by virtue of the limited income that they
command, to spend all of their income. Therefore, the more income the rich
have, the more savings there will be, and, unless some way is found to convert
all this saving into spending on newly-produced goods and services, the more
likely it is that there will be a crisis caused by not enough spending (and its
corollaries of unsold goods and services and unemployed labor). If we
understand that growing inequality is the normal trajectory of capitalist
economies, a trajectory only mitigated by the power of organized working people
to win a bigger share of the pie for themselves and to compel the government to
intervene in the marketplace on their behalf, then it is correct to say that
capitalist economies are crisis-prone for this reason alone.<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Growing
inequality also creates other potential problems for the system. Sometimes it
can generate a political crisis, a crisis of legitimacy so to speak. The rich
exert tremendous political power, and this power grows as those at the top
command a larger and larger share of a society＊s income. To the rest of us, the
game looks increasingly rigged, with us having little chance to improve our
circumstances through individual efforts. More inequality also has harmful
social and economic consequences that we don＊t normally think of. Recent
research has shown that if we compare two entities (two states in the United
States, for example) with equal average incomes but different degrees of
inequality, then the place with more unequal incomes will also have higher
rates of infant mortality, arrest and imprisonment, school dropouts, low infant
birth weights, and many other measures of social well-being. Growing inequality
actually kills some of us, makes some of us sicker, and puts some of us in
jail.<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>I want to
add an important point. To say that capitalist economies are crisis-prone,
because of a tendency toward income inequality or whatever other reason, is not
the same as saying that these economies are on their deathbeds, no matter how
severe a crisis may be. It is possible for an economy to exist in a crisis or a
prolonged period of slow growth (stagnation) without it being ready to
collapse. In the end, it is political struggle, that is, class struggle, that
truly destabilizes an economy and generates conditions in which it is possible
to imagine the birth of a new system.<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Fred
Magdoff</span></font></b></strong>: It is one of the many contradictions of the
system. If ordinary folk are paid well they can buy a lot of stuff and help
keep the system going. So from the point of view of the system as a whole,
higher paid workers would help the economy. However, there is only one driving
force for individual capitalists每and that＊s to make as much money as possible.
What might be better for the overall economy can be of no concern to the
individual trying to maximize profits. For an analogy, let＊s take a look at
ocean fishing. Almost every fish species is being fished to the point at which
the population crashes. It would make sense for all of the companies operating
the large trawlers to cooperate and fish less in order to preserve the resource
on which they depend. So what＊s good for their long-term future is sacrificed
as each individually tries to maximize their catch and therefore profits.<o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>MW</span></font></b></strong>:
Here＊s another excerpt from the book: ※In 2006, the financial sector employed
about 6 percent of the workers but ＆produced＊ 40 percent of the profits of all
domestic firms.§(pg 56) A few paragraphs later you add that, ※Making money
without actually making something turned out to be the largest growth sector of
the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
economy from the early 1980s to the present crisis.§<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>This
seems to imply that as manufacturing and other parts of the ※real§ economy have
become less lucrative, the trading of paper assets has become Wall Street＊s new
profit-center, the Golden Goose. What impact has the ※financialization§ of the
economy had on ordinary working people?<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Michael
Yates</span></font></b></strong>: I think that an answer here has two parts.
First, it was the neoliberal ※revolution§ begun in the 1970s that did immense
harm to working people. For example, unionization rates began to fall
dramatically in the 1980s, as Reagan began his ※magic of the marketplace§
assault on the working class. Real wages (the purchasing power of our
paychecks) began to stagnate in the 1970s and are not much higher today than then.
Relatively high-wage public employment began to endure a long period of
privatization, which also damaged working class living standards. The move
toward ※free trade§ did workers here no good, as manufacturing began to flee
our shores for low-wage havens abroad. None of these things had to do with
financialization per se.<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Second,
however, once the neoliberal attack on working class living standards took hold
and incomes began to flow upward, those with a great deal more money began to
look for ways to put this money to work. The corporations that they owned also
had higher profits, and they did the same. The <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region> has always had a
robust financial sector, though in the past, it was not the tail that wagged
the dog as far as our system of production and distribution was concerned.
Neoliberalism brought with it a deregulation of international movements of
money and goods and services. [It is important to note that we see
neoliberalism as a political response to capital＊s quest for restored profits beginning
in the mid-1970s when the post-Second World War two economic boom ended and the
slow growth (stagnation) common to mature capitalist economies reasserted
itself.] These, in turn, required a certain amount of financial innovation, to
reduce, for example, the risks of fluctuations in currency exchange rates and
sharp changes in political conditions that could threaten investments. From
these innovations came still more, until finance began to take on a life of its
own. And while neoliberalism and direct corporate actions inside workplaces did
reduce costs and raise profits, they did not create nearly enough capital
spending opportunities (investment) to absorb the growing individual savings
and business profits. Finance of one kind or another then began to be seen as a
place to dispose of surplus and make still more money. Leveraged buyouts, stock
market speculations, real estate ※investments,§ all took off from the 1980s on,
absorbing money that could not find enough opportunities in the real economy of
production. As these things happened, financial ※innovation§ exploded, with all
of the alphabet soup of financial instruments we describe in our book.<o:p></o:p></span></font></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>This
explosion of finance proved detrimental to working people in a number of ways.
Leveraged buyouts inevitably resulted in the hollowing out of what were often
perfectly viable businesses. Companies were saddled with debt, assets were
stripped and sold, and workers were furloughed by the tens of thousands. The
inflation of asset values gave rise to the notion that it was the job of
managers to increase the share price of their businesses〞in any way possible.
Businesses came to be thought of as mere collections of assets rather than
entities that produced things. Asset inflation gave rise to asset speculation
and the development of ever more complex financial instruments, all leading
sooner or later to financial bubbles and the inevitable bursting of the
bubbles. As we have seen, the bursting of financial bubbles has had
tremendously negative impacts on working people: shuttered workplaces and
unemployment to name but the primary ones. The last bubble, in real estate
markets, was harmful to workers not only after it burst but also as it was
developing. In the aftermath of the dot.com bubble, Alan Greenspan, former
Chairman of the Fed Board of Governors, directed Fed policy to pressure
interest rates down to very low levels. This helped to push loose money into
real estate. As house prices began to rise, banks and brokers started to
encourage working people to do two things: borrow money against the appreciated
value of their homes and buy homes, either as first-time buyers or as
purchasers of more expensive homes (after selling old ones). Working people
were eager to do both because they saw houses as sources of cash to compensate
for stagnating household incomes and as a form of wealth that could help secure
them against the hazards of ill health, lost pensions, or college-age children
needing money for school. Working class households began to take on large amounts
of debt, making themselves more vulnerable, even as they thought they were
making wise financial decisions. Ironically, those who saw their incomes rise
so high because of neoliberalism were now, in effect, loaning money to those
who didn＊t fare so well. As banks accumulated mortgages, farsighted Wall Street
swindlers saw golden opportunities to develop a slew of new financial
instruments based upon the packaging and repackaging of mortgages into new and
exotic instruments. Greenspan played their shill, arguing that they had
uncovered the secret of hedging infallibly against risk. From here it was but a
short step to the criminal schemes of Countrywide and a host of other financial
institutions. The billions of dollars made were used not only to finance a new
gilded age of revoltingly lavish consumption but to corral the most tractable
politicians money could buy.<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Fred
Magdoff</span></font></b></strong>: Financialization of the economy created the
possibilities for people to take on more and more debt〞credit cards, new cars,
2nd mortgages, etc. It was the selling of a lifestyle way beyond people＊s
ability to pay for it plus the easy access of loans that created the bind that
many people find themselves in today. In essence, it allowed people to live
beyond their means. They were encouraged to take on debt as their house values
seemed headed up forever, and the great rise in foreclosures and bankruptcies
is the unfortunate result of the financialization of the economy. Also, those
people who had retirement money in individual accounts or with pension systems
and thought that they had become very wealthy, now found themselves with much
less to rely upon.<o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>MW</span></font></b></strong>:
In the last couple of decades, consumer debt has skyrocketed, as you note,
※doubling from 1975 to 2005, to 127 percent of disposable income.§ (pg 60) Have
we gone as far as we can without deleveraging and paying down debts? What
happens to a credit-dependent economy when the consumer can no longer increase
his/her debt-load? Is this just the beginning of a decades-long down-cycle?<o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Michael
Yates</span></font></b></strong>: Certainly no entity〞not a person, a family, a
business, even a government〞 can take on rising levels of debt (relative to
income) indefinitely. Sooner or later, the piper has to be paid. Working-class
consumers took on large amounts of debt, to compensate in part for stagnating
wages and incomes, and, it is important to note, to pay for health problems and
other household traumas. This meant that the burden of the debt rose, since
income wasn＊t rising as fast as the debt, and also because the interest rates
charged on credit cards and subprime mortgages were so high. We at Monthly
Review have been decrying the rise of consumer debt for many years, and we said
that the debt chickens would come home to roost sooner of later. I must say
that I was surprised that debt could be broadened and deepened for so long. The
ingenuity of creditors in extending loan periods and devising so many new forms
of debt has to be admired for its audacity. Then, the ways in which these debts
were packaged and sold so that more debt could be extended was truly
breathtaking. Unfortunately, consumers ultimately couldn＊t pay and all hell
broke loose. Now, with so much unemployment, workers are truly strapped. They
will not be borrowing so much or spending so much anytime soon. [One
interesting recent development is that, as some households have defaulted on
debts or simply stopped making payments, consumer spending has showed a bit of
an upward tick!] So the question arises: what spending will fuel a sustained
recovery? It won＊t likely be consumer spending. Capital spending was stagnating
to begin with and was the root cause of the crisis. There are no new
※epoch-making§ innovations on the horizon that would generate the amounts of
investment that were brought forth by the automobile. <st1:country-region
w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> exports
seem a very unlikely demand support. That leaves the government. In a
capitalist economy, especially one like the United States with its lack of a
history of generally accepted public spending, it seems very unlikely that
public spending will make up for shortfalls in aggregate demand. Already, there
are widespread entreaties (and not just from the far right) urging the federal
government to wind down in spending programs〞well before, I might add, the
economy has recovered. As we see it, the <st1:country-region w:st="on"><st1:place
w:st="on">United States</st1:place></st1:country-region> is, indeed, in for a
long period of stagnation, a ※down cycle§ as you put it.<o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Fred
Magdoff</span></font></b></strong>: This is one of the major constraints on the
system. The economy is in a process that economists call ※deleveraging,§ which
is just another way of referring to somehow getting rid of debt. Some are able
to pay off what they owe, a few are able to renegotiate down some of their
debt, many are losing their homes, and some are going bankrupt. Until this
works its way out, and a lot of debt is shed one way or another, there will be
a drag on the ※consumer§ portion of the purchases. This is particularly
significant to the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region>
economy because it is so dependent on consumer purchases〞in 2007, these
absorbed approximately 70% of the goods and services produced.<o:p></o:p></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>MW</span></font></b></strong>:
<em><i><font face="Times New Roman">The ABCs of the Economic Crisis: What
Working People Need to Know</font></i></em> is as lucid and compelling summary
of the financial crisis as any I have read. In the closing chapter you state
that capitalism is undergoing a ※crisis of legitimacy§ and that ※the system can
never deliver what is needed for us to realize our capacities and enjoy our
lives＃ That ※instead of private gain§ the purpose of society and the economy is
※to serve the needs of people, by providing the necessities of life for all,
without promoting excessive consumption (consumerism) while protecting earth＊s
life support systems.§<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>All of
the things that which kept capitalism in check每progressive taxation, crucial
regulations, and the power of unions每have either been reversed, repealed or greatly
eroded. More and more people are beginning to see the greed which governs the
system, and it scares them. But is the country really ready for structural
change or will the vision of an economy which ※serves the needs of its people§
be dismissed as ※pie-in-the-sky§ Utopianism?<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Michael
Yates</span></font></b></strong>: Well, first thank you Mike for the kind
words. They are much appreciated. Typically, the best we have been able to hope
for from the public in the <st1:country-region w:st="on"><st1:place w:st="on">United
States</st1:place></st1:country-region> has been an amorphous populism;
people are willing to say that the system is corrupt and that it is biased in
favor of the rich. But proposals for change, much less a radical transformation
of the economic system, are rare commodities. I think things would be
different, however, if we had a real labor movement, one that was rooted in
communities, broad in its composition, and not afraid to have principles and
stand by them come hell or high water. This should be the lesson that
progressives learned from the right-wing. The talking heads of Fox may seem
insane to us, but they and their intellectual gurus almost never deviate from
the set of reactionary principles with which they began to transform the
※common sense§ of the nation. We suggest at the end of our book that we ought
to ask ourselves if a return to the pre-economic crisis status quo is what we
want. In the best of times, there is plenty of unutilized labor, a degraded
environment, poverty, dead-end jobs, and much more that is not so desirable. So
we chose a number of alternative outcomes to what we have now that we think
have mass appeal, from universal healthcare to basic food guarantees. However,
as you say, these might well, and I think will cause people to react with a
pie-in-the-sky indifference. What might make working men and women stand up and
take notice would be for these goals to have a mass-based advocate, one that
would make these goals matters of rigid principle and begin to fight for them
through mass actions. We might think that the right-wing ideologues we see on
television are insane. Yet, come hell or high water, they stick to their guns.
Their political and economic adherents have wielded tremendous power for a long
period of time, and even today when they seem to be losing their grip on the
national ※common sense,§ they can still mobilize the faithful. The left needs
to take a lesson from this. More particularly, the labor movement must take a
firm and rigid stand on issues like national health care, food security,
environmental degradation, full employment, good and cheap housing, <st1:country-region
w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> war-making
and imperialism, racism, and a host of others. Then it must educate members
rigorously and constantly about such principles. Most importantly, it must
begin to actively fight to achieve them, activating its millions of members and
allies, wherever it can find them. It is through action, bold and unafraid,
that people＊s minds will get changed and a new ※common sense§ developed.<o:p></o:p></p>
<p><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Having
said this, I think it is clear that the labor movement, as currently
constituted, is not up to the tasks at hand. Too many unions are moribund,
stuck in the failed labor-management cooperation mind set of the past and run
by people too old and infirm to do much of anything. So, not only will we have
to have a worker-led opposition to the status quo, fighting to change it
radically, but this opposition will have to be built on a new basis. There are
some hopeful signs, such as the development of community-based worker centers,
mainly in immigrant communities. These may be models for the labor movement of
the future.<o:p></o:p></span></font></p>
<p><strong><b><font size=3 face="Times New Roman"><span style='font-size:12.0pt'>Fred
Magdoff</span></font></b></strong>: Just getting what should be the most
reasonable reforms through Congress is a major effort, which usually fails or
is corrupted in the process. Look what＊s happening with health care ※reform.§
Even if a ※public option§ is finally part of the bill, it will be a bill that
helps some people, but is primarily a boon to the health care industry, which
will get a lot of new revenue. It＊s not a bill designed with the single purpose
in mind: how can we supply medical care for everyone at reasonable cost. Rather
it＊s a bill designed with significant input from the for-profit sector that
will end up supplying them with extra profits. It is clear that government-run
systems (and there are a variety of ways to do this) are far cheaper and more
efficient and can actually cover everyone. SO, it seems as though piecemeal
reform is a) very difficult to obtain and b) can be reversed as the power of
the wealthy increases. A system is needed that can break the power of the
wealthy and create a real political and economic democracy in order to be able
to meet the basic needs for all the people.<o:p></o:p></p>
<p class=author><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'>Mike Whitney lives in <st1:place w:st="on"><st1:State w:st="on">Washington</st1:State></st1:place>
state. He can be reached at: <a href="mailto:fergiewhitney@msn.com">fergiewhitney@msn.com</a>.
<a href="http://dissidentvoice.org/author/MikeWhitney/">Read other articles by
Mike</a>, or <a href="http://">visit Mike's website</a>.<o:p></o:p></span></font></p>
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