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Thursday, October 17, 2013

A Superb Analysis of our Economic Crisis by S. Aronowitz



Facing the Economic Crisis  (by Stanley Aronowitz)

The main news since the Summer of 2008 has been the global economic crisis, an event described by economists and most pundits as a “financial meltdown” caused by the irresponsibility of US lending institutions and consumers alike in offering—and accepting—“sub-prime” mortgages, interest-only loans, and a series of complex derivative financial instruments. Many of the variable mortgages, which were initiated during the credit-driven bubble of the 1990s (and welcomed by the Clinton administration) and whose growth accelerated in the first years of the new century, require homebuyers to put no money down. Interest rates on these kinds of mortgages, which begin at 5%-9%, are slated to rise within a few years when they can double, triple, or balloon even more. In September 2008 we began to hear of massive foreclosures in almost all sections of the country. The projections for 2008 and 2009 were for 2 million homes (six percent of the US total) to go into serious default. New home construction came to a screeching halt and commercial building suffered only slightly less pain. In a few weeks of October, several major banks, bloated with bad loans, had failed, prompting the Fed to inject billions of dollars into the financial markets; others, like Merrill Lynch, merged with more stable partners. But the venerable old-line investment banking house Lehman Brothers was fated to fail when the Treasury Secretary and the Fed chair refused to extend bailout funds. Of course, goliaths like Citibank, Bear Stearns, the insurance giant AIG and a few others were deemed “too big to fail” by the Treasury Secretary, Hank Paulson. By the end of the month the banking system, which held trillions of dollars in unredeemable mortgages, business and credit card loans, was teetering on the brink of disaster, and the crisis was widely described as a “financial meltdown.” Many leading investment banks disappeared and those that remained were reconstituted and converted into bank holding companies.
By October 2008, mobilized by Paulson and backed by the Fed chair Ben Bernanke, Congress quickly passed a massive $700 billion bailout to financial institutions without scrutinizing the fine print. For different reasons, only a band of arch- GOP conservatives and a few liberal Democrats were prepared to let the system collapse, respectively hoping that the market would self-correct or that it would force a more radical program of extensive re-regulation (of the kind that had last been mooted – and rescinded – by the Carter administration and a Democratic Congress in 1978). The purpose of the bailout legislation was, initially, to permit the government to purchase vast quantities of the bad securities at, or near, nominal value; in effect, this was a major infusion of cash into the banking and insurance systems without imposing stringent conditions on how the banks and insurance companies could spend the money. However, within weeks of President Bush’s signing the bill into law and in the wake of the banks’ refusal to loosen consumer and business credit, Paulson announced that this strategy was being replaced by a policy of purchasing bank shares, a direct infusion of cash in return for which the government would assume a measure of temporary partial ownership but would not assume outright ownership and management of the system. Nor, as it turned out, did the Federal government closely supervise the use of the funds they had so generously given. Within weeks, complaints resounded throughout the economy that the banks, instead of loosening their lending policies, were holding the money close to their chests. Of course business loans were tightened, but many would-be buyers of homes, cars and other durable goods, not to mention borrowers of much-needed cash to pay their bills were turned away on one pretext or another, often because their credit rating was not top-of-the-line.
Meanwhile, jobless rates began their steep ascent. In reporting the spectacular job losses, the New York Times ran an investigative story that argued the official figures were only a fraction of the true extent of joblessness. According to the Times the number of discouraged job seekers who left the labor market, premature retirees who had no prospects but to accept inadequate pensions, and recent high school and college graduates who simply did not look for work, might swell the actual figure by four or five percent. By early December, the National Bureau of Economic Research (NBER) reported that the economy had been in recession since December 2007, a year before they declared the recession “official.” This revelation prompted no leading politician or economist to ask why the information had taken so long to be determined and revealed. The conservative NBER explained that it often takes that long to check their calculations and come up with a definitive judgment. That they felt obliged to offer an explanation at all was no doubt in response to the unspoken suspicion that the delay had something to do with the presidential election. Many believe that if the recession had been declared in the midst of an election season, candidate Obama could have prepared to vacation in Hawaii for more than just a few days.
The NBER’s admission that the economy was in recession at least ten months before the financial meltdown poked a huge hole in the initial view that excessive and wanton lending was at the core of the troubles and that the crisis was exclusively financial in nature. Since 2002 the emerging recessionary signs were assiduously ignored by virtually all mainstream quarters. Fall 2006 witnessed the beginning of sagging economic growth, falling housing prices that prompted a severe slowing of new housing starts and sales, and gradual increases in jobless applications. The fact that throughout the first decade of the new century plants continued to close and reduce workforces (not only in the Midwest but in the South as well) was not registered as a sign of a slowdown in the midst of so-called “prosperity.”

Indeed, the erosion of US manufacturing was barely noticed in official circles. According to the conventional wisdom the US economy had become “post-industrial” -well on the way to realizing the belief that ours is a service economy and that it is better to let others such as the Chinese and Koreans produce material goods. If the US remained a major producer of food, armaments (for national security reasons), aircraft, heavy machinery such as machine tools, trucks and specialty steels, these were necessary to maintain our trade balances, but were not otherwise fundamental for insuring economic health. According to postmodern economics our future lay in specializing in various forms of “immaterial” production. So, we could afford to lose the remnants of once huge garment and textile production industries, even when it was already certain that the US was no longer the center of basic steel and car production. Software, research, and the growth of higher education (both as the center of innovation and, in terms of employment and capital formation, a major industry), pharmaceuticals and other activities linked to the health care industry, and entertainment, would surely fill the gap left by the demise of the “rust belt” industries. And so what if the past thirty years were times of wage stagnation and decline, we had perfected a magnificent credit system (the main spur to consumption) that seemed to know no limits. Or so the story went.
The bare truth is that what has been taken as economic expansion since the early 1970s was a symptom that the United States (and the UK and other European countries) have survived a genuine period of economic decline by means of a dramatic increase in the creation of huge amounts of fictitious capital. Fictitious capital is a speculation on future economic performance. Fictitious capital is an ordinary function of the credit system: manufacturers borrow and lend money from each other and from banks to finance purchases of raw materials and labor on the promise of a future repayment when the value of their products is realized through sales, either within the production sector or through wholesale and retail purchases. But when these such loans are exchanged by banks to businesses and non-commercial consumers on a long-term basis at exorbitant interest rates, and and when these loans become the basis of at least 2/3 of economic activity, an element of systemic instability emerges. And when when consumers or business owners default on their payments on a large scale, and when finally the bubble bursts, the whole system reverberates collapse.
Which is exactly what happened. Small producers, retailers and building contractors would routinely borrow money from banks or other lending institutions with which to purchase raw materials, rent stores or industrial facilities and hire labor – on the premise that consumers would in turn receive loans from lending institutions and have sufficient income sufficient to pay their credit debts on time. But as the the edifice of debts finally collapsed and credit flows froze, what Marx termed a “realization” crisis ensued—commodities cannot be sold at profit rates that are sufficient to stimulate further investment in plant, equipment, construction and labor. In order to alleviate their inventory glut business is obliged to reduce prices, but this tactic may take years before capital investment on a grand scale resumes. As long as deflation lingers new investment is bound to remain tepid. What follows is a period of layoffs, downsizing, and falling prices. Many American dreams of homeownership become nightmares as the amount of the mortgage loan exceeds the exchange value of the home.

For thirty-five years, the private sector has not produced a net increase in good jobs. The work it has offered is increasingly low-wage, temporary and contingent; it work usually carries no benefits and is often of a casual nature. The growth of jobs in computer-mediated services and software production was counterbalanced by losses in manufacturing; job losses due to mergers and acquisitions in the retail industry were barely matched by growth in fast food employment. Over the past decade, as the private sector failed to create new jobs but relied increasingly on contingent and temporary labor to meet short-term labor requirements, the public sector (especially education and health care), became the main source of new, decent paying jobs. As the Federal government abdicated responsibility for a variety of services, state and local bureaucracies added jobs. Of course, besotted by the conventional neo-liberal ideology that only the private sector is a job creator, economists and politicians conveniently ignored this fact and continued to insist that whatever the service, the private sector can do it better, and more efficiently. What net increases in private sector employment occurred were largely, if not exclusively, the result of contracts awarded by federal, state and local governments who adopted both the mantra and practice of privatizing public goods. Although industrial production held steady, factory jobs stagnated during the boom because computer-mediated production began to dominate key industries and, contrary to the hype that computer-based manufacturing creates more jobs than it destroys, the reverse is actually the case. And eventually the technology sector, of which the bubble in software and communications (dot.com) companies were the leading edge, burst; as early as 2000, this sector began to experience mass layoffs, the effects of which were noticed for about fifteen nano-seconds but quickly relegated to the back burner.

A New ‘New Deal?

Five prior administrations beginning with Carter relied on monetary policy to address economic problems (interest rates were their major tool) and had strenuously avoided using the tool of fiscal stimulus—that is, increasing spending on public goods and consequent job creation and income support—to address economic grief. After flirting with the possibility of a job creation program, the Obama administration opted for the historic model, exemplified by the Federal government’s solution to the Savings and Loan Crisis during the 1980: bailout at the top. Given the depth of the 2007-2010 crisis, the Obama administration proposed a stimulus plan of nearly $750 billion, exponentially greater than the miniscule $25 billion it originally pledged. Some jobs were saved, but few were created. We should not expect miracles because job creation is far down the priorities list of the stimulus package: after 18 months of official recession, the emphasis remains bank and insurance bailout, intended, ostensibly, to loosen credit. Liberal economists like Paul Krugman, for example, have consistently urged that another trillion dollars be injected into the economy, chiefly to the financial sector. The economic policy of the Obama administration focuses on finance, and indirectly, on re-stimulating the debt-based consumption that led to the crisis in the first place. It is clear that beyond the creation of more fictitious capital, the Obama team has few alternative ideas.

Nevertheless, as he took office, the new president promised to save or create 2.5 million jobs in his first term. To begin with, Obama has warned that the 2.5 million job figure is a long term projection. How much money would it take to create 1 million jobs, about 7% of current unemployment? This is a tricky calculation. Would the program(s) be contracted out to private employers or would the government be the direct employer? If contracts are let at 30% gross profits, fewer jobs would be created. And what average wage would be offered? Would the government insist on “prevailing wages” as in the construction industry? If the new jobs paid 50% above the poverty level, for example, they would match the current national average of about $20 an hour. The sum required to create a million jobs at prevailing wages, would range from $60-$75 billion annually, depending on whether the Obama administration replicated the New Deal practice of government as direct employer or continued the extant policy of privatization.

There is also the problem of contracting out these activities. During the Great Depression, the Works Projects Administration, a government agency, was the direct employer; today, in the era of privatization federal and state governments often contract to private companies to perform these tasks. This means that profits must be factored into all expenditures; like the privatized US health care system, it is more expensive than socialized production and the job payoff is less. Moreover, under this contracting regime there are fewer controls over hiring practices; people of color tend to be shortchanged. Which would mean that the level of oversight would need to be much more stringent than any administration has been willing to implement. What is the warrant for believing that the Clinton-era appointees who dominate Obama’s economic policy team will be willing to reverse past practices of relaxing government controls, especially if the Obama administration persists in advocating the politics of compromise with a Republican Party dedicated to scuttling any program that would increase government intervention in areas not related to the war and national security.

Progressives hope that Obama will usher in a “new” New Deal. But the New Deal of yesteryear was never intended to pull the United States out of the depression. Even though it employed more than a million workers in government projects, as late as 1940, unemployment still hovered around 20% of the labor force. In 1937, four years after Roosevelt took office, the United States was plunged into a new recession from which it did not recover until the advent of the war economy. What the New Deal accomplished went well beyond its relatively modest economic impact; more important was its ideological and political force. In contrast to Herbert Hoover and the first New Deal’s focus on stimulating economic activity by pouring capital into business corporations, controlling prices and wages in order to foster profits and limiting its direct aid to the unemployed to feeding the hungry, the so-called “second” New Deal put money in the pockets for the jobless through public works and service programs, promised to save small farms from foreclosure through government purchases of crops and paying farmers to retire part of their growing capacity in a land bank. But it was the farmers themselves who, through direct action and mass organizing, sometimes prevented evictions, created cooperative enterprises to oppose the big processing corporations and, even before the depression became official, created their own political vehicles. And, after the mass strikes of 1933 and 1934, conducted without a legal framework for union recognition, in 1935 the National Labor Relations Act guaranteed workers the right to organize unions of their own choosing, established a procedure for official union recognition and collective bargaining, and outlawed company unions and competitive unionism within the same bargaining unit. In short, the second New Deal was a consequence of a popular upsurge, not only the brainchild of FDR and his advisors.

It remains an open question as to whether the organizations at the base of the Obama administration will match or even exceed the achievements of the movements that forced the second New Deal into existence. There is little or no prospect that the deepening economic crisis can be significantly reversed within the current framework of neo-liberal capitalism – at least not when unemployment, wage stagnation and declining living conditions are taken as the relevant indicators. The stock market may rise for a time and prospects for certain professional and technical employment categories may improve, but the situation remains grave for youth, women (whose jobless rate exceeds that of men for the first time since World War II), blacks and Latinos, the elderly and semi-skilled workers.

The Politics of the Crisis

After eight months in the White House, the new administration has demonstrated, to the disappointment of even some of its fervent supporters, that it has virtually no plan to address the growing jobs crisis except through a program of “trickle down.” The most it has done is to extend unemployment benefits beyond the statutory 26 weeks limit, and supplement the food stamps program. Either the Obama administration actually believes that the huge sums handed over to financial institutions and the car industry will, over time, pull us out of the recession or, lacking a genuine protest movement from below, it simply experiences little pressure to do anything different. I suggest that the latter is the case and even some of Obama’s supporters are beginning to come to that realization – witness Krugman, New York Times columnist Bob Herbert and MSNBC talk show host Rachel Maddow’s increasingly critical public comments. The administration obviously believes it has enough breathing room to await an economic turnaround without sacrificing its political standing or directly confronting the large financial corporations with proposals to shift funds in order to directly assist the unemployed and those facing foreclosure. Under these circumstances, its economic advisors have accepted the conventional wisdom that we are in the midst of an ordinary recession which will peak at 18 months to 2 years. Although this length of time is somewhat longer than the last three recessions—2001-2002, 1990-91, and 1982-1983—they believe it is well within the range of normalcy. Skeptics, notably Nobel Prize winners Joseph Stiglitz and Paul Krugman and NYU professor Nouriel Roubini have cast some doubt on this prognostication – but to little effect since all of them generally support the administration’s economic strategy and merely fault it for not being bold enough.

On August 21, 2009, Fed Chairman, Ben Bernanke, looked into his crystal ball and opined that the recession was bottoming out—about the fifth time he made such a statement that year. The statement appeared to be geared to the stock market and intended to assuage popular fears that the recession was damping home sales and creating more uncertainty in the labour market. Few in the public debate and certainly nobody in the ranks of policy-makers has heeded the warnings that persistent job loss and lackluster consumption were weighing heavily on the prospects for economic recovery. In fact, in numerous statements, the president himself has warned that unemployment would grow well beyond the declaration of official recovery, a tacit acknowledgement that substantial Federal jobs and income support are not on the horizon.

Obama’s poll numbers declined in summer 2009, a reflection of growing disappointment with the performance of his administration on the economic crisis, health care reform, and the accelerated war in Afghanistan. But polling is only an indicator of public sentiment. As “progressives” fret, the organized opposition to Obama’s programs still comes mainly from the Right. Liberals are divided between those who, in fear of Right-wing putschism (which recently displayed its strength in a plethora of town meetings on health care reform), are clinging to the administration and those who wring their hands and voice their disappointment more loudly. But neither the labor movement nor the mainstream of the civil rights, feminist and environmental movements are prepared to openly oppose a Democratic administration on a broad range of economic issues.

The seriously divided labor movement regularly issues statements calling for a jobs program but has, until now, shown no political will to mobilize its own still vast membership (16 million)—as it did during the 2008 elections when it handed $250 million to the Democrats—to demand a share of the trillions that the Bush and Obama administrations have given or lent to a few key Wall Street banks and insurance companies. Progressives in the main liberal organizations, intellectuals and the AFL-CIO and Change to Win leaderships have replied to criticism that they are willing to give Obama “the benefit of the doubt” and have stood idly by as joblessness spreads. Until Spring 2009, Organized Labor’s main legislative priority was Congressional passage of the Employees Free Choice Act (EFCA), which would have required employers to recognize unions on the basis of card-checks rather than a mandatory secret ballot election. When the administration and the Democratic Congressional leadership pronounced the bill “dead”, the unions – notwithstanding brave words to the contrary – folded their tents and followed the administration’s call for rapid passage of health care reform. But at no time in the first year of the Obama administration did they put the dire economic situation facing workers at or near the top of their agenda.

The reasons for the unions’ passivity, even as their membership and economic power continues to wane, should not be sought in conspiratorial theories of perfidy or complacency. According to such views, union leaders have simply lost their edge. That is, they sit on top of a bureaucracy that tends to inure them from rank-and-file suffering: while workers are straining under the burden of job losses, stagnant wages, employer demands for “furloughs” and wage reductions, and rising food and health costs, their leaders seem to have other fish to fry. While there is some truth to such perspectives, they fail to address the deeper causes of labor’s organized passivity in the economic crisis. Perhaps the least noticed among these is the degree to which the unions—and the social movements that arose during and after the 60s—have become what C. Wright Mills once termed a “dependent variable” in the political and economic “set ups”: the unions—and the movements—lack autonomy from either the state or the corporations with which they bargain; they experience themselves as subordinate to and dependent on these institutions. While these relationships can easily be characterized as instances of “class collaboration”, what often remains unexplained are the origins of this situation and the forces that maintain it. In what follows I would like to venture an informed speculation.

Historical Transformations

Since the 1950s, Organized Labor has hitched its fate to capital. During the Cold War it shed all of its socialist ideas and a good number of its militant socialist and communist activists as well. In fact, union leaders have come to believe that capitalism is in their and their members’ best interests and that full-blown systemic opposition is tantamount to political and economic suicide. This attitude was already encouraged during the heyday of the New Deal, but reached its apogee during the Cold War – when the permanent war economy and US global economic power enabled key sections of the American working class to achieve an unprecedented degree of job and income security. Of course, a major element in the new perception that workers were an integral part the corporate capitalist order was the initiation by the state and its financial partners of an extensive credit system that permitted working-class people to borrow money with which to own their homes, send children to college, go on vacations, and regularly update their cars.

After the defeat of Congressional legislation that would have established a National Health Service and the stagnation of the social security (pension) system, unions in key industries (such as steel, auto, coal, electrical, communications, oil and transportation) negotiated a “private” welfare state with their employers, thereby taking the air out of efforts to enact a publicly-financed universal health care program and extend the welfare state. The bare truth is that since the passage of the Wage-Hour law of 1938, the only major extension of the welfare state was Medicare, passed in 1966. While the unions can take considerable credit for its passage, they were moved only to apply the necessary pressure after they found that “their” corporations refused to insure retirees.

These deals were of a tri-partite nature. In most cases, the health and pension contributions were paid in lieu of wages and to private insurance companies, even where the union administered the services. Since 1955 many major unions have become “partners” with some of the leading insurers who provided benefits in return for fairly substantial fees. Moreover, the provision of benefits under the union contract rather than under public authority allows union leaders to claim credit for health and pension improvements and so gave them a political base (needed for reelection to union office) that would not have been available under socialized medicine. In some instances, the traffic between unions’ health and welfare staff and these private insurers was fairly heavy. Many unions hired consultants from Wall Street firms to advise them on how to handle their benefits programs. During the fiscal crisis of 1976-77 these consultants actually acted as intermediaries between the union leadership and city officials in New York, Detroit, Chicago and elsewhere who successfully persuaded the unions to grant concessions, most of which are still in effect.

In 1975 union membership was about a quarter of the labor force. This was down from 35% in 1953, but organized labor was still driving wages and benefits levels for all workers. Having organized millions of public sector employees, the AFL-CIO was not only a powerful fraction of the national Democratic Party, but was also able to name many of the party’s candidates at the state and local level. But the “rational” basis of Labor’s close alliance with capital began to vanish in the 1970s. The last thirty years have witnessed the massive deindustrialization of America and a profound decomposition and recomposition of the working and salaried middle classes. Except in the public and health care sectors, union organizing slowed to a crawl. By 2009 union membership was only 7% of the private sector labor force and slightly less than 12% of the entire labor force. Today, what was once an industrial union base of 7 million members has been reduced to less than 2 million. And the composition of that membership has radically changed: public and private sector service and transportation employees are now, overwhelmingly, the majority of union members.
In the main, having bowed to the view that globalization and technological innovation are engines of “progress” and that workers’ pain was temporary, the unions accepted the inevitability of these losses. After conducting a fairly vigorous campaign to defeat the North American Free Trade Agreement in 1993, the bulk of Organized Labor has settled for crumbs at the table of capital. When some auto, meat packing and steel workers locals protested capital flight or refused to accept concessionary bargaining, the national leaderships ruthlessly suppressed these movements, sometimes by agreeing to plant migrations used by corporations to thwart militants. For example, the UAW leadership looked benignly on as the big three auto companies removed plants from the Detroit area and Flint—the heart of the union’s traditional strength—to the American South and to rural areas. Belatedly, they took something of a stand against outsourcing auto parts production to Mexico, China and other developing countries – but they presented their objections in the form of crass “Buy American” slogans.

The union leadership—and a considerable portion of its members—are suffused with fear that if they conduct a determined struggle against wage freezes, pension and health care reductions and plant closings, they will lose everything. They are facing capital without weapons that they believe can win. The past thirty years of steady retreat is a tale of collective worker anxiety as much as corporate boldness in testing workers’ resolve to protect their hard-won gains. The so-called Treaty of Detroit, whereby the Auto union all but ceased its shop-floor militancy in return for regular raises, early retirement with a substantial pension, and a reasonably good health benefits program, has been dead for almost thirty years now. The bare truth is that the UAW and other unions have no strategy that takes into account to counter the fact that the post-war era’s tacit “treaty”—in auto, steel and other major industries—between labor and capital of the post-war era was abrogated by management and that capital has no interest in a new accord that would constrain its room to maneuver. In the face of a situation where they have no place to turn except to their families and their communities, workers have beat a steady retreat, forever setting up new rear-guard positions until the ground appears to have completely shifted under them. It is no exaggeration to claim that the United States working class has become invisible in the public sphere and to itself as a class. Workers now often seem , often despondent, seem caught in a sado-masochistic relationship with not only with capital and but also their own their union leaders who are often indistinguishable.

We have witnessed several generations of labor’s dependence and at least a generation of workers that have never experienced a victory over capital. The political defeat of the unions has reverberated throughout the entire society. The basis of this broader effect of labor’s decline should be fairly clear: apart from the Churches, the unions remain the largest, most resource-blessed and visible force in the modern liberal camp. Their demise has reduced the prospects for the less organized sectors of society that remain relatively unprotected from the vicissitudes of the economic crisis. In the absence of meaningful struggle at the level of civil society and the workplace, millions have turned to electoralism in the hope that government can solve their problems, i.e. to a Democratic Party taken over by neoliberal interests and ideology. The 2008 Obama victory was based on these hopes but is already in the process of producing widespread disillusion.

The Politics of Distraction

Labor’s reliance on Congress and the Democratic Party may be interpreted as a strategic shift from the relative autonomy unions enjoyed until the late 1940s. Although some of the “progressive” unions joined the Roosevelt coalition during the 1930s, most of this alliance was forged at the national level. At the local level, most unions still relied on their own shop floor forms of direct action. One of the Treaty’s main provisions was union agreement to observe a “rational” process of adjudicating the thousands of grievances that regularly glutted the channels of contract enforcement. Most of the grievances resulted from management’s willful abrogation of the provisions of the bargaining agreement. Where once most of these grievances were settled on the shop floor, by the early 1950s their resolution became subject to a complex bureaucratic process that ordinarily favored management. The move to political action within the framework of the two-party system was a sign that some quarters of the labor movement had given up its weapons of economic independence.

Despite growing skepticism about its policies, the Obama administration does have a well-articulated strategy to keep its labor, social movements and liberal intellectual base quite busy: it has successfully shifted the ground of the debate from the economy to health care reform. The decision arguably reflects the orientation of the administration toward the crisis: it has adopted a program that implicitly views rising unemployment as a symptom that can only be addressed by alleviating the financial crisis, and even then only eventually. To be sure, the provision of universal health care has long been on the progressive agenda. During the New Deal, and again during the fight for a National Health Service in the late 1940s, the proposals, like in Europe, were to finance universal health care through the Federal tax system. As was the wont of the Roosevelt administration, health care would be subject to a separate tax from income levies. Such is the case for social security, including Medicare. But the Obama administration has chosen a piece-meal approach to the issue. In the first place its program is to address the needs of the 50 million uninsured by offering a “public option” to enable all citizens to buy low-cost insurance, in addition to which it would increase social security taxes. So employer-based and personal insurances would not be replaced under the Obama/Democratic Congressional plan. The plan supplements existing health insurance programs and is intended as much to regulate costs as to extend benefits. As many observers have pointed out, the Obama plan amounts to a bonanza for for health insurers and, more generally, the health and pharma industries.
By mid-year the unions and liberal organizations had, in effect, turned their backs on the effects of the economic crisis and were primarily concerned to defend the Obama administration’s health program—which included a publicly-financed health insurance option. They were quickly forced to defend it not only against relentless conservative opposition but also against suggestions by members of Obama’s own administration that the public option could be dropped if it stood in the way of passing a bill. Despite the threat issued by the next presumptive AFL-CIO president, Richard Trumka, i.e. that Organized Labor might sit out the next election if the Democrats do not pass a public option in their health legislation, there is little doubt that he would have great difficulty putting his money where his mouth is. Labor is so intertwined with the Democratic Party that any actions that might result in its distancing would surely generate significant internal opposition.
The Left’s relation to the economic crisis, to health care debates and to the Obama administration tends to reflect the actual relations of power in American politics. That is, none of the existing forces to the left of the administration have either the credibility or the political will to intervene on the basis of an anti-corporate capitalist approach to the crisis. Perhaps its most effective intervention over the last two years is to have launched a national campaign for single payer—i.e. socialized—medical care. More than five hundred union locals, state and local labor bodies have endorsed the campaign; thousands of physicians, the 60,000 member California Nurses Association and some important national unions (e.g. The United Steelworkers, The United Auto Workers, American Federation of Teachers) have formally endorsed the single payer option. And it is a growing movement. Even as the Obama plan remains stalled in a series of compromises which will cripple the effectiveness of the version that Congress will ultimately pass, it may be that the fight for single payer will constitute the best option for Left intervention in the near future. Compared to the monumental task of reversing neoliberal economic policies across the board, health care is a manageable fight.

But on the fundamental politics of the economic crisis, on the class nature of the Obama administration’s program, for instance, the Left has been unable to mount either a counter-movement or to propose an alternative that can gain some public traction. At the local level, there are some attempts, initiated by community organizations, to organize the unemployed and stage small protest demonstrations against the banks’ takeover of the stimulus package. But the Left has been unable to forge an independent position in the debate. It remains reactive, on the one hand, to the retreats by the Obama administration and, on the other, to the expressions of disappointment by progressive and liberal public intellectuals. With some exceptions, the Left shared an expectation that Obama, who ran on a centrist platform, was really somebody else. But the fault is not his. Obama never pretended to be more or less than he is. As one commentator has stated: illusion leads to disillusion. On a more accurate understanding of the character of the Democrats and the political perspective of the Obama camp, there was never ground for either position.

In the main, the Left has become a dependent variable of the progressives, the liberals and the movements that provide their social and political base. Lacking a “party” of its own (by which I mean not a third electoral vehicle, but an independent radical political formation), the diverse individuals and institutions of the Left remain buffeted and uncertain where to take their stand. Some are tied to the same electoralism that has afflicted the once vibrant movements. Against all evidence to the contrary, they harbor vain hopes that the progressives can push the Democratic Party to the Left and so loosen its ties with financial capital and force the Democrats to move on pressing economic and social issues. Others, imprisoned by “third party” electoralism, are confident that disillusioned progressives and a section of labor and other movements will become the political base of a new national party. And still others contemplate their retirement from politics and a peaceful return to private life.

Perhaps the most interesting are those who are engaged on two, quite distinct fronts: labor and community activists who fight, chiefly at the local levels, for a politics of resistance and alternative. Their ranks are relatively thin, but in some places they have enjoyed some success in opposing gentrification, creating significant environmental initiatives and building unions that are not of the bureaucratic mold. Others are exploring the concept of new radical political formations, some from anarchist and others from non-dogmatic Marxist perspectives. In this camp are not a few black and Latino intellectuals and a smattering of whites who refused the blandishments offered by the progressives within the Democratic Party and on the sectarian Left.

The real problem for the Left is that it has no firm moorings on which to build new radical political formations. Postmodern politics has effectively undermined the concept of the totality, mislabeling it “authoritarian.” Many hesitate to develop theories of practically anything and have instead resigned themselves to either identity politics or single issue struggles without making an effort to link them together. Notions of the supersession of class and political economy make it impossible for them to confront the economic crisis or engage in a politics that links issues together and transcends local struggles. But theory should clearly be at the top of our list. While this is not the place to elaborate such a theory, I want to conclude with a set of questions that urgently need answers if the Left is to have a chance at making practical interventions that make a difference in facing the crises of our time:
  1. As a starting point the Left must call into question many of its own presuppositions, its taken for granted assumptions, the unstated theoretical basis of its own politics. For example, should the Left ask whether the working class—and the trade unions—have the ideological capacity and the political will to remain at the heart of radical hope? And if we are still socialists, what does this mean in the light of the failures of the Communist and Social Democratic versions of socialism?
  2. What is the significance and content of the race question in the United States? Has the Left made an adequate contemporary class analysis of black and other subaltern formations in order to discern the patterns that have conditioned the black and Latino freedom movements? Do we have an adequate understanding of the race/class articulation?
  3. Although the state remains the primary scene of politics, in view of the global character of capital, what are the relevant global forms of class organization and struggle?
  4. What is the role of political intellectuals in the struggle for a new society?
  5. Is reform still possible in contemporary capitalist societies? Or have we reached the point where we should expect struggles for reform to almost inevitably be frustrated? Then what? In this connection, note I have not outlined an alternative program of economic policy. If state and capital have become so tied together that the demand for “government action” is likely to mean strengthening those ties rather than transferring power and resources to the people, what are the new targets of struggle?
  6. What is radicalism’s conception of democracy? To what extent can liberal representative political institutions be incorporated into a radical democratic society? Or must they be replaced, root and branch?
  7. How does the rise of the new immigration of the past quarter century bear on Left political perspectives everywhere?
http://www.stanleyaronowitz.org/new/facing-the-economic-crisis