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Thursday, November 8, 2018

Where is the Economy Headed?



Headlines such as “World Stocks Fall to Two-Year Low” that appears in today’s (October 30) Wall Street Journal have many wondering if the tepid recovery from the 2007-2008 crash is finished. Since mid-Summer, the Shenzhen Composite, FTSE 100, Stoxx Europe 600, and other benchmark exchanges have steadily declined, with the US Standard and Poor’s joining them over the last few weeks. As author Akane Otani notes: “After a punishing October, major indices in Europe, Japan, Shanghai, Hong Kong, Argentina, and Canada are languishing in correction territory-- a drop of at least 10% from a recent high. The US is teetering on the edge of joining its peers…”

The Stock Market Fetish

Like Gross Domestic Product (GDP) and the Unemployment rate, composite equity performance is a limited measuring stick of the economy’s health, though it is favored by popular mainstream pundits and celebrity economists. As such, all three become the grist for the bourgeois political mill. Invariably, they soon obscure more than they enlighten.

So what do the markets tell us?

In some parts of the world, they signal that stimulus programs have failed to revive stagnant economies (e.g. EU, Japan). Additionally, measures of manufacturing growth have declined for nearly every segment of the global market since the beginning of the year (emerging markets, EU, Japan, etc., excepting the US).

Last week’s EU quarterly GDP figures confirm the European Union’s persistent stagnation: the aggregate growth for the European Union’s 19 members was a mere 0.6%, the lowest in 5 years.

For the US stock market, on the other hand, highs and lows are more intertwined with policy decisions, financial manipulation, and speculation. Thus, the market euphoria of the last few years did not reflect real economic fundamentals, and the current volatility does not foretell an imminent collapse. Instead, US stock exchanges have thrived on nearly free money and a Federal Reserve that removed all of the “asset” flotsam and jetsam lingering in the wake of the 2007-2008 collapse. But the usual shakeout of less profitable, damaged firms was incomplete, thanks to the availability of money at interest rates suppressed by the central bank, the Federal Reserve. The low interest-rate environment was especially favorable to high-tech firms (slow to show sufficient revenue growth), emerging markets (hungry for low interest foreign loans), and small capitalization enterprises that should have sunk into oblivion because of investment unworthiness after the meltdown.

For the behemoths of monopoly capital, low interest rates in the wake of the crisis allowed for an orgy of mergers and acquisitions and stock buybacks that electrified equity markets without creating any socially useful results. In others words, the era of interest-free money buoyed up a leaking capitalist ship that predictably converted the gift into market “value” and profit.

Wiser heads in the Federal Reserve understood that if it continued to be a wet nurse for mature capitalist enterprises, asset inflation would continue unabated. Investors would wake up and see that there was no ‘there’ there and punch a hole in the market bubble.

Consequently, the Fed began a program of gradual interest-rate increases to slow the promiscuous borrowing that was fueling asset inflation. Industries like Technology, Finance, and Communication were particularly vulnerable to this program since their earnings growth stood well beyond their more modest growth of revenue.

Nothing shows the weakness of the overheated market more than the Initial Public Offerings (IPOs)-- the first stock offerings of newly public companies. So far in 2018, fully 83% of IPOs have been conducted for companies that have lost money in the last 12 months, a figure greater than that leading to the dot-com crisis year of 2000.

It is no wonder that the Federal Reserve, fearing an asset bubble, has put the brakes on. And it is no wonder that capitalists are caught between the responsibility of managing capitalism as a system and the ecstasy of operating with free money, the contradiction between systemic discipline and unrestrained accumulation.

Leading Indicators?

But if the stock market is a not-so-reliable guide to the health of the US economy, what are more reliable markers?

On the surface, the US economy is uniquely healthy in the midst of global stagnation or decline. The television hawkers of economic news herald the GDP growth rate in the second (4.2%) and third (3.5%) quarters of this year, numbers well above the post-crash averages. Similarly, the pundits are in awe of the officially reported low unemployment level. And they point to the less impressive, but welcome growth of wages in recent months as further evidence of a vibrant economy. They are less forthcoming-- embarrassed, perhaps-- about the explosion of already robust earnings (profits) in 2018.

Likely, this photo-shopped picture of the US economy will benefit Trump and his candidates in the elections. The warm and fuzzy picture is conveyed by the so-called leading indicators. But if we open the hood and look more closely at the capitalist economic engine, we get a somewhat different picture.

Behind the 2018 GDP growth are several contingent factors, including the Trump tax cut. But unacknowledged by many is the increase of government spending, largely military. Nearly half of the year-to-year growth-rate increase through April was accounted for by government spending alone, two-thirds of which was directly for the military. The bipartisan endorsement of an obscene military budget pumps up Trump-era growth as it has for many previous Presidents (remember Reagan?).

Fully 1.22 points were added to the 4.2% 2nd-quarter growth solely from global trade, the overseas purchase of US products like soybeans before the onset of the Chinese retaliatory tariffs.

And third-quarter GDP growth was equally a result of consumer spending (highest growth since 2014) and the aforementioned growth in government spending.

Despite the hollow celebration of rising wages, the aggregate numbers mask an important reality: Labor Department figures show that the greatest growth in weekly earnings accrue to the bottom 10% of earners (+5%) and the top 10% (+3+%), while 80% of US workers now see their incomes grow at a level only marginally above their cost of living.

While growth in income for the bottom 10% is welcome, it results only from the tight labor market in low-paying jobs, the largest source of job growth since the crash. The pressure on that segment underscores the hollowness of the employment recovery.

The US capitalist “recovery” has relied on the availability of low-wage labor. The collapse of 2007-8 generated a veritable ‘reserve army of unemployed’ willing to accept low-paying jobs, absent union militancy. Consequently, the capitalists have felt no need to invest in productivity-enhancing equipment-- it is cheaper to hire minimum-wage workers than invest in new machinery. Therefore, the last decade has experienced tepid growth in labor productivity demonstrated by 32 straight quarters (8 years!) of sub-2% productivity growth, but strong profitability, unprecedented in the post-World War II era.

Most of the growth in consumer spending is fueled, not by workers’ pay, but by additional borrowing and more people working more hours. US household debt hit a new high in the 2nd quarter; debt continues to rise faster than income for the average US citizen.

Fundamentals

Contrary to the promises of the Trump Administration, the deep cut in corporate taxes along with the 21% increase in profits in the 3rd quarter have produced little increase in business investment. Growth in business investment was a mere .1% in both August and September.

A key measure of core industrial production—durable-goods orders excluding military orders-- declined 0.6% in September.

Retail spending-- a core element of consumer spending-- rose by only 0.1% in both August and September.

Two other critical components of consumer spending-- auto sales and home sales-- are flashing danger. Auto sales declined steeply by 6% in September, after a mostly sluggish year.

And home sales, a huge element in the US economy has tanked. New-home sales declined in September by 5.5%, the slowest rate in 2 years, and the latest month of a four-month slide.

Existing-home sales, a far bigger part of the housing market, declined by 3.4% in September, the latest month of a seven-month slide!

What to Expect

While it is true that Trump has been somewhat corralled into being a conventional right-wing Republican, but with his own uniquely vulgar and infantile stamp on the Presidency, he retains unconventional elements of populist nationalism-- the tacit confession that the empire is in trouble and the need to “Make America Great Again.” Both stances play into Trump’s economic policy in unusual and contradictory ways.

Like archetypical right-wing President Reagan, tax-cutting and deregulation drives a Corporation Über Alles approach. 

Like Reagan, the current Administration uses defense spending as the central stimulus for the economy. Since such a policy needs powerful enemies, the two parties have collaborated to concoct Russia and China as the countries to play the role of bitter enemies. The threat of war against China and/or Russia justifies far more spending and weapons sales than a war against Islamists in sandals or weak countries with ancient Soviet equipment.

Trump’s nationalism rejects alliances, pacts, and submission to international constraints, regulation, or authority. Instead, it embraces the economics of sanctions and tariffs; it substitutes the blatant behavior of a bully for the formerly fostered notion of global cooperation. If other countries deny US hegemony, the US will demonstrate it forcefully.

To the chagrin of the Democrats, the popular perception of the booming US economy has calmed corporate fears of Trump’s recklessness and emboldened Trump’s advisors and supporters.

But behind the appearance of economic exuberance is an economic engine running out of gas: key fundamental markers for consumption and investment are slackening, profits are threatened, and major political stumbling blocks lie ahead.

Despite record-breaking profits, compensation costs for capitalist enterprises are eating into those profits. The low unemployment rate has spurred an intense competition for workers. With fewer unemployed available, firms are offering higher wages, salaries, and benefits to wrest employees from other firms.

Further, the rising interest-rate environment is tacking on additional borrowing costs to overall costs, cutting into corporate margins.

And the relatively slow corporate-revenue growth, especially in Technology and Communication, is squeezing profits as well.

The explosive growth of Federal debt further challenges the Trump economy, though only for those wedded to conventional economic dogma. Because of the tax cuts, the deficit expanded by 17% in the fiscal year ending in September to the highest level in 6 years. With rising interest rates, deficit growth will only accelerate. The debt scolds in both parties will be screaming in chorus for budget cuts and spending limits (as they did so often during the Obama Administration). Of course they will argue for the cuts to come from programs and institutions that serve the people. The scourge of austerity will descend again over the economy, producing the readily predictable result of dampened growth.

The Trump Administration is battling the Federal Reserve over the issue of interest rates. The Fed is attempting to raise interest rates to take the oxygen out of the economy and evade speculative bubbles. Trump, on the other hand, wants low rates to pump oxygen into the economy to secure the continued growth that he has promised. Neither approach will save the economy from the turmoil ahead.

Next year will bring stagnation, if not economic decline, for the global as well as the US economy. Inevitably, capitalism will attempt to place the burden of the system’s failure onto the backs of working people. It will sell austerity as the palliative for that failure, another sign of the bankruptcy of the system.

Some will fight to fix the capitalist system, to reform it. Others will struggle to replace it. The goals should not be confused. They are different projects. Only one can promise a humane, peaceful, and sustainable world.

Greg Godels

Friday, October 19, 2018

The Lemming Effect and the Left

 With two weeks before the mid-Presidential-term US elections, the number of Democratic Party political solicitations in my e-mail inbox now approaches fifty a day. The curious-- “cynical” might be a better word-- thing is that none mention a genuine issue, none suggest an argument for a cause. All come with a folksy tone, an easy familiarity (from Bob, Chuck, Nancy, or Michelle) and all presume that I’m on their “team’  with cash at hand. The cheap emotional card is pulled frequently-- “Do you want to wish President Obama/Michelle Obama/Nancy Pelosi a happy birthday?” or “You didn’t respond to our request, do you HATE Bob Mueller?” Some are scolding: “TRAGIC ENDING. I [Nancy Pelosi] e-mailed yesterday. Barbra Streisand e-mailed. Harry Reid e-mailed. Now I’m e-mailing again…” And some are foreboding: “This is bad news…” One of the hilarious best: “Hi Friend, I just got off the phone with Senator Menendez, and he asked about you specifically.” Sure, he did...

But not a serious issue, an urgent cause, or a principled stand revealed.

Despite the lack of issues, not to mention a program, the Democrats fundraising tactics are working: ActBlue reports that Democrats raised $385 million in the third quarter alone, more than they raised in the entire 2014 midterm effort. Clearly, Trump-hating, even in its most visceral form, pays off.

However, the fund-raising orgy comes with a cost to democracy. Over 60 contested house seats sought by Democrats drew over a million dollars in campaign-fund donations in the third quarter alone compared to only 3 in the same quarter of 2014. The price of running a competitive campaign has risen dramatically (Source: WSJ, 10-16-2018).

Texas Senate Democratic hopeful Beto O’Rourke, a frequent solicitor appearing in my inbox, raised $38 million in the third quarter.

To date, Democratic House candidates have scheduled $122 million in TV commercials (Republicans $67 million) (WSJ, 10-16-18). It should be obvious that such fund raising is beyond the reach of truly independent candidates. The financial bar is set far too high to forego support from corporations, other well-heeled organizations, or wealthy contributors and expect to wrest power from Democratic or Republican incumbents. Accordingly, democracy is further stifled.

The notion of an authentic grass-roots campaign has nearly disappeared from the arsenal of the two major parties.

While posturing as a “people’s party,” the Democrats have largely substituted emotion for issues. Hatred of Trump and fear of Russia have served as the catalyst for the 2018 campaign. The Democrats have crudely sought to fold the two emotions into a brew disconnected from the sinking living standards, growing insecurity, and uncertain future of working people. A truly meaningful assault on Trumpism would necessarily target Trump’s pro-capitalist measures, cast light on betrayals by the Democratic Party, and underscore the failings of the two-party system, consequences that Democratic Party leaders dread.

It is no wonder that some commentators are describing political behavior today as “tribal.” In place of principled differences, the two parties have urged an amalgam of brand loyalty and blind faith. Stoked by a corporate media with its own interest in masking class-based issues and promoting imagery of class harmony, personal invective, anonymous charges, rumors, and internet gossip constitute the substance of political debate today. We have a reality TV-star President for reality-TV political theater.

After many decades of rightward drift by the two-party monolith, it is exceedingly difficult to find even a glimmer of hope that either party can be wrested from its corporate mooring. Yet hope does spring again and again with large sections of the US Left which attempt to pry open a door and commandeer the “people’s party,” a task now embraced by the youthful veterans of the Bernie Sanders campaign.

Our Left

With the last Presidential election, growing dissatisfaction with centrism found a home with Trumpism, a process that previously fueled the Tea Party movement for the Right. The Left experienced a similar distaste for centrism, a counterpart process that fueled the Bernie Sanders campaign-- a candidacy quickly subverted by the Democratic Party leadership.  

After the election, disenchanted young Democrats found expression in the nominal political residence of their pied piper: Democratic Socialists of America (DSA). DSA provided an organization; its burgeoning numbers provided energy and impact; but it left the youthful activists in ideological limbo, torn between a slapdash socialism and a decadent Democratic Party.

Like endless numbers of their predecessors, the youthful idealists are preparing to exhaust their principles and vision on the bastion of hypocrisy, the Democratic Party. Inexperience may excuse this illusion, but older veterans of the Left know no similar excuse. They have witnessed the subversion of George McGovern’s Presidential campaign, rallied around an exciting 1976 Democratic national platform, only to see the sanctimonious Jimmy Carter quickly run away from it. They have observed the Democratic Party leadership wilt in the face of right-wing reaction, abandoning the New Deal gains piece by piece. They have supported “insurgents” like Jesse Jackson or Howard Dean, only to see the dissidents pacified and escorted back into the fold.

It is a long and tortured history of failure, Don Quixote-like journeys to wrest the Democratic Party from the grip of its corporate owners. Sadly, many who embarked on these journeys were lost by the Left; disappointment bred inaction and cynicism.

Beyond the socialists (DSA), the US left is a small, largely electorally irrelevant motley mix, stretching ideologically from center-left liberals disenchanted with the Democrats to committed Marxist-Leninists.

Despite the fact that their endorsements or support will have virtually no effect on the outcome of the interim elections, the predictable stampede to support the Democrats has begun. Grandiose exhortations to stop Trump will serve as coded messages to support Democrats in the interim election. The ideological bankruptcy that fails to put promoting third parties, independent candidacies, anti-monopoly coalitions or advocating for socialism ahead of unconditional support for Democrats guarantees that the rightward two-party drift will continue, Trump or no Trump.

Unconditional support for Democrats reinforces the two-party stranglehold in two ways:

  1. It acquiesces to the already prevalent view that there is no other route to progressive change.
  2. It thwarts the development of third parties or actions that will disrupt the grip that Democrats have upon the Left.

That grip is continually strengthened by the insidious material influence (money!) spread by foundations, nonprofits, think tanks, right-wing labor organizations, etc. that enables the Democrats to capture the Left. And of course many reluctantly support the Democrats because they fear the ire of their allies in the broader mass and labor movements.

For decades, Leftists have explained their support for Democrats through a clumsy, misappropriation of Marxist-Leninist theory. Many have advocated a “United Front” tactic in the face of what they perceive as the threat of fascism. Specifically, Republican Presidential candidates-- Nixon, Reagan, Bush II, and now Trump-- are seen as harbingers, if not bearers of fascism. It is a bitter irony that much of the 1968 Nixon-era Republican platform would appear largely acceptable to today’s Democratic Party leadership.

But the fascism of the first half of the twentieth century does not figure in the crises facing the US today. Fascism was a ruling-class response to a dire challenge to its rule spawned by disillusionment from a bloody, but meaningless World War, crushing economic crises, and, especially, the political challenge from a powerful revolutionary Left.

Those conditions simply do not coalesce in the US at this time.

Instead, the ruling class in the US (and many other countries) faces a crisis of the legitimacy of the centrist parties that have ruled throughout the Cold War until today. Opinion polls in the US (and many other countries) show nearly non-existent confidence in the long-standing ruling parties. The Trump phenomenon and the Sanders experience demonstrate that dissatisfaction, no matter how imperfectly. The electoral successes of non-traditional parties in many other countries equally demonstrate a popular desire for a new course, a new direction.

One can bury one’s head in the sand and refuse to recognize the mass shift in political allegiance; one can continue to slavishly tail the Democratic Party or the now-discredited, corrupt parties of social democracy; one can choose to embrace the myth of containing the barbarian hordes; but this moment is different, demanding different strategies.

The Left must discard the unproductive, out-of-touch approach of defending the left flank of capitalism and begin an earnest search for a new, independent politics. The growing mass rejection of the old politics demands it.

The Left cannot grow in size and influence if it continues to attach itself to a rotting Democratic Party.

Paradoxically, continuing to support the discredited Democratic Party and failing to offer a credible alternative will only encourage more people to look rightward for inspiration and answers.

Greg Godels


Monday, October 8, 2018

Anti-Racism: Back to Affirmative Action



The situation of blacks in the workplace without AA [Affirmative Action] is not difficult to imagine. The racist impact of irrelevant job requirements will continue, perpetrating the victimizing effects of inferior ghetto education and the racial bias that has denied blacks training and work experience. Unless AA measures reduce the racist impact of seniority-based layoff, blacks will, as always, move down during recessions into unemployment. Should blacks wait until recessions are eliminated (until capitalism is fundamentally restructured) to achieve job security? Without AA, desirable jobs will be distributed through a white pipeline, as an ingrained practice in America’s two segregated societies.

...The aim of AA is to break that racist barrier. Without that pressure, even in an expanding economy, occupational segregation will continue. Blacks will remain second-class citizens. Gertrude Ezorsky, Racism and Justice: The Case for Affirmative Action, 1996.

The question of racial oppression in the US against peoples of African origin remains unsettled well over two hundred years after the country’s foundation.

Some would like to believe that the question was substantially solved after the Civil War with the liberation of African slaves from their bondage.

Still others would like to believe that the question was largely solved with the Civil Rights “revolution” of the 1960s when legal segregation was overturned and historical racially-based legal obstacles to voting were abolished.

And still others would like to believe that the final racial barrier was shattered when Barack Obama was elected, breaking the ultimate glass ceiling.

For many well-meaning liberals, only a mopping-up of the vestiges of racism remains: the abusive impact of language, attitudes, individual relations, micro-aggressions, etc. remain problematic. And, of course, these attitudes can fester into collective violence organized by the police or the so-called “alt-right.” From this perspective, the race question can neatly be absorbed into a vast rainbow of worthy causes, an intersection of dozens, if not hundreds, of group grievances for which liberal academics have concocted an umbrella word: “intersectionality.”

The wholly unique history of depredation and alienation experienced by a people forcibly “exported” to foreign lands for slave labor and subsequently scorned because of skin color is cast into a cauldron of -ism’s that range from the most benign to the most harsh, systemic, and unimaginably violent, elevating the slight and trivializing the brutal.

It is the relativizing of oppression that allows vast numbers of otherwise disinterested citizens to remonstrate against second-hand smoke while ignoring the slaughter of hundreds of thousands at the hands of the US military in its imperial campaigns throughout the world.

African Americans today fall behind their white counterparts in every objective, material standard of well-being, from life expectancy to accumulated wealth. Despite the relative successes of an upper stratum (petty bourgeoisie) of US Blacks who have parlayed education, social or political contacts, professional prowess, ethnocentric entrepreneurship, or fealty to power to its advantage, most African Americans occupy the lowest, most precarious rungs of the US working class.

Black citizens often live in bantustan-like neighborhoods, isolated from better housing, better schools, and better human services. Where Northern, urban African Americans have historically been confined to city ghettos, they are now being ethnically cleansed from inner cities by a process of gentrification motivated by young, white professionals enamored with the amenities of urban living. Today, Blacks are herded into declining suburban ghettos where they were formerly denied residence.

It is no exaggeration to say that the segregation of Blacks and whites is as great or even greater than ever, with a consequent disparity of advantage.

The Liberal Moment

The high point of progress against racism and its effects occurred in the 1960s coincident with the growth in breadth, militancy, and unity of many decades of anti-racist activism. New Deal liberals, prodded by a largely Communist left and CIO working-class radicalism laid the foundation for the direct action and broad-based movements of the 1950s and 1960s.

The Democratic Party, long an unholy alliance of Northern liberals and Southern racists, acutely felt the pressure from this movement. A unique conjuncture of sympathy for an assassinated President’s initiative, the rare audacity of a succeeding President, Lyndon Johnson, obsessed with leaving an historic legacy and repairing the international image of the US, widespread outrage over officially sanctioned violence in the South, and, most importantly, a disruptive mass movement for racial justice culminated in unparalleled legislation expanding civil, political, and human rights for US Blacks. The Civil Rights Act of 1964 and the Voting Rights Act of 1965 marked the high-water point in the struggle against racism. The history since that juncture has been one of defending, enforcing or, most tragically, witnessing the erosion of those gains.

To a great extent, the gains of the 1960s reached the limits of bourgeois democratic, rights-based reform. Unlike a revolutionary change brought on by the US Civil War, a war that overturned an entire politico-socio-economic system (while leaving the deplorable material conditions of Blacks largely intact), liberal reformism promises opportunity but does not promise the delivery of outcomes. In other words, liberal reformism may open closed doors without providing the means to pass through those doors.

The legislation of the mid-1960s opened many doors for African Americans, but failed to offer most of them the material essentials-- the education, the jobs, the living conditions, etc.-- to successfully pass through those doors toward real equality.

Just as the promise of 40 acres and a mule never materialized to liberate former slaves, liberal reformism fails to offer Blacks the socio-economic foundation that would liberate the African American working class in the twentieth and twenty-first centuries. To grant that foundation would challenge the most sacred values of capitalism and open further doors to the emancipation of the entire working class.

The aftermath of the Civil Rights era brought two promising developments: a movement to desegregate public schools in both the South and the North and an emerging commitment to affirmative action.

Beyond the Limits of Reformism?
School Desegregation

Of all of the potential reforms targeting racism, desegregating public schools and forcing children to bear the burden of social change was the least likely to come at a cost to capitalism or disrupt existing power relations. Nonetheless, there was great promise in dramatically improving the education available to Black youth by putting them in the same classroom with white youth, where the quality of teaching, resources, facilities, and options are consistently higher.

While minimalist in economic sacrifice, public school integration met intense opposition from highly organized racists who rallied many under the bogus banners of “forced busing,” “school choice,” and “neighborhood schools.” It made no difference that elites had embraced publicly subsidized busing and travel out of neighborhoods for their children’s attendance at private and parochial schools. The hypocrisy was only underscored by the use of busing and the abandonment of neighborhoods to avoid attendance at integrated schools.

Nonetheless integration of city schools persisted. Of course the problem of better education for Blacks remained unsolved because of the even greater class disparity between urban and suburban schools. To achieve some parity for Blacks would necessarily involve consolidating school districts across this class line at some additional material cost and with social and political cost to the existing racial barriers.

This dramatic step for parity education for African Americans was quashed with the Burger Supreme Court decision of 1974, Milliken v. Bradley.

The Burger majority effectively removed any legal obligation of suburban school districts to participate in school desegregation unless they could be shown to be intentionally racist, placing an untenable onus upon reformers. The urban Detroit school district was 75% Black when it originally appealed for judicial relief. With the Supreme Court denying relief, it was 90% Black by 1987.

Dissenting Justice Douglas caustically noted: “...the task of equity is to provide a unitary system for the affected area where, as here, the State washes its hands of its own creations.” One should clarify: the capitalist state washes its hands of its own creation.

With a substantial legal obstacle placed before it, the reformist desegregation movement collapsed well before it achieved any real educational parity for African Americans. Liberal reformist leaders surrendered without a further fight. Since Milliken v Bradley, it has been a persistent battle to protect the limited gains made from opportunist politicians.

Beyond the Limits of Reformism?
Affirmative Action

The other promising reform stoked by the Civil Rights movement-- and potentially the most significant-- was the policy of affirmative action, a policy designed to move beyond allowing participation in the US economy to actually leveling the employment playing field for US Blacks. Marxist political economist, Victor Perlo, calls affirmative action “...the principal mechanism designed to reduce discrimination against African Americans.”

Among the most thoughtful, passionate advocates for affirmative action is the liberal philosopher Gertrude Ezorsky. Her brief, concise book, Racism and Justice: The Case for Affirmative Action, is the classic on the policy. From first reading her book many years ago, I remember well her central datum that jobs are acquired overwhelming through contacts or personal networks. It caused me to reflect on my own work history from digging a basement for a neighbor when I was thirteen through the rest of my employments. Without exception, every job was gotten through family, friend, or other acquaintance. Every thoughtful person, except for the mythical “self-made man/woman,” will concede this datum.

Of course this means that those limited to the worst jobs through racism will only produce and reproduce, through their limited networks, still others locked into bad jobs.

It is this cycle that affirmative action promises to break by guaranteeing Black representation in workplaces proportional to African American representation in the population.

While ‘60s liberals acknowledged both the necessity and promise of affirmative action (Title 7, Civil Rights Act 1964), they were slow to devise plans or seek implementation of the policy. Ezorsky notes that, ironically, two of the more effective plans were enacted during the Nixon Administration. The 1969 Labor Department Philadelphia Plan saw the representation of Blacks in the construction trades go from 1% to 12% in Philadelphia. And Nixon’s 1971 Executive order 11246 required “that dated numerical targets for hiring, training, and promoting minorities be set by firms that hold government contracts but have underutilized minorities…” (Ezorsky, p.37)

Affirmative action got as much attention in the 1976 Democratic Party platform as did fisheries. When mentioned, it was conflated with the Black unemployment rate. Even less attention was given by the Carter Administration, in practice.

Ezorsky concedes that “[t]he affirmative action programs begun in the 1960s have been diminished in the 1980s in response to a different political climate.”

The Democratic National Committee’s 1986 83-page statement of principles, New Choices in a Changing America, written and endorsed by the Party’s luminaries, contains not one endorsement (or mention) of affirmative action. In its place were vague policies directed at unemployment and job training.

Affirmative action was dead.

Racial Justice

Because Ezorsky grasps the historical specificity of US racial oppression, she recognizes a strong need for restorative justice, a justice that must go beyond merely establishing opportunity. The liberal conception of justice as fairness-- everyone playing by the same rules-- professes a distance, a willful blindness to outcomes. But blindness to outcomes fails to acknowledge that inequality of means determines outcomes even when equality of opportunity is assured.

Thus, an equal opportunity to apply for acceptance from Harvard means little to the gifted African American student saddled with a third-rate education; an “equal opportunity” job-training program in the suburbs means nothing to a motivated potential employee lacking the financial resources to travel to the suburbs; and the right to stay at the Greenbrier resort counts for little to the vacationer who would have to devote an entire paycheck for a visit.

Of course it is the class dimension that arises with these examples, an “intersection” with racism that academics and “middle class” liberals seldom recognize.

Consequently, restorative justice-- like affirmative action, but unlike merely establishing civil rights-- depends on a redistribution of society’s resources. For Blacks to finally enjoy justice, they must acquire a material foundation beyond newly minted rights in order to participate productively in society and enjoy its benefits.

Obviously capitalism opposes any redistribution of assets or any reordering of power relations, unless it comes at the expense of the working class. And that opposition explains the stillbirth of affirmative action. It has disappeared almost entirely from the mainstream conversation.

Could affirmative action succeed in bringing racial justice to African Americans under capitalism?

Probably not, but the struggle for affirmative action would bring Blacks closer, and would attack racism at its core.

Anti-racism for the Twenty-first Century

The shallow and patronizing anti-racism that occupies much of the left-- the language-scolding, the tokenism, the guilt-driven deference-- leaves the structure of racial oppression untouched.

Nor does the idea of “reparations” attack that structure. Reparations draw upon hollow legalisms: the notion that a retributive settlement can be negotiated with a guilty party and magically restore justice to a people kept back for centuries. It fundamentally looks to the past, promising to repair damages incurred, but with no promise of delivering future justice. Further, reparations fail to explain how any settlement would be distributed in a way that benefits those most aggrieved. Like other liberal answers to racism, it fails to recognize the fact of class.

Any attack on the structure of US racism must recognize that eliminating the racial ghettos of poverty, inferior education, poor housing, mass incarceration, poor health care etc. must attack the economic ghetto of centuries of super exploitation, unemployment, underemployment, and inadequate jobs.

In his classic reprise on the subject, Economics of Racism II, Victor Perlo writes:

A program to achieve economic equality [for Blacks] has two main requirements:

  1. Affirmative action; that is, specific measures to improve the economic conditions of African Americans, Hispanics, Native Americans, and sections of the Asian population;
  2. Measures to advance the conditions of the entire working class. (Perlo, p. 281)

Any anti-racist reforms must, therefore, revisit affirmative action. An authentic People's anti-racist strategy must place restorative measures at the center of our efforts-- measures that afford African Americans the minimal means to march through the doors of opportunity won in the great Civil Rights struggles of the 1960s.

Greg Godels

Tuesday, September 25, 2018

Trumpism as Capitalism’s Default Option



Happily, many on the US left are beginning to see the intense, ongoing battle between Trump and his defenders and the self-described “Resistance” as reflective of a “split in the ruling class.”


This is a welcome development because it removes some of the confusions fostered by the Democratic Party leadership and the childish sensationalism and witless simplicity of the capitalist media. With little more than Russians-under-every-bed to rouse the electorate, the Democrats sell a narrative of Trump-as-Traitor, Trump-as-Defiler-in-Chief, and Trump-as-Fascist. Nancy Pelosi, the billionaire face of the Democratic Party parliamentary contingent, declared three priorities, should the Democrats win the interim election, three pieces of battered, rusty liberal boilerplate: lowering health costs and med prices (always promised, never delivered nor deliverable under a private system), higher wages and improved infrastructure (unrealized for nearly half a century and a teaser to the labor movement), and “cleaning up corruption” (which means continuing the bizarre Mueller witch hunt). No mention of overturning the Trump administration’s tax cuts for the rich.


It is a step out of the weeds of political posturing and shallow cable news analysis to now see a real, fierce battle between different groups of the wealthiest and most powerful, a conflict that gives some deeper meaning to the bizarre antics of the Trump era. Behind the lurid and illusory imagery of a corrupted vulgarian (Trump) resisted by the “heroic” protectors of freedom and security (the FBI, the CIA, the NSA, etc.) lies an actual contest over ideas, interests, and destiny. So it is a good thing that not everyone has been seduced by the cartoon-like political circus constructed by the capitalist media. It is a good thing that more are seeing a contest between the rich and powerful, contesting different visions of the future of capitalism: “a split in the ruling class.”


My administration is the only thing between you and the pitchforks”


For much of the last two years, I have written often of the emergence of a ruling class alternative to the conventional wisdom of market fundamentalism-- so-called “neo-liberalism” and “globalization.” I have written of the growth of economic nationalism in the “advanced” economies as the expression of that alternative. I have postulated its increasing ruling class popularity as grounded in the damage to globalism-- deceleration of trade, slow growth, financial imbalances, popular discontent, etc.-- in the wake of the global crisis that began in 2007. The intensifying competition in the politics of energy are offered as materially symptomatic of economic nationalism, as is the disinterest in maintaining a relatively peaceful backdrop to securing and promoting trade. The US, for example is more interested in selling arms than in resolving its many wars (Secretary of State Pompeo is said to have convinced those in the Trump administration publicly shamed by the slaughter in Yemen not to cut off support for Saudi Arabia because of the possible loss of $2 billion in weapons sales).


Therefore, a recent commentary (The Dividends of Wrath, 9-3-18) by the influential senior national correspondent for Bloomberg Businessweek, Joshua Green, counts as recognition of the shifting political terrain triggered by the crisis and its direct consequence in “Making America Great Again,” the slogan of Trump’s economic nationalism. The subtitle of Green’s think-piece clearly identifies that theme: How anger over the financial bailout gives us the Trump presidency.


Through reminiscences of an interview with former Treasury Secretary Timothy Geithner, Green takes us back to the aftermath of the financial collapse, where a resigned Geithner expressed a profound fear of the populace seeking “Old Testament justice” for Obama’s bailout of the banks and the coddling of the banksters.


Green reminds us of Obama’s infamous White House meeting with the CEOs of the major banks where he candidly told them, “My administration is the only thing between you and the pitchforks.”


Reflecting on Obama’s words, Green comments:


Ten years after the crisis, it’s clear Obama was foolish to think public sentiment could be negated or held at bay… Millions of people lost their job, their home, their retirement account-- or all three-- and fell out of the middle class. Many more live with a gnawing anxiety that they still could. Wages were stagnant when the crisis hit and have remained so throughout the recovery. Recently the Bureau of Labor Statistics reported that US workers’ share of nonfarm income has fallen close to a post-World War II low.


This unusually harsh mainstream indictment of post-apocalyptic capitalism well captures the conditions that have stoked fear of dusted-off pitchforks. And make no mistake, those who rule the major capitalist centers pay attention to the anger, not to answer it, but to deflect it.


Green continues: “...the pitchfork-wielding masses will eventually make themselves heard. The story of American politics over the last decade is the story of how the forces Obama and Geithner failed to contain reshaped the world… unleashing partisan energies on the Left (Occupy Wall Street) and the right (the Tea Party)... The critical massing of conditions that led to Donald Trump had their genesis in the backlash...” [my emphasis]


While it may be emotionally satisfying to blame Obama and Geithner and go no further, it is more revealing to locate the cause of Trump in the failure of market fundamentalism and the unsettling consequences for capitalism if no alternative were found. Trump and “Make America Great Again” may be a crude response to dangers unleashed by market fundamentalism run amok, but response it is.


We worked very hard to keep our fingerprints off these proposals


Insightfully, Green locates the first stirring of an alternative to the reigning politico-economic paradigm in Republican Senate majority leader Mitch McConnell’s decision to dissociate the Republicans from the Obama bailouts-- in his words to “...keep our fingerprints off these proposals [the TARP funding of the banks].”


But it wasn’t until Trump that anyone crafted a strategy that successfully harnessed the mass anger into political success. “By the time Trump declares his candidacy in 2015, Americans of every persuasion had soured on the ‘elites’ running both parties, something his Republican opponents didn’t understand until far too late,” Green notes.


Trump was able to cobble together a campaign based on responding to the anger with a measure of economic nationalism, patriotism, and, paradoxically, partisanship for the working class.


Green explains:


Today, his campaign is remembered as having been driven mostly by anti-immigrant animosity. But… Trump spent loads of time attacking Wall Street on behalf of the forgotten little guy and fanning the suspicion that a cabal of political and financial eminences was screwing ordinary people.

When I interviewed Trump just after he’d locked up the Republican nomination, he told me that he intended to transform the GOP into “a workers’ party. A party of people that haven’t had a real wage increase in 18 years, that are angry.”


His closing message in the campaign consciously evoked the disgust so many people had come to feel toward Wall Street and Washington. His final ad on the eve of the election flashed images of Federal Reserve Chair Janet Yellen and Goldman Sachs CEO Lloyd Blankfein and sought to implicate them, and Hillary Clinton, in what Trump called “a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth, and put that money into the pockets of large corporations and political entities”... It’s no surprise that this message struck a chord: What is Trump if not the embodiment of a balled fist and a vow to deliver Old Testament justice?


Of course the idea that Trump is building a workers’ party is ridiculous, and Green knows it. But that is not the point.


The point is that Trump is not merely the anomaly, the Elmer Gantry figure, bent on capitalizing solely on his cynicism, his vulgarity, his hypocrisy to cheat his way to the pinnacle of power. He is not simply the cartoon-like character of orange hue, small hands, and a Mussolini-like pout. Instead, he represents a section of the ruling class’s alternative to the now nearly thirty-year unopposed reign of market fundamentalism.


But it is most important to stress that he is a ruling class answer to the failings of a ruling class-dictated era of the universal worship of private property exclusively, of US policed globalism, and of lubricated trade. The latter ideology has not surrendered and the ideology of economic nationalism has yet to dominate. In no way does the struggle between the two roads promise to advance the interests of the working class-- both are dead ends for working people. And Green confidently reminds us that the damage wrought by the economic crash “...makes it all but certain that the next presidential election, and Trump’s possible successor, will be shaped by it, too.”


Green, with his earnest, liberal hopes, believes that there is a chance that the otherwise disinterested Democrats will take up the cause of those wielding the pitchforks. He sees that opportunity in Elizabeth Warren. Others see it in Bernie Sanders or the ripples of DSA progressivism on the surface of the Democratic Party.


With the Democrats delivering no qualitatively meaningful reforms for the US working class since the Presidency of Lyndon Johnson, that likelihood has moved from hope to groundless faith.


Taking sides in this struggle over how best to serve capitalism will only further set back the cause of working people. And looking for a road away from serving capitalism within the Democratic Party is a futile repeat of old illusions.


Only a concerted effort to create or nurture a truly independent, anti-capitalist movement addressing the real and urgent needs of working people makes sense today, when the bourgeois parties willingly sacrifice the interests of workers to the Moloch of capitalism. Only a movement with revolutionary purpose can divert the working class from the false prophets of inward-looking demagogy, tribalism, and Spencerian Survival of the Fittest.


Greg Godels
zzsblogml@gmail.com