Robert Brenner on the Crisis

Robert Brenner, a professor at UCLA, is most widely known for his re-sparking of an old, largely academic dispute about the transition from feudalism to capitalism. The Brenner debate brought much fury, though in a rather limited, confined community of Marxist scholars, to a question that took on far more self-conscious importance than the matter probably deserved. Much turned on how one understood feudalism and capitalism, yet the various disputants managed to pull in all the old controversies troubling the academic left for the last century.

This is not to belittle the question – actually a very interesting matter – but to remind how scholars, aloof from the urgency of party politics and robust class struggle, can drain a subject of the very life that might teach something useful to those thirsting for political understanding.

Apart from his position in this academic dustup, Brenner demonstrated a tenacious grasp of the Marxist method and an admirable ability to plow up tendencies and organize the historical data meaningfully.

Some years later, Brenner authored a lengthy paper, The Economics of Global Turbulence: A Special Report on the World Economy, 1950-1998, in May/June 1998 issue of New Left Review. In this book-length article, he sought to bring some deeper and more revealing understanding to the trajectory of post-war capitalism. Though ambitious, Brenner attacked this matter with a wealth of impressive economic and social data that challenged the then triumphant notion of capitalist stability and growth. As the Clinton golden era drew to a close, Brenner was one of the very few to see the precarious state of global capitalism. Certainly, he was among the even fewer embedding this projection in a Marxist framework.

Today, “Marxist” scholars are returning from the wilderness to offer alternatives to an anxious public thirsty for alternatives to the barren well of neo-liberal thinking. Those who did not flee the tradition in the face of the capitalist counter-revolution of the late twentieth century occupied themselves with fixing the “errant” ways of Marxist thought. Marxism was “rethought” and “reconstructed” in ways that accommodated the new perceived realities, the smug claim that There is No Alternative. For the most part, those returning from the wilderness are today offering an eviscerated, superficial caricature of Marxist thought: Marxism-lite. Of course they command the greater attention of the media.

Robert Brenner has not made these accommodations, nor has he been the darling of media attention. Nonetheless, he offered an interview on the current crisis to a Korean newspaper, Hankyoreh (http://www.hani.co.kr/arti/society/society_general/335869.html), in late December of last year. His careful thoughts are well worth reviewing. His comments are in italics.

1. What mainly accounts for [this crisis] is a deep, and lasting, decline of the rate of return on capital investment since the end of the 1960’s. The failure of the rate of profit to recover is all the more remarkable, in view of the huge drop-off in the growth of real wages over the period. Brenner correctly seeks and locates the source of crisis in a tendency for the rate of profit to decline. Profit – both absolutely and relatively – is the lifeblood of capitalism, determining its stability and growth. But it is not the militancy of labor that accounts for the pressures on profits since real wages have grown very little over this period.

2. I don’t think it’s helpful to counter-pose… the real and financial aspects of the crisis. As I emphasized, it is a Marxian crisis, in that it finds its roots in a long term fall and failure to recover of the rate of profit, which is the fundamental source of the extended slowdown of capital accumulation right into the present. Brenner locates the origins of the crisis in the economy and not, as is the fashion, just in the financial sector (specifically, degraded mortgages). They are only a manifestation of the far deeper illness plaguing capitalism since the long post-war expansion.

3. The persistent weakness of aggregate demand has been the immediate source of the economy’s long term weakness…Since the start of the long downturn, state economic policies have tried to cope with the problem of insufficient demand by encouraging the increase of borrowing, both public and private… But because profitability had still not recovered… US authorities ended up adopting an approach [that]…[b]y keeping interest rates low… made it easy to borrow so as to encourage investment in financial assets. They were able to borrow on a titanic scale, vastly increase their investment and consumption, and in that way, drive the economy. So private deficits replaced public ones. What might be called “asset price Keynesianism” replaced traditional Keynesianism. With the ratcheting down of labor militancy and a long era of retreat and concessions by labor, the opportunity to grow profits became limited by diminished consumer resources. Investment opportunities were restricted – and consequent profitability – by stagnant incomes. I might add that public spending was restrained as well by a draconian neo-liberal ideological assault upon social welfare and public institutions. Debt – deferred payment - became the motor force for restoring profitability. Brenner is insightful in viewing this as a kind of perverted Keynesian stimulus.

4. Today, the recession is making the [financial] meltdown worse because it is exacerbating the housing crisis. The meltdown is intensifying the recession because it is making access to credit so difficult. It is the mutually reinforcing interaction between the crisis in the real economy and financial sector that has made the downward slide so intractable for policy makers and the potential for catastrophe is evident. This contradiction, stated so clearly by Brenner, captures the trap in to which policy makers have stumbled. Because the malady is rooted in a long term, chronic tendency of the capitalist system to strangle its own profit potential, policy makers are scrambling to restore profit while attempting to rescue a financial system dragging down that same potential. Where the massive debt was counted as an asset in the virtual expansion of the last two decades, it has now become of doubtful realization and, therefore, is counting as a dubious liability. Of course it’s not just the housing crisis that feeds the failure to meet debt payment, but also debt in commercial real estate, credit cards, student and auto loans, etc. that fall into default. While seldom noted, the “solution” – planned or unplanned – that capitalism offers to such a deep crisis is radical “restructuring”: the demise of smaller enterprises, the absorption of others, in short, the concentration and further monopolization of capital.

5. The idea of [“financialization”or]of a finance- led capitalization is a contradiction in terms, because, speaking generally…sustained financial profit making depends on sustained profit making in the real economy. To respond to the fall in the rate of profit in the real economy, some governments, led by the US encouraged a turn to finance by de-regulating the financial sector. But because the real economy continued to languish, the main result of de-regulation was to intensify competition in the financial sector, which made profit making more difficult and encouraged ever greater speculation and taking of risks. Brenner is correct to dismiss the fashionable “financialization” thesis which merely gives a pretentious name to a process requiring deeper analysis and understanding. Like the popularity of the shallow term “globalization”, nominalizing an observed phenomenon draws us no closer understanding its mechanism. However, Brenner does fail to note the division of labor in the global economy that stands behind the US economy’s dependence on the financial sector. It was not just de-regulation that pushed the financial sector forward, but the shifting of different capitalist functions to advantageous areas: manufacturing to low-wage areas, financial manipulation to wealthy, high consumption areas.

6. The triumph of Obama in the election is to be welcomed. A victory for McCain would have been a victory for the Republican Party and give an enormous boost to the most reactionary forces on the US political scene… That said, Obama is, like Roosevelt, a centrist Democrat, who cannot be expected, on his own, to do much to defend the vast majority of working people, who will be subjected to an accelerating assault from corporations trying to make up for their collapsing profits by reducing employment, compensation and so forth. Obama’s backed the titanic bailout of the financial sector, which represents perhaps the greatest robbery of the US taxpayer in American history… He also supported the bailout of the auto industry, even though it is conditional on massive cuts in the compensation of the auto workers. The bottom line is that, like Roosevelt, Obama can be expected to take decisive action in defense of working people only if he is pushed by way of organized direct action from below. The final point – the absolute necessity of pressure from working people to secure any gains for the masses – cannot be stressed enough.

7. I think that is probably the case [that only the crisis can resolve the crisis]. At first in the early 1930’s, the New Deal and Keynesianism were ineffective. In fact, through the length of the 1930’s, there was a failure to establish the conditions for a new boom, as was demonstrated when the economy fell back into the deep recession of 1937-1938. But, eventually, as a result of the long crisis in the thirties, you shook out the high cost, low profit means of production, creating the basic conditions for high rates of profit… all that was missing was a shock to demand. That demand was provided of course by the massive spending on armaments for World War II... [B]ut you needed a system-cleansing crisis first. Brenner’s understanding of Marxist crisis theory is buttressed well by his Great Depression example and equally apt for today: a “system-cleansing” is the order of the day, but not an answer to shrinking consumer demand brought on by declining incomes and employment and growing insecurities.

8. I think the Chinese crisis is going to be a lot worse than people expected, and this is for two main reasons. The first is that the American crisis, and the global crisis more generally, is much more serious than people expected, and in the last analysis, the fate of the Chinese economy is inextricably dependent upon the fate of the US economy, the global economy. While Brenner’s point is sound, he may underestimate two factors: the Chinese have a huge potential and largely untapped domestic market with huge reserves potentially available for its development. And, secondly, the Chinese financial sector was, for the most part, not infected with corrupted US “assets”.

9. None of the world’s elites are trying to exploit the crisis, and the US’s enormous economic problem’s, to challenge US hegemony. Perhaps they are not setting out to challenge US hegemony, but there are underlying economic forces unleashing a current of economic nationalism. How this emerging nationalism plays out may yet, in fact, establish a new economic order. Here, I think, Brenner overlooks deeper economic factors and the logic of capitalism, while elevating political postures - a mistake he seldom makes.

10. …Now the crisis has revealed the total bankruptcy of the neo-liberal mode of economic organization… It has been very powerfully manifested in the opposition by American working people to the bailouts for the banks and financial sector. What they are saying today is “We are told that saving the financial institutions, the financial markets, is the key to restoring the economy, prosperity. But we don’t believe it. We don’t want any more of our money going to these people who are just robbing us”. So there is a big vacuum ideologically. Thus there is a big opening for left ideas. The problem is that there is very little organization of working people, let alone, any political expression. So one can say that there is this very big opportunity created by the change in the political environment, or the ideological climate, but that by itself is not going to provide a progressive outcome. So, again, the top priority for progressives – for any left activists – where they should be active, is in trying to revive the organizations of working people. Without the re-creation of working class power, little progressive will be possible, and the only way to recreate that power is by way of mobilization for direct action. Only through working people taking action, collectively and en masse, will they be able to create the organization and amass the power necessary to provide the social basis, so to speak, for a transformation of their own consciousness, for political radicalization. As a careful, open-minded historian, Brenner has drawn the right conclusions from his economic analysis and study of past working class struggles. Indeed, there is a vacuum - a vacuum unprecedented in our lifetime – begging to be filled with a radical vision. He is correct to note that our charge is to embed that vision in the working class movement, the most essential agent for change. I would add that this charge requires both a vital vanguard organization as well as a class-conscious labor movement to succeed and begin the trek towards working class power. Phony patriotism aside, this is the road-map to addressing the real “terrorism” against working people presented by the catastrophic crisis.

There is much to learn from Robert Brenner’s analysis and I would urge readers to read him carefully. I would only fault him for failing to fully appreciate the impact of the counter-revolution in the European socialist countries, an event that left a profound impact upon the direction of the world economy in the closing decade of the twentieth century.

Zoltan Zigedy

A Valentine's Day Reflection on Love

Christopher Caudwell was a young Communist poet and scholar whose commitment to humanity and liberty drew him to Spain and the struggle against fascism and for Spanish freedom. He joined the International Brigades and was killed fighting on February 12, 1937 at the age of thirty.

He wrote about "Love" in his posthumously published Studies in a Dying Culture:

Christopher Caudwell

To-day love could prepare an appalling indictment of the wrongs and privations that bourgeois social relations have inflicted upon it. The misery of world is economic, but that does not mean that it is cash. That is a bourgeois error. Just because they are economic, they involve the tenderest and most valued feelings of social man. For the satisfaction of all rich emotional capabilities and social tenderness which bourgeois relations have deprived him, he turns vainly to religion, hate, patriotism, fascism, the sentimentality of films and novels, which paint in imagination loves he cannot experience in life. Because of this he is neurotic, unhappy, sick, liable to the mass-hatreds of war and anti-semitism, to absurd and yet pathetic Royal Jubilee or Funeral enthusiasms to mad impossible loyalties to Hitlers and to mad Aryan grandmothers. Because of this life seems to him empty, stale, and unprofitable. Man delights him not, nor woman neither.

Bourgeois social relations, by transforming in this way all tender relations between men to relations to commodities, prepare their own doom. The threads that bind feudal lord to liege, chief to tribe, patriarch to household slave, father to son, because they are tender are strong. But those that bind shareholder to wage-employee, civil servant to taxpayer, and all men to the impersonal market, because they are merely cash and devoid of tender relations, cannot hold. The chief’s laws are understandable. The fiat of a man god is still a personal and affectionate command. But the laws of supply and demand (their substitute in bourgeois culture) are without any power save blind compulsion. To-day it is as if love and economic relations have gathered at two opposite poles. All the unused tenderness of man’s instincts gather at one pole and at the other are economic relations, reduced to bare coercive rights to commodities. This polar segregation is the source of a terrific tension, and will give rise to a vast transformation of bourgeois society. They must, in a revolutionary destruction and construction, return in on each other and fuse in a new synthesis. This is communism.

Caudwell's ideas on bourgeois love were shared by film maker Joseph Losey in several of his early films made in England after his exile from the anti-Communist blacklist.
While they were commercially boycotted in the US, they are available in DVD format.

Zoltan Zigedy

Another Look at the French Experience

In November 2008, I wrote:

The economic crisis has reversed the post-Soviet process of international integration – so-called "globalization." As with the Great Depression, the economic crisis strikes different economies in different ways. Despite efforts to integrate the world economies, the international division of labor and the differing levels of development foreclose a unified solution to economic distress. The weak efforts at joint action, the conferences, the summits, etc cannot succeed simply because every nation has different interests and problems, a condition that will only become more acute as the crisis mounts… We see great stress on the European Union. Germany's export driven economy is collapsing. France, on the other hand, has yet to feel the full force of the crisis… Indeed, the unraveling of the EU is a possibility. (The Deepening Crisis and the Socialist Option, MLToday 11-28-09)

At the time, the media were hailing the efforts on the part of the major capitalist governments and international organizations to forge a common solution to the economic crisis. Confidence was high that some kind of cooperative solution could be won. In the ensuing three months that confidence has been shattered. As I forecast, economic nationalism has emerged with a vengeance. "Buy American" has returned to spice the speeches and writings of many labor leaders. Limiting bailout funds and stimulus programs to US companies has swept through congressional debates. The same nationalist sentiment has caught fire throughout the world, including the headline-grabbing strike in the UK.

There is no point in lamenting this development since it is a logical feature of capitalism. It is impossible to secure joint action among nations that tolerate collective action only out of self-interest or economic coercion. Roosevelt understood this by stepping away from seeking international solutions and focusing upon domestic policies to attack The Great Depression.

There is however a point in critically analyzing the form that this nationalism takes. Some forms are more defensible than others.

In the US, we see a vulgar, unproductive nationalism that identifies the interests of the nation with the interests of corporations led by CEO's with English surnames or US residence. Never mind that US companies do not exist; they are virtually all multi-nationals. Never mind that these companies have long evacuated factories and jobs to low-wage countries. Never mind that these corporations reward product loyalty with further layoffs and intense exploitation through "restructuring".

Contrast this with the French nationalism expressed by the policy of linking bailout money for corporations to work place retention and job protection discussed in yesterday's ZZ post. Thanks to French labor militancy, Sarkozy - "le Petit Bush" – was forced to impose guarantees upon French auto makers that they would not lay off workers. In return, they are to get $8.4 billion in low interest loans. Today, we learn that the French government will insist that corporations close foreign plants before downsizing domestic enterprises.

It is not the return to nationalism that I admire, but the French labor movement's insistence that corporations cannot benefit from public funds while at the same time bringing desperation to French workers. This is far and away superior to a vacuous, impossible "Buy American" campaign that would not, and could not benefit US workers.

The more advanced level of class struggle in France underlines the bankruptcy of the policy of class collaboration deeply entrenched in the US labor movement. For years, French labor militancy was the butt of jokes by visitors and commentators who mocked the frequent public demonstrations that influence public policy and the comprehensive social safety net won by these actions. I remember well discussing the French 35 hour work week with friends in a Parisian restaurant only to be interrupted by tourists from the US who proceeded to lecture us on France's decline and failure to follow in the footsteps of the US.

Despite the efforts of many of the French to force emulation of the US version of capitalism, France has preserved much of its social democratic legacy, including the world's best health care system according to the UN. The Wall Street Journal concedes today (Feb. 12, 2009) that "France has long resisted textbook free market economics – and it could weather the downturn slightly better than its neighbors as a result." They report that France is the only European country that avoided recession in 2008.

The Wall Street Journal, in part, attributes France's relative immunity from the crisis to its large public sector spending: the French spend 52.7% of GDP, Germany 44.4%, and the US only 37.4% (2007) in the public sector. As the Journal explains, "Because most governments seldom shed workers quickly – particularly during a downturn – a bigger public sector means that a country's overall wages – and thus, consumption – tend to hold up."

Thus, the French do better because they keep workers employed, but we encourage companies to "restructure" by disposing of workers.

Those who study the New Deal should take note. Roosevelt engaged direct government employment by absorbing the unemployed into Federal works projects, conservation, and services without the intermediary of private companies as envisioned by the US government's current stimulus package. The French experience confirms the wisdom of this approach.

Zoltan Zigedy

A Lesson from France

“The French government said it would give 6.5 billion euros ($8.4 billion) in low interest loans to Renault SA and PSA Peugeot-Citroen in exchange for pledges that the car makers won’t close any factories or lay off any workers in France for the duration of the funding.” Wall Street Journal 2-10-09

Quel surpris! The French government bailout of France’s auto industry requires the auto companies to continue the employment of the company’s workers! In the US, on the other hand, the government urges the auto industry to “restructure” before receiving bailout funds, principally by laying off workers.

Are US auto workers any less deserving of this pledge? Does government owe them any less, in a time of global economic crisis?

But then nobody asked…

In the US, representatives of the auto workers join the CEO’s in begging for corporate bailout money while conceding that everyone must make sacrifices. It is a foregone conclusion that tens of thousands of workers will lose their jobs for the sake of “restructuring”.

France’s commitment to its auto workers certainly does not spring from any compassion on the part of its government. French President Sarkozy has dedicated his term to breaking the back of France’s unions. He is widely viewed as a French George Bush, seeking to wipeout the social gains of years of struggle in the interest of a harsh competitive regimen.

But the French working class has pushed back with militant, united street actions and strikes. They have joined students, immigrants, retirees, and professionals in resisting. Long derided by arrogant tourists for its labor militancy, France has - ironically - faired better economically than its European counterparts in the face of the world crisis.

There are lessons here. Is anyone listening?

Zoltan Zigedy

Two and a Half Trillion for the Capitalist Economy, ???? for the People’s Economy

Tuesday’s announcement of the Obama economic team’s plans to rescue the financial industry was met by indifference or hostility from the “masters of the universe” on Wall Street. Meanwhile, the stimulus plan – meant to address the decline of production and employment in the real economy – stumbled through the legislative chambers, picked apart by the partisans of greed and aloofness and leaving little but crumbs for a population starved for jobs and an assured future.

Those expecting a miraculous turn around – and they were many, mesmerized by the energy of the Obama transition – were brought back to earth. There is still a monstrous economic catastrophe – some now are saying worse than The Great Depression. There is still an uneven class struggle with one side fighting a desperate slash and burn campaign and the other side frozen with trust and patience. And there is still a poverty of boldness, fresh thinking, and a commitment to social justice.

Could it be otherwise?

Trapped into a box of conventional thinking, the economic policy team around Obama understands that they cannot simply assume the huge pile of garbage accumulated by an irresponsible financial sector without encouraging a return of the behavior that heaped this unknown and undesired mass of unredeemable debt upon the economy. They recognize that socializing this financial excrement would be politically suicidal. But nothing short of cleaning up the financial backyard will please the lords of capitalism.

Thus, Volker, Summers, Geithner et al – stumble along, offering Hoover-esque statements of confidence and pumping new resources into the tired policies of the Bush administration. Change? Where?

Yet lurking in the shadows is a fresh, but unspeakable solution: Nationalize the Banks! Already the capitalization of former financial giants like Bank of America and Citigroup amounts to around half of the public funds thrown at the feet of their discredited, but shameless managers. How much more must we give them? Sanity cries out for, at least, a discussion of this option.

If the labor movement will not speak and press this option, who will? If the left and progressive movement will not come together around this solution, who will?

Time is running short.

Zoltan Zigedy

A Hollow Debate

It is almost unimaginable, but less than six months ago there were few discussions of the “big” issues facing the world economy. Today, facing an economic disaster, the media-noise on the economy is almost unbearable. “Experts” spew theories from every print and electronic faucet, with most of it polluted with bad economics and inflexible thinking. One can draw an easy line between two schools that now look back upon The Great Depression and draw two contrary, intellectually lazy, and wrong headed conclusions. On one side are Republicans and some Democrats who maintain that Roosevelt’s New Deal worsened the 1929 collapse, an illness that would have cured itself with just a bit of monetary tinkering. These hard-core adherents to laissez faire capitalism stretch credulity with their semi-religious faith in economic orthodoxy.

Arrayed against them are other Democrats and allied soft-left progressives who worshipfully proclaim the New Deal as the savior of capitalism and the harbinger of a humane economy. This group finds a blue print for economic recovery in the myriad acts, agencies, and programs associated with the Roosevelt tenure.

To the extent that these two options exhaust all but a tiny segment of the public discussion, we are enslaved by a field of battle chosen by the partisans of our two ossified political parties. To the extent that these views are merely two branches of the same theoretical tree, we are starved for fresh, daring solutions. As the debate goes along, both sides are discredited by one fact, conceded by all credible, serious students of The Great Depression: A vigorous recovery only came with the military build-up preceding and continuing through the Second World War.

Why is it so hard for our experts to face this fact squarely?

Accepting this conclusion calls into question the shared fundamental beliefs of all those wedded to a purely capitalist solution. The Second World War economy challenged private employment, market-driven production and distribution, hyper-consumerism, waste, private research and development, and a host of other sacred tenets of the for-profit economy. Unfortunately, huge profits remained a feature of the war-time economy. Millions of US citizens were organized into government employment (military service), millions more were drawn into a centrally planned economy driven by government production goals free from market forces. Consumption was substantially leveled. This economy raised the living standards of the vast majority of the poor and destitute while creating a collective consciousness and a spirit of common sacrifice. The world viewed this great economic engine as the arsenal of democracy with huge government funded and selflessly motivated advances in technology, engineering, and creative thought. Unfortunately, this was all directed to death and destruction; capitalism only turned to these quasi-socialist measures in a moment of desperation. Yet no respectable public figure would dare concede these truths.

Perhaps even more embarrassing to those entrusted with rescuing the economy, the recovery from The Great Depression only came with a cataclysm of unmatched suffering and brutality. Unwilling to unleash this powerful, rational economic organization for peaceful purposes, the ruling class readily retained the war economy as a regular feature of the capitalist economy from the Cold War until today. Over the years, the socially advanced aspects of the World War II economic engine have been corrupted and “profitized” beyond recognition. Today, the huge military economy stands as a cesspool of waste, cronyism, and excessive profits and a bulwark of US imperial design on the rest of the world.

As we face a frightening world crisis of capitalism, we must begin to recognize the enormous human cost of our surrender to the self-proclaimed “masters of the universe” occupying the boardrooms of the corporate world. The class pillage of the people’s wealth by these arrogant, privileged lords engineered by their political minions under the guise of “rescue” goes beyond shame. As with the soon to be instituted stimulus plan, the financial bail-out was a product of rigid, dogmatic thinking, policies hatched by those who could never imagine a course of action that put the people’s interest ahead of profits and the fate of the “masters”. In only a few short months, a policy hailed as necessary and universally beneficial by most of our political and intellectual leadership has been exposed as an unparalleled give-away to arrogant white guys in business suits who smugly scorn those “beneath” their elevated status. Many of the same politicians who hastily shoveled a trillion dollars at the feet of the “masters of the universe” just as hastily strangled welfare, universal health care, affirmative action, veterans benefits, public education and other so-called “entitlements”. The very word, “entitlement”, reflects an Orwellian view of our class society - the lofty deserve and need support, the rest of us must establish our claims.

While there are rumblings of discontent and anger, most of the US remains captive to the world-view shared by the governing elite. We are trapped into a narrow view of the crisis that depicts the explosive growth of the financial sector and its subsequent implosion as a real phenomena and not an other-worldly fantasy football game with virtual wealth and virtual profits. We speak misleadingly of all of the wealth and profits created and lost by the Gordon Gekko’s of our time. Instead, we should look at the Clinton/Bush years as a delusional, fantasy deviation from the flat trajectory of a struggling, wounded capitalism limping through the post-Vietnam War years with stagnant incomes and wealth, unemployment and a tattered social net. The economic crisis is a return to that trajectory, with the economy shorn of the fictitious value and profit of the now tarnished golden era of “free” market euphoria. The fact is that the entire financial structure was built upon blurring the lines between real assets and accumulated debt, where debt is merely some kind of promissory note against future income or assets. As debt – counted as an asset – circulated faster and wider in the world economy, as the promissory costs and conditions loosened and loosened, as income and profit projections supported greater and greater debt acquisition, the future redemption of debt grew dimmer and dimmer. Bourgeois economists metaphorically call these events “bubbles”, though the metaphor hides the fictitious substance of such behavior. Some warned that debt acquisition could not go on interminably, yet history gave no answer to where those limits were. Like most fantasy games, the financial game might have continued forever if the game were never disturbed by unwelcome, unexpected intrusions – in this case, a decline in housing values. Imagine the even more obscene disparities of wealth generated if all the assumed debt were remitted.

As the fictitious value disappears, the giants of the financial sector are revealed as complicit in disguised Ponzi schemes. Daily reports of new Ponzi schemes - The Wall Street Journal (1-28-09) reports at least seven exposed in January – demonstrate that the difference between what the media calls a Ponzi and regular financial dealings is merely one of degree. When financial institutions commonly carry debt twenty-fives greater than their cash assets the possibility of a failure of redemption teeters on a razor’s edge. The only difference between a Madoff and an AIG rests on the government’s willingness to re-capitalize AIG for another round of financial fantasy football. With a generous injection of capital, Madoff and the other Ponzi-artists could still keep up the ruse, at least as well as Citigroup or Bank of America.

It is time to stop the bleeding. Rescuing the monopoly banks is not rescuing the economy. Nor does it move us any closer to rescuing the millions of working people facing misery and desperation. Nobel laureate Joseph Stiglitz recognizes this fact when he recently, and belatedly, advocates that “the government take… over those banks that cannot assemble enough capital through private sources to survive without government assistance” (“How to Rescue the Bank Bailout” www.cnn.com). Unfortunately, Stiglitz’s call for nationalization is far too timid – he would privatize these banks when the financial sector stabilizes. He offers no reason to privatize other than his blind faith in markets. Nor could he do so. Returning the banks to private ownership is like giving a weapon back to a murderer.

Stiglitz’s slavish dedication to private ownership also blinds him to the opportunity and necessity of preemptively nationalizing the entire monopoly financial sector, including the insurance and mortgage giants. Their nationalization would stabilize the smaller regional and local financial institutions that are constantly endangered by unfair competition and the threat of absorption by the giants. Roosevelt passed on this opportunity in the New Deal era, hastening the monopolization of the financial sector that we have inherited. The opportunity should not be lost again.

Very soon we will face the mortal decline of the auto industry, an industry experiencing dramatic drops in sales and exploding unsold inventories. As with the financial sector, we will be asked to mount a further rescue, engaging billions more of public funds on top of the billions already granted. Hopefully, Stiglitz and other influential thinkers will urge the nationalization option over further bail-outs for monopoly capital. Until we popularize the idea of public ownership, we are engaged in a class war with only one side fighting.

The Obama victory has brought a break with the relentlessly reactionary policies of the Bush administration. But on the economic front, his advisors show little stomach for policies that will directly benefit those victimized by capitalist folly. Instead, they continue to foster the discredited view that the people’s fate is inseparably linked with the survival of the “masters of the universe”.

Zoltan Zigedy