Jack Rasmus’ new book, Obama’s
Economy (PlutoPress, 2012), is a marked departure from his earlier volume, Epic
Recession: Prelude to Global Recession (PlutoPress, 2010). Where the
earlier effort sought to provide a theoretical framework to understand the
worldwide economic crisis that began over four years ago, the new book offers a
detailed, critical history of President Barack Obama’s policy responses to that
crisis. In fact, much of Obama’s Economy reads like a vivid, insightful
diary of economic life during that period. Rasmus links these events into a
powerful narrative that was easy to miss as we lived it.
This blow-by-blow account of economic
decline and feeble policy response is all cast in the shadow of Obama’s
campaign promises, promises that were neither bold nor progressive. As Rasmus
demonstrates, Obama -- the candidate – drew his financial support from Wall
Street, surrounded himself with corporate-friendly, free-market-oriented advisers, and preferred caution and compromise to any bold, new vision:
Another clear conclusion from the campaign period is that once Obama had all but sewn up the nomination, he began a shift even further to the right. This was not unnoticed, even by the ultra-conservative editorials in the Wall Street Journal, not to mention columns by liberal economists like Krugman. To the extent that candidate Obama’s election-period programs were “populist” in any sense, they were positions largely borrowed from his Democratic opponents in the primaries. Most of these populist elements were de-emphasized in the fall election period, or soon after the election. Few would appear in his eventual 2009 first economic recovery program. (p. 33-34)
Beyond Rasmus’ account and well before
the Presidential candidacy, Obama’s career was marked by sycophancy to power
and wealth and by opportunism. What is truly pathetic is that so many who
willfully overlooked the stark evidence and chose to embrace a Pollyanna
picture of hope and change are now outraged at an imagined but non-existent
“betrayal.” As Rasmus demonstrates, Obama’s economic course was largely
predictable from his campaign promises. But then liberals and most progressives
have been dining on the thin gruel of imagined Democratic Party “leftism” for
decades. And they are at it again in this election cycle.
Rasmus sifts through the seeming chaos
and improvisations of the last four years to find three distinct Obama recovery
programs implemented in 2009, 2010, and 2011. In addition, Obama’s Economy
identifies “two and a half” Federal Reserve actions (Quantitative Easings)
meant to revive the slumping economy. It is Rasmus’s considered opinion that
all these efforts failed to restore the US economy to anything like a
sustainable vitality. The current abysmal state of the global economy and the
sluggishness of the US economy would certainly suggest that Rasmus is right.
Further, he chronicles the bi-partisan,
near-consensual debt-reduction mania that emerged in 2011, a development that
found politicians competing with one another to suggest severe budget cutting
and program elimination. Rasmus takes this anti-stimulative austerity to augur
a “double dip” recession: a forthcoming decline in gross domestic product no
later than 2013. In this, he is in agreement with the May 22, 2012 statement by
the staid Congressional Budget Office which predicts a GDP contraction in the
first two quarters of 2013 unless federally legislated measures are rescinded
(the equally draconian state and municipal austerity programs are not a factor
in the CBO calculations).
After reading Rasmus’ new book, one
will find little to justify praise for the Obama administration. While the
three trillion dollars of recovery programs (as tabulated by Rasmus) from March
of 2008 until September of 2011 may have staved off an even deeper downturn,
they have done little to revive the economy. And more than two thirds of these
federal dollars were allocated on Obama’s watch.
Certainly from the perspective of
capital and a wealthy and powerful tiny minority of our citizens, the recovery
has been satisfactory, if not a rousing success: profits have been rapidly
restored and, for those individuals, incomes and wealth are expanding. But for
the vast majority in the US, wages are stagnant or dropping, benefits shaved or
eliminated, living costs rising, home ownership in jeopardy, and employment
tenuous; most of us are still looking for the recovery. And the economic data
promise little improvement.
So
if the Obama recovery program failed, why did it fail?
And what might succeed? What should we advocate to save the majority from the
devastation of this global economic catastrophe?
For the loyal opposition, most clearly
represented by the high-profile, Nobel Prize awardee, Paul Krugman, the answer
lies in the size of the stimulus programs. Obama and his administration failed
to devote enough resources to bring the economy back. For these left liberals,
size does matter. And the tragedy of
Obama’s recovery program lies simply in pouring too little water on a raging
fire, leaving hot embers that are about to re-ignite.
Of course this approach is merely a
twenty-first-century revisiting of the ideas of John Maynard Keynes, ideas
distilled from lessons he drew from the Great Depression of the 1930s. In its
twenty-first- century incarnation, Keynesian solutions are advocated for their
alleged ability to multiply or amplify economic growth as generated by
government action. Neo-Keynesians, like Krugman, Stiglitz, Roubini, etc, see
little difference in how or where governments act provided only that they
generate more effective demand or investment push for economic activity. If
recovery doesn’t come or if it stalls, more resources need to be committed.
Rasmus correctly challenges the simple,
but flawed, remedy of the neo-Keynesians. Drawing on his understanding of the
actual history of previous severe downturns—as described in greater detail in
his earlier work—Rasmus stresses that the “where” and “how” of economic
stimulus are of critical importance in generating recovery—it is not merely a
matter of size, but also of composition, timing, and focus. Thus, tax cuts are
proven ineffective stimuli, while jobs programs, infrastructure programs,
government services, etc., often generate worthwhile outcomes. Likewise, the
focus on restoring corporate health should not have overshadowed restoring home
ownership, jobs, income and the stability of state and local government.
Unlike the formulaic neo-Keynesians,
Rasmus respects the intent of the New Deal which was not conceived as a
stimulus program, was not designed in its specifics as a recovery
program, but, first and foremost, was implemented as measures to create jobs,
provide humane living standards, and restore a popular sense of confidence.
That is, the Roosevelt administration set out not to execute a general,
comprehensive stimulus program for the flagging economy as did the technocrats
in the Bush and Obama administrations, but to fix the many
problems—unemployment, price deflation, impoverishment, financial distress,
etc.—wrought by the Great Depression. All historians concede that the myriad
New Deal programs—including the CCC and WPA jobs programs-- were largely
improvisational and trial-and-error. There was no overarching stimulus goal
binding the programs together. Recovery would come when the broken elements
were all fixed.
The idea of a stimulus program grounded
in fiscal and monetary action is really a product of neo-classical economics, a
conventional mode of thinking that captivates both the Obama administration and
its neo-Keynesian critics. It is a toolbox approach linked to a mechanical
model of the capitalist economy, an approach that smugly presumes that recovery
is simply a matter of troubleshooting and tinkering with a fundamentally sound
economic engine.
There is, however, a larger question
that neither the liberal neo-Keynesians nor Rasmus addresses credibly, though
Paul Krugman readily concedes its significance. After over four years of
agonizing, painful economic distress, the global economy is mired in a crisis
that, like the Great Depression, appears intractable. Certainly the measures
taken by the New Deal administrators went a long way toward alleviating the harshest pains of the Great
Depression; surely the many popular programs pressed by the Roosevelt team kept
the economy from sinking even deeper; but on all historical accounts, these
commendable efforts failed to generate the desired recovery. It was only the
war build-up and subsequent world-wide conflagration costing tens of millions
of lives, untold wounded and injured, and the production and unparalleled
destruction of inestimable billions of dollars of wealth. Yes, World War II
generated the recovery from the crisis of the '30s, but at a cost in lives and
resources far beyond what anyone could find acceptable.
Is a similar orgy of destruction --
erasing debt, commanding production, and mobilizing the idle—necessary to
escape the economic calamity of our time? Should we think that anything short
of a planned, disciplined, state-directed war effort will rescue the US and
world economy? Is war the only effective
“stimulus” to a global economic catastrophe of this dimension?
Certainly, Rasmus is aware of this
conundrum. In an aside in his earlier book, he states the following:
Wars have a double-edged impact on Epic Recessions and depressions… The financial panic of 1857 was cut short by the onset of the Civil War, which clearly dampened the potential impacts of the panic of 1857 on the real economy. The timing of the Mexican-American War in 1845 has yet to be analyzed as to its role in ensuring an end of the depression of 1837-43. Similarly, the Spanish-American War in 1898 perhaps not accidentally coincides with the ending of the depression of 1893-98… [T]he role of World War I in putting a definitive end to the Epic Recession of 1907-1914 is less debatable. The war put a definitive end to the extended stagnation period of 1908-14. (Epic Recession, p. 163)
Yet, if devastating wars are the only
decisive solutions to the most severe crises of capitalism as history strongly
suggests, then surely this raises the urgent question: Is capitalism worth saving? Is it time for a radical overhaul or
replacement of the capitalist economic engine?
While I find much to admire in the
writings of Krugman and other liberal public intellectuals, as much as I’ve
learned from and appreciate the insights of Jack Rasmus, I am disappointed that
they offer no answer to this, the most pressing question of our time. Indeed,
they do not even acknowledge the question.
Since World War II, the US capitalist
economy has become a perpetual war-time economy—first with the Cold War and now
a contrived world-wide “war on terror.” When President Eisenhower warned of the
“Military-Industrial Complex,” he was describing this new structural feature of
capitalism in his own cautious words.
Nonetheless, even with the preferred
“pump priming” of war and its associated economic “stimulus,” the global
capitalist economy is now seriously broken. No way is it obvious or even likely
that “repairs” are apt to be effective or that a recovery will ensue.
Thus a discussion -- at the very least,
a discussion -- of socialism as an alternative economic system would seem to be
in order. It is not surprising that a New
York Times Nobel laureate would evade this question; otherwise, Krugman
would be neither a Nobel laureate nor a New
York Times columnist. It is disappointing that a writer of Rasmus’
integrity and acumen would not discuss its relevance.
The question of socialism is intimately
linked with the politics of “recovery.” Rasmus, like the New Deal liberals (a
brand of liberalism far to the left of what passes as “liberal” today), offers
a people-oriented program that promises to restructure capitalism in a way that
would dampen many of the inequalities and injustices generated by the
capitalism of our time ( though I don’t share his confidence that it would
revitalize the capitalist economy nor do I want
to “save” capitalism).
His program in Obama’s
Economy is one that, popularized and adopted by a broad political movement,
could serve us all well for the immediate future. It is bold and daring,
engaging the government in employment in a way unseen since the New Deal. It
reverses the housing crisis and protects and strengthens the social safety net
(While it mirrors the programs advocated in Rasmus’ earlier book, Epic Recession, it curiously and
unfortunately omits a single-payer healthcare solution in this version).
But in sharp contrast with the New Deal liberals,
there is no political vehicle for this program. Certainly the Democratic Party
has not and will not adopt it. The Democratic Party of the twenty-first century
is Obama’s Party and not even a vague shadow of Roosevelt’s Democratic Party.
And today’s weak labor movement has shown neither the desire nor gumption to
re-shape or divorce the Democratic Party and opt for such a course. That leaves the fine Rasmus economic
plan outside of US politics looking in.
Conversely, the socialist option will
become increasingly attractive to millions of people as the global economy continues
to sink and the wholly capitalist-owned political system continues to block any
popular challenges to take-no-prisoners capitalism. Thus, the most urgent task
is to ideologically and organizationally prepare a vehicle to advance that
option.
Whether others agree with me, the wasteland of US
mainstream politics leaves plenty of room to advocate independent, broad-based
movements that will adopt a progressive program embracing the recommendations
so persuasively argued by Rasmus. I regret that Rasmus does not engage in this
advocacy in Obama’s Economy; perhaps
he will in a later book. Nonetheless, I can wholeheartedly recommend the book
for its unparalleled recounting of the economic failures of the Obama
administration and its detailed, well-argued plan for the opening stages of the
founding of a people’s economy.
Zoltan Zigedy
zoltanzigedy@gmail.com
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