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Thursday, November 27, 2008

George Soros and Markets

There is now an entire cottage industry writing about the capitalist crisis. When I first projected something ominous, something far worse than an ordinary downturn on the MLToday website in April of 2007, I noted that many radical commentators had made a career of projecting capitalism's collapse. Like religious zealot's predicting the end of the world, some were bound to eventually get it right. But few did.

At that time, I used the headlines in the tabloid, The Weekly World News, a National Enquirer spin-off, as a rhetorical and facetious foil. The now defunct scandal sheet foretold a coming depression in the summer of 2007. It proposed all kinds of outlandish strategies to survive the catastrophe. I noted at the time that the writers seemed to have a deeper understanding of the world economy than the experts pandering their wares in the media. I'm happy to say that I stood shoulder to shoulder with the editors of this august publication, though I sought a Marxist explanation to support my position. On the other hand, I've seldom shared an opinion with the editors of the New York Times.

Reflecting on this article, I think its fair to say that few found my argument compelling, probably even the writers of The Weekly World News who made careers out of reporting unlikely events. Nonetheless, the fact that I playfully put my projection side-by-side with a super market tabloid shows how uncommon and unconventional such a view was in the Spring of 2007. While I'm not pretending that I was the first or only writer to predict the crash, most - including the doom-and-gloom forecasters of the left - did not foresee an economic event of such catastrophic impact. I would like to believe that this is a tribute to the power of Marxism.

One person who, while not predicting the collapse, has anticipated a profound disruption of the financial sector for over a decade is the billionaire investor, George Soros. Soros is a strange bird. He has been a willing and able accomplice to American imperialism, spending millions of his vast fortune in support of the many so-called "color" counterrevolutions in Eastern Europe. Through his Soros Foundation, he supports "democratic" change - change that curiously coincides with his own vision of free market capitalism and seeks to sway those who's idea of democracy deviates from his own. Nonetheless, when it comes to understanding capitalism, his success in mastering the vicissitudes of the global economy is unmatched. In other words, he knows how to make money.

Soros's unique skills separate him from the many academic economists who have much to say about modern capitalism, but have put nothing on the table. While celebrated and award winning economists like Stiglitz, Reich, and Krugman have argued forcefully for a capitalism with a human face, Soros has raised deeper questions about the way capitalism functions. Even the most liberal of trained economist, like Paul Krugman, are confined in their thinking by the dogmas of classical and neo-classical economics. Soros, concerned mainly with making money, knows no such restrictions. Moreover, he is willing to step beyond the bounds of conventional thinking. He is a maverick, but a maverick with wide experience in the inner workings of contemporary capitalism.

Soros develops his views in a recent book with the ponderous title of The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means and in a recent article in The New York Review of Books entitled The Crisis and What to Do About It (12-04-08). In the later essay, he makes several points that separate his views from the orthodoxy, even the newly awakened orthodoxy of neo-Keynesian regulation.

1. He writes: With the financial system in cardiac arrest, resuscitating it took precedence over considerations of moral hazard - i.e., the danger that coming to the rescue of of a financial institution in difficulties would reward and encourage reckless behavior in the future - and the authorities injected ever larger quantities of money... Unfortunately the authorities are always lagging behind events... Even if it is successful, consumers, investors, and businesses are undergoing a traumatic experience whose full impact on global economic activity is yet to be felt. A deep recession is now inevitable and the possibility of a depression cannot be ruled out. (NYRB, p. 63)

This is an unusually frank and accurate statement of what has been done to solve the crisis and where events stand. What is unsaid, but suggested, is that force feeding public funds into proven irresponsible financial institutions only encourages irresponsible behavior - outrageous executive bonuses, predatory mergers, and the pawning of toxicity onto the public. Soros recognizes that nothing done so far changes the behavior patterns of financial players, it only cleans the mess after they've made it. And he rightly sees more of a mess ahead.

2. Credit - whether extended to consumers or speculators or banks - has been growing at a much faster rate than GDP ever since the end of World War II. But the rate of growth accelerated and took on the characteristics of a bubble when it was reinforced by a misconception that became dominant in 1980 when Ronald Reagan became President and Margaret Thatcher was prime minister in the United Kingdom.

The misconception is derived from the prevailing theory of financial markets, which... holds that financial markets tend toward equilibrium and that deviations are random and can be attributed to external causes. This theory has been used to justify the belief that the pursuit of self-interest should be given free rein and markets should be deregulated. I call that belief market fundamentalism and claim that it employs false logic. (NYRB, p. 64)

Soros is correct to see that credit has grown as has the role of financials and the risk undertaken by them. He is correct to see that the ideological pillars of the accelerated growth were laid during the rise of ultra-right politics, though it is misleading to suggest that Reagan and Thatcher were the architects. But he fails to see that the material conditions for this leap in credit were created by the demise of the Soviet Union and the ensuing era of so-called"globalization".

To his credit, he is bold enough to challenge the myth of the market. While he supports limited market regulation, his rejection of market infallibility opens the door to a far reaching challenge to markets. Markets, like mathematics, cannot be usually, or more often than not, accurate. If they are not always optimizing, then they are always necessarily subject to human scrutiny, adjustment, or trumping. Let's call that Zoltan's law. The appeal of a market based economy - "free markets", as their high priests like to call them - is that they make optimal decisions in allocating resources, labor, and products. If they cannot optimize, as Soros concedes, then they must be corrected by human intervention. But if they can only achieve optimal results with the help of a higher power - human intellect - then they have lost their mythical power to determine economic life. Not only is economic planning possible, but necessary.

Even if markets could always optimize, they face the contradiction between optimizing profit and optimizing social well-being, a contradiction that would seem more and more apparent with every passing day. Zealots for markets have argued that one of the benefits of markets is that they optimize the common good by maximizing profits. With living standards and social mobility for most people frozen at or deteriorating to levels of nearly forty years ago, this seems hardly a compelling argument.

3. Soros offers an eccentric theory called "reflexivity" which he attempts to graft onto conventional market theory to explain market aberrations like the current financial debacle. He hopes to rescue markets as an otherwise optimizing mechanism by isolating and explaining deviant market behavior in terms of a certain psychologically grounded "self-reinforcement". In essence, he is simply saying that markets fail when market players deceive themselves. And self-deception encourages even greater self-deception - it reinforces itself. Bubbles result.

What he does not say is that the underlying motive for self-deception is the unfettered lust for profits - the sooner the better and regardless of other costs. Soros correctly notes that the financial sector grew to occupy 25% of market capitalization. What he fails again to note is that, at the same time, the financial "industry" accounted for nearly 40% of all profits! The easy profits, acquired through what he calls "financial engineering", sucked away resources from more productive, socially useful needs. It placed an enormous amount of wealth in fewer and fewer hands. And the pool of accumulated wealth cried out for even more arcane and risky methods to maintain and grow profit rates. This is the logic of markets and the logic of capitalism, only to be countered by a severe economic crash.

4. At the end of the day, Soros is in the same position as those who clung, at all intellectual costs, to the Newtonian world view when faced with the telling predictions of Einsteinian physics. He stretches for an ad hoc explanation to save the dogma of markets: human excesses distort markets and human correctives must be employed to fix those excesses. But this just exposes the deeper truth that "markets" are merely a short-hand term for economic exchange between people, a social relation. These exchanges are shaped and determined by a host of political, juridical, cultural and power relations. There is no magical "correctness" to the allocations determined by markets. As the sum total of a society's conventions, these "markets" - social relations - reflect the interests of the social forces that dominate that society; in our case, capitalism.

For the society of the future - socialism - economic exchange will be determined, not with the social conventions of capitalism, but by mechanisms that place the optimization of the common good first. They will not be determined by a rigid theology of markets, but by the best rational mechanisms for ensuring both societal goals and efficiency. Only a medieval scholastic (or a neo-classical economist!) would not see a greater role for democratic, scientific planning. Neither the rigid dogma of market-fetishism nor the anarchy of markets will have a place in this world.

Zoltan Zigedy

Tuesday, November 25, 2008

What Would Nationalization of the Financial Sector Look Like?

Now that disgust with the financial sector and the government bailout is reaching a fever pitch, it's a good time to look at how nationalization of this wounded shark might proceed. Discounting those who foolishly defend the looting of public funds as nationalization, there are more and more calling for public ownership of financial institutions. Unfortunately, most calls for nationalization are short on specifics and potentially more harmful than helpful.

Below are some notes - admittedly tentative and sketchy - that may stimulate the discussion further.

1. What do financials "produce"? Essentially banks, insurance companies, and other financial institutions produce paper and plastic. More specifically, they deal in debt and other future obligations; they serve as an intermediary between people or institutions and money tendered and money borrowed or awarded.They collect assets from depositors, the insured, and investors and loan money or award money to willing borrowers or those meeting certain contracted conditions. What separates them from publicly-owned or cooperative financial institutions is profit. What they have in common with other privately-owned enterprises is, again, profit. Their primary mission is to make money and not serve any greater or collective cause. Their radical self-interest precludes any collective solution to the current financial disaster through individual bailouts precisely because their individual behavior is driven only by profit maximization. They have no social consciousness. Bailouts, like the current mega-gift to CitiBank, cannot work unless the profit motive is contained or by sheer dumb luck. Giving public funds to them is like giving drugs to a junkie.

2. If bailouts cannot work, what will? There is an essential need for the financial functions that are currently served by private institutions; without these services, there would be no economic activity, no hope for a better future. But for the vast, vast majority of people, these needs are fairly simple and easily administered: the accounting and distribution of compensation; insurance against life's unforeseen eventualities; loans for home purchase, education, consumer goods; guarantees of health care and retirement benefits; etc. Private institutions perform these functions poorly and at a high cost, duplicating services, incurring unnecessary expenses for marketing and promotion, thwarting economies of scale and, of course, expanding profits.

In addition, private financials are genetically determined to go beyond the essential functions of banking and insurance into areas of speculation. The profit imperative encourages speculation. If they engaged in reckless behavior with their own money, no one would care. But they are in the unique position of gambling with other people's money: deposits, retirement funds, insurance funds, savings, etc. Moreover, they are driven to take more extreme and socially irresponsible choices in pursuit of profit: securitization, derivatives, CDO's, and a host of other instruments that are impossible to explain or understand. The results are what the pundits call "toxic assets". They are indeed toxic because they engage and affect the fate of millions of people, but they are hardly assets. The real, original value of these instruments has been squeezed out through fees and charges, leaving nothing else but nearly worthless paper.

3. So what should be done? Three options are available. Firstly, we could shore up, at public expense, the speculative functions of the financial industry. This is the policy of the Bush administration and most of the Democratic opposition. Obama has not rejected this approach. It cannot and will not work.

Secondly, we could broadly nationalize the financial sector, paying current market value for their assets and taking on the essential financial services as well as the "toxicity".

Or, thirdly, we could simply create the means - easily and quickly - to provide the essential financial serves required by most of us. In other words, we could devise the necessary "products" through government agencies to provide - without profit, marketing costs,high management salaries, etc. - housing, automobile, health, home owners insurance; student loans; mortgages; consumer loans; etc. This move would fulfill the unrealized promise of Fannie Mae, the Federal National Mortgage Association, established in 1938. While Fannie Mae only addressed one aspect of the financial crisis of the Great Depression, it pioneered the creation of government institutions that supplied essential financial services formerly provided by the private sector. Over time, virtually all the existing financial liabilities incurred in the private sector could be absorbed by refinancing into the public sector. Such a move would be both rational, efficient and cost saving. Imagine if the estimated $7.7 trillion (the total value of ALL mortgages in the US is estimated to be $10.6 trillion!) already gifted to the financials were put to this use, a figure that is both wasted assets and equally a liability on the citizens of the US who must pay for it.

4. What would happen to private financial services: banks, insurance companies, etc.? They would remain whole based upon fair market compensation for any of their assets surrendered to the public sector, but they would be left to their own devices to dispose of the "toxic" assets that they have created. This harsh measure would eliminate the moral hazard of unfettered financial speculation, discipline their practices, and lower their profit expectations to levels commensurate with their actual productive value. I predict that they would shrink to service financial niches much as private doctors do in some countries with national health care.

5. Would there be other advantages to this nationalization other than stepping over the toxicity of greed fostered by the private sector? Sure. The current banking system is antiquated, changing slowly to adjust to new technologies. To a great extent finance is moving quickly to electronic transactions, but less so below the level of high finance. On the consumer level, the industry is still dominated by a "brick and mortar" approach , but with declining service stretching customer tolerance. Automated telephone systems, hidden penalties, long service queues, massive paper work, deceptive contracts, etc. are common complaints about the financial system. In addition, the security concerns associated with financial transactions engage draconian tactics, zero tolerance and extreme penalties, all, in the final analysis, enforced by the government.

Furthermore, the era of printed money and coinage is coming to a close only hindered by the untold cash transactions that the banking industry conducts with criminals and tax-evaders. Super-profits give the private bankers no incentive to report or hinder these transactions in the illegal economy.

A publicly-owned and democratically run financial organization free of the profit motive would eliminate the wasteful duplication of brick and mortar facilities, moving most financial transactions to the internet or other electronic media. Where two or three drive-thru banks are in one city block or in one mall, facilities for those unable to access or use these technologies would be strategically placed for convenience rather than where the money flows most freely. Uniform credit and debit cards, procedures, terms, and universal acceptance would replace the chaos and uncertainty found today. Consumers would democratically determine service levels and service mechanisms, balancing cost-effectiveness with ease of usage. Enforcement of obligations would, as with a humane health-care system, stress prevention over punitive remedies. Moreover, enforcement of obligations would be elastic to adjust for circumstances and external conditions, unlike with the shameless foreclosures and repossessions exploding in the current crisis. Needless to say, government monitoring of criminal finances would be vastly improved: drug dealers don't use credit or debit cards.

6. But what about enterprise financing? Assuming - contrary to my vision - private enterprises still exist, they can be financed directly from the government. Quietly - a few months ago - the Federal Reserve opened loans directly to financial corporations without the intermediary of banks. There is nothing different - except for cost-savings and efficiencies - in making this a general practice of a publicly-owned, democratically run central bank. Loan decisions would include, contrary to today, matters other than profits: environmental impact, social consequences, long term effects, etc. Certainly if private investment banks can serve this function better and more efficiently, but under government scrutiny, they are welcome to try.

7. Does this nationalized financial sector include insurance? Nothing in the private financial sector is as utterly parasitic as the insurance industry. A monkey could take the government funded and researched demographic data and contrive actuarial tables to balance set-asides with projected expenses. The trick, for the private sector, is to shave enough away from realized expenses to accrue a profit from accumulated charges. They have been very successful at the expense of equitable and efficient use of the resources they accumulate. They do this in many ways, including "over-insuring", denying insurance to the unlucky, denying benefits, offering misleading terms and coverage, inflating liabilities, and buying out the regulators. And in recent years, they have taken their reserves - set aside to cover beneficiaries - and gambled them in the insane speculative carnival that is now bringing down the entire financial sector. The insurance industry is the ultimate huckster.

It would take less than a week to establish a government agency to perform the functions of the insurance industry, an agency that would be more efficient, responsive, humane, and cost-effective than what we have now. I might add that without private insurance, the single-payer health care solution would not only be more likely, but essential.

8. In its simplicity, cost-effectiveness, and social responsibility, this nationalization option would best serve the needs of 90% of the people in the US. Perhaps, the other 10% would be less pleased. They could explore other options. But the poison of unbridled speculation would be expunged from the productive economy.

I offer this sketch of financial nationalization, not as a blue print, but as viable and attractive alternative. Such an option would not come about from the will of a treasury secretary or "progressive" president, but from an intense, determined class struggle. The forces arrayed against such a plan are formidable, but there is no better time to press for it.

Saturday, November 22, 2008

Getting Beyond Euphoria

Of all the many post-election, euphoric self-congratulations over the Obama victory few can match in fulsomeness the long-winded, pompous posting of Carl Davidson on Portside. In "The Bumpy Road Ahead: New Tasks of the Left Following Obama's Victory (long)", Davidson indulges 19 Word-document pages of hyperbole and pontification to affirm much of the left's unqualified support for Obama and the elevated expectations from the electoral victory. In many ways this is a welcome document because it serves as an unabashed example of the strange, deluded route that so many chose to follow. A taste of Davidson's exaggeration should be quite enough to illustrate. Davidson writes:

"...hundreds of millions-Black, Latino, Asian, Native-American and white, men and women, young and old, literally danced in the streets and wept with joy,celebrating an achievement of a dramatic milestone in a 400-year struggle, and anticipating a new period of hope and possibility."

Hundreds of millions? Literally? A dramatic milestone? Of course there were not hundreds of millions even voting, nearly half of which voted against Obama! And "dramatic milestones" should be reserved for truly world shaking events like the Civil War, The Great Depression, and possibly the economic catastrophe now looming. This dramatic overstatement is precisely the kind of puffery that contributes to isolating the left from working people.

Davidson's foray into the politics of class alignment would be amusing if it weren't meant so seriously. Davidson lists the following as one Obama's strategic accomplishments :"...he realigned a powerful sector of the ruling class into an anti-NeoCon, anti -ultra right bloc.” This is sheer nonsense. The ruling class, with a few exceptions, turned against Bush before the 2006 elections, not out of hostility to the ultra-right ideology, but because his policies were failing and proved to be a hindrance to the advancement of capitalism. There is no fundamental change in ruling class thinking, only a shift to more reliable partners. To think otherwise is a flight of unfettered imagination.

He goes on:
"The Obama team at the top is comprised of global capital's representatives in the U.S. as well as U.S. multinational capitalists, and these two overlap but are not the same. It is a faction of imperialism, and there is no need for us to prettify it, deny it or cover it up in any way. The important thing to see is that it is neither neoliberalism nor the old corporate liberalism. Obama is carving out a new niche for himself, a work in progress still within the bounds of capitalism, but a 'high road' industrial policy capitalism that is less state-centric and more market- based in its approach, more Green, more high tech, more third wave and participatory, less politics-as- consumerism and more 'public citizen' and education focused. In short, it's capitalism for a multipolar world and the twenty-first century".

Davidson draws distinctions that don't exist and makes projections that are unfounded. The folks around Obama (the cabinet has yet to take shape) are Clinton retreads or worse. Vague notions like "'high road' industrial policy" and "third wave" are unhelpful in understanding a candidate like Obama who campaigned on broad, equally vague pronouncements and the virtues of bi-partisanship. Apparently, Davidson listened little to what Obama said.

The retail politics of the campaign are hard to reconcile with Davidson's claim that Obama has departed from "politics-as-consumerism". The clear fund-raising winner in the billion dollar presidential derby raised more money from most sectors of the ruling class than any candidate in the primaries or the general election. Through the ruse of so-called "joint fund-raising committees", Obama received contributions of over $25,000 from 2,205 individuals. Does Davidson really believe that they will have no more impact on the administration than an individual giving $200?

Perhaps Obama will carve a new niche, perhaps he won't. But history does show that bourgeois politicians never stray too far from the capitalist ranch unless there is intense popular pressure. There would be no revolutionary break with England without an uprising in the colonies; there would be no emancipation of slaves without an abolitionist movement; there would be no Social Security, unemployment insurance, or industrial unionism without mass action; there would not be integration without a civil rights movement; and so on. In no case was an electoral victory sufficient to guarantee these outcomes. And in no case were the movements that drove these victories dependent upon or limited by electoral outcomes.

So "...the important thing to see is that it [the Obama team's ideology] is neither neo-liberalism nor the old corporate liberalism." Given that the Obama's team is shaping up as old-guard Clintonites, this is a wildly misleading statement indeed. What are Obama's associates? Socialists? Closet New Dealers? Born-again progressives? One sees the transformation of hope into faith in such blatant, naive wishfulness.

To help us understand the new world opened with the Obama victory Davidson garnishes the victory with a flourish of pop-Gramsci:
"The Obama alliance is an emerging, historic counter-hegemonic bloc, still contending both with its pre-election adversaries and within itself. It has taken the White House and strengthened its majority in Congress, but the fight is not over. To define the victorious coalition simply by the class forces at the
at the top is the error of reductionism that fails to shine a light on the path ahead".

O ne is surely struck dumb by a bloc that contends with its former adversaries by putting Hilary Clinton in charge of foreign affairs - a most unusual way of "contending". But Davidson is right; the fight is not over; in fact, it hasn't really began. To evade the glaring affirmative action for the ruling class among Obama's close collaborators, Davidson evokes the tired, cheap, and, by now, vacuous charge of "reductionism". Like a cross waved before a follower of the devil, the mere appearance of the word is supposed to drive the Marxist left back into the shadows.

Davidson distinguishes the layers of the Obama victory: At the top - as he likes to say - is a superstructure of solidly established, old guard politico's who have yet to propose one idea that departs too far from the limited toolbox of neo-classical economics and imperial foreign policy. Yes, there is talk of green initiatives, a friendlier relationship with labor, support for social liberalism, and a vague, dangerously tame reform of health care. But this group has shown no new thinking on the catastrophic economic crisis. Moreover, their timidly progressive pronouncements differ little from the false hope promised by the Clinton and Carter Democratic administrations that precede this one. This is hardly the promise of a "historic milestone" as foreseen by Davidson.
Below this elite center of power is an electorate overcoming racism, demonstrating a decisive rejection of the Bush administration, and starved for real change. Yet Davidson never - even remotely - bridges the chasm between their aspirations and the actual promises of the new administration. Change will come from the efforts of those organized oppositionally to force new initiatives and not from those relying on the good will of ruling elites. To ignore this historical truth is to risk the disillusionment and alienation of all of those who have advocated change with their vote.

Davidson huffs and puffs in a scolding and self-congratulatory diatribe against those he characterizes as the "ultra-left" because they failed to share his total submission to the Obama road show. He singles out three organizations who "mostly got it", though he concedes that they are "rather small and not growing in any major way". Of course they're small and not growing! They have surrendered their independence and they have been completely absorbed by the Democratic Party campaign to take a turn at bourgeois democratic rule. The dogmatic proposition that the left cannot welcome the rejection of the Republican agenda without subjugating itself to the agenda of the Democratic Party is unacceptable to anyone committed to moving beyond the tyranny of the two-party system. It may come as a surprise to Davidson that many members of the three organizations mentioned were able to work for the Obama victory without vassalage to the Presidential candidate (full disclosure: I voted for Ralph Nader).

Now that the election is over there is no excuse for not working to build a socialist left - an oppositional force - that will go beyond a three decade long defensive struggle against a persistent and relentless rightward shift in bourgeois politics. Maybe the Obama victory signals a halt to that drift; maybe it doesn't. But the urgency of the moment - a profound economic crisis - affords a rare opportunity to advance an anti-monopoly agenda beyond anything that Democrats would or could support. For many of us this may well be the opportunity of a lifetime to make an anti-monopoly, if not a socialist, option a real factor in US politics. There is time to celebrate the repudiation of Bush and the setback to racism, but not too much time. We must not yield to those who urge the unearned confidence in a political party with a history of betraying that confidence.

Davidson's article is available at:

Thursday, November 6, 2008

The Presidential Election: A victory for the People?

The 2008 US Presidential election is behind us. A fair estimation of the results might be as follows: A clear, significant statement of the US electorate; a hollow, likely disappointing result for the people. After the euphoria of the Obama victory, it is vital that we separate these two assessments and avoid the cynicism of leftist isolationism and the self-deception of hopeful idealism. What the voters wanted was unquestionably significant change. What they were promised was change. Whether change will come from the Obama administration is - at best - questionable.

The Meaning of the Vote

The vote was most importantly a repudiation of racism and the Bush administration. White voters in working class areas cast aside crude racist appeals, put aside the three-headed Trojan horse of abortion, gays, and guns, and voted economic self-interest. They knew that McCain would do nothing for them and they wanted to believe that Obama would. A kind of reverse Bradley effect - unnoticed by the media - was operating. Many were afraid to openly support an African-American, but were comfortable doing so in the privacy of the voting booth, canceling out any lost votes from the opposite tendency. Thus, the polls proved to be an accurate, if not underestimated, gauge of the election results.

The significance of this cannot be overstated. The level of overt racism - the open, vulgar racism fostered by talk radio, shock jocks, internet slime - should diminish with the expression that most citizens are comfortable with an African-American President. Of course it won't disappear.

Also, the vote opens the door to a more unified working class. Make no mistake about it, union leaders who were lukewarm, often absent fighters for equality were forced by the circumstances of the campaign to take strong, out-front statements against racism. This is a good thing, and, though their efforts were sometimes clumsy, commendable.

Of course much work lies ahead in the struggle against racism; voting for Obama is not a free pass for racial insensitivity.

The three strongest constituencies for Obama (giving Obama the largest portion of their group vote) were African-Americans, Latinos, and union labor. African-Americans understandable took pride in the candidacy of Obama with predictable results. Latinos voters represented 8% of the total vote, siding decidedly for Obama. Both the growth of their total vote and their stronger support for this Democratic candidate mark a greater importance in electoral politics and a powerful progressive tendency. These results were duplicated in Florida, where the intimidating gusano influence continues to wane.

The election confirms the demographic expansion of the minority population and their increasing importance for anti-monopoly political organizing. The shift in the Latino vote makes the excuse for appeasing the anti-Communist Cubans in foreign policy even more lame.

The union labor vote - which overlaps substantially with the minority vote - was strong for Obama: 67% supported him, according to the AFL-CIO. Most importantly, the union electoral drive proved effective in blunting and overcoming racism and the always present distractions of abortion, gun control, and gay marriage. Like the Prohibition issue in the election leading to the New Deal victories, these issues are used to deflect attention from more fundamental issues. The union electoral effort shows the potential for influencing policy well beyond the electoral arena and much more frequently than the electoral cycles. Labor activism is an untapped source, lacking only ideological clarity and militant leadership - a task for the left in the coming period.

The Catholic vote went for Obama despite the efforts of many right-wing bishops to to swing the vote towards anti-abortion candidates. Protestant Obama fared better than Catholic Kerry in 2004 - another measure of self-interest trumping self-identity.

In general, the vote results show an electorate ripe for new policies, new answers and moving in a clear progressive direction. The trends exposed by the Pew Research Center's two decade long polling study ("Trends in Political Values and Core Attitudes") towards social democratic policies and away from insularity and obscurantism is born out by the 2008 election.

The Meaning of the Obama Victory

There is a glaring contradiction between the wants and needs of the people of the US and the issues debated and embraced by the Presidential candidates - it is as if they existed in two different worlds. The institutionalization of the two-party system both allows and insures this fact. It is no criticism of Obama or his hope-filled partisans of change who worked with such great enthusiasm to point this out. But, by the same token, it is delusional to forecast a progressive turn in the Obama administration from this great effort. If Nader, if Cynthia McKinney, if even Bob Barr were allowed to debate the candidates before a television audience, there might well have been progressive issues on the legislative table. If... if... if... But the institutionalized two-party system does not allow for such opportunities. And it will continue to block any move leftward without a dramatic mass movement forcing it.

The political influence of the right-wing Democratic Leadership Council surrounds Obama with the appointment of Rahm Emmanuel as chief-of-staff only underlining this reality. With Emmanuel as the gate keeper, the notion that progressives at least have access to the White House is even more remote. Despite the fact that the DLC is completely out of touch with the needs of the majority of the citizenry, they exercise inordinate influence within the Democratic Party. It must be remembered that they have a strong base in the South as well as the suburban bed-room communities in the North. These suburban communities proved to be the power base for sweeping away the progressive platform of the Democratic Party after the 1976 election victory.

Again, in 2008, suburban voters left the Republicans and sided with the Democrats. Despite their fickle loyalty to the Democratic Party (they respond mainly to the Party's social liberalism agenda of gun control, abortion rights, gay marriage, and other personal freedom-based issues), they are the main justification for the constant urging by the Party's pundits to tack towards the center and center-right). Their "activism" is what the Democratic Party best understands - money and power. And they stand as rivals for policy influence with African-Americans, Latinos, and labor.

On the economic front, Obama's advisors are hardly inspiring; indeed, they are a bit scary - Paul Volker, Lawrence Summers, Robert Rubin. Austin Goolsbee, Jason Furman, Timothy Geithner, and Warren Buffet have all the wrong corporate and academic credentials. None have stepped too far from the warm, comforting waters of neo-liberal orthodoxy. And in a world of real oppositional politics all would have been ferreted out for previous personal or policy sins. For the hope-crazed progressives, there should be some puzzlement at the absence of Krugmans, Stiglitzs, and Reichs from this group (actually Reich is part of the transition team - a rose among so many thorns).

At this early date, the names floated for key cabinet positions are largely political retreads of previous administrations and old legislative warhorses. Very few wear any progressive medals for deviation from the center, center-right agenda.

Regrettably, the electoral victory was no victory at all for the left. That is just to say that the Obama victory brought no assured policy reward for left support. At best, the Obama administration would be more accomodating to, less intransigent against any advances forced upon it by mass action. That is something, but hardly a justification for most of the left's unconditional support of the Obama campaign. The occupation in Iraq is no closer to conclusion; universal single-payer health care is no closer to being achieved; there is no plan to end the Afghan war; the Cuban embargo remains policy; Palestinians remain political untouchables; and so on and so on... And every indication is that the Obama administration will continue down the path of advancing imperial interests and privileging corporate America.

Looming over this election is the global economic catastrophe - a giant gorilla towering over all other issues. Many see a repeat of the Great Depression - a sense not completely farfetched. And many hopefully see Obama as the new Roosevelt launching a new New Deal - a sense built upon the sand of "Yes we can". In truth, Roosevelt was not the great savior of capitalism or the people, a myth that lingers in liberal theology. But the facts give no portent that Obama is Roosevelt, either. It's time for the left to put the aside comforting illusions and rebuild an independent, oppositional front that is not dependent upon the good will of the corrupted Democratic Party. We desperately need that left to forge a true people-saving agenda from the destructive gorilla.