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Thursday, June 28, 2012

Scoundrel Time-- Again?

A constant of life in the US has been an unrelenting diet of anti-Communism and anti-Sovietism. Even before the Big Mac, children in the US were force-fed lurid stories of Soviet horrors, labor camps, and political liquidations. Popular magazines like Coronet, Readers’ Digest, Look, and Life were a constant source of tales recounting the cruelty and inhumanity of Soviet Communism just as their modern counterparts spew scorn upon Muslims.

Academics and other intellectuals built a scholarly foundation for the popular imagery, allowing media to forego the journalistic niceties of seeking corroboration or entertaining counter-claims—the evils of Communism became articles of faith. We were only to learn later what some suspected, that the much of the academic and intellectual construction was generously funded by the CIA and other government agencies.

After the demise of the Soviet Union and a world-wide retreat from Communism, the anti-Communist campaign took a strange twist. Despite the expected triumphal chest-beating, the most hysterical, wild-eyed anti-Soviet intellectuals like Robert Conquest were thoroughly discredited by newly released archival information. Their victim number-mongering proved wildly and recklessly inflated.

Paradoxically, a new breed of scholar of Soviet history, while not necessarily endorsing the Soviet project, used the evidence to construct an account of Soviet history that cast aside the demonic caricature for a more rational, persuasive depiction of the forces shaping Soviet behavior and development. While these scholars had little influence on the popular vulgar misconceptions, they were able to carve out a significant, credible, but marginal, niche in academic circles.

Though funding for hard-core anti-Communists surely declined after the Cold War, anti-Sovietism still found a happy nest in the academy and with old Cold War publications like The New Republic and The New York Review of Books. The latter publication even softened its hard-line support for Israel while maintaining and even intensifying both its demonizing of the Soviet Union and its hatred of China and Cuba. Perhaps it is anxiety over Eastern European opinion polls that show nostalgia for the old system; perhaps the editors fear a rebirth of Marxism in the face of the persistent global economic crisis. Whatever the motive, the NYRB happily assumed the burden of keeping anti-Soviet hysteria alive and fostering a new generation of anti-Soviet writers.

The NYRB can take much credit for promoting three figures who are twenty-first-century incarnations of the Cold War intellectual: Anne Applebaum, Orlando Figes, and Timothy Snyder. All three review and lavish praise on each others’ works; all three breath the thin air of the most elevated of public intellectuals; and all three harbor a boundless hatred of all things Soviet. Applebaum’s signature work is on the Soviet penal system, an exposition sufficiently lurid to launch an otherwise undistinguished career and earn a vaunted position as a Washington Post columnist. Her ties by marriage to Polish officialdom causes no pause to Western intellectuals who see no conflict in the long standing animus of post-Soviet Polish elites towards Russia and the Soviet era.

The latest to rise above the crowd of anti-Soviet intellectuals is Timothy Snyder, whose Bloodlands enjoys fame by paralleling Soviet “atrocities” to those of the Third Reich. Snyder both trivializes the horrors of Nazism and scandalizes the legacy of Soviet achievement by pressing equivalency between Nazi brutal and calculated inhumanity and Soviet desperate and dogged resistance. Even more than the others, Snyder tosses around victim numbers with little or no attribution, numbers that are curiously and suspiciously rounded.

But now the anti-Soviet nest has been further fouled by Orlando Figes. Of the anti-Soviet triumvirate, Figes is perhaps the most celebrated, with several books, movie and theater adaptations, and radio and television performances. His books have enjoyed translation into over twenty languages and he has won numerous literary prizes. Wide acclaim has made him arguably the most respected and authoritative of the anti-Communist Soviet experts.

Despite the acclaim, and thanks to recent revelations by Stephen F. Cohen and Peter Reddaway in The Nation magazine, Figes’ reputation has been fatally shattered (at least with those who still maintain a measure of intellectual integrity).

Reddaway and Cohen take us back some years when Figes was winning several distinguished literary prizes. At that time, a number of established scholars of Soviet history found “shortcomings,” “borrowing of words and ideas…without adequate acknowledgment,” “messed up references…,” etc. One scholar asserts that: “Factual errors and mistaken assertions strew its pages more thickly than autumnal leaves in Vallombrosa.” Of course shoddy scholarship has never stopped the anti-Soviet bandwagon once it gathers momentum.

Then there was the rather indecent matter of Figes launching anonymous attacks against books by other authors through his online reviews on Amazon while praising his own work. If that wasn’t sleazy enough, he denied doing it until forced to deliver a confession. Still, the bandwagon rolled on.

Ironically, it is his Russian sources that finally deflated his overblown reputation. Figes’ most celebrated book, The Whisperers, allegedly drew on interviews and memoirs of Soviet citizens collected by a Russian NGO, the Memorial Society. While the English language edition drew the highest praise in the gullible “tell-me-a-tale-of Soviet-perfidy” West, the book failed to find a publisher in Russia. Thanks to Cohen and Reddaway we know that the book can’t get published in Russia because it “would cause a scandal…” The Memorial Society itself reviewed the book against its primary sources and concluded that there were too many “anachronisms, incorrect interpretations, stupid mistakes and pure nonsense.” One of the leading lights of the Memorial Society noted that Figes was “a very mediocre researcher…but an energetic and talented businessman.” The fact that so many “experts” and “intellectuals” were snookered by Figes says much about the standards and biases of Soviet studies in the West.

I cannot leave this bizarre and pathetic tale without noting that one of Figes chief promoters, the New York Review of Books, published a flattering review of Figes’ latest book in its June 21 issue. Michael Scammell, one of the lesser lights in the journal’s anti-Soviet stable, devotes numerous column inches of fulsome praise for the book while concluding with a brief “caveat” outlining Figes’ sins. Scammell declares The Whisperers a “masterpiece” while noting that the Memorial Society found “dismaying discrepancies” in the book (he buries the Cohen/Reddaway charges in a footnote). One wonders if Scammell would show the same tolerance for an undergraduate student.

Yes, it's scoundrel time, again.

Zoltan Zigedy

Monday, June 18, 2012

The Debt Dilemma, Bankrupt Policies, and Europe's Future

The reason for virtual disappearance of great depressions is the new attitude of the electorate… [E]conomic science knows how to use monetary and fiscal policy to keep any recessions that break out from snowballing into lasting chronic slumps. If Marxians wait for capitalism to collapse in a final crisis, they wait in vain. We have eaten of the Fruit of the Tree of Knowledge and, for better or worse, there is no returning to laissez faire capitalism. The electorate in a mixed economy insists that any political party which is in power—whether it be the Republican or the Democratic, the Tory or the Labor party—take the expansionary actions that can prevent depressions.  Economics, 8th Addition, Paul Samuelson (1970, McGraw-Hill), p. 250.
Since Samuelson---probably the most influential bourgeois economist of the post-war era---died at the end of 2009, we will never know if he would now retract these statements. Every claim in the above quote is false, and false in a way that sheds light on where we are today.  And because every claim is false, policy makers are in a hell of a mess.

The reason for virtual disappearance of great depressions is the new attitude of the electorate…… [E]conomic science knows how to use monetary and fiscal policy to keep any recessions that break out from snowballing into lasting chronic slumps.

In 1970, when the 8th edition of Samuelson’s iconic textbook was published, nearly everyone did share the belief that government had access to tools that could reverse any slump. Even the old red-baiting Cold Warrior President, Richard Nixon, embraced Keynesian prescriptions at that time.

But matters changed quickly in the 1970s. A long period of inflation and stagnant growth settled in, seemingly immune to fiscal and monetary therapy. The loss of the “stimulus” of the war in Vietnam and a restructuring of energy prices challenged the consensus celebrated by Samuelson. Many economists identified the soaring inflation with union and other cost-of-living escalators; consequently, a dampening of wages and benefits was urged, a tendency that continues unabated today. By the end of the 1970s, Treasury Secretary Volker’s shock therapy to contain inflation brought the US economy into deep recession. The Reagan victory in 1980 signaled a loss of confidence in government intervention and the rise of a competitive ideology. Some called it “voodoo economics,” but it proved to have amazing resilience: it turned away from the Keynesian toolbox, and it established a new consensus. 

We have eaten of the Fruit of the Tree of Knowledge and, for better or worse, there is no returning to laissez faire capitalism.

By 1980, the “Fruit” was less than appetizing. Reagan’s election (and Thatcher’s before him) signaled a return to the gruel of laissez faire under the cheery brand description, “neo-liberalism.” A whole new set of popular terms like “supply side,” “trickle down,” etc. were created to sell the new thinking, while the “deep” thinkers of academia, cast off the economics of aggregates and the priority of demand for the micro-foundations of Hobbes and his selfish, but rational animal dominating his/her living space. By 1992, with both the collapse of European socialism and the election of a “New Democratic” President, the “Tree of Knowledge” was a mere stump and neo-liberalism had penetrated nearly every aspect of life in the most advanced capitalist countries. Laissez faire returned with a vengeance and enjoyed even greater dominance than in its original incarnation. And the restored economic doctrine saw no need for the tools of repair since it saw the capitalist market as self-correcting. 

The electorate in a mixed economy insists that any political party which is in power—whether it be the Republican or the Democratic, the Tory or the Labor party—take the expansionary actions that can prevent depressions.

This unassailable truth of 1970 has proven to not only be assailable, but down right false. The political parties mentioned by Samuelson – the dominant parties in the US and UK – did not vigorously defend the value of “expansionary actions;” rather, they fled from the policy as though it were radioactive. With William Clinton’s ascendancy to the Presidency at the head of the old New Deal party, advocates of expansionary government intervention had been largely purged from prominence in the Democratic Party. Likewise, Tony Blair’s rise to Prime Minister in the UK signaled the Labour Party’s wholesale embrace of neo-liberalism.

Of course Samuelson’s claim that the “electorate… insists…” on these policies was never tested because the electorate was never asked — elites settled the matter for them. In 1970, prominent intellectuals still believed that important matters were decided through the electoral process; surely few share that illusion today, when political actors persistently ignore the will of the electorate on matters like taxing the rich or shoring up social programs. 

It bears reflecting upon the words of the Nobel committee in awarding the prize in economics to Samuelson in the same year as the publication of the 8th edition: “More than any other contemporary economist, Samuelson has helped to raise the general analytical and methodological level in economic science. He has simply rewritten considerable parts of economic theory.” Unfortunately, the “general analytical and methodological level” has proven to be unhelpful in understanding the course of economic history.

If Marxians wait for capitalism to collapse in a final crisis, they wait in vain.

Samuelson’s peculiar coinage of the term “Marxians” suggests that he seldom engaged Marxists to solicit their opinion. Of course one does encounter Marxist-poseurs who frequently and loudly predict an apocalyptic final collapse of capitalism just as one hears of half-baked fans who believe the Chicago Cubs will win the World Series—it’s possible, but not likely.

Capitalism will assuredly disappear as a result of “a final conflict” (“C’est la lutte finale” in the original words of the Internationale) and not a final economic crisis. Yet there is a relationship between economic and social crises and the final conflict that will push capitalism into the fabled historic dustbin. That is just to say that wars, economic calumnies, or political paralysis are almost always the immediate and decisive causes of revolutionary risings.

We cannot give Samuelson this point, however, because he meant to deny both that (1) economic crises will not alone bring down capitalism and that (2) no economic crisis – like the Great Depression—can again shake the foundations of the capitalist edifice. On the later, all (authentic) Marxists are in agreement: capitalism cannot, from its internal logic, escape serious economic turmoil; crises are inescapable partners of the accumulation process.

With capitalism’s foundations seriously buffeted by the last four years of bank failures, housing foreclosures, mass layoffs, financial scandals, shrinking wealth, stagnant incomes, dwindling social services, and a host of other blows, few would want to stand on the ground carved out by Samuelson in 1970. What may have appeared to be transparently obvious in 1970 is now decidedly questionable in the light of the protracted economic crisis that we have endured since late 2008.

The Next Step?

I have written often and confidently that we have only seen the first act of a continuing severe structural crisis of global capitalism. Regardless of policy initiatives, there is much more pain and economic chaos ahead. Contrary to the most esteemed minds of the economic profession, there are no quick or decisive solutions to be found from either the market fundamentalists or the Keynesian heretics opposing them. And their political expressions—conservative and social democratic parties – are equally bankrupt, offering no real exit from the looming disaster. Thus, both the seriously damaged economic engine and impotent political institutions combine to guarantee that the crisis will be with us for some time to come.

For the moment, Europe is the locus of the global crisis. The European Union project, realized in an era of great optimism and capitalist triumphalism, is in imminent danger of collapsing; its vulnerability to predatory financial capitalism has left its constituent countries, particularly its weakest countries, in immediate danger of reversion to nineteenth century standards of development and living. The global market mechanism has determined that Greece, Portugal, Ireland, Spain and probably Italy have no essential role in the global economy except for nostalgic tourism and retirement villas.

The illusion of a unified Europe, devoid of borders and with a shared standard of living, is just that—an illusion. The old economic and social relations of dominance and exploitation did not evaporate in Europe because politicians voted in idyllic times to create a union. And with a profound global crisis, the weaknesses of this unsteady union became the target of the bond vultures that turn hardship into profits. In the beginning, these bond vultures swooped down upon Greece, capturing its economy for the big banks and handing its sovereignty to the European imperial centers. I wrote of the weakness and vulnerability of this union often in 2008 and 2009. I returned to this theme in November, 2011: “one might conclude that unification – mutually beneficial combinations of national entities—is extremely unlikely to be successful with capitalist social and economic relations intact. Conversely, socialist social and economic relations, linked with an internationalist perspective hold the only real, lasting opportunity for unity among diverse states.”

The Great Debt Dilemma

The foreclosing of a bourgeois solution to the European crisis arises from the dominance of finance capital in the world economy. That is to say, no real solution is available through policy initiatives crafted by bourgeois economists or advocated by politicians who are intent upon keeping state-monopoly capitalism unchanged while ignoring the predatory role of the financial sector. Those who hope to return to the capitalism of Samuelson’s time are simply delusional.

Market fundamentalists who thought that the Euro-crisis would dissipate with a bit of budget discipline, a heavy dose of government austerity, and perhaps a few emergency loans have been thoroughly discredited by shrinking growth, even greater debt burdens, and intense human suffering. The wholesale dumping of political incumbents has signaled the bankruptcy of conservative answers to those ruling elites who first chose this road.

In the trail of this failure is the “I told you so” of the Keynesians and social democrats. In truth, liberal economists were loud and outspoken about policies that hung on a thin strand of hope rather than rational thought (Despite the fact that policies of austerity made absolutely no sense, it drove the media and politicians into a frenzy of advocacy—a tribute to the power of elitist wishful thinking over common sense). Krugman, Stiglitz and a host of other economists seek to bolster the social democratic case by advocating robust deficit spending to re-kindle growth in the Euro-zone. They argued sensibly that austerity and reduced government spending would only make matters worse. And they assumed that the converse—more government stimuli—would therefore make matters better. But this is a non sequitur.

Certainly more government spending when directed towards programs that benefit those suffering from the economic crisis is a justifiable social good and urgently needed, though it does not follow that it is necessarily a prescription for recovery. Neither the historical record nor theory demonstrates that government spending is a sure-fire recipe for restoring capitalist growth and profitability. It may help, it may not. And it will not in this case unless we excise the influence of financial markets upon the fate of the Euro-zone.

To hear the social democrats, the answer to the European debt crisis is to reject austerity in favor of growth. But they forget or choose to ignore the elephant in the room: the international debt market. Bond vultures, their accomplices --the credit rating agencies, and lending institutions-- pounce on even a hint of deficit spending. The entire contemporary history of the European crisis is that of a crisis engineered by debt holders who view any additional credit extension or currency deflation as a threat to their existing debt holdings. And they hold the power to enforce their interests through debt markets. Equally, they have nearly all the European political forces in a strangle hold that places the interests of the financial sector ahead of all else. That is the demonstrated dominance of finance capital in the twenty-first century. We ignore this at our peril.

The facile answer of the social democrats—from the recent successful electoral campaign of the “socialists” in France to the ascendancy of SYRIZA in Greece—is to reject austerity and endorse growth. But this is no answer at all if it depends upon the “good will” of financial markets that neither have a “will” nor respect the social “good.” The dominance of finance capital cannot be wished or negotiated away.

Nor is exit from the Euro an option without a radical break from international finance. Credit markets will be closed to any country that departs the zone without guaranteeing the integrity of existing debt, a burden that leaves an exiting or exiled country exactly where it was before it left.

Doom or Promise?

The debt dilemma poses an impossible challenge to those who wish to see Europe governed as usual. It forecloses both a conservative and social democratic answer to the current crisis ravaging Europe. Understandably, the habits of decades of complacency and relative stability leave the electorate with a desire to find an easy way out within the confines of the known rather than a leap into the unknown. Embracing solutions beyond the habitual ones comes with great difficulty even among the victims. But for four years, the habitual solutions have failed and the debt dilemma gives us every reason to believe that they will continue to fail.

Only a vigorous people’s movement determined to overthrow the dominance of finance capital will lead Europe (and the rest of us) out of the death grip of financial markets. Central to that overthrow is the establishment of public ownership and control over financial institutions and the removal of those institutions from the market place. It is a nascent movement; we see its stirrings in the growth of the Communist movement emerging around the ideological pole established by the Greek Communist Party, a Party that refuses to compromise by joining a doomed-to-fail coalition government with no answer to the debt dilemma. The era of smug, smooth, and easy recoveries from the capitalist business cycle, as announced by Paul Samuelson, is over. Likewise, the era of economic tinkering and political self-satisfaction is inadequate for this moment. We enter a new era with fear and uncertainty gripping most of the world’s population. Therefore, the realization of the promise of the new era may be a while in coming, but it's surely coming. 

Zoltan Zigedy

Wednesday, June 6, 2012

Obama’s Economy: A New book by Jack Rasmus

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