Last Thursday, in a panel discussion at New York University, Doug Henwood and Anwar Shaikh offered their views on the ongoing economic crisis. Their presentations were both excellent and largely complementary. I hope the organizers of the discussion upload the video on the web for others to watch it directly. Meanwhile, I will share a few impressions/comments on the issues involved:
[12/8/2008 UPDATE: The audio file is already available at: http://nyusociology.org/blogs/radical/2008/12/08/the-deepening-economic-disaster/]
1. Doug had an understandably skeptical view of the political opportunities opened to the left by the crisis. One of his remarks, was that an economic crisis — with its sequels of joblessness and insecurity — could tilt people towards solidarity and collective struggle just as well as to the kind of misanthropic despair that strengthened Fascism. This is a valid warning. I’d just add the qualification that the very fact that, as a result of a crisis, things might tip from one extreme to the other suggests that the moment is pregnant with political opportunities for the left: the U.S. and global left. At times like these, the actions of the left — especially actions that are thoughtfully conceived — can have large positive consequences.
2. In his introductory remarks, Doug referred to the discontent among leftists towards Paulson’s bailout plan when it was initially announced. Doug said that, not taking some sort of action to bail out the banks, even if it involved handing money out to Wall Street, could have triggered even worse consequences to working people than the alternative. The collapse of banks entailed serious risks for everybody. Doug aptly alluded to the debate between Bernanke and Friedman/Schwartz on the causes and propagation mechanisms of the Great Depression of the 1930s (Anwar reminded us that we should be specific when we refer to the Great Depression, since the U.S. experienced a few of them in the late 19th century).
3. Bernanke’s reputation as an academic, which in turn led him to the Fed chairmanship, was based on his famous 1983 paper, “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression,” (AER, 73-3). In his essay, Bernanke questioned prevailing views, because they implicitly assumed perfect (neutral) financial markets. The banks’ collapse simply echoed the fall in output or — as claimed by Friedman & Schwartz — fed the fall in output as a result of wealth effects or (in tandem with tone-deaf monetary policy moves) via the shrinkage of the money supply. Instead, Bernanke argued compellingly, bank bankrupticies led to a credit freeze with real output negative effects.
4. At this point, Doug failed to make the crucial distinction between the collapse of banks and the collapse of banking — or the collapse of the banking system as a whole. Even if we rule out socialism as a feasible alternative in the short run, under capitalism, existing banks and banking are by no means the same thing. By failing to draw this distinction, Doug leaves unquestioned a key article of faith of the neoliberal doctrine, namely that banking is a business to be left to private interests.
5. As I’ve written previously on this blog, it is entirely feasible — within the confines of the U.S. capitalist economy — to dampen the effects of the credit freeze on the economy by providing direct relief to mortgage debtors. That can be duly complemented with alternative ways to get credit flowing into the economy, e.g. by nationalizing at least some banks (buying a controlling interest and, using the current laxity in monetary policy to expand credit to well directed social goals). My back-of-the-envelope estimations tell me this approach would be significantly more economical and effective than the favored ones. (In all fairness to Doug, a questioner moved him to entertain the possibility of credit unions, development banks, and other forms of banking under greater public control, but he made these remarks with due skepticism.)
6. This leads me back to the issue above. In fluid times, when its inherent instability and antagonisms sow doubts in people’s minds on the social efficiency and equity, rationality and desirability of capitalism, Marx’s famous epigram becomes more operational than under normal conditions: Ideas become a material force when they grip the minds of the masses. How can the proposals of the left grip the minds of the masses if we don’t even dare to entertain them publicly in the first place? The first task of the left is to articulate the needs of people, frame them in ways compelling enough to enligthen their actions when they set themselves in political motion. The realm of political feasibility is being expanded by the crisis. When the reigning economic ideology (e.g. neoliberalism) has exhausted itself, people otherwise impermeable to the ideas of the left are more ready to regard them.
7. In his closing statement, Anwar remarked that we shouldn’t view the ongoing crisis as a U.S. crisis, but as a crisis of capitalism. Today’s capitalism continues to be largely an alienated phenomenon, without a central manned direction, subject to its own inherent, spontaneous laws above and beyond the control of the so-called “Masters of the Universe.” I don’t disagree with his statement as a general methodological, abstract proposition. In fact, just the other day, I was going to write critical comment to a recent paper by Samir Amin using an argument similar to Anwar’s. If it weren’t for views as those espoused by Amin and others, I’d have said that Anwar’s statement was unnecessary.
8. Having said that, there’s clearly a dimension in which this is a crisis of national hegemony — a crisis of U.S. imperialism. The view that global capitalism is driven by spontaneous social laws doesn’t have to exclude the recognition that, on a more concrete level, some nations, states, classes, groups, and individuals wield a much greater amount of social power than the rest of the human race — and that they use it to exploit others less fortunate. (In fairness to Anwar, he also said in his reply to a questioner that he didn’t deny that national policies significantly altered the operation of the “pure” laws of capitalism, although the latter would wind up asserting themselves, usually in the form of sudden crises.) This asymmetry of power is at the root of capitalism and imperialism. The issue of international hegemony is a real political dimension that the left has to ponder. Although no given nation state exercises absolute global social control or can impunely violate the laws of motion of capitalism, the U.S. continues to dominate the world economically and politically. As I’ve tried to argue elsewhere, imperialism is nowadays the weakest link of the capitalist chain. Imperialism, as a form of forceful extra-economic appropriation of the social labor of poor countries for the benefit of rich countries, is in a terminal crisis.