Wednesday, August 4, 2010

The Topsy-Turvy World of American Politics

Here is a bit from a talk given by Left Business Observer editor Doug Henwood at the Studies in Political Economy annual meeting in Ottawa, January 29, 2010.
It’s amazing that amidst our worst economic crisis since the Great Depression, most of the dissent is coming from the right. Despite watching 8.5 million jobs disappear, much of the population has been passive while the bankers got billions and the jobless got an average of $305 a week in unemployment benefits—if they were lucky. Unlike the 1930s, there’s been no upsurge of union organizing, plant occupations, or solidarity with those facing foreclosure. Tea Partiers are enraged by the march to socialism being engineered by Barack Obama, particularly through his health insurance reform scheme and $787 billion stimulus program. Never mind that the health insurance scheme was from the first designed to be friendly to the medical–industrial complex, and never mind too that a third of the stimulus program consisted of tax cuts and zero New Deal-style jobs programs. Despite that, the Tea Baggers are setting the political agenda. At first, it seemed odd that the Republicans, despite having lost the 2008 elections badly, had so much influence on political discourse, and despite showing no interest in cooperating with the administration or Con-gressional Democrats, were courted by the Dems. Now it looks like the right wing of the Republican party, or a fringe group that finds the Republicans too establishment, is exerting a weird gravitational pull not merely on speech but also on policy.

Who are these Tea Baggers? They were nicely described by Ben McGrath in The New Yorker as a collection of “footloose Ron Paul supporters, goldbugs, evangelicals, Atlas Shruggers, militiamen, strict Constitutionalists, swine-flu skeptics, scattered 9/11 ‘truthers,’ neo-‘Birchers’ and, of course, ‘birthers’—those who remained convinced that the President was a Muslim double agent born in Kenya.” Though no one has yet done the rigorous sociological work, they look to be a movement of middle managers, professionals, and retirees—the petite bourgeoisie, to use the old language. ...

To that pessimistic view of the “grass-roots,” let me add a gloomy diagnosis of our elite. Our rulers have learned nothing from our brush with economic death. The initial response of both the Bush and Obama administrations has been to spend enormous wads of public money on trying to restore the status quo ante bustum. One would like to think that McCain lost the election in November 2008 because he represented that status quo—and that Barack Obama represented, if only in fantasy, a fresh departure. Those hopes have proved misplaced. There’s been almost no effort to stiffen financial regulation to avoid future catastrophes.

...

I see the U.S. as being in the midst of several structural crises. There’s the economic crisis—and not just the immediate one, caused by the housing bust. That was the culmination of a process long in the making. The capsule history would be this. In the 1970s, the American ruling class was faced with several interrelated problems. Abroad, having just lost Vietnam, the U.S faced a crisis of imperial authority. The Third World was demanding a bigger slice of the pie. Oil and other commodity exporters were nationalizing resources. Japanese and European competition was hammering U.S. manufacturing. At home, the streets were full of demonstrators, women and minorities were agitating against white male privilege, and the working class had developed a serious attitude problem. Corporate profitability, which had peaked around 1966, had been drifting lower ever since. From the point of view of the U.S. ruling class, things were slipping out of control.

That class eventually engineered a very successful crackdown. It had several dimensions. First, in 1979, Jimmy Carter, blindly following the recommendation of David Rockefeller, appointed Paul Volcker chair of the Federal Reserve. On taking office, Volcker announced that the U.S. standard of living must decline, and then made it happen. He drove interest rates towards 20%, provoking the deepest recession since the 1930s. That terrified the U.S. working class, and drove Latin America into debt-crisis-induced depression.

Just over a year after Volcker’s ascendancy, voters put Reagan into the White House. Reagan’s major contributions to the class war were firing the striking air traffic controllers, signalling open season on the unions; cutting taxes on the rich, signalling that all social constraints on wealth accumulation were suspended; and rebuilding U.S. military power, signalling that the era of imperial reticence following Vietnam was over.

It all worked splendidly. Unions were broken, wages stagnated, and Latin America was restructured using the club of debt. Corporate profitability bottomed out in 1982 and began a fifteen-year surge. But—and this is a very big but—an economy that was dependent on high levels of mass consumption and a political system that depended on the same thing for its legitimacy had to figure out how to keep spending up while wages were heading south. The answer, as we all know, was debt: household liabilities more than doubled relative to income between 1982 and 2008. The ratio has since come down a bit, but not by much.

So here’s the structural crisis: profitability was restored, but at the cost of fostering unsustainable levels of personal debt. The profit boom and the upward redistribution also gave rise to a gusher of cash that flowed into the financial markets, prompting a proliferation of incomprehensible instruments of mind-boggling vastness. The ratio of financial assets of all kinds to GDP more than doubled between 1982 and 2007. That too has come down a bit, but not by much. The financial sector’s share of corporate profits nearly tripled over the same interval.

...

The U.S. needs something like the transformation envisioned by Romer, but that’s not happening. Which brings up the next structural crisis: the political and intellectual one. Neither the U.S. elite nor the U.S. electorate is capable of analyzing our problems coherently, much less coming up with solutions, and much much less adopting them. And that’s not just our problem.

For a little while it almost seemed like Obama’s election might represent some sort of departure for the U.S.—a willingness to rethink the stupid verities about minimal government and the vital private sector that we grow up hearing. I never bought the line that he was some sort of progressive, but I did, for a now almost un-recallable instant, think he was a grownup who could prod a maturing country in a more sensible direction. The model wouldn’t have been the New Deal, even—maybe something more like the Progressive Era, meaning a more sensible, organized, regulated capitalism without a major redistributionist component.

But that was not to be. From the first, he was hot for compromise with the party that his had decisively beaten. Why? One reason is that the discursive grip of Ronald Reagan remains unchallenged. For evidence you need look no further than Obama’s State of the Union address—despite making some Romerish noises about necessary transformations, he couldn’t stop from bragging about all his tax cuts and praising the wonders of our private sector. The fact that this private sector’s major innovations—computers, the Internet, pharmaceuticals—have been made possible by very generous public subsidies can’t be spoken in public. And he couldn’t resist closing the address with the phrasing introduced by Reagan: “God bless America.” No public address is complete without invoking our status as the new chosen people.

That address was a core sample of American political pathologies. In the days leading up to it, the White House assured us that Obama would make a “hard pivot” towards jobs. Sounds not so bad. But how did he go about this? With an ineffectual tax break for small business. Businesses invest when they have the cash and think that their future sales will be strong; neither is the case now. Adding a tax break won’t change this. To help working families, as they like to say, he proposed an expansion of the child care tax credit—which would apply to one in twelve families, to the tune of $0.88 a day.

And on top of those micro-initiatives, he added a dose of austerity: a three-year freeze in domestic civilian discretionary spending. The Pentagon will be allowed to flourish. For the moment, entitlement programs like Medicare and Social Security—which are funded automatically under current law, the opposite in budget-speak from discretionary, which must be funded annually by Congress—will be spared. But much of the good stuff that government does—nutrition, environment, education—will be squeezed. Announcing this, administration officials bragged to the press that the freeze will bring this category of spending down to its lowest share of GDP in 50 years. You can’t fund a Romeresque transformation out of that. And an anonymous administration official told the New York Times that this freeze was intended as a first step in a plan to build political support for an attack on entitlements, meaning Medicare, Medicaid, and probably Social Security as well.

But it’s not just the discursive grip of Ronald Reagan that provokes these things. It’s also the structural situation of the Democratic party—a party of capital that has to pretend for electoral reasons that it’s something else. So Dems make progressive noises to satisfy the base, but once in power, do the bidding of their funders. Sometimes these contradictory tendencies can be seen in one figure, like Obama himself, and sometimes in the wings of the party (e.g. the Progressive Caucus vs. the Blue Dogs). But in both cases, the more conservative faction, whether of personality or party, usually prevails. That’s especially the case when there are no popular movements pushing them in a better direction.

...

The individualistic common sense of the U.S., or at least its white Protestant core, has become increasingly dysfunctional. The U.S. reminds me in many ways of a startup company that’s grown so big that it needs a serious overhaul but is incapable of the necessary transformation. In the corporate example, you frequently see that the founders don’t want to turn things over to professional managers. They want to keep running the show on instinct and animal spirits. But those aren’t working anymore.

So too the U.S. The dog-eat-dog model of social Darwinism worked well (on its own terms) while the U.S. was growing rapidly in the 19th and early 20th centuries, but since growth slowed down in the 1970s, we’ve been in need of a rethink of the old model. But we’re incapable of it. Instead, we’ve tried ever more reckless applications of debt to keep things going.

The recent financial crisis looked like a major affront to that approach, but we’re now emerging from the crisis phase without things having changed all that much. The country seems to be rotting from within, but the political and ideological systems are incapable of recognizing that fact. I wish I could detach myself from the consequences and find it all amusing, in the style of H.L. Mencken. But I can’t. Now I’ve got a kid who was born into this nuthouse, so I take it all more personally. I hope we can get our act together and make this a less brutal place. But it’s hard to get hopeful. I guess this is what it’s like to live in the midst of imperial decline.
That is an excellent summary of the truly mind-boggling idiocies of the American political system and its dysfunctions.

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