Jim Flynn & Eugene V Debs

by David
At the recent* Alliance Party national conference Jim Flynn, emeritus professor of politics at Otago University, gave an informative account of the busting of the USUS housing bubble in 2007, explaining how the banking system got caught out when the housing bubble burst. Flynn explained that an important part of his “social-democratic” analysis was looking at the world through “class spectacles”. Nevertheless, he seemed to accept, rather than challenge the basic pillars of a capitalist economy. For example, he talked of banks having a “legitimate function”, which is to spread risk for investors and to match those who have money to lend with those who want to borrow. But surely, looking through “class spectacles”, reveals that the wealth capitalists invest and the “return” on investments, comes from the exploited labour of workers. How can any part of this system be considered legitimate? Another gripe: Flynn’s solutions to financial crisis seemed very technocratic. Several times he mentioned the idea of a committee of academics (on one occasion this was to include business leaders too) who would regulate the banks and other corporations and “tame the market”. But why would the corporations submit to being tamed? One theme that Flynn returned to several times was the lack of a “social-democratic culture” and the need to build one in the US and NZ. For those not so familiar with political jargon Wiktionary gives a useful definition: A “social democrat” is:

A supporter of social democracy, a political ideology which in its contemporary form aims to reform capitalism democratically through state regulation and state sponsored programs which work to ameliorate injustices inflicted by the market economy.

And “social democracy” is:

A moderate political philosophy that aims to achieve socialistic goals within capitalist society such as by means of a strong welfare state and regulation of private industry.

When he talked of “social-democratic culture”, I took Flynn to mean a situation were social-democratic policies (such as a strong welfare state and government regulation of the market) are the standard or common sense response of politicians and business leaders, to any problem or crisis. Leaving aside the question of whether social democratic policies really can tame the market and ameliorate injustices of capitalism, the question of how to fight the dominance of market ideology and push social-democratic, socialist or generally left-wing ideas back into the mainstream, is an important one. As you might expect from a professor of politics, Flynn’s ideas on how this might be done seemed to come back to the work of academics and other experts. However, this wasn’t the main topic of his talk and he and the Alliance may well have other ideas about how to rebuild a left-wing culture. One answer is to look at how the mass socialist movements that existed 100 years ago were built in first place. Flynn mentioned the tradition of the US Socialist Party, and it’s greatest leader Eugene V Debs (1855–1926) [pictured below]. For Debs promoting socialist ideas and political campaigning went hand in hand with union organising, industrial action and other grass roots campaigning. I think that this remains the way forward for the left today.

Eugene V Debs

* OK so it was on October 17, which isn’t all that recent. It’s just taken me a long time to finish off this article.

Marxism Alive 2009 conference video, Part 1

Several dozen activists attended Socialist Worker's Marxism Alive conference on June 27. It was broadest gathering of the Left in Auckland in recent memory. Over the course of the day-long educational forum, the panel speakers and participants contributed to a penetrating analysis of trends and charted moves to unify the Left. A series of video highlights from key debates will be posted on UNITYblogNZ over the coming days.

Is National the new natural party of government? Will Labour return to social democracy?

Daphna Whitmore, Workers Party

Sarita Divis, Alliance Party

Grant Brookes, Socialist Worker

Predicting the future with Obama's ghost: Franklin D. Roosevelt

Socialist Worker Auckland forum

US President Franklin D. Roosevelt

The forum will examine President Roosevelt's New Deal in the United States during the Great Depression of the 1930s. This will help us to predict where his ideological successor, Barack Obama, might go in today's global mega-slump. Presenter: GRANT MORGAN, longtime socialist campaigner 2pm Sunday 22 February Socialist Centre, 86 Princes St, Onehunga

ALL WELCOME

The real change the world needs: a response to Barack Obama

by Grant Morgan Chair of RAM (Residents Action Movement) 6 February 2009 US president Barack Obama yesterday penned a perspectives article for The Washington Post called The Actions Americans Need. Given that Washington's actions affect the world, it's fitting that non-Americans (like myself) respond to Obama's strategy. Here are five representative quotes from Obama's article, along with my responses: QUOTE #1: DEEP Obama: "We have inherited an economic crisis as deep and dire as any since the days of the Great Depression." Me: Just days ago, New Zealand's Reserve Bank governor Alan Bollard flatly denied that today's global crisis is anything like the Great Depression. Many other world leaders are saying similar silly things. Now Obama is linking the two Combo Crises. This breathes a welcome sense of reality into official pronouncements on the depth of the slump. QUOTE #2: DEEPER Obama: "If nothing is done, this recession might linger for years... Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." Me: Implicitly, Obama is raising the spectre of a slump growing so bad that it threatens the continuation of capitalism, as did the Great Depression. Of course, the US president softens his words with the usual politik-speak about the worst only happening "if nothing is done". QUOTE #3: HOPE Obama: "That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will... strengthen our country for years to come." Me: Here the US president is doing what Franklin D. Roosevelt did during the Great Depression: planting the flag of hope in the midst of an economic blizzard. Obama is hoping that the expression of hope will (as it mostly did in FDR's time) keep the grassroots from revolt even when reality fails to match the expressions of hope. QUOTE #4: SILENCE Obama: "In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis... I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change." Me: Yet Obama is silent on the fundamental reforms needed to bring about real change beneficial to the grassroots. Such fundamental reforms would include moves to permanently socialise the banks and other corporate monopolies (instead of merely socialising their losses) as part of democratising control of the economy. QUOTE #5: IDEOLOGY Obama: "We can pull together... We can place good ideas ahead of old ideological battles." Me: Behind an ideological swipe against ideology, Obama ends with a somewhat tired battle cry in favour of the very old ideology of social democracy. This ideology claims that crisis can only be overcome if all social classes and political forces "pull together". Yet that would leave intact the old class and state hierarchies which have given us today's economic and climate crises, and will give us new horrors tomorrow unless there is a bottom-up refoundation of society. WHAT DOES HISTORY SAY? Obama is outlining a crisis-inspired manifesto to save capitalism from itself in a re-play of Roosevelt's role in the Great Depression. Where might Obama's strategy lead? Let's look quickly at what history can tell us (if we wish to listen, of course). Roosevelt's New Deal created some jobs (but not enough) and expanded social welfare (again, not enough). These commendable achievements helped many struggling citizens (yet again, not enough). There is a dark side as well, however. Because Roosevelt left intact the old power structures, his strategy led directly towards an era of perpetual imperial bullying, a war on ecology, expanding corporate domination, third world poverty, increasing labour exploitation and the many other sins of global capitalism. Thus Roosevelt's New Deal planted the seeds of today's job-destroying Combo Crisis as well as a life-threatening Climate Crisis. Will Obama act on history's lessons? We should applaud Obama's call for "change". At the same time, we should shout out that real change must challenge the dictatorship of the profitariat if we are to escape further social and ecological calamities. You can go to The RAM Plan (viewable at ram.org.nz) for some grassroots Kiwi ideas on the path towards a humanistic and ecological society.

The Action Americans Need

by Barack Obama President of the United States from The Washington Post 5 February 2009 By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression. Millions of jobs that Americans relied on just a year ago are gone; millions more of the nest eggs families worked so hard to build have vanished. People everywhere are worried about what tomorrow will bring. What Americans expect from Washington is action that matches the urgency they feel in their daily lives -- action that's swift, bold and wise enough for us to climb out of this crisis. Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse. That's why I feel such a sense of urgency about the recovery plan before Congress. With it, we will create or save more than 3 million jobs over the next two years, provide immediate tax relief to 95 percent of American workers, ignite spending by businesses and consumers alike, and take steps to strengthen our country for years to come. This plan is more than a prescription for short-term spending -- it's a strategy for America's long-term growth and opportunity in areas such as renewable energy, health care and education. And it's a strategy that will be implemented with unprecedented transparency and accountability, so Americans know where their tax dollars are going and how they are being spent. In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive. I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change. They know that we have tried it those ways for too long. And because we have, our health-care costs still rise faster than inflation. Our dependence on foreign oil still threatens our economy and our security. Our children still study in schools that put them at a disadvantage. We've seen the tragic consequences when our bridges crumble and our levees fail. Every day, our economy gets sicker -- and the time for a remedy that puts Americans back to work, jump-starts our economy and invests in lasting growth is now. Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process. Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years. Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans. And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway. These are the actions Americans expect us to take without delay. They're patient enough to know that our economic recovery will be measured in years, not months. But they have no patience for the same old partisan gridlock that stands in the way of action while our economy continues to slide. So we have a choice to make. We can once again let Washington's bad habits stand in the way of progress. Or we can pull together and say that in America, our destiny isn't written for us but by us. We can place good ideas ahead of old ideological battles, and a sense of purpose above the same narrow partisanship. We can act boldly to turn crisis into opportunity and, together, write the next great chapter in our history and meet the test of our time.

Battle of the manifestos

by Grant Morgan RAM Chair 5 February 2009 A telling document has been published in The Independent, one of Britain's foremost social democratic papers. Titled "A manifesto to save the free market", it sets out business editor Jeremy Warner's prescription to save global capitalism from erupting social discontent sparked by the world's first Combo Crisis since the 1930's Great Depression. (reprinted in full below.) Although Warner admits that "unfettered markets would seem manifestly to have failed us", he continues social democracy's historic compromise with capitalism by promoting a 10-point action plan to save the market from itself.

Continue

Battle of the manifestos

by Grant Morgan RAM Chair 5 February 2009 A telling document has been published in The Independent, one of Britain's foremost social democratic papers. Titled "A manifesto to save the free market", it sets out business editor Jeremy Warner's prescription to save global capitalism from erupting social discontent sparked by the world's first Combo Crisis since the 1930's Great Depression. (reprinted in full below.) Although Warner admits that "unfettered markets would seem manifestly to have failed us", he continues social democracy's historic compromise with capitalism by promoting a 10-point action plan to save the market from itself. Relying on parliamentary legislation and revenge against a few bankers, he advocates the patently impossible task of making corporates serve a "social and ethical purpose" rather than their market-driven fixation on profit, profit and more profit. Here is a classic example of a supposedly "left" social democratic paper rushing to prop up the corporate world when crisis hits. Not only is Warner refusing to promote people's freedom from the dictatorship of the profitariat, he is implicitly opposed to the "popular unrest" of the jobless because it threatens the "very existence" of his beloved market. Never mind. The very fact that Warner has to pen a manifesto to save the corporate market is a signal of how worried the ideological priests of capitalism have become. They know their system's legitimacy is starting to be called into question by large sections of the grassroots who, if united and organised, have the capacity to pull down the flag of the dollar and run up the flag of the people. The Combo Crisis and its associated social turbulence create historic opportunities for a broad left challenge to the dictatorship of the profitariat. It has never been more important for the world's people's movements, including RAM in New Zealand, to provide a broad pole of attraction to everyone wanting to move away from the failed market and towards a humanistic and ecological future. History will judge the left by how well we respond to the economic, ecological and political crises of global capitalism. The time to respond is now. The ways to respond can be worked out by trial and error. One good starting place for ideas is The RAM Plan (viewable at ram.org.nz). In effect, The RAM Plan is a people's manifesto, an antidote to Warner's market manifesto. Let the battle of the manifestos rage.

A manifesto to save the free market by Jeremy Warner from The Independent 5 February 2008 As is now all too apparent, we are in the midst of the most extreme economic event of our lifetimes. Already, the crisis is turning comfortable, self satisfied and consensual Western ways of looking at the world on their heads. Yet if policy makers, business leaders and financiers move with urgency to adopt the right solutions, there is still time to prevent the financial meltdown from turning into an equally disastrous social and political catastrophe. Without swift and co-ordinated action across nations, there is every chance of already rising resentment among the ever-swelling ranks of the unemployed spilling over into popular unrest, threatening the very existence of "open access" societies. Preserving the basic principles of the free market system must be the paramount purpose of policy around the globe, even though unfettered markets would seem manifestly to have failed us. Without such freedoms, societies become dominated by corrupt political and economic elites, excluding the less fortunate and depriving economies of their creativity and ability to innovate. The risk of a severe backlash against free market policies, with creeping trade, financial and labour market protectionism, is now obvious. Lax regulation allowed financial markets to run amok, and anti-capitalist sentiment is now rising fast across the globe. Yet it is not the free market system as such that failed. Rather it lost its sense of social and ethical purpose, became corrupted, and therefore also became unsafe and unfair. In every crisis there is opportunity. The severity of the credit crunch has given policy makers a unique mandate for action on an international scale. Even a year ago, the opportunity now presented for cooperation and financial reform would not have been thought remotely possible. Next April's meeting of the G20 in London provides a ready-made springboard for such action. It is vital that it be seized with both hands. The world is sinking fast into a vicious downward spiral of collapsing credit and demand, with rising unemployment. So grim has the picture become that it is no longer clear which is cause and which is effect. The following 10 point manifesto is therefore directed both at crisis resolution and at long-term reform. Some of the initiatives are aimed at mitigating the immediate crisis. Others are directed solely at the policy response here in the UK, while still others have international relevance. Remedies are also suggested for shoring up the system, for reforming and rebooting it, so that future financial and economic crises of this magnitude are averted and free markets are preserved for future generations. 1. Start fire-fighting Paradoxically, addressing the crisis involves the same poison that created it in the first place ­ excessive debt. As governments around the world seek to bail-out their banking systems and revive their economies with fiscal stimuli, they are only replacing one form of debt with another. Public debt is substituting for the private debt which is no longer available. Credit risk is thereby being socialised on a hitherto undreamt of scale, leaving future generations of taxpayers with potentially crippling liabilities. Though obviously undesirable, this is for the time being a wholly necessary response to the crisis without which the banking system would collapse and a classic deflationary spiral of rapidly rising unemployment would soon establish itself. Even as the banks draw in their horns and reduce the availability of credit, the state must stand ready to act as alternative lender of last resort. Previously unacceptable levels of public debt therefore become inevitable and may be part of the cure. 2. Restore sound money To win credibility in markets, governments must set out a clear road map for restoring balanced budgets and reducing public debt over the medium term. Without this plan, it may not be possible for governments to borrow on the scale necessary to see economies through the crisis. Markets could as easily lose confidence in the ability of governments to repay their debts as they have done with banks. Nations that lose the confidence of markets will be forced to pay penalty interest rates, further adding to the costs of supporting their economies. Any attempt at "quantitative easing" ­ the technical term for printing money as a way of funding these newly acquired, public liabilities ­ should be used with the utmost caution. Historical precedent points to the potentially calamitous inflationary consequences of debasing the coinage in this way. The return of inflation may seem the least of our worries right now, or even mildly desirable, but there is no point in simply replacing one problem with another. Inflation is as much an enemy of sustainable growth as deflation. Return to the principles of sound money will eventually require steep rises in taxation and cuts in public spending. Just as growth in government spending shares responsibility for the crisis with the bubble in credit, the public sector must help shoulder the pain of the correction. Real cuts in public sector wages and pension entitlements will have to be pushed through to match those the markets are imposing on the private sector. 3. Nationalise the banks Outright nationalisation of a number of domestic banks may be the only way to get them to resume their proper role of transforming short-term deposits into long term loans for enterprise and households. Not all countries will have to do this, but in the US and the UK, we are halfway there already. There is a certain inevitability about the likely end game of full-scale public ownership. Nationalisation is an emotive word, encouraging the idea of a return to socialism and state control. This would not be the purpose of public ownership of the banks. Rather it would be to enable a clean, swift and effective way of restructuring the banks so that their bad assets could be removed into a long-term workout fund, and the "good bank", in which depositors and the money markets could have renewed confidence, could then be refloated on the stock market. In nationalising, governments must therefore commit to a clear timetable for re-privatisation. As things stand, there is no confidence in bank balance sheets. Government initiatives to recapitalise the banks, underwrite their bad debts and provide them with liquidity support may have saved them from outright collapse, but have failed to restart the process of credit creation. Furthermore, any increase in domestic lending that the banks have achieved seems to have been at the expense of lending to emerging and other overseas markets. The process of balance-sheet reduction is unrelenting. Only by nationalising the banks outright and funding vital domestic lending directly from the public purse can governments properly address the viciously negative effect of bank "deleveraging". The "good bank" that emerges from the public sector restructuring would have the balance sheet strength to lend and borrow in the normal way. Yet there is no getting away from the fact that a crisis caused by an excess of credit can only ultimately be addressed by removing the debt overhang. Virtually all developed nations are overleveraged, with public and private debt combined representing a significant multiple of GDP. The consequences of reducing this overhang slowly are likely to be less severe than the chaos of a disorderly unwind, yet however it is done, there is no way of avoiding the pain altogether. 4. Complete Doha Protectionism is once more on the march, threatening an internationally destabilising rush to "beggar thy neighbour" tariffs, bungs, subsidy, soft loans and trade restrictions. From steel tariffs in India to the "Buy American" attributes of the Obama fiscal stimulus, measures aimed at protecting local jobs and industries are mushrooming. In this crisis, there is also the emergence of a new form of protectionism, where governments seek to funnel scarce credit to their own home markets at the expense of the developing world and other foreign debtors. Some countries already see protectionism as the medicine. In fact it is the poison which will stifle all hope of swift recovery. With recessionary forces now biting hard the world over, there could scarcely be a more difficult time to complete a further round of trade liberalisation. Yet nor could it be more necessary. The deal is almost done. All that is required is the political will among a small number of recalcitrant nations ­ chiefly the US, Brazil, India and France ­ to push it through, thus reaffirming international commitment to free trade and the arbitrating powers of the World Trade Organisation. Without free trade, political extremism and international conflict becomes almost inevitable. Yet we also have to be realistic, and to acknowledge that extraordinary times call for extraordinary measures. It's entirely reasonable for nations to want to support their key strategic industries through the storm with subsidy, soft loans and other forms of government assistance. The temporary suspension of such rules therefore looks justified provided it is done according to an internationally agreed framework with a firm commitment to their reintroduction as soon as economic conditions improve. Otherwise all the hard won achievements of the single European market and other free trade areas will be thrown away. 5. Introduce counter-cyclical measures Governments must move swiftly to reform the Basel capital requirements, which encourage banks to lend recklessly during the good times but to wrench the gears into reverse during the bad. The same is true of "fair value accounting", which similarly encourages banks to expand their balance sheets during the boom but shrink them during the bust. Thus does originally well-intentioned regulatory reform frequently give rise to perversely adverse outcomes. A "B20" of business leaders and bankers might be formed to guard against the dangers of over-reaction and the law of unintended consequences in the reform agenda. Banks are not just at the heart of the business cycle, they also magnify it and may in the way they turn the credit taps on and off be its predominant cause. These pro-cyclical attributes of the banking system must be addressed with urgency. Bankers make convenient scapegoats, but years of easy money and lax regulation, deliberately encouraged by the politicians because it created the illusion of prosperity, was the backdrop against which banks lost the plot. Governments, regulators and central bankers must take their share of the blame. In addressing the failings of bankers, the G20 must address all the embedded pro-cyclicality of the system, even where it involves interfering with the politics of the ballot box. Central bankers must be made to target the growth in credit and asset prices, as much as inflation in the price of goods. 6. Reduce capital imbalances Governments are also to blame for ignoring the dangers of global trade and capital imbalances, under which the consumerism of the West was financed by the savings and capital surpluses of the developing world and the oil-rich nations of the Middle East. In essence, the Chinese and the rest of the developing world have been lending us the money to buy their goods. For years, economists have been saying it's unsustainable. Yet in time it became the new norm and it ended up fuelling the biggest credit bubble the world has ever seen. It is not just the deficit nations that must now pay the price. The big surplus nations must accept that they have responsibilities too and must take greater steps to stimulate domestic demand. A free-floating Chinese exchange rate would be a good place to start. 7. Enforce corporate responsibility Something very precious was lost during the boom, when banking and business became more about individual enrichment than serving the interests of the client. Providing it was legal and you could get away with it, almost anything went. Complexity in financial markets came to be used as a form of concealment, or even deception. Wall Street and City bankers behaved like the snakeoil salesmen of 19th-century America. The fundamental purpose of finance became forgotten in the rush to personal, short-term gain ­ that the markets are there to serve the wider economy and the wider economy is there to serve society as a whole. A statutory code of conduct may have to be introduced to ensure generally accepted ethical values are injected back into the system, and to encourage long-term thinking in investment decision making. Bankers should be forced to take something similar to a Hippocratic oath. Alternatively, they could be made personally liable for failings within their institutions, leading to confiscation of their ill-gotten gains when things go wrong. Many bankers have so far lost their jobs, but they have yet to pay any penalty in terms of personal assets. Personal liability would increase the sense of partnership with other stakeholders, as well as discourage excessive risk taking. 8. Retribution Justice demands that bankers whose excesses have helped bring the system to its knees are punished. They may not have done anything overtly illegal, though there is plenty of evidence of deception and false accounting. But there will be no closure on this crisis, or end to the growing sense of public injustice, until those responsible are subjected to the full force of public and criminal inquiry. The careless way in which the crisis is dismissed as an inevitable part of the cycle is entirely unsatisfactory and only encourages the view of one rule for the poor and another for the rich. Some bankers need to be made an example of. An eye for an eye. 9. Don't forget climate change The climate and credit crises have much in common. Both have their origins in the idea that it is perfectly acceptable to pump up the system with huge amounts of toxic material ­ in the case of the credit crunch, trillions of dollars of sub-prime lending, and with climate change, millions of tons of carbon. The consumerism of the credit bubble has moreover fed the growth in emissions. Both were based on unsustainable assumptions. Success in Copenhagen would send out a powerful message of international co-operation. But to succeed, the developed nations must be humble before the reasonable aspirations of the developing world. Developing nations cannot be frogmarched by the West into a low-carbon future but helped and nurtured into it. 10. Reform international institutions There needs to be a complete overhaul of the international organisations responsible for enacting all of the above, from the International Monetary Fund to the Financial Stability Forum and the international accountancy bodies. We'll never get global regulation of banking ­ or not until there is a global currency, central bank and fiscal organisation ­ if only because as things stand individual nations must use their own taxpayers' money to underwrite their banking systems, and are therefore highly unlikely to cede prudential supervision to a non sovereign regulator. But a treaty-based organisation such as the World Trade Organisation, with powers of enforcement on internationally agreed standards, is a reasonable aspiration. Jeremy Warner has been Business and City Editor of 'The Independent' since 1995.