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On Socialism for the Rich
John Bellamy Foster, Editor of Monthly Review
Full text of the
interview with Foster conducted by P�gina/12 (Argentina)
 "As
for the politics of nationalisation of banks in the US and UK, one should
not confuse this -- as is all too common -- with socialism or even
radicalism, unless one is talking about socialism for the rich. This is just
another desperate stop-gap measure aimed at preventing a full-scale debt
deflation. But as a sign of the total collapse of the "US model" of "free
market" finance capitalism, the moral and political consequences are vast...
Marx said, in one of his ironic moments, that the only part of the national
wealth that was held in common amongst all the people was the national debt.
If the wealth is not shared, why should the public take on more debt,
supporting the opulence at the top while the great majority of the people
are seeing their basic conditions deteriorate? Let the system take care of
itself; let us devote our public resources to the people. More good would be
accomplished that way. "
Comment by
tamilnation.org
"The US government prefers that public money go not to the
people but to big business. The result is a unique society in which we have
free enterprise for the poor and socialism for the rich."
Gore Vidal quoted by Richard Adams in Socialism for the Rich
P�gina/12: What is your opinion about the decision of the US Treasury Department
to consider taking ownership stakes in many United States banks? Do you think
this is the right political-economic strategy? I mean, will it lead to the
recovery of the system? JBF:
The Treasury Department proposal to purchase majority shares
in major US banks (the extent of this is still not clear) is, in a US
context, an act of sheer desperation, following a whole series of
increasingly desperate actions. It signals that the crisis is out of
control. The standard operating procedure whenever there is a major credit
crisis is to activate the lender of last resort function and for the central
bank to flood the economy with liquidity, while bailing out large financial
and economic institutions that threaten to bring down the whole ship.
Since the publication in 1963 of Milton Friedman and Anna
Schwarz's A Monetary History of the United States, most US economists have
come to believe that the Great Depression was a result of the failure to
open up the monetary floodgates when necessary; that it had little to do
with the real economy. All of the prevailing notions of how to deal with a
financial/economic crisis grew out of this. This is the tradition that Ben
Bernanke, the current Federal Reserve Board chair, comes out of. It meant
dealing with the problem primarily in monetary/interest rate/price terms.
But in the face of this massive financial crisis, now 14 months old, and
rapidly morphing into what looks like a full-scale debt deflation on the
order of the Japanese meltdown/stagnation in the early 1990s -- even
threatening to turn into a new Great Depression on the scale of the 1930s --
the US government is bailing like mad with bigger and bigger buckets, and
trying absolutely everything it can think of.
It has poured hundred of billions of dollars, and is prepared to pour
trillions of dollars more, into bailing out the financial sector (witness
the Treasury Department's $700 billion bailout plan, and the Federal Reserve
Board's declaration that it will be the buyer of last resort for the
commercial paper market, to the full amount of $1.3 trillion). The lender of
last resort has changed into the buyer of last resort on a huge scale.
An array of tools has been unleashed to combat the crisis of a kind and
of a magnitude scarcely even imagined before. Just the other day central
banks across the world cut interest rates basically in tandem. Nothing has
worked. The meltdown has continued. The financial contagion is spreading
globally, with all of Europe and now Japan caught in the downswing. It is
only in these dire circumstances that the United States, where private
property is more sacrosanct probably than anywhere else in the world, is
talking about some kind of nationalisation of banks, if only limited. In
financial circles they are now calling this "regime change," borrowing the
term of course from a different context.
But it is clear what it means: the end of neoliberalism, and the rise of
aggressive government interventions into the economy. It represents a clear
recognition that this is not a liquidity crisis that can be solved by
pouring more money into financial markets or by lowering interest rates.
What difference does a reduction in rates make for a borrower who could not
obtain a loan at a higher rate and now cannot obtain a loan at a lower rate?
There's a lot of dollars out in the financial world, the problem is that
those who own the dollars are not willing to lend them to those who cannot
be certain to pay them back -- and that's just about everyone who needs the
dollars. This is a solvency crisis, where the balance sheet capital of the
US and UK financial institutions -- and many others in their sphere of
influence -- has been wiped out by the declining value of the loans (and
securitised loans) they own, their assets. As an accounting matter they are
insolvent.
Will it work? Can they avoid a massive devaluation of capital across the
board?
I doubt it. It is likely too late to stabilise things in
this way. Things have gone too far. The crux of the matter is that the whole
"Atlantic" economy is in trouble, not just the financial sector. Consumption
is collapsing in the United States, where it represents more than two thirds
of total demand, and a good part of world demand. Fifteen per cent of the
population is under water with their mortgages. Real wages in the United
States have not risen since the 1970s and people are deeply in debt and
their circumstances are eroding. Unemployment is way up and jobs are
vanishing. Where the productive base of the economy is weakening
drastically, a falling financial superstructure, finding the ground shifting
under it, is unlikely to be able to right itself.
As for the politics of nationalisation of banks in the US and UK, one
should not confuse this -- as is all too common -- with socialism or even
radicalism, unless one is talking about socialism for the rich. This is just
another desperate stop-gap measure aimed at preventing a full-scale debt
deflation. But as a sign of the total collapse of the "US model" of "free
market" finance capitalism, the moral and political consequences are vast.
Which sort of policies should the government implement to sort out this
crisis, extending beyond the financial market?
I don't think anyone knows how to "sort out" or stop this crisis. What we
are seeing is a lot of improvising while the house is falling down around
us. There is no possibility of avoiding a very severe world economic crisis
at this point; the object has shifted to avoiding a deep debt deflation as
in the 1930s. We are facing one of the great crises in the history of
capitalism; nothing this bad has been seen in advanced capitalist world in
eighty years, since the Great Depression itself. My own view is that the
sole object at this point -- though it is hard to imagine this in the United
States at present due to the weakness of labour and of working-class
organisations in general -- should be to reorganise social and economic
priorities to meet the needs of those at the bottom. It is a fact that the
US economy over decades has drastically weakened the conditions of the wider
population, which is at the root of the whole problem. So addressing those
conditions is the real key. But even if that were not the case, the goal of
those who identify with the great majority of the population, with the
working class, the propertyless, the poor, should be clear: to put the
employment, food, nutrition, housing, health, education, environmental
conditions of those at base of society first. This is simple humanity and
justice.
Why flood the financial world (which means first and foremost the rich,
the near-rich and corporations) with trillions of dollars ultimately at
taxpayer expense, probably to no avail, when something might be done for the
greater population? Marx said, in one of his ironic moments, that the only
part of the national wealth that was held in common amongst all the people
was the national debt. If the wealth is not shared, why should the public
take on more debt, supporting the opulence at the top while the great
majority of the people are seeing their basic conditions deteriorate? Let
the system take care of itself; let us devote our public resources to the
people. More good would be accomplished that way.
Of course what this means is a reactivation of class struggle from below;
something we haven't really seen in the United States in a long time. I
ended a lecture recently by saying that the working class in the United
States could learn a lot from how class struggles have been waged in the
streets in Argentina. You may think your working class has not accomplished
all that much, but from our perspective things look different.
Do you think it is necessary to change the regulation of the financial
system or sector to solve the crisis?
If you mean by regulations, placing more limits on the financial system,
it certainly will happen in the future after the economy settles down to
whatever level it will end up at. But no real regulations will be imposed
now during the height of a financial meltdown. The Federal Reserve and
Treasury Department in the United States and the other branches of the
government, and of course other governments as well, are doing everything
they can to combat a more catastrophic financial meltdown, including getting
the printing presses going (this is a metaphor of course these days since
now it is done electronically) in order to pour liquidity and capital into
the system. Beyond that they want to "restore confidence," which is code for
increased risk taking. The goal is to get the "animal spirits," as Keynes
called them, going again. To inflate the financial system they are reducing,
not increasing, regulations at the present moment; and that is how the state
authorities always respond to a financial crisis. They have no choice as
long as they represent the interests of capital. Imposing tough regulations
would make things worse for financial interests that find everything closing
in on them at present. The goal is to get money flowing again. So the answer
is that for the moment at least any real reregulation is not in the cards.
The truth is the advanced capitalist system has been dependent on a process
of financialisation (the increase in the financial superstructure relative
to the "real economy") as the main means of combating the stagnation of
production and investment for decades now -- beginning in the 1960s, but
accelerating in the 1980s, and accelerating still more in the 1990s. It is
the underlying tendency to stagnation rooted in exploitation and inequality
that is the root problem. (This was brilliantly and relentlessly explained
in a long series of articles by Monthly Review editors Harry Magdoff and
Paul Sweezy from the 1960s to the 1990s.) Financialisation, the blowing
of one bubble after another (ideologically justified by neoliberalism), was
offered as the solution to stagnation in the real economy. It was this that
mainly spurred economic growth in the United States and elsewhere at the
centre of the system given the stagnation of investment in new productive
capacity (held down by existing overcapacity). Ultimately, however, there
was no "solution" other than the wiping out of capital: "the real barrier to
capitalist production," Marx wrote, "is capital itself."
We are once again up against that real barrier. Hence the issue of
regulation/deregulation/reregulation is, at this point, immaterial -- at
least if one is talking about new restraints on capital as a solution to the
immediate problem. Restabilisation of capitalism requires what has always
been the saving function of crises: a vast amount of existing capital must
be extinguished to enable a smaller surviving amount to begin again the
process of blind, crazed accumulation. But the real-world suffering that
would accompany such a massive "devaluation of capital" -- the lost jobs,
housing, self-respect and the misery, even starvation, which would follow on
a global scale today -- would mean the end of the US model of capitalism,
since the rest of the world would never accept such a result. What we need
and must fight for is real regime change: that is a socialism for the 21st
century.
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