There is always opportunity in catastrophic events. To financier J.P. Morgan, the stock market crash of 1907 was an opportunity to consolidate wealth and power, thus undermining the antitrust and monopoly busting policies of Theodore Roosevelt.
The market crash of 1927 leading to the Great Depression paved the way for Franklin Roosevelt’s New Deal, a legacy of responsible government regulation, social security, unemployment benefits, public works and labor rights, but it also served as an opportunity for further consolidation of corporate power and wealth.
The cataclysm of World War II exposed the dangers of imperial monarchy (Hirohito’s Japan), corporate fascism (Mussolini’s Italy) and the susceptibility of democracies to the politics of fear at a time of crisis (the rise of the Nazi Party in the German Republic), but it also gave rise to the powerful and corrupting force of the military-industrial complex.
Over the years leading to the current economic crisis we have forgotten altogether too many lessons of the past. We have forgotten that the innovations of the New Deal were not the temporary fixes of an ailing marketplace but systemic reforms designed to prevent the conglomeration of circumstance that inevitably resulted in past cataclysms from engulfing us again.
Instead of building on the foundation of the New Deal we have gradually allowed our corporate behemoths to tear it apart brick by brick until even Social Security and Medicare are openly challenged by politicians pretending to represent their voting constituents.
Meantime, the consolidation of wealth has marched on unabated and its power to dominate the political process has been zealously protected by both major political parties and the most anti-democratic Supreme Court in modern history – a court that has repeatedly struck down meaningful campaign finance reform on the specious constitutional grounds that corporate contributions are protected “free speech.” (This from justices who never tire condemning “legislating from the bench.”)
We would do well to recall that the ongoing federal bailout of private financial institutions began with those deemed “too big to fail”: Bear Stearns and American International Group. How sweet it must be for corporations to reach that lofty status without the stigma of a government sponsored enterprise – the designation that so offends John McCain and his Free Marketeer compadres when discussing mortgage giant Fannie Mae (originally a government agency created in the New Deal) and its cohort Freddie Mac.
Beneath the radar, while we were dazzled by the hundreds of billions floating away in the Treasury’s bailout package, General Motors, Ford and Chrysler were also awarded bailout funds for a bargain $25 billion – presumably too big to fail. Now GM is poised to gobble up Chrysler (if they don’t someone else will) and the Big Three will be down to two.
It was the Free Marketeers who cried out loudest against the bailout yet it was their philosophy (embraced by both major parties in an unrivaled if under-publicized era of bipartisan agreement) of corporate free reign and the dismantling of market regulation that led to the breakdown. The Marketeers made a great show of condemning what they like to call corporate socialism (they voted against it before they voted for it) but what is happening today is by no means socialistic (it’s a bailout, not a buyout); it is rather the deadly combination of runaway capitalism and corporate fascism.
What else can you call a system that allows corporate giants to reap unconscionable profits on a foundation of imaginary assets and when the time comes to the pay the piper, they reach out their hands to go on the public dole: Too big to fail?
Few would deny that the system is rigged and that the government is controlled by corporate interests: That, ladies and gentlemen, is a textbook definition of Mussolini’s fascist state.
Despite the dramatic surge on Monday’s opening session, most Americans are coming to terms with the fact that we are only at the beginning stage of a great upheaval. The phenomenal rise in the marketplace may signal that the hemorrhaging has been abated but the crisis is not over.
It is a clear indication, however, that governments remain a powerful force in the global economy – even more powerful than the corporate conglomerates they are called upon to rescue. That power is fortified by the ability of nations to achieve international cooperation and coordination at a time of crisis.
It is critical in the days and years ahead that governments retain that power and achieve greater independence from corporate influence.
The crisis in the financial markets required a massive infusion of capital – an infusion so massive it could not be provided by any single nation. But the broader economic crisis goes much deeper than the housing bubble and mismanagement of the financial sector.
What led us to the edge of economic collapse were the policies of free market fundamentalism. It created ever-larger international corporations answerable to no one. It decimated government regulatory authority. It all but destroyed organized labor by allowing corporations to exploit work forces anywhere in the world where labor rights and living wages did not exist. In its zeal for ever-increasing profits, it created financial assets where none in fact existed. It created a pyramid Ponzi scheme where those at the top could escape with obscene profits before the inevitable implosion.
In its short-term, profit oriented vision it neglected to see the obvious: That by stealing wages and benefits from ordinary workers they were destroying the foundation of the real economy. They were destroying the middle class, the working people, the consumers of goods.
In September 2001, after the attack on the World Trade Center and the Pentagon, our president told us to go shopping and have faith that those in power would do the right thing. We now know how bad that advice was.
While we whipped out our credit cards as if it was an act of patriotism, our president committed us to perpetual war in two nations, neither of which had attacked us (no, Al Qaeda was not an agent of the Afghan government).
Whatever your opinion on the wars, that strategic decision left us weaker both politically and economically. The current crisis in the financial markets, however it is resolved in the short term, will also leave us weaker (by at least a trillion dollars and counting) and therefore less able to deal with the next crisis.
If we do not take the necessary measures to ensure it will not happen again, it inevitably will – and next time it will be much worse.
Rebuilding the government’s regulatory authority is necessary but it is not enough.
Public works (reconstructing bridges, roads, public buildings, dams, mass transit) to put the people to work is essential but it is not enough.
Tax relief and incentives for working people and small businesses, as well as extended unemployment benefits, is important but it is not enough.
Removing corporate control of the electoral process is critical but it too is not enough.
In order to affect the systemic changes that will enable us to avert a future and inevitable collapse, we must address the role of labor in the global economy and the consolidation of wealth that unwisely places too much responsibility in too few hands.
On the one hand, we must take the lead in asserting the fundamental rights of labor on a global scale. This will require the same kind of international agreement that we have seen come together to rescue financial institutions.
As this financial crisis plays out, the consolidation of wealth accelerates: Wells Fargo absorbs Wachovia, Bank of America absorbs Merrill Lynch and Countrywide Financial, JP Morgan absorbs Bear Stearns, GM absorbs Chrysler, on and on.
To appreciate the dangers of this consolidation (and the diminished competition that comes with it), imagine that a school decided to house all its students in a single large room: When one student catches the flu, the school shuts down.
To a large extent, that is what happened in this financial train wreck: They were all drinking from the same well, all breathing the same toxic air, all sharing the same house and they all caught the same disease.
Image Courtesy of Heritage Canada - An unidentified man sleeps on a park bench during the Great Depression