Future conditional: The Nation counsels Washington on the financial crisis

The Nation magazine, the leading publication of America’s left-liberal milieu, has waded into the US financial meltdown with numerous columns and articles in print and on its web site.

The published material offers little in the way of explanation for this cascading crisis. Where Nation contributors have offered brief explanations, they have focused on deregulation as the root cause. Economist Joseph Stiglitz, for example, refers to “the underlying causes of the problem: the spirit of excessive deregulation that the Bush Administration so promoted” (“A Better Bailout,” Sept. 26). In fact, deregulation is itself a manifestation of a far deeper malady—the thoroughgoing and protracted rot of American capitalism, which has sought to offset its decline by turning to financial criminality, attacks on workers’ living conditions, and foreign wars of plunder.

The Nation expends considerably more effort in criticizing Paulson’s proposals to bail out the entire financial industry. Some of this criticism hits the mark. William Greider, for example, correctly points out that Treasury Secretary Paulson’s proposed bailout is “an historic swindle” (September 29). “Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope,” Greider writes. “It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses--many hundreds of billions, maybe much more.”

But the Nation’s editors recognize that the magazine’s fundamental task is to offer advice to the political class, and especially to the Democratic Party.

Along these lines, Greider writes, “My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called ‘responsible opinion.’ If this deal succeeds, I predict it will become a transforming event in American politics--exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.” This, for Greider, is to be avoided.

In the same vein, James K. Galbraith (son of the noted Keynesian economist John Kenneth Galbraith) and William K. Black, in their column “Trust but Verify” (Sept. 23), suggest that the Democratic-controlled Congress must “impose conditions to protect the public, the national interest, and, not least, the interests of the next administration.” (Emphasis added).

Nation editor Katrina vanden Heuvel, sounding much like a respectable politician nervous over her constituents’ anger--but knowing all the while where her bread is really buttered--stakes out a similar position. “While billions or even trillions of taxpayer dollars are being proposed for the benefit of the banks and big corporations, we also need to ensure accountability and oversight and protect taxpayers from being ripped off in a rushed, blank-check, no-strings-attached Wall Street bailout,” she writes. (“Give Main Street a Fair Shake,” Sept. 22).

Vanden Heuvel, accepting the idea of a bailout but with “strings attached,” refers approvingly to the efforts of Democratic Congressman Barney Frank, chair of the House Banking Committee and a zealous proponent of this rescue package for the financial oligarchy--with no “strings attached.”

The Nation’s advice depends, of course, on finding a hearing in Washington’s chambers of power. In this regard, it is worthwhile to point out the frequent use of the future conditional verb tense in the Nation’s writing on the financial crisis. The magazine’s writings are replete with “should,” “could,” and “would,” along with other conditionals and modifiers, such as “if” and “maybe.” This is the translation into written style of a hopelessly shallow, and fundamentally delusional, political perspective.

For Katrina vanden Heuvel, “Congressman Frank and his fellow progressive Democrats would be wise to take an extra step over to the people’s side of the aisle.”

John Nichols, after correctly denouncing Paulson’s proposed bailout as unconstitutional, concludes that Senate Banking Committee chair Chris Dodd (Democrat, Connecticut) “should be able to restrain Paulson’s power grab.” Nichols is no doubt aware that Dodd, like Congressman Frank, is one of the top recipients of campaign money from the banking industry and Wall Street. He has also been Paulson’s chief ally in the Senate, acting the part of a loyal vassal in chairing the hearings where Paulson and Bernanke have testified.

Greider, for all his criticism, offers the same prescription as that of Paulson--a bailout, with a few conditions. According to Greider, “Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own--cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess.” What are these conditions? Greider suggests that banks can be forced to “keep lending to the real economy of producers and consumers.”

“Only with these conditions, and some others, should the federal government be willing to take ownership—temporarily--of the rotten financial assets that are dragging down funds, banks and brokerages,” he writes.

So much for the banks. What does the Nation propose for the millions upon millions of working class Americans facing ruin?

For them, Greider offers a “suspension of home foreclosures and personal bankruptcies.” But he hastens to add, “the debtors will not escape injury and loss--their situation is too dire--but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.” In other words, while Greider proposes that the government “temporarily” take over the “rotten” debt of the banks, he favors a slow-moving bankruptcy policy for the masses.

For her part, vanden Heuvel outlines a dire situation confronting masses of American, who live in “an economy marked by job losses, crumbling infrastructure, the lowest levels of personal savings since the 1920s, Gilded Age inequality and the highest level of foreclosed homes since the Great Depression.”

A great deal of disaster, indeed. But vanden Heuvel’s proposal proceeds no further than banalities. “Attention must be paid to restoring people’s opportunities and hope and addressing America’s investment deficit.” She adds that “a portion of the $700 billion [should] be used for mortgage refinancing and putting people back in homes.

“The cupboard is bare”

The Nation has served up heaps of advice for Obama, but they have not subjected Obama’s own position, or that of the Democratic Party as a whole, to scrutiny.

On the contrary, the Nation has welcomed the economic crisis as a means of resuscitating Obama’s electoral fortunes. In an editorial published Sept. 17, “Crashing the Election,” the Nation attacks the false demagoguery of John McCain. “Only in a personality-driven, contentless climate will John McCain be able to pass off his two-faced promises of reform as a populist campaign.” However, “[p]uncturing McCain’s newfound Teddy Roosevelt persona will require brutal honesty from Barack Obama and his campaign.”

And what could Obama possibly be honest about? The Democratic Party, Obama included, is essentially a two-faced formation, dishonestly speaking “left” in order to prevent the working class from breaking with bourgeois politics, but at the same time speaking “right”--with a much higher degree of honesty--so as to reassure the financial oligarchy that actually dominates US politics and controls both parties. What The Nation really wants when it calls for “brutal honesty” from Obama is merely more deceitful “left-speak.”

In fact, what few cosmetic differences existed between Obama and McCain in relation to domestic policy have vanished--their solidarity on foreign policy having already been established. The next administration, whether Democrat or Republican, will usher in a period of severe austerity. Nicholas von Hoffman admits--and appears to endorse--as much (“The Mother of All Bailouts,” Sept. 19), when he writes, “the economic tar pit is so deep and so sticky it may be necessary to sacrifice wildlife programs, preschool education and scientific research. Even without knowing the numbers, we can kiss health insurance goodbye. If and when Obama gets in, he will discover the cupboard is bare.”

Stiglitz, after proposing a number of amendments to the bailout, throws up his hands and hopes for the best. “No politician wants to be accused of being responsible for the next Great Depression by blocking key legislation,” he writes. “By all accounts, the compromise will be far better than the bill originally proposed by Paulson but still far short of what I have outlined should be done.”

Greider winds up in an even more delusional state (“Political Turmoil as House Rejects Bailout,” Sept. 29). According to him, Democrats have made some mistakes, and now one must just hope they will be won over to a more progressive position: “Democrats are still in recovery from twenty-five years of deferring impotently to the wise men of Wall Street and retreating tactically from conservative initiatives. I see this crisis as the Democrats’ hesitant first step toward rediscovering their nerve and abandoned convictions. They are not there yet. But this crisis is not over. I predict they will get another opportunity to stand up for something and rather soon.”

A new New Deal?

On Sept. 27, vanden Heuvel, together with Eric Schlosser, author of Fast Food Nation, published an op-ed in the Wall Street Journal, entitled “America Needs a New New Deal.” The column also appeared in the Nation. On the surface, it appears to be an ambitious statement, calling for the reregulation of US finance, relief for homeowners through the revivification of the Home Owner's Loan Corporation (HOLC), and a vaguely defined “reconstruction” of the infrastructure and health care system.

The Nation’s proposal for a second New Deal is an exercise in self-delusion.

The New Deal, Franklin Delano Roosevelt’s response to the Great Depression from his inauguration in 1933 until the onset of World War II, was the name given to the wide array of agencies, reforms, and economic regulations designed to preserve capitalism and capitalist class rule in the US from the threat of economic collapse and social revolution. These included organizations such as the Civilian Conservation Corps, the Works Progress Administration and the Tennessee Valley Authority, which were designed to provide jobs through improvements in infrastructure. Social Security was established during the Depression, as were agencies such as HOLC, and the Federal Deposit Insurance Corporation (FDIC).

There is no chance that the Democratic Party, even should it find itself in control of the presidency and the Congress, will embark on a similar major reform effort. The Democratic Party has revealed itself, in the course of the Paulson bailout proposals, as the most subservient tool of Wall Street. The Nation does not acknowledge that Obama has already pulled the shepherd’s crook on his minimal reformist agenda due to the economic crisis. (See Obama demands deep cutbacks to pay for Wall Street bailout). If he should win, Obama will press forward with policies designed to achieve “balanced budgets” at the expense of the working class. Funding for education, transportation, unemployment, the national parks, the environment, Medicare and Medicaid will be ruthlessly slashed. The temptation for an Obama administration to plunder Social Security--one of the few remaining vestiges of the New Deal--will prove irresistible.

Moreover, even if there existed a consensus within the Democratic Party leadership in favor carrying out major reform--and there does not--the means for doing so have been substantially eroded since the 1930s. The financial and economic position of the federal government, and American capitalism as a whole, have declined sharply since the 1970s. Prior to the 1930s, deficit spending was rare and the national debt was insignificant. The US remained a creditor nation through the Great Depression, producing trade surpluses most years during the 1930s.

Today the US trade deficit establishes a new record nearly every year, while public debt is approaching ten trillion dollars and growing rapidly. All of this is raising serious questions about the solvency of the state and the viability of its debt obligations.

The Great Depression was an economic crisis that was, in a world-historical sense, caused by the economic rise of the US. The US economy, based on its superior technique, management and domestic market, was the world’s strongest. However, it was hemmed in by its lesser rivals in Europe and Asia, who preserved their restrictive national and colonial trading blocs. It ultimately took the horrible carnage of World War Two--not the New Deal--to temporarily resolve this contradiction between world economy and the nation-state system in favor of US capitalism. The current crisis, on the other hand, is a manifestation of the protracted but rapidly intensifying decline of US capitalism, which menaces humanity with wars and destruction on a scale unthinkable in the 1930s and 1940s.

While the New Deal did not resolve the Great Depression, it did achieve a notable political success on behalf of US capitalism. It staved off social revolution. Against the more reactionary layers of the bourgeoisie, Roosevelt was able to gain the support of millions of workers, assisted by the class collaboration of the Stalinist Communist Party and the trade union bureaucracy. It is no doubt this element of the New Deal that the Nation finds most attractive.