The American Recovery and Reinvestment Bill passed this week will define Barack Obama’s presidency. But it is really just the younger sibling to the Troubled Assets Relief Programme. To separate the now trillions being handed out to the banksters from the $800 billion being handed out to the lottery winners is to be ingenuous. The elder sister’s patrons are already blackmailing mama Obama, wailing for more trillions or they will plunge the economy into even greater financial crisis. “You ain’t seen nothing yet,” they hissed to Treasury Secretary Geithner, who, according to economist Michael Hudson, quickly “pledged government financing for as much as $2 trillion….to spur new lending and address banks’ toxic assets, seeking to end the credit crunch hobbling the economy.”
Hudson calls it “Stage One of a two-stage plan”, so far unannounced, to transfer trillions more to people who, in any sane world, would be behind bars, the purpose being to re-inflate the bubble economy that made them wealthy beyond their dreams while leaving wages stagnant and creating little meaningful work. The “change” president is continuing the Bush-Paulson giveaway, allowing the process of creating a few giant Wall Street-based trusts which will act as the economy’s central planners in the new “socialism for the rich”. Any talk of nationalisation should be seen in this context. ” Washington has given them $9 trillion so far, with promises now of another $2 trillion – and still counting.” Instead of sputtering about capping CEO bonuses, if he is serious, why hasn’t Obama reversed the Clinton-Rubin repeal of the Glass-Steagall Act, responsible for the massive speculation for the past two decades?
But this is in fine American tradition, albeit taken to the extreme. Bankers have always worked hand-in-glove (either that or dagger-in-hand) with politicians. 19th century Democratic president Grover Cleveland vetoed a bill to give Texas farmers $100,000 to buy seed grain during a drought, saying: “Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character.” However, he thought nothing of giving bondholders $5 million the same year. After WW II, Keynesianism provided an intellectual gloss to government handouts to failing industries, especially military, with workers similarly being lectured about belt tightening as executives quietly deposited their bonuses and accumulated their stock options.
To pretend that throwing all this money at a sick economy will heal it is the height of folly. To understand the way out of the crisis, compare the situation with the world food crisis. Is the current economic crisis due to too many people? That may sound foolish – it is – but that is how many economists address the food crisis. Leaving aside the debate about an optimal global (or US) population size, the correct answer to both is: the crisis is due to extremely skewed distribution of wealth and lack of access by the poor to basic food (and increasingly now in the US – shelter).
The current crisis simply can’t be addressed without facing the accumulation of 30 years of creeping – under Bush II, accelerating – income redistribution in favour of the rich. The wealthiest one per cent have increased their share of returns to wealth – dividends, interest, rent and capital gains – from 37 per cent a decade ago to nearly 70 per cent today. This is the highest proportion since records started, worse than the situation in the 1920s, which incidentally preceded the 1930s. Without facing up to this, no stimulus package will bring prosperity to the homeless and jobless. Certainly no tax reductions will bring any positive effect when more and more are too poor to pay taxes, and the rich, who benefit from this, will spend not on basics, but luxury goods, probably imports, or just spirit the extra funds into offshore accounts to avoid any worries.
The centrepiece of the stimulus package, much like president Franklin Delano Roosevelt’s, is job creation. House Majority Leader Steny Hoyer said that “millions and millions and millions of people will be helped, as they have lost their jobs and can’t put food on the table of their families.” All well and good, though there is no guarantee that even if millions of jobs are created in the short term that this will translate into a systemic recovery. This was the case under FDR. It took WWII – government-enforced socialism for all – to drag the US out of depression.
This brings us to the other distortion that has continued to weaken the US economy since the days of Reagan (really, since WWII): the inexorable militarisation of the US economy, spending money on unproductive – indeed destructive – commodities, which only sap the economy’s vitality, providing no general-use infrastructure which can benefit all, no goods which can be consumed or traded except to foreign dictators quelling rebellions. The soaring trade and budget deficits are a direct result of the joint US obsession with weapons and tax reduction. As the Soviet Union found during its economic crisis in the 1980s, spending an exorbitant amount – almost a trillion dollars by the US today – on military nonproduction is simply unsustainable. America accounts for nearly half of all global military spending, an amount larger than the next 45 nations together.
Just as the answer to the food crisis is promoting land redistribution, providing peasants with ready access to the means of feeding themselves, so the answer to the world economic crisis is wealth redistribution, putting money in the hands of the poor, who will be likely to spend it locally on basics, supporting themselves and their local communities. The most successful of Obama’s stimulus projects will put money into their hands which will be rapidly respent on, say, house repairs, starting new small businesses, paying wages to daycare workers, and the like.
The original stimulus package included a clause requiring US steel to be used in spending, a perfectly rational “protectionist” policy. “Buy American” should not to be denounced per se. It is nothing more than an application of “think globally, but act locally.” Any spending to stimulate the economy should of course rely on local production wherever possible. It is the government’s role to make sure it is more economical to buy and sell locally than truck and fly goods thousands of miles. If this violates WTO rules, then work to change those irrational rules, for as well as hurting local economies, they promote ecologically harmful global warming.
The days of relying on both corporate agriculture and global finance and industry are numbered, the very opposite of the conclusion proposed by Henry Kissinger in The Independent on 20 January. There, he gloats of the “unique opportunity for creative diplomacy” which the present crisis provides. True, he admits that it struck “a major blow to the standing of the United States “, encouraging every other country to “seek to make itself independent, to the greatest possible degree, of the conditions that produced the collapse.” So far so good. But his prescription, strangely, is more “common action”, a “political” “new world order”, corresponding to the international economic one now in existence, the alternative being “chaos”.
But political decisions are already largely coordinated among countries at such gatherings as the recent WEF and the upcoming G20. These gathering of the most powerful political and economic leaders occur like clockwork, and any independence shown by mavericks, such as Venezuelan President Hugo Chavez or Iranian President Ahmedinejad, is ruthless attacked and subverted, if possible. No, the NWO, relying on increasing world corporate control – legimitated by use of the likes of the UN – has come to an impasse not by some fluke, but because it is wrongheaded. It has produced “chaos”, and it must be abandoned.
Kissinger calls for “a new Bretton Woods”, finessing the important point that this was a financial institution set up primarily by the victorious US to meet its own global needs. It would be more apposite to call for “a negation of Bretton Woods”. His provides a choice between “an international political regulatory system with the same reach as that of the economic world” (that is, consolidate the current inequalities) vs a dismantling of the current global monster, and of course opts for the first alternative. But, it, ably administered by Kissinger et al, is the one that brought us to this impasse. The “chaos” Kissinger fears is really the democratic awakening of the people. Since the collapse of the Soviet Union and the apparent eclipse of socialism, they have been lulled into accepting the soothing promises of politicians in thrall to their ever more powerful corporate masters.
“The extraordinary impact of the President-elect on the imagination of humanity is an important element in shaping a new world order,” enthuses Kissinger. But will Obama’s stimulus package be an opening salvo in the battle for even greater imperial overreach, or will Obama listen to the millions of simple Americans who stumped for him and reject this ominous NWO proposed by his patron?
Food is a human right, but production to feed mainly corporate profit will merely lead to more food crises. Similarly, fulfilling all our basic needs should be a human right as enshrined in the vaguely worded UN Declaration of Human Rights, which should be dusted off and promoted as part of the inspiration for Obama’s defining policy tackling the current economic “chaos”. A truly new world order requires stimulating real people, not yielding to banksters’ threats and the failed policies of Kissinger et al. There Is No Other Alternative.
Eric Walberg writes for Al-Ahram Weekly. You can reach him at www.geocities.com/walberg2002/