By Gary Tedman
I found this, I think, brilliant term (to 'endarken', implying the opposite to enlighten, to confuse and obfuscate) mentioned by the blogger 'suav' on a BBC blog. The writer says it was from Polish youth.
The principles of 'endarkenment' are working well in the Press these days while they try hard to disassociate the current sovereign debt crisis (Greece and so on) from the earlier banking crisis (Lehman collapse), whilst constantly trying to highlight the 'recovery', but the fact that the latter crisis developed from out of the former will not go away, it is history and it shapes events anyway.
From an article in the Independent online edition "Sean O'Grady: Greece is a problem – but Spain could destroy the euro" Friday, 30 April 2010, a useful timeline of the current shenanigans is given:
See:
http://www.independent.co.uk/news/business/comment/sean-ogrady-greece-is-a-problem-ndash-but-spain-could-destroy-the-euro-1958682.html
"2 May IMF talks in Athens with Greek officials end
3-6 May French parliament expected to approve rescue package
3-10 May IMF board, EU Commission have to formally approve the deal
6-7 May Greek parliament votes on new three-year austerity programme
6-10 May German Bundestag expected to endorse the deal, the last of those required to, the Netherlands and Luxembourg already having given tacit approval
9 May Key elections in North Rhine-Westphalia, Germany's most populous state
10 May European summit formally endorses the deal
19 May Next repayment of Greek debt; €8.5bn must be in place if Greece wants to avoid default
31 May €355m debt repayment due
Summer/autumn 2010 Threat of widespread strikes and unrest in Greece at harshness of deal; risk of political instability or that the government might fall
29 September Further €180m debt repayment due
2011 Greece needs to refinance the equivalent of 18 per cent of its GDP, or €23bn, with almost €9bn due on 20 March 2011. Annual deficit down to 9 per cent of GDP. Return to world growth should help
2012 Annual deficit down to 3 per cent of GDP by year end"
From http://www.independent.co.uk/news/business/comment/sean-ogrady-greece-is-a-problem-ndash-but-spain-could-destroy-the-euro-1958682.html
To illuminate this from NYTimes "As Greek Drama Plays Out, Where Is Europe?", Published: April 29, 2010, Steven Erlanger writes:
from http://www.nytimes.com/2010/04/30/world/europe/30europe.html?hp
“The fact that a German regional election can play such a disproportionate role in messing up efforts to contain what was a much smaller crisis several months ago is astonishing,”
Mr. Kirkegaard said. And the fact that there will be no European Union summit meeting until May 10, after the German elections, “is so blatantly political,” he said.
“This is no way for an E.U. that has to contain an accelerating crisis and market panic to behave,” Mr. Kirkegaard said.
"...the Lisbon Treaty that created Mr. Van Rompuy’s position, and which was intended to make the enlarged European Union more agile and coherent, deliberately left out powers for coordinating fiscal policies, which are the fiercely guarded prerogative of the separate nations. Even so, countries like Germany can only blame themselves for not insisting on realistic European oversight of Greek statistics, which were widely believed to be false for two decades."
(…)
“Questions are asked to nations, not to the E.U. — but nations cannot deal with this problem alone,” said Dominique Reynié, director of the Foundation for Political Innovation and a political scientist at the Institut d’Études Politiques de Paris.
“The silence of the E.U. and its institutions has become deafening. It is incapable of demonstrating that an entity called Europe exists. This is a situation that cannot go on.”
"...The European Union “seems to be in a state of permanent self-promotion,” he said. “But it cannot ask its voters to relinquish part of their nations’ sovereignty and then not answer the call when there’s a problem.”…."
from http://www.nytimes.com/2010/04/30/world/europe/30europe.html?hp
Well… it has… so far; Merkel is, or was, trying still to put off any vote to ratify a loan in Germany until May 10 after the elections there, when it 'is expected' to be agreed by the whole Bundestag, all of whom are (weirdly, given they are still 'expected' to agree it) voicing strong anti-bail-out sentiments, and thus making her job rather more difficult. This would, if achieved, exculpate her party from sole responsibility for dumping the crisis onto the backs of German workers again.
Meanwhile neither the Greek nor the German working people want a bail out. They didn't cause the crisis.
Yes, the Greek and German people agree, they don't want a bail out which will just make them suffer more and help make the bankers and bourgeoisie even more wealthy (yet again). But the politicians, they want a bail out and don't want it all at the same time. The one's who stand to lose from a default want the bail out, but the others who want the euro low for exports want the falling euro, they also fear more for their personal political position. If both lots look at the future though, they see whole rounds of bail outs being necessary, including very probably for themselves, but will there be any money left in the kitty after a few have gone to the wall? Unlikely. But they won't worry about the future much.
Thus the current 'solution' is letting things slide, the anarchy of the market. And the longer the politicians dither about the loan the higher its price becomes and the more serious the social consequences of 'contagion', but it doesn't matter to these politicians because they know they won't be paying the price anyway, this will be taken on by the working classes of Europe, who they seek to be elected by (!), thus what matters to them is their own political futures. After all, the founding members of the EU wanted Greece on board for the benefits, to collude and trade with, not for its social problems, not to share responsibility for looking after the people who they are meant to represent, just for swapping them as a cheap labour force.
At the moment the world is being led by credit rating agencies, big investment banks, and big speculators (this is almost always the case in capitalism, but it is now very visible in the crisis). The main credit rating agencies are anointed by the SEC, based in New York they are private financial corporations that wield a lot of power and influence and are a part of the problem, they are not independent and 'objective' as is often made out, but have vested interests. Their judgements are as political as they are economic. The SEC was once run by Bernie Madoff, now in prison, and that just about sums up their approach to regulating finance. Of course they got the ratings wrong in the crisis (giving top ratings to bankers toxic CDSs), but that isn't the point - it just proves the politics of it. Most 'economists' are paid to get it wrong in the 'right way' for the ruling class, they are perhaps one of the last academic professions to still be in this backward condition of anti-science.
The opinions, views, thoughts, and ramblings of editors of PoliticalAffairs.net – and other stuff worth reading or viewing.
Showing posts with label Banking Crisis. Show all posts
Showing posts with label Banking Crisis. Show all posts
Friday, April 30, 2010
Monday, March 2, 2009
Nationalization, Socialism, and the U.S. Banks
By Jim Genova
Associate Professor of History
The Ohio State University-Marion
In the midst of the unfolding global economic crisis politicians, pundits, and bankers have engaged in much hyperbolic discussion about the prospect that major banks in the U.S. may be “nationalized.” On 27 February the U.S. Treasury Department announced that it was converting its “preferred shares” in Citibank into “common shares” giving it a 36% ownership in one of the world’s largest financial institutions. This and other actions taken on the part of the Federal Reserve and U.S. Treasury Department since the crisis began to accelerate last Autumn has led hardened neo-liberal ideologues to exclaim that this is “creeping socialism.” The proclamations of many anchors across the business channels, Conservatives gathered in Washington on 28 February, and Republicans in Congress during the debate over the stimulus bill have elevated to the level of mainstream discourse a conversation over the meaning of the terms “nationalization” and “socialism,” even if the purpose of such right-wing defenders of unbridled global capitalism is to induce ideological confusion and a sense of panic.
On 25 February, members of the House Financial Services Committee asked Fed Chairman Ben Bernanke to explain what he understood to be the definition of “nationalization.” In response, he said it is when “the government ‘seizes’ a company, ‘zeroes out the shareholders and begins to manage and run the bank.” He reassured the anxious Congressmen that “we don’t plan anything like that.”[1] Treasury Secretary Timothy Geithner seconded Bernanke’s comments, describing nationalization as “the wrong strategy for the country and I don’t think it’s a necessary strategy.”[2] Sen. Charles Schumer, member of the Senate Banking Committee, also tried to reassure a nervous investor class stating that a “federal takeover of the banks should be avoided at all costs. No one intends, ever, to have the government running these banks or insurance companies for a long period of time.” His goal, somewhat more ambitious than that proposed by either Bernanke or Treasury Secretary Timothy Geithner, is to have the government “come in, clean them out, take out the bad assets, put in new management.”[3] Despite such reassurances from those at the center of power, howls from the right and from brokers on the floor of the New York Stock Exchange and Chicago Mercantile Exchange continue to charge that the U.S. beginning under the Bush Administration and continuing at an accelerated pace is heading down the road to “socialism.”
None of the half-measures, abrupt shifts in policy, or tenuous interventions in the financial sector over the past year at least (Bear Stearns went under on 17 March 2008) have been effective at stemming the ever deepening global financial crisis. Banks continue to fail, large monopolistic financial institutions are reeling around the world, and the global economy is spiraling into perhaps its worst crisis ever. Events, as the recent contorted interventions to rescue Citibank have shown, are forcing the leaders of U.S. capitalism to make very difficult and, to them, unpalatable decisions. Neither former Treasury Secretary Henry Paulson (a supposed expert on the Great Depression of the 1930s) nor current Treasury head Tim Geithner (Governor of the New York Fed when Lehman Brothers went down in September 2008) appear to have to will to carry off what is historically necessary – the outright seizure of the major financial institutions of this country. This should not surprise us as they are “true believers” in the neo-liberal capitalist world order. For them, the current crisis is perplexing since it should not be happening at all. At the very least, the market should have shown the way out by now. This led former Fed Chairman Alan Greenspan to recently acknowledge before Congress that the theory to which he (along with Paulson, Bernanke, and Geithner) ascribed was “deeply flawed.” No such statement of contrition has as of yet come forth from Bernanke and Geithner.
Ultimately, many analysts believe that the U.S. government will have no choice but to nationalize some of the largest financial firms, including Citibank, Bank of America, and some large regional banks.[4] Nobel Laureate Joseph Stiglitz recently echoed calls from leading economists Nouriel Roubini and Nassim Taleb to nationalize the U.S. banks telling German television network Deutsche Welle “the banks have failed. Nationalization is the only answer.”[5] Stiglitz has much experience at the center of global finance having served as a member of President Clinton’s Council of Economic Advisors (1993-1997) and as Chief Economist and Senior Vice President of the World Bank (1997-2000). During those terms he witnessed the LTCM and East Asia currency crises (1996-1998) that some economists like Paul Krugman warned was a prelude to a global economic depression.[6] What has happened in the meantime is that trillions of dollars have been thrown down the bottomless chute of fundamentally insolvent institutions beyond hope of rescue.[7] Moreover, for all of this public money used to prop up badly run speculative private institutions not once has the government forced the management to resign (the recent move at Citibank showed the first signs of the Treasury making demands about the composition of corporate boards) nor has it called for any “claw back” provisions of the bonuses and extravagant pay for executives who ran their enterprises into the ground. Instead, public wealth is being transferred on a rapidly moving conveyor belt into the hands of unscrupulous and failed bankers. This is becoming one of the greatest thefts in world history. As Stiglitz told Deutche Welle, “separation of ownership from control is a recipe for disaster.”[8]
What is called for is an emergency solution not unlike that confronting Russia in the summer of 1917 when the Bolshevik leader V. I. Lenin wrote The Threatening Catastrophe and How to Fight It. In that pamphlet, Lenin described an unfolding crisis where the wheels of the Russian economy were grinding to a halt. Banks had ceased lending, railroads were shutting down, food supplies were dwindling, and unemployment was mounting. Lenin also noted that there was much public discussion among politicians and leaders of industry that something dramatic had to be done to salvage the situation. “Everybody says that. Everybody recognizes that. Everybody has agreed to that. And nothing is being done.”[9] Even more recently, Sweden’s experience in the early 1990s has been held up as analogous to the broad parameters of the current U.S. situation. There a housing boom in the late 1980s led to speculation on mortgage-backed debt that eventually ended badly leading to the government taking effective control of the largest banks. Sweden then forced the banks to create two institutions under one roof – a good bank and a bad bank. All of the “toxic assets” were concentrated in the bad banks, which gradually (over four years) sold them off.[10] The problem with using Sweden’s banking crisis as a model for understanding our own is that not only is Sweden’s economy a fraction of the size of that in the U.S. but its institutions are not at the epicenter of the global capitalist system. Institutions like CitiGroup, Morgan Stanley, Bank of America, JP Morgan Chase, Goldman Sachs, and others are global monopolistic enterprises with branches, partners, and subsidiaries throughout the world. Moreover, they are the vehicles through which the leaders of U.S. government pass on their way to political power. Consequently, there is an incestuous relationship between the “too big to fail” banks and the officials in charge of their oversight. There was nothing analogous in Sweden’s case. Finally, the U.S. crisis does not stem entirely from a decline in home prices (the much vaunted bursting of the housing bubble). Rather, for decades there has been a mounting structural weakness in the U.S. economy and by extension global capitalism. That is the overwhelming dependence for the survival and expansion of the system on debt of all kinds – credit cards, mortgages, auto financing, leveraged stock trading, and greatly expanded issuing of public debt of many varieties. Since the early 1970s there has been a widening disconnect between the real wages of workers in the industrialized world and the accumulation of public and private debt.[11]
We are at a crossroads in the current crisis. Every leading politician, pundit, and financial analyst acknowledges that the situation requires urgent action. On financial, ethical, and political grounds it is imperative that the U.S. government nationalize the major financial institutions, place them under federal control, unify them into one central bank to provide for more efficient management, and completely dispatch the executive management of those firms that have been seized. Only through that device can the process of daily pumping billions upon billions into dead institutions be stopped. Only through such bold moves can the government gain the leverage it needs to control the credit markets, make interest rates meaningful, and aggressively restructure mortgages. Only through the decisive action of seizing, controlling, and re-directing the functioning of the banks to serve the immediate and long-term needs of the people can the rate of decline be slowed and some stability be restored to the financial sector of the economy.[12]
This should not be confused with socialism. Such labeling is an effort on the part of those ideologues still committed to the failed neo-liberal policies of the Washington Consensus dating to Reagan and Thatcher years of the early 1980s to derail any meaningful assistance to those workers, farmers, and middle class people who are suffering because of the greed of the capitalist elite. Moreover, it is the same callousness that those practitioners of gung-ho capitalism displayed in guiding IMF and World Bank policies on a path to crippling and impoverishing developing countries around the world through “Structural Adjustment Programs.” Lenin clearly delineated the difference between “state monopoly capitalism” and socialism, but argued that it was imperative in the period of impending catastrophe that responsible officials of any government take the decisive measures necessary to save people from mass unemployment, famine, and deep social dislocation. That the global economic crisis portends widespread political upheaval has been attested to by analysts and researchers who work in Africa, Asia, and Latin America.[13] In describing the 1917 crisis in Russia, Lenin wrote that nationalizing the banks would improve “the accessibility and the easy terms of credit, particularly for small owners [and] for the peasantry.” Further, the state would “be in a position to survey all the main monetary operations without concealing them, then to control them, then to regulate economic life, and finally to obtain millions and billions for large state operations.”[14] This addresses many of the most salient aspects of the crisis in the financial sector: transparency, accountability, assistance for those who actually need it, saving funds that will be needed for further stimulus, and it resolves the fatal disconnect Stiglitz identified in the current approach between having ownership without control. Beyond the current crisis, though, since the capitalist ideologues have raised the specter of socialism in the U.S., it is an opportunity for progressive forces to intervene in the public conversation and offer a real understanding of what socialism is while also highlighting the ultimate flaws of capitalism that can never be overcome or resolved from inside the system. This is an historic opportunity for the government to act on behalf of the people to mitigate the effects of a dying system and for progressives to make the case for socialism. The fate of millions of people around the world depends on the abilities of both to do what is historically necessary.
[1] Craig Torres and Bradley Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization,” Bloomberg.com 25 February 2009.
[2] Robert Schmidt, “Geithner Calls Nationalizing Banks ‘Wrong Strategy’ for Economy,” Bloomberg.com, 25 February 2009.
[3] Torres and Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization.”
[4] Matthew Richardson, “The Case for and against Bank Nationalisation,” VoxEU.org, 26 February 2009.
[5] Michael Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer’,” Deutche Welle, 16 February 2009. Reprinted in the People’s Weekly World.
[6] Paul Krugman, The Return of Depression Economics and The Crisis of 2008, New York: W. W. Norton, 2008.
[7] On 27 February Bloomberg Financial Group provided an assessment of the entire contribution made by the Federal Reserve and U.S. Treasury Department to prop up the financial system since the beginnings of the crisis in August 2007. Its conclusion was that to date $11.6 trillion has been either spent or taken on as liabilities in the process. This includes cash injections into the trading markets, the TARP and other emergency programs, loans to banks facilitating their takeover of other even worse off financial institutions, the seizures of AIG, Freddie Mac, and Fannie Mae, loans to the Auto Industry, and the expansion of the Fed’s balance sheet to facilitate the commercial paper market that seized in September and October 2008.
[8] Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer.””
[9] V. I. Lenin, The Threatening Catastrophe and How to Fight It, New York; International Publishers, 1932, p. 5. The essay was written 23-27 September 1917.
[10] Edward Harrison, “Did Sweden Really Nationalize Its Banks?” online blog post, 25 February 2009.
[11] Federal Reserve Table 100.B Data for 1945-2005, published by AutoDogmatic.com.
[12] Binyamin Appelbaum, “What Is Nationalization? Depends Who You Ask,” Washington Post, 25 February 2009. See also Robert Griffiths, “Why Nationalization Isn’t Socialism,” Politicalaffairs.net, 3 November 2008, reproduced from the Morning Star.
[13] Nelson D. Schwartz, “Job Losses Pose a threat to Stability Worldwide,” New York Times, 15 February 2009.
[14] Lenin, The Threatening Catastrophe and How to Fight It. Italics in the original.
Associate Professor of History
The Ohio State University-Marion
In the midst of the unfolding global economic crisis politicians, pundits, and bankers have engaged in much hyperbolic discussion about the prospect that major banks in the U.S. may be “nationalized.” On 27 February the U.S. Treasury Department announced that it was converting its “preferred shares” in Citibank into “common shares” giving it a 36% ownership in one of the world’s largest financial institutions. This and other actions taken on the part of the Federal Reserve and U.S. Treasury Department since the crisis began to accelerate last Autumn has led hardened neo-liberal ideologues to exclaim that this is “creeping socialism.” The proclamations of many anchors across the business channels, Conservatives gathered in Washington on 28 February, and Republicans in Congress during the debate over the stimulus bill have elevated to the level of mainstream discourse a conversation over the meaning of the terms “nationalization” and “socialism,” even if the purpose of such right-wing defenders of unbridled global capitalism is to induce ideological confusion and a sense of panic.
On 25 February, members of the House Financial Services Committee asked Fed Chairman Ben Bernanke to explain what he understood to be the definition of “nationalization.” In response, he said it is when “the government ‘seizes’ a company, ‘zeroes out the shareholders and begins to manage and run the bank.” He reassured the anxious Congressmen that “we don’t plan anything like that.”[1] Treasury Secretary Timothy Geithner seconded Bernanke’s comments, describing nationalization as “the wrong strategy for the country and I don’t think it’s a necessary strategy.”[2] Sen. Charles Schumer, member of the Senate Banking Committee, also tried to reassure a nervous investor class stating that a “federal takeover of the banks should be avoided at all costs. No one intends, ever, to have the government running these banks or insurance companies for a long period of time.” His goal, somewhat more ambitious than that proposed by either Bernanke or Treasury Secretary Timothy Geithner, is to have the government “come in, clean them out, take out the bad assets, put in new management.”[3] Despite such reassurances from those at the center of power, howls from the right and from brokers on the floor of the New York Stock Exchange and Chicago Mercantile Exchange continue to charge that the U.S. beginning under the Bush Administration and continuing at an accelerated pace is heading down the road to “socialism.”
None of the half-measures, abrupt shifts in policy, or tenuous interventions in the financial sector over the past year at least (Bear Stearns went under on 17 March 2008) have been effective at stemming the ever deepening global financial crisis. Banks continue to fail, large monopolistic financial institutions are reeling around the world, and the global economy is spiraling into perhaps its worst crisis ever. Events, as the recent contorted interventions to rescue Citibank have shown, are forcing the leaders of U.S. capitalism to make very difficult and, to them, unpalatable decisions. Neither former Treasury Secretary Henry Paulson (a supposed expert on the Great Depression of the 1930s) nor current Treasury head Tim Geithner (Governor of the New York Fed when Lehman Brothers went down in September 2008) appear to have to will to carry off what is historically necessary – the outright seizure of the major financial institutions of this country. This should not surprise us as they are “true believers” in the neo-liberal capitalist world order. For them, the current crisis is perplexing since it should not be happening at all. At the very least, the market should have shown the way out by now. This led former Fed Chairman Alan Greenspan to recently acknowledge before Congress that the theory to which he (along with Paulson, Bernanke, and Geithner) ascribed was “deeply flawed.” No such statement of contrition has as of yet come forth from Bernanke and Geithner.
Ultimately, many analysts believe that the U.S. government will have no choice but to nationalize some of the largest financial firms, including Citibank, Bank of America, and some large regional banks.[4] Nobel Laureate Joseph Stiglitz recently echoed calls from leading economists Nouriel Roubini and Nassim Taleb to nationalize the U.S. banks telling German television network Deutsche Welle “the banks have failed. Nationalization is the only answer.”[5] Stiglitz has much experience at the center of global finance having served as a member of President Clinton’s Council of Economic Advisors (1993-1997) and as Chief Economist and Senior Vice President of the World Bank (1997-2000). During those terms he witnessed the LTCM and East Asia currency crises (1996-1998) that some economists like Paul Krugman warned was a prelude to a global economic depression.[6] What has happened in the meantime is that trillions of dollars have been thrown down the bottomless chute of fundamentally insolvent institutions beyond hope of rescue.[7] Moreover, for all of this public money used to prop up badly run speculative private institutions not once has the government forced the management to resign (the recent move at Citibank showed the first signs of the Treasury making demands about the composition of corporate boards) nor has it called for any “claw back” provisions of the bonuses and extravagant pay for executives who ran their enterprises into the ground. Instead, public wealth is being transferred on a rapidly moving conveyor belt into the hands of unscrupulous and failed bankers. This is becoming one of the greatest thefts in world history. As Stiglitz told Deutche Welle, “separation of ownership from control is a recipe for disaster.”[8]
What is called for is an emergency solution not unlike that confronting Russia in the summer of 1917 when the Bolshevik leader V. I. Lenin wrote The Threatening Catastrophe and How to Fight It. In that pamphlet, Lenin described an unfolding crisis where the wheels of the Russian economy were grinding to a halt. Banks had ceased lending, railroads were shutting down, food supplies were dwindling, and unemployment was mounting. Lenin also noted that there was much public discussion among politicians and leaders of industry that something dramatic had to be done to salvage the situation. “Everybody says that. Everybody recognizes that. Everybody has agreed to that. And nothing is being done.”[9] Even more recently, Sweden’s experience in the early 1990s has been held up as analogous to the broad parameters of the current U.S. situation. There a housing boom in the late 1980s led to speculation on mortgage-backed debt that eventually ended badly leading to the government taking effective control of the largest banks. Sweden then forced the banks to create two institutions under one roof – a good bank and a bad bank. All of the “toxic assets” were concentrated in the bad banks, which gradually (over four years) sold them off.[10] The problem with using Sweden’s banking crisis as a model for understanding our own is that not only is Sweden’s economy a fraction of the size of that in the U.S. but its institutions are not at the epicenter of the global capitalist system. Institutions like CitiGroup, Morgan Stanley, Bank of America, JP Morgan Chase, Goldman Sachs, and others are global monopolistic enterprises with branches, partners, and subsidiaries throughout the world. Moreover, they are the vehicles through which the leaders of U.S. government pass on their way to political power. Consequently, there is an incestuous relationship between the “too big to fail” banks and the officials in charge of their oversight. There was nothing analogous in Sweden’s case. Finally, the U.S. crisis does not stem entirely from a decline in home prices (the much vaunted bursting of the housing bubble). Rather, for decades there has been a mounting structural weakness in the U.S. economy and by extension global capitalism. That is the overwhelming dependence for the survival and expansion of the system on debt of all kinds – credit cards, mortgages, auto financing, leveraged stock trading, and greatly expanded issuing of public debt of many varieties. Since the early 1970s there has been a widening disconnect between the real wages of workers in the industrialized world and the accumulation of public and private debt.[11]
We are at a crossroads in the current crisis. Every leading politician, pundit, and financial analyst acknowledges that the situation requires urgent action. On financial, ethical, and political grounds it is imperative that the U.S. government nationalize the major financial institutions, place them under federal control, unify them into one central bank to provide for more efficient management, and completely dispatch the executive management of those firms that have been seized. Only through that device can the process of daily pumping billions upon billions into dead institutions be stopped. Only through such bold moves can the government gain the leverage it needs to control the credit markets, make interest rates meaningful, and aggressively restructure mortgages. Only through the decisive action of seizing, controlling, and re-directing the functioning of the banks to serve the immediate and long-term needs of the people can the rate of decline be slowed and some stability be restored to the financial sector of the economy.[12]
This should not be confused with socialism. Such labeling is an effort on the part of those ideologues still committed to the failed neo-liberal policies of the Washington Consensus dating to Reagan and Thatcher years of the early 1980s to derail any meaningful assistance to those workers, farmers, and middle class people who are suffering because of the greed of the capitalist elite. Moreover, it is the same callousness that those practitioners of gung-ho capitalism displayed in guiding IMF and World Bank policies on a path to crippling and impoverishing developing countries around the world through “Structural Adjustment Programs.” Lenin clearly delineated the difference between “state monopoly capitalism” and socialism, but argued that it was imperative in the period of impending catastrophe that responsible officials of any government take the decisive measures necessary to save people from mass unemployment, famine, and deep social dislocation. That the global economic crisis portends widespread political upheaval has been attested to by analysts and researchers who work in Africa, Asia, and Latin America.[13] In describing the 1917 crisis in Russia, Lenin wrote that nationalizing the banks would improve “the accessibility and the easy terms of credit, particularly for small owners [and] for the peasantry.” Further, the state would “be in a position to survey all the main monetary operations without concealing them, then to control them, then to regulate economic life, and finally to obtain millions and billions for large state operations.”[14] This addresses many of the most salient aspects of the crisis in the financial sector: transparency, accountability, assistance for those who actually need it, saving funds that will be needed for further stimulus, and it resolves the fatal disconnect Stiglitz identified in the current approach between having ownership without control. Beyond the current crisis, though, since the capitalist ideologues have raised the specter of socialism in the U.S., it is an opportunity for progressive forces to intervene in the public conversation and offer a real understanding of what socialism is while also highlighting the ultimate flaws of capitalism that can never be overcome or resolved from inside the system. This is an historic opportunity for the government to act on behalf of the people to mitigate the effects of a dying system and for progressives to make the case for socialism. The fate of millions of people around the world depends on the abilities of both to do what is historically necessary.
[1] Craig Torres and Bradley Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization,” Bloomberg.com 25 February 2009.
[2] Robert Schmidt, “Geithner Calls Nationalizing Banks ‘Wrong Strategy’ for Economy,” Bloomberg.com, 25 February 2009.
[3] Torres and Keoun, “Bernanke Rejects ‘Anything Like’ Bank Nationalization.”
[4] Matthew Richardson, “The Case for and against Bank Nationalisation,” VoxEU.org, 26 February 2009.
[5] Michael Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer’,” Deutche Welle, 16 February 2009. Reprinted in the People’s Weekly World.
[6] Paul Krugman, The Return of Depression Economics and The Crisis of 2008, New York: W. W. Norton, 2008.
[7] On 27 February Bloomberg Financial Group provided an assessment of the entire contribution made by the Federal Reserve and U.S. Treasury Department to prop up the financial system since the beginnings of the crisis in August 2007. Its conclusion was that to date $11.6 trillion has been either spent or taken on as liabilities in the process. This includes cash injections into the trading markets, the TARP and other emergency programs, loans to banks facilitating their takeover of other even worse off financial institutions, the seizures of AIG, Freddie Mac, and Fannie Mae, loans to the Auto Industry, and the expansion of the Fed’s balance sheet to facilitate the commercial paper market that seized in September and October 2008.
[8] Knigge, “Stiglitz: Nationalized Banks are ‘Only Answer.””
[9] V. I. Lenin, The Threatening Catastrophe and How to Fight It, New York; International Publishers, 1932, p. 5. The essay was written 23-27 September 1917.
[10] Edward Harrison, “Did Sweden Really Nationalize Its Banks?” online blog post, 25 February 2009.
[11] Federal Reserve Table 100.B Data for 1945-2005, published by AutoDogmatic.com.
[12] Binyamin Appelbaum, “What Is Nationalization? Depends Who You Ask,” Washington Post, 25 February 2009. See also Robert Griffiths, “Why Nationalization Isn’t Socialism,” Politicalaffairs.net, 3 November 2008, reproduced from the Morning Star.
[13] Nelson D. Schwartz, “Job Losses Pose a threat to Stability Worldwide,” New York Times, 15 February 2009.
[14] Lenin, The Threatening Catastrophe and How to Fight It. Italics in the original.
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