by Ernie Haberkern
One of the features that has been overlooked in the understandable outrage over what is going to amount to over one trillion dollars bailout of unaccountable financial institutions is that Paulson’s original plan effectively shielded the Secretary of the Treasury, an unelected appointee, from any oversight by either the legislature or the judiciary. In effect, this proposal annulled the Constitution of the United States of America. It gave Paulson complete control over the economic resources of the country. Stalin’s Five Year Plans were, in comparison, relatively modest.
In the end these provisions were eliminated. But that isn’t the end of the story. I happened to catch, almost by accident, one of the more interesting features of the bill that did pass. Representative Barney Frank, a liberal Democrat who was one of the prime movers in the campaign to bully the House of Representatives into accepting this handover of power, happened to mutter that, of course, in return for this trillion dollars the Treasury would receive non-voting stock in the company. Legislators were persuaded that this measure would allow the taxpayers to get their money back when (if) the financial institutions (unnamed) returned to profitability. But, unlike several of the European bailouts, the US legislation did not give the elected representatives of the citizenry any control over the actions of the financial institutions receiving money taken from the taxpayers. There was outrage, on both the right and the left, over the continued million and even billion dollar awards to corporate executives who, after running their companies into the ground, calmly asked the government to continue paying them. But this furor, in fact, was a distraction. The legislation finally approved by the Congress provides for no oversight over the companies receiving the funds.
One immediate consequence has been, as Joe Nocera reported in the October 24 edition of the New York Times, hardly a red rag, the banks have hoarded the money they received in order to strengthen their credit position. They are not lending it out as was the original justification for the measure. What can the Treasury Department do under the terms of the legislation? Nothing. George W. Bush did go on national television to urge the banks to start lending money. But the broadcast was early Saturday morning because the Republicans would like the voters to forget George’s name at least until after election day.
So what would democratic socialists have done in this crisis? Well, there are more deserving objects of taxpayer largesse than the big banks. Obviously, credit institutions could have begun by buying up the mortgages of pressed homeowners with this money. But which credit institutions. Unfortunately, in the US a once thriving cooperative movement has all but disappeared But the movement still exists at least in many European countries. And even in the backward US many working families, especially people employed by school districts, local and state governments and similar enterprises have access to credit unions. These are not only subject to controls through trade unions, some are even democratically run by boards elected on a one member-one vote basis. How much money you have in the union is immaterial. Why shouldn’t these institutions, democratically run, which exist to save members money rather than speculate with it been encouraged by federal tax support? Why not use tax money to redeem the sub-prime mortgages and turn them over to credit unions with the people who owe on the mortgages becoming credit union members?
But there is a more practical and immediate political question than “what would we do if we were in power?” From the 1970s through the 1990s there was a serious third party movement in the United States. It was a popular grass-roots movement that did not depend on huge, expensive advertising campaigns. The Clinton and Bush II administrations effectively side-lined this movement. Especially since the popular anger over the Vietnam war that fueled this movement dissipated. But now the economic crisis, coupled with popular revulsion against the wars in Iraq and Afghanistan, has stirred new interest in a “new politics”. The immediate beneficiary has been Barack Obama. As a relative newcomer to politics he has been seen as an antidote to the current, despised, political system. The McCain campaign does not realize that by denouncing his “inexperience” they are boosting Obama’s standing in the polls.
But what happens if Obama is elected as seems likely? He has supported the bailout. He is for withdrawing from Iraq but only in order to pour more lives and money into Afghanistan which is rapidly spinning out of control. Not too long ago Obama flirted politically with Palestinian activists like Rashif Khalidi who support a popular movement from below of Israeli and Palestinian peace activists. In order to win over a largely imaginary “Jewish vote” Obama sought the endorsement of the American Israel Public Affairs Committee (AIPAC) an extremely influential lobby which is hostile to any serious peace initiative. While this body has a veto power over both Democratic and Republican parties when it comes to questions of the Middle East, most voters who identify themselves as Jewish do not support AIPACs hard line. It is a good example of how far removed from the electorate the Washington establishment is. And Barack Obama wants nothing more than to become the Commander in Chief of the Washington Establishment.
So what happens if Obama wins? Where will the enthusiastic, rejuvenated voters who supported him go? And it is not only the voters. The revolt against the Paulson bank robbery (a robbery by, not of, the banks) met with a revolt by liberal Democrats and grass roots Republicans. A significant number of Democrats remained oppose even during the second vote at a point when all the news media and political pundits were hysterically calling for support of the Paulson plan. What will these people do if Obama comes to power on a wave of popular enthusiasm and then betrays everyone’s hopes? And, if McCain wins, where will the disillusioned Obama supporters turn?
What do we have to say, not so much to these politicians, but to the people who supported them? This economic crisis calls into question the whole series of bureaucratic, international organizations that have come to dominate the world economy since the collapse of the Soviet Union. In terms of the “free market” versus “state controlled” dialectic that has dominated ideological discourse, especially in the academy, for the last thirty years, where do we place organizations like the IMF (where Henry Paulson moonlights as a member of the board of governors) or the World Bank. Here are organizations run by people who are not only unelected but, except for the occasional Paul Wolfowitz, unknown to the general public. Yet, they dictate tax policies and social policies to entire national economies. Even Alan Greenspan has come to realize that the standard ideology is, well, false.
In this situation the democratic left is uniquely qualified to raise the fundamental question of democratic control which neither the “free enterprisers” nor the neo-Stalinists like Hugo Chavez want to see raised.