In the public imagination George W. Bush (and his malignant sidekick, Dick Cheney) represent the height of political criminality and “abuse of power.” His regime is therefore excoriated as an aberration to an otherwise healthy if not exemplary system of governance and economic organization. Bush’s crimes, however, are not an aberration but a natural and logical outgrowth of the system’s antisocial dynamic, which Obama, rhetoric aside, won’t be able to cure.
Wall Street vs Main Street: It’s the SYSTEM stupid!
Finger Pointing vs System Change
By Rick Wolff
Amid the current capitalist crisis, fear spreads and scapegoating
surges. Media and politicians charge the predictable suspects.
Arrests may follow. Few recognize the system as the problem, rather
than this or that group reacting to the system’s demands and
pressures. True, the word “capitalism” now arises in public
discussion. But there it means big business, big banks, or Wall
Street, rather than the system that ties together all streets,
businesses, workers, households, and the government.
Cruder right-wingers scapegoat the home-buyers now unable to pay for
their sub-prime mortgages. The slightly more sophisticated denounce
government intervention — to help minorities and the poor become
home-owners — for whatever ails the economy. The crudest of all
blend Wall Street, bankers, and crooked Washington insiders into
conspiracies to profit personally and/or sell out the US to world
communism or terrorism or maybe Muslims.
Hank Paulson, Goldman Sachs alum and emblematic of Wall Street’s decades of unregulated greed, is now a convenient whipping boy for media pundits and politicians, but he, too, is nothing but a “normal” figure in the constellation of power players continually enabled by capitalism. (Note he’s still very much in power.)
On the left, favorite whipping boys include Wall Street, bankers,
hedge funds, overpaid executives, crooked corporations, and
compromised politicians who let bad things happen “to our economy.”
More sophisticated leftists accelerate condemnations of “neo-liberal
deregulation.” Ever since Reagan’s election, they say, government
failures to regulate markets and control private enterprises
facilitated the wild financial misdeeds that have now brought us low.
Neither side treats the capitalist system as the basic problem.
Rather, both mostly agree that the interacting network of corporations
with their boards of directors, salaried managers, and wage-workers
are the necessary and appropriate foundations “of our economy.” As
that network, capitalism strikes them as inevitable, and thus not the
appropriate target for right or left. Instead, they debate how much
blame should attach to this or that group for “causing” the crisis:
poor people or too much government intervention or too little or the
overpaid rich with hedge funds or the corrupt bad apples fouling the
system. Fingers point to culprits spoiling a capitalism — “our
economy” — that would otherwise work just fine.
Consider the Wall Street vs Main Street debate. Many leftists and not
a few rightists accuse Wall Street of “causing” the sub-prime mortgage
mess (as if countless Main Street banks and mortgage brokers had not
pushed profitable mortgages onto locals unable to afford them). They
scowl that Wall Street invented “derivatives,” those dangerous new
financial gimmicks (as if Main Street types did not invest in and
profit from them). Leftists claim that Wall Street got politicians to
de-regulate the economy (as if many Main Street businesses did not
likewise support and profit from deregulation). Many rightists claim
that insufficient government de-regulation, because of Wall Street
influence, caused the crisis (as if Main Street did not benefit from
that government intervention). Rightists and leftists both largely
blame Wall Street and Washington for together producing the housing
and real estate bubble (as if Main Street did not cheer the rising
prices and building of houses, the booming demand for household
products, the resulting jobs, incomes, and tax revenues, etc.).
As capitalism’s latest boom goes bust, Wall Street and Main Street
shift from mutually profitable cooperation to a struggle over
survival. Main Street fears Wall Street will use its power, money,
and influence to dump the pains of economic crisis onto workers and
governments (by cutting wages and jobs, paying fewer taxes, and
demanding more government aid and bailouts). This will hurt Main
Street. Capitalism works to shift economic costs down the economic
structure and economic gains upward. So Main Street fights back with
public opinion campaigns to blame Wall Street for the crisis. In this
falling out among thieves, left and right mostly take sides rather
than reject the system that spawned those thieves. The alternative
position would be to demand system change.
System change does not mean what Paulson and Bernanke now plan: to buy
shares of private US banks. In this partial “nationalization” of the
banks, the US government will buy and hold bank shares and possibly
place state officials on the banks’ boards of directors. Private
enterprises thereby become, partly and probably temporarily, public
enterprises. This change is big for Bush, Paulson, and Bernanke
because they always denounced public enterprises as socialism or
But replacing private members of bank boards of directors (elected by
and responsible to private shareholders) with public members (named by
and responsible to state officials) does not basically change the
system. The workers still work 9 to 5; they still follow the board’s
orders; and the goods, services, and profits they produce belong to
the boards of directors to serve their interests. Those boards,
whether private or public, still give the orders, sell the products,
receive the revenues, and decide how to use the profits. The profound
inequalities between workers and board of directors remain. The
profound absence of democracy in the capitalist workplace remains.
Both public and private boards of directors have historically sought
to evade, weaken, or eliminate state controls and regulations limiting
their freedom of action and their profitability (in the USSR as well
as the US).
Capitalism has everywhere oscillated between private and public
phases. Private capitalism minimized government interventions and
mostly kept state officials off boards of directors. In capitalism’s
public phases, governments intervened and sometimes replaced private
with public members of boards of directors. Crises of one phase often
provoked transition to the other. The 1929 crisis of private US
capitalism ushered in Roosevelt’s New Deal state intervention
(establishing social security, unemployment insurance, and other
costly — to business — programs and regulations). The 1970s crisis
of state-regulated capitalism returned the US to another private
capitalist phase, the Reagan-Bush era, which undid most of the New
Deal. What will follow today’s crisis of private capitalism? Will
the pendulum swing back to state re-regulated capitalism? If so, the
US business community will utilize decades of accumulated expertise in
how to evade, then weaken, and finally eliminate state regulation.
Re-regulation will thus likely be short-lived. Or might the
alternative of system change become important?
System change would supplement re-regulation with a transformation
inside enterprises. Suppose old boards of directors were replaced by
new boards whose members understood and shared the goals of regulation
rather than seeing regulation as limitations to be undermined. This
might happen if the new boards comprised the collectivity of the
workers themselves. Job descriptions of all workers would henceforth
combine the particular labor of each with her or his full
participation in the collective tasks of the board of directors.
In this way, workers-as-also-bosses could both shape economic
regulations — alongside other workers running other enterprises —
and then carry them out inside each enterprise. The conflict of
interests between employers and employees would be transformed once
these were no longer different and opposed groups. This would be real
system change. Without this, boards of directors, private and/or
public, will continue to function in the future as they have in the
past. They will undermine regulations aimed to make the economy serve
society, will continue to run their enterprises undemocratically, will
maintain economic inequalities, and will continue to generate economic
crises like the one imposed on us all today.
Rick Wolff is Professor of Economics at University of Massachusetts
at Amherst. He is the author of many books and articles, including
(with Stephen Resnick) Class Theory and History: Capitalism and
Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick)
New Departures in Marxian Theory (Routledge, 2006).