Economic “Stimulus” Considerations

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Minority Leader John Boehner (R-Oh) is playing obstruction politics to extract even deeper tax cuts for the rich than Obama has already offered. Tax cuts for the rich are a form of thinly-disguised “trickle-down” approach to economic stimulus, a chapter from the supply-side economics bible, and both have been shown to be conceptual frauds. In any case, no stimulus package will stop the unraveling of “the economy” unless the reign of unbridled capital is brought to an end. That kind of radical solution is not likely to issue from terminally cynical Republicans overtly in the service of plutocratic interests (who almost singlehandedly created the problem), nor from spineless Democrats who went and continue to go along. 

By Rowan Wolf

There are certain realities and issues that need to be recognized in our current economic “crisis” as trillions of dollars are being thrown around to try and “fix” the problem. Unfortunately, the debate seems to be focused around rescue of one sort or another. Further, that rescue is being focused on stabilizing the system. I believe we need to step back and examine this a bit differently.
Hegemonic Capital

We are no longer living with “capitalism” per se. Instead, we are living in an era of capital. The markets are no longer solely issues of production, resources, or even service sectors. They are capital (or financial) markets. There is a difference and an important one. Markets in the old sense had at their base certain tangible things such as a tangible product, a natural resource, or labor. The financial market does not. Money is a construct, and financial markets are largely ruled by emotion and trust (and greed).

With the progression of contemporary globalization, we have moved from an environment of national (or even regional) economies and into an era of globalized capital. Underlying modern economic globalization has been the removal of “barriers” (national controls) to trade, then services, then capital. This plan was deliberate, and nations large and small have paid huge prices for its “success.”

The rewriting of the General Agreement on Tariffs and Trade (GATT) shifted power from states to corporations – or corporate powers. While the initial thrust caused dramatic changes in global labor and production, the press was on very quickly to liberalize financial and investment markets. What has been created (or evolved) is a global financial environment that has no controls or controlling institutions. There is no framework in place. No fences. No protections.

The current economic crisis, which is spiralling downward at an ever faster rate, is not a U.S. crisis, or a European crisis, or an Asian crisis, or and African or South American crisis. It is a global crisis. Across the globe, nations are trying numerous strategies to stem the bleeding. None of them are working.

Why the trillions being thrown into the breach are having virtually no effect.

The creation, or evolution, to our current situation has created a global capital market without control. Nations, individually and collectively, have largely deregulated these “markets,” and have looked the other way as “exotic instruments” have been created. These exotic instruments have magnified the creation of capital investments that are “vaporware”, but are honored as if they had some real basis. In fact, they are less tangible than Monopoly money, but being honored by the “full faith and credit” of nations.

Now nations are literally throwing trillions of dollars into trying to stabilize a Monopoly money crisis where non-state actors have built their own printing presses. In doing this, the “real” money is rapidly becoming very similar to the Monopoly money, but it is backed by us – the people.

I am neither an economist, nor an accountant, but the issue seems pretty straight forward. We have a global derivatives market which has been created. That “market” (which is thousands of “dollars” to funny money to the penny) is estimated to be valued at more than the entire gross domestic product of the planet. That essentially means that if we took everything – all labor, all products, and all services, and threw them into the maw of the derivatives market, we would still not break even – or fill the hole that has been created.

In attempting to stabilize the financial markets (banking and investing), we (all of the nations) are throwing real money to back Monopoly money which no nation ever printed – but all nations have guaranteed.

Suggestion 1
Close the “derivatives” and related markets. Shut them down and do not honor them. Disconnect them from the economic “system.” This HAS to be a global decision and action. No one nation (or small alliance of nations) can do this on its own because the “arteries” are there in every national economy. If the whole market is not closed then there will be ongoing “collateral bleeding” through international markets and connections.

I am sure there is some consequence of this action. I have no idea what it would be. However, I am sure that this is a gangrenous limb that is poisoning the “body” and needs to be removed. It is for sure that trying to “save” this limb (or make it whole) is bleeding the rest of the world dry.

The “Stimulus” Packages
Thus far, the United States and other nations have attempted to bail out the banks and investment firms (and other corporations) largely by trying to pump money into them and to take their “toxic” assets off their hands. Some of this is considered (or is) “nationalization.” That has many very nervous if not outraged. In the U.S. there are loud complaints that the effort it nothing more than “socialism.” Hence, the struggle (in the U.S. and I imagine elsewhere) is to have states somehow find a balance between “saving” the system while maintaining the autonomy of private capital and corporations.

TARP I, which threw more than $300 billion to banks and investment firms without any controls or even oversight, has failed. We are told that things would have been so much worse without that injection of funds, but no one is saying what we were saved from – as the crisis spirals faster out of control. Now, the Obama administration is requesting another $850 billion in stimulus with the remaining $350 billion authorized under TARP to throw into the rescue effort. While some of those requested funds are directed towards job and infrastructure, a significant portion is going straight to where the TARP funds were directed – capital markets.

What is happening, and what is continuing, is that we are seeing giant capital become behemoth capital as the entire financial market rests in the hands of fewer and fewer players. As that happens, the need to prop up these failing giants becomes ever more critical. This will not take us to economic stability – but it massively expands the power and reach of a system that created, and continues to benefit from what they created.

More and more of our “eggs” are going into fewer and fewer deteriorating baskets. The current strategy is potentially setting the world up for a collapse of almost unimaginable proportions. What we may see out of that collapse is the emergence of a “capital” world where there are a few very big interests … and the rest of us.

Suggestion 2
Redirect the flow of public funds to community banks and credit unions. Invest in small business, and seriously consider [1] micro-lending banks in the United States. Refinance the housing market through community financial institutions – not through Citibank.

While we are all too well aware that we are in the throws of a national and global economic crisis, it is not the only one we face. We also face resource and climate crises. What is clear from virtually all ways to approach sustainability (economic, resource, and climate) is to relocalize economies. This means building and rebuilding local economies so that money and energy “circulates” and strengthens at a local level. The converse is what we have created – generators of wealth that are siphoned off to global corporate entities.

Some might argue that this is “isolationist.” However, I am not arguing for isolationism. I am arguing for more localized functioning and control of our economies. Restructured trade and investment, coming from strong communities and nations, sends the largest share of the benefits to the actual people – not to corporate entities.

I am a sociologist by trade. “Economy” within my frame of reference is the “production and distribution of goods and services.” Framed another way, it is the organization of what people do on a day to day basis to survive, and how the benefits of that effort are distributed. It is more than money and finances, and it is more than capitalism or socialism.

One example (and there are many) that has received some public recognition is the [2] 100 Mile Diet. The 100 mile diet aims at eating only from food sources and production within 100 miles of where you live. It is considered a sustainable diet that addresses critical issues. Namely, it is more “environmentally friendly” because it dramatically reduces the oil and greenhouse gas costs of transporting food for thousands of miles. However, it has other benefits. It increases security for farmers. It creates local jobs in food production and processing. It creates a safer, and more secure, food supply. We could also argue that it creates stronger social networks within those communities.

Infrastructure Issues
We have had numerous examples of infrastructural weakness (see the [3] AASCE Report Card) in the United States. From the [4] power grid failure in 2003, to collapsing bridges, to massive water main leaks, to crumbling sewage systems. Infrastructure has been more than ignored. In many areas it has been privatized (corporatized). Politicians don’t think that infrastructure is a salable (sexy) campaign issue, and when it is in corporate hands, it is not profitable to either maintain, expand, or rebuild. Hence it falls apart. As a consequence, the U.S. infrastructure (pretty much in every area) is a big mess.

We need, and any stimulus package should, address infrastructure issues. Infrastructure is a foundation that is critical for the present and the future. However, the way we approach the infrastructure challenge will shape our nation for perhaps the next century or beyond. Do we approach it as strengthening what we have, or do we approach it with an eye to the future and what will be best long term? Almost everything aims towards acting fast – projects on the books. The argument is that this will get jobs going, and money to local communities, most quickly. Almost certainly, if we act fast we will support exiting structure and interests.

We know that the national power grid system is teetering on collapse. We know that we need to include renewable energy into the power grid. The national discussion has included building massive wind and solar farms and building power grid capacity to connect it all. It places energy companies at the hub and control of both existing and new energy infrastructure and delivery. (The oil tycoon initiated [5] Pickens Plan for example). But we could invest in a different approach.

Instead of going big and centralized, we could go decentralized. We could have a nationwide program to upgrade existing construction for energy efficiency and production. This is happening on a small scale, where businesses and homeowners install wind and solar capacity on their own properties. It decreases their electric consumption and allows extra energy to flow back into the “grid” (where they may be paid for it). How many jobs would be created by investing in program of decentralized – versus massive construction of centralized – energy production? I believe it is likely that far more would result from decentralized. Further, for the people, there would be a benefit of decreased costs (and possible income) versus, paying to construct a new and expanded centralized system, then paying for the energy from that system.

Certainly, there is a place for centralization. I believe for example, that we really do need a national power grid. Moving to renewable energy sources creates a storage problem that is not there (in the same way) when you are dependent on metered generation – oil, coal, hydro. In other words, those sources where you can control how much electricity is generated in relationship to demand. However, decentralized production (and storage) could be handled at a city (or even regional) level.

The same could be said of technological infrastructure – which would create a different category of jobs and access. Why don’t we fund communities to create and connect folks through free (or cheap) fiber-optic or broadband based connections? (I am not going to push national wifi here because I think that this may actually ultimately be found to have strong negative health and environmental issues – electronic pollution; loss of bees…). We could end the “digital divide” fairly easily. I am relatively confident that it will never end, and will continue to grow, if we leave it in the hands of corporate interests.

Suggestion 3
Include a decentralized, local economy, component to infrastructure projects.

Including funding of decentralized approaches to infrastructure would create more jobs, strengthen local economies, and return more economic benefit to the people than massive “follow the existing path” investment would.

Do we move forward, or create a bigger version of where we are?
I strongly suggest that we get a clear look at where we are, and choose a different path forward. We are looking at a huge “investment.” That investment can essentially try to recover what has failed us, or it can be to place us on a new footing. It we are talking about trillions of dollars (and we have already thrown trillions at this collapse), then I think that creating a new foundation would be an excellent idea.

It will be notable to some, and a critique of more than a few, that I have not challenged capitalism as a system in these suggestions. While I think that ultimately, we need to seriously examine the ideology and structure of capitalism, I don’t think we are going to even get to that discussion from our current place. I do think it is possible to shape the discussion, and to create something that is stronger and more beneficial to people and the world we share. However, this will entail shifting power (on all levels) from the hands of the few. The suggestions that I have offered are a starting place – not a destination.

Rowan Wolf helms CJO’s Avenger212  blog area.  Rowan Wolf  is a sociologist, teacher, writer and activist. Her areas of interest include social justice, environment, and globalization/corporatization at the core. She frequently writes where these issues intersect which takes her from empire and fascism, to civil liberties and politics, to the links between corporatization and genocide.

Article reprinted from CJO’s Avenger212:

2 comments on “Economic “Stimulus” Considerations
  1. A great article. I think that all three should be implemented.

    Thanks Rown for your insight and offering a start.

    If I may offer a couple more suggestions for the beginning of something new. (I am sure I will have more as time goes by).

    Suggestion 4 – Corporations need to have their ‘human rights’ revoked and start serving humanity instead of the other way around.

    Suggestion 5 – Give money creation and ownership back to the people. Make money serve us instead of the other way around.

  2. I totally agree with the author’s conclusion that we need a new start: this social arrangement has demonstrated over and over again that it does not serve the people, only some extremely privileged individuals at the very apex of the wealth pyramid.

    The problem is that these visions — to be implemented —require a political revolution, something which in turn requires a movement, which in turn requires that we break the information (misinformation) monopoly of the rich, and the squandering of votes in the Democratic party, as a false option, and so on and on. In the absence of a broad and well led and organized movement, even excellent ideas such as these will never get a chance of implementation. Meanwhile, I welcome the discussion.

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