Out of the Crisis: Building a new era of justice and peace

Out of the Crisis: Building a new era of justice & peace

by Sam Webb, National Chair
Communist Party, USA

(Based on a speech delivered March 21, 2009, New York City.)

Video version of the speech
Audio version of the speech
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An excerpt for the speech published in the People's Weekly World


Introduction

Welcome to everyone in Winston Unity Center and to everybody on line.

We are living in very turbulent times. The world is in transition. An old era — an era of neoliberalism, financialization and rightwing extremism — is fading away and a new era is being born.

But no one is quite sure what the new era will look like. It resists easy prediction. It is safe to say that the future of both our country and the world is still to be written.

As bad as things have been over the last three decades, few thought they could get much worse. But they have. Depression economics has entered our vocabulary not simply as a historical event, but as a lived experience for millions.

Only a short time ago most economists said the economic cycle had been tamed. In 2004, in a speech titled “The Great Moderation,” Federal Reserve Board Chair Ben Bernanke said we live in an era in which macroeconomic instability has been eliminated.

Fast forward five years and the Great Moderation has turned into the Great Crisis. That which few thought would ever happen again has happened again, and without much warning.

The social fabric is rupturing. The terrain on which billions of people earn a living and raise their families feels foreign, even unrecognizable. Haven’t you heard more than one person say, “Is this the country I grew up in?”

Much the same is happening across the planet as billions try to adapt and give meaning to gut-wrenching shocks.

And yet while old certainties and markers are melting away and while no one really knows what tomorrow will bring, hundreds of millions of people haven’t given up on the future. As ominous as this moment feels, it is also a time when the parameters of the possible have expanded geometrically.

I hear warnings about a future of rightwing authoritarian regimes and even fascism. No one should rule out such scenarios, but in my view the arc of history is bending more towards justice and peace, towards respect for each other and the earth.

A future worthy of humankind is possible. Is there any reason to think that millions in motion can’t transform this country and world into the just, green, sustainable and peaceful “Promised Land” that Martin Luther King dreamed of? It would be a profound mistake to underestimate the progressive and socialist potential of this era. The American people have a once-in-a-lifetime opportunity within their reach.

It will take, of course, new ideas and energy, practical activity, and arms that reach across the divides of race, gender, sexual preference, income, border, oceans, religions and generations.

And, above all, it will take united action. Broad objective forces and challenges will shape our future, but human actions and choices will decide humankind’s fate.

Had the elections turned out differently, I might be less hopeful and enthusiastic. But because of the outcome, a friend of labor and its allies sits in the White House and enjoys high approval ratings. Larger Democratic majorities control Congress. A feeling of renewal and hope is in the air. And after a short holiday pause, the labor and people’s movement that was so instrumental to the election’s outcome is getting in gear – albeit not yet at full throttle, but more about this later.

Meanwhile, the Republican Party is on the defensive, its grassroots constituency is dispirited, and its governing philosophy is discredited.

But more about this later too.

Current economic crisis

Of the challenges facing the American people and our new president, none looms larger than the slumping economy. I don’t propose in this report to go into the economic processes that brought the country and world to their knees.

Suffice it to say that the present economic crisis has its roots in the interweaving and interaction of a short-term cyclical crisis, especially in housing and the longer-term triad of financialization, neoliberalism and globalization.

Moreover, both are the offspring of a crisis of overproduction (too many commodities and too little purchasing power) and overaccumulation (too much surplus value and too few ways to absorb it profitably) that are at the core of capitalism’s dynamics and contradictions.

Or to put the matter another (more abstract) way, this is a crisis of capitalism in which its production relations became a parasitic fetter on the development of its productive forces — so much so that when financial markets collapsed in the center of world imperialism, the world was thrown into an unprecedented system-wide economic crisis.

The Marxist practice of reducing every crisis to overproduction and overaccumulation is “correct,” but if left there makes it difficult to understand this crisis. To gain such an understanding it is necessary to fold into our explanation financialization as well as neoliberalism and capitalist globalization. This triad largely determined the specific dynamics and specific path of the economy over the past three decades and the specific scope and specific character of the current crisis.

With this in the background, what is the current status, dynamics, and growth pattern of the U.S. and global economy?

Unemployment is growing to staggering levels. Nearly 700,000 workers lost their jobs in January. To make matters worse, this trend is accelerating with no end in sight. Since December 2007, 4 million workers have been pink-slipped.

One of 10 homeowners is in foreclosure; many more are under water with the probability of foreclosure in their future. President Obama’s measures are helpful to be sure, but don’t go far enough to address the full scope of the crisis.

The financial system is on life support. Nearly every major financial institution that anchors it is insolvent. So far roughly $9 trillion has been thrown into the financial system in various ways. And yet credit lines are still blocked and the system is still filled with toxic assets.

Moreover, the same banks and institutions that are receiving government largesse are attempting to foist the cost of the crisis onto taxpayers. If as is claimed, these banks are too big to fail, then they are too big to be left in private hands.

Business investment is going rapidly south, manufacturing is in a free fall, retail chains are going belly up and construction sites are empty.

Consumer spending has fallen steeply and will continue its slide, as the economy worsens and debt obligations take a bigger bite from paychecks.

Deflationary pressures are growing as well. Now, falling prices might seem to be a good thing, except that deflation leads consumers to postpone spending, businesses to hold back on investment in new plant and equipment, and borrowers to cut back on borrowing. During the Great Depression, deflation became a powerful contractionary pressure, deepening the crisis and slowing the recovery.

States and municipalities are cutting back on jobs and services. And they’re doing it at exactly the wrong time.

Corporate profits, not surprisingly, are down, although not every corporate player is a loser. In fact, some sections of capital, including big mortgage-lending companies, hedge funds, and even auto corporations, are exploiting the crisis to extract more surplus value from the working people, capture market share from their competitors, and centralize class power, especially in banking.

While the crisis is wide in scope, its impact is uneven both geographically (Michigan and California, for example) and demographically. While nearly every section of the working class feels its impact, Black, Latino, Asian and Native American workers and people experience the consequences especially intensely. African American unemployment, for example, stands officially at 16.4%.

Poverty, which was rising during the Bush years, is getting worse, although the stimulus will help. It too invades the communities of the racially oppressed disproportionately.

Not since the Great Depression has the economy been in such bad shape. Downward pressures are powerful and — I want to underline this — mutually reinforcing. That is, spending cuts cause other spending cuts which in turn cause still other spending cuts, turning into a vicious circle.

Forecasts that economic activity will resume at the end of this year or early next year have less and less currency. No one quite knows where this is all headed or when a recovery will occur. But it is safe to say that more and more economists predict the downturn will be L-shaped — that is, deep and prolonged.

What adds to the depth, duration and difficulty of resolution of this crisis is its worldwide and synchronized character. No buyer or investor of last resort in the world community has the resources or capacity to reverse the current downward slide. In the 1990s, the U.S. economy did exactly that.

But that option is no longer available. It was thought that China could be a growth engine to pull up the global economy, but that hope has disappeared as China’s export markets crumple and layoffs mount. Every state and region in the world is experiencing economic pain.

Some states such as Iceland and Latvia are on life support; others are a heartbeat away. Asia, Europe, and Russia find themselves in economic quicksand. Developing countries dependent on export-led growth are reeling from sudden drops in export demand, throwing into question the wisdom of an export-led developmental model.

In many emerging market countries, prices for primary commodities are falling rapidly.

Structural imbalances in commodity, currency, and capital flows are growing.

Dollar reserves of developing countries are dwindling as investors migrate to safe investment havens in the U.S.

According to official figures that don’t include millions of workers in the informal economy, 55 million new unemployed workers joined the army of 230 million in recent months.

No country, ours included, can hope to make a full recovery without global coordination and cooperation. In an integrated global economy, we either swim together or sink together.

New Model

Just as the era of finance-led globalization and rightwing ascendency stretching from 1979-2008 reconfigured the economic patterns of growth and capital accumulation — not to mention the role of the state — the current crisis and its eventual resolution will do much the same.

What their contours and content will be is unknowable at this time. What we do know is that protracted struggle involving diverse class and social forces and striking for its shifting alliances and coalitions will determine the outcome.

Implied in the above is a challenge to the notion that capitalism is a self-correcting system and that ruptures and breaks are not in its resume.

This notion has its roots in the so-called “golden age” of U.S. capitalism from 1945-1973, during which economic growth rates, investment levels and living standards steadily increased for broad sections of the American people.

But there are two problems. First, capitalism is a global system and to judge its performance by that of one state or a group of states is methodologically flawed. It has to be judged on a global level and take into account the experience of economies on the semi-periphery and periphery of world development as well as economies in the core.

Second, an era of stable and continuous growth is unlikely to occur in the foreseeable future. Indeed, the conditions for U.S. capitalism’s “golden age” no longer exist. They were specific to a historical moment — not universal and timeless features of U.S capitalism.

To remind everyone, we emerged from the Great Depression and World War II a creditor nation. The economy was at near-full employment and strength. Because of war rationing, consumer demand was pent up. New industries — auto, aviation, communications and others — were taking off. Public infrastructure expansion was massive. Raw materials and oil were cheap and easily available. Political and economic competitors from other centers of capitalism were nearly nonexistent. The dollar was supreme and new international arrangements (Bretton Woods) gave stability and coherence to the world capitalist economy and system of states.

None of those conditions exist today; indeed just the opposite is the case. The economy is not poised either in the short or medium term to take off as it did in 1945; long-term stagnation is more likely.

All things being equal, the traditional Marxist method marks the different stages of capitalist development as follows: competitive capitalism, monopoly capitalism and state monopoly capitalism.

I have no quarrel with this. But depending on what questions you want to answer, there may be other ways to mark phases of capitalist development that are more concrete and thus more useful conceptually and politically.

In this report, for example, I mark phases of development in a temporal (time) sense according to the beginning and end of a model of governance and capital accumulation at the government and corporate level. Which probably causes you to say to yourself – what is he talking about? Let me try to illustrate my point.

In the course of the Great Depression and World War II, the New Deal model, or New Deal-Keynesian model of political governance and capital accumulation took root, resting on an enlarged role of the state, integrated production units employing thousands of workers on a single site, a measure of class compromise, the welfare state, and macro-economic policies favoring broad prosperity. It remained in place until the late 1970s. At that time it ran up against economic and political contradictions that it couldn’t resolve and gave way over time (although not entirely; government obligations and social rights were never completely eliminated even during the Bush years) to a new model in the course of a bitter political struggle.  

This model – usually called neoliberalism or the neoliberal model — rested on flexible production networks on a global scale, union busting, deregulation, low-wage labor and inflation, the hollowing out of the welfare state, massive income inequality, and the rise to dominance of finance — all clothed in a right-wing political skin. Last year the combination of Obama’s victory and the financial collapse signaled the long-awaited death knell of this model of governance and accumulation of capital.

No new model has yet taken its place, thus leaving a vacuum. The model that eventually fills the vacuum — and one will — will be the result of the political contest between two contending political and social bloc/coalitions of a very complicated political struggle.

A new New Deal

Because of the election of Barack Obama, the American people in their great majority have a leg up, but there is still a long way to go. To his credit, the new president is off to a quick start. In less than three months in office he has:

• Issued an order to close Guantanamo prison and end torture — a practice that stains our image, violates our Constitution and endangers our troops in the field.
• Signed the Lilly Ledbetter bill that gives much greater scope to workers’ discrimination claims as well as a bill that would extend health care to millions of children.
• Released funds to clinics that serve women’s health care needs in developing countries.
• Expressed support for higher fuel efficiency standards for motor vehicles — something the United Autoworkers Union (UAW) also supports.
• Opened up a greatly needed dialogue with the Muslim and Arab world, including overtures to Syria and Iran.
• Dispatched George Mitchell to the Middle East in hopes of mediating the Palestinian-Israeli conflict — a conflict that cannot be solved by military means, but only by negotiation between the Israeli government and the representatives of the Palestinian people with the aim of establishing an independent and viable Palestinian state and the right of both states to live peacefully and within secure borders.
• Ordered the withdrawal of all U.S. troops from Iraq no later than 2011.
• Rolled out a new framework for diplomacy and conflict resolution, notwithstanding an escalation of troops to Afghanistan, which we oppose.
• Reinstated Davis Bacon, which establishes prevailing (union) wage at public works sites.
• Changed the framework for nuclear nonproliferation and dismantlement in a very positive way.
• Reversed many of the Bush administration’s rulings that have been so harmful to the environment.
• Taken some steps to reverse the draconian policies toward Cuba.
• Placed health care at the top of the administration’s agenda.
• Supported new Labor Secretary Hilda Solis’ recent rulings overturning many of the anti-labor directives of the Bush years.

• Counter-crisis spending of a bigger size and scope to invigorate and sustain a full recovery and meet human needs — something the New Deal never accomplished.
• Passage of the Employee Free Choice Act (EFCA) in order to rebalance the power between labor and capital in the economic and political arenas.
• Renegotiation of trade treaties to include core labor and environmental standards as well as opposition to the Colombia, FTAA, S. Korea, and other unfair trade agreements. In a world of mobile capital, international trade union unity and action is imperative against trade agreements that promote (in the name of “free trade”) a vicious "race to the bottom" that pits workers in developing countries against workers in developed countries.
• Equality in conditions of life for racial minorities and women.
• Turning education, childcare and health care into “no profit” zones.
• Amnesty, an easy path to citizenship, and full democratic rights for undocumented immigrant workers.
• Rerouting investment capital from unproductive investment (military, finance and so forth) to productive investment in a green economy and public infrastructure.
• Changing the direction of our nation’s foreign policy toward cooperation, disarmament and diplomacy.
• A full-scale assault on global warming.
• A serious and sustained commitment to assisting the developing countries, which are locked in poverty and misery.
• Global cooperation on a new level and with a new content. The era of U.S. imperialism dictating to the world is over; in fact, no state has the political, economic, ideological, and moral capital to exercise a dominant influence on world developments. Unlike at the end of World War II when U.S. imperialism gave stability, coherence and rules to a new global capitalist order, no state today has that capacity, resources or legitimacy. The world is multi-polar and that isn’t going to change any time soon, especially as new states emerge — China, in the first place — and new configurations of regional power become new global realities. In fact, the unfolding economic crisis could easily accelerate the closing of the gap between China on the one hand and the U.S. and other traditional centers of capitalist power on the other. In any event, new (more egalitarian) forms of global economic cooperation and governance are necessary in order to surmount this crisis, not to mention other global problems.
• Democratization of all aspects of economic life, beginning with finance, energy and other industries whose future is problematic if left in private hands.