[Marxism] The Obama Delusion by Lynn Henderson
Lynn and Cindy
lynncindy at comcast.net
Fri Aug 19 10:50:24 MDT 2011
The Obama Delusion
By Lynn Henderson
On Aug. 7th the New York Times printed a long article entitled
"What Happened to Obama" by Drew Westen (a professor of psychology
at Emory University) which was featured on the front page of the
Sunday Review. The article is emblematic of the growing
disillusionment among middle-class liberals and intellectuals, who
have come to the sudden realization that Barack Obama is not who
they thought he was. However the more fundamental question they
shrink from is that American capitalism is not what they thought
Professor Westen's sympathies are certainly in the right
direction. He eloquently describes and laments a present day
American society in which "400 people control more of the wealth
than 150 million of their fellow Americans." Where, "the average
middle-class family has seen its income stagnate over the last 30
years while the richest 1 percent has seen its income rise
astronomically." A society in which "we cut the fixed incomes of
our parents and grandparents so hedge fund managers can keep their
15 percent tax rates" and where "only one side in negotiations
between workers and their bosses is allowed representation."
Westen recognizes that all of this combined with the reckless,
unregulated activities of an ever more dominant and rapacious
financial sector has plunged the U.S. and the entire world into a
massive economic crisis. Like many he saw the election of Barack
Obama as a major turning point, capable of reversing these trends
and rescuing the nation from the "Great Recession" His article
expresses his heartfelt and bitter disappointment with Obama's
performance and policies.
"When faced," he writes, "with the greatest economic crisis, the
greatest levels of economic inequality, and the greatest levels of
corporate influence on politics since the Depression, Barack Obama
stared into the eyes of history and chose to avert his gaze.
Instead of indicting the people whose recklessness wrecked the
economy he put them in charge of it."
With the election of Obama, Westen thought American capitalism was
getting the kind of president, "best exemplified", as he writes,
"by F.D.R. and his distant cousin, Teddy." A president who would
institute up-dated versions of the so-called "New Deal" and
"Square Deal" - curbing the reckless financial sector and
launching a massive stimulus program of social and infrastructure
spending focused on reducing unemployment and reviving the
But the hundreds of billions in government bailouts and "stimulus"
already floated by the Bush and Obama administrations have had
little effect in reversing the so-called "Great Recession". This
is particularly true in the key area of growing unemployment.
But more fundamentally, the idea that today's escalating
world-wide economic crisis can be reversed by replicating the
policies and strategies of the Roosevelt New Deal years is a
fantasy. Today the U.S. economy and the Obama administration stand
in an entirely different place than the U.S. economy and the
Roosevelt administration stood in the 1930s and 40's.
Seventy years ago the United States was the largest creditor
nation in the world. Today the United States is the largest
debtor nation in the world. The Roosevelt deficit budgets and
national debt reached unprecedented levels which have never again
been matched, but this debt was entirely held domestically. It
was the U.S. economy and American citizens who bought the bonds
that funded that unprecedented debt.
Today most U.S. treasuries have to be sold in the international
market and are held by such countries as Japan, the Middle East
oil nations and especially China. The United States has become
utterly dependent on continued international purchases of these
treasuries and the regular rollover of those already held. As the
U.S. debt grows and the dollar becomes shakier, these nations
become nervous and reluctant about continuing to fund the soaring
U.S. debt. This can only end badly for U.S. and world capitalism.
At the end of WWII an expanding and completely dominant U.S.
economy was able to pay down the huge federal debt (as a
percentage of GNP more than one and one half times larger than
present U.S. debt) relatively quickly despite its unprecedented
size. Today the American middleclass/working class rightly
suspects that at best they will be impoverished for generations to
come with paying off a debt that was primarily incurred to bail
out predatory financial institutions. What has changed?
The United States won WWII. It won WWII big. It won WWII not
just against the Axis powers but against its allies as well. The
war ushered in what U.S. capitalism triumphantly called "The
American Century". The usual laws of capitalist international
competition were uniquely and temporarily in suspension. The
dollar, freed from any monetary gold backing was transformed into
what economist call a fiat currency, and enthroned as the reserve
currency for the entire capitalist world replacing the pound
sterling. This gave the dollar and U.S. capitalism a uniquely
advantageous position - the exorbitant privilege of paying its
foreign bills in its own currency, which it could just print. This
status lasted for decades. But not for a hundred years.
With the reemergence of intense international competition the
"American Century" came to an end. How has U.S. capitalism
responded to this new global reality? In response to growing
global competition in manufacturing, it shifted its profit making
focus. It concluded that the quickest, biggest, and surest
profits were now to be made not in the making and selling of
products, but in the so-called financial sector. Between 1973 and
1985, the U.S. financial sector accounted for about 16 percent of
domestic corporate profits. In the 1990s, it ranged from 21
percent to 30 percent. In this last decade, it soared to 41
percent of all U.S. domestic corporate profits.
Banking, real estate, mega insurance companies, and stock markets
speculation replaced industry and manufacturing at the center of
the U.S. economy. Many economists refer to this as "casino
capitalism". Like a gambling casino, most of this financial
activity generated no new wealth or real investment, but merely
shifted existing wealth out of the hands of many into the hands of
a few. At least casinos provide free drinks and entertainment.
In response to the reemergence of global competition U.S.
capitalism also found it necessary to maintain profits by
aggressively driving wages down. For at least 40 years now the
American working class, or the media's preferred euphemism, the
American middle class, has been the target of an intense one-sided
class war in which real wages and income have been relentlessly
reduced. According to the most recent U.S. Bureau of Labor
Statistics, real wages adjusted for inflation from 1970 to the
present have fallen more than 12%.
While driving down wages can certainly boost profits in the short
run it introduced another problem. Economists calculate that
approximately 70 percent of the U.S. economy is driven by consumer
spending. If real wages have been falling over the last 40 years,
how has the economy, at least until recently, continued to expand
and profits continue to grow?
Over subsequent decades three strategies designed to offset the
effect of falling real wages on consumer spending emerged. The
first of these was the simple expedient of drastically increasing
the total number of hours worked. Overtime was increased, leisure
time was decreased. The single wage earner family was largely
eliminated More family members were put to work, working longer
hours at more full and part time jobs. However the number of extra
hours an individual can work is limited, as is the number of
additional family members that can be put to work. New additional
steps had to be taken to offset the negative effect falling wages
continued to have on consumer spending and the economy.
The next move was a massive expansion of consumer debt. The
credit card industry was born. The banks issuing these cards made
record profits and consumer debt soared to record levels. But it
did mask the effects of falling wages and produced a significant
if temporary boost in consumer spending.
As credit cards maxed out and the size of consumer credit card
debt became unsupportable a final and particularly dangerous
financial gimmick was floated. Consumers were encouraged, and
driven by necessity, to take cash equity out of inflated house
values. Second mortgages, third mortgages, adjustable rate
mortgages, home equity loans, became the last desperate hope for
keeping their heads above water -- for meeting expenses and paying
on credit card debt that was killing them with 20% plus interest
rates. The banks made big bucks out of the credit card ploy but it
was peanuts in comparison to what they were able to accomplish
with the new mortgage schemes.
When the housing bubble burst, it triggered not just a crisis in
the mortgage market but the collapse of a financial house of cards
that had been building for decades. A house of cards built on the
idea that you could on one hand increase profits by relentlessly
driving wages down and on the other hand maintain consumer
spending by driving people into ever deeper debt. There is a term
for this kind of operation -- "Ponzi" scheme. In reality the
entire U.S. economy over the last 40 years has operated as little
more than a gigantic "Ponzi" scheme. Like all "Ponzi" schemes it
was destined to eventually play itself out and collapse.
The roots of this crisis are not correctable "political and
policy" errors, but much more fundamental forces. An aging U.S.
capitalist economy was inexorably and unavoidably forced to shift
from industrial capitalism to finance capitalism to maintain its
viability. Financial deregulation and the freedom to create new
"exotic" financial instruments was not some blunder, but an
absolute necessity if falling industrial profits were to be
replaced and offset by rising financial sector profits. That
necessity remains in place today. That is why there has not been,
nor will there be, any real re-regulation of the finance and
banking sectors. And the costs of shifting U.S. capitalism from an
industrial model to a financial model and maintaining profits in
the new global reality can only be met by further significantly
reducing wages and living standards. Putting the structure in
place to accomplish all this was, and continues to be, an entirely
Westen sees things quite differently. The deepening of the crisis
and seeming inability to turn it around are correctable political
and policy failures - but this has been side tracked by the
failings and limitations of Barack Obama. Obama's failure to put
in place correct "New Deal" type policies and solutions is
traceable to "his lack of experience and a character defect", "his
deep-seated aversion to conflict", and his "profound failure to
understand bully dynamics". Professor Westen even berates himself
for not recognizing signs of Obama's limitations prior to his
election - we are told "he had a singularly unremarkable career as
a law professor, publishing nothing in 12 years at the University
of Chicago other than an autobiography".
"When he wants to be", Westen explains, "the president is a
brilliant and moving speaker, but his stories always lack one
element: the villain who caused the problem, who is always left
out." The "villain" is left out because the villain is
capitalism, and Obama as president and head of the Democratic
Party can be nothing less than a staunch defender of capitalism.
Westen's suggestion of Franklin and Teddy Roosevelt as corrective
role models for Obama and a solution to the escalating economic
crisis is ironic. Even in the 1930s it wasn't Roosevelt's "New
Deal" based on a government stimulus plan of social spending and
infrastructure investment that got the U.S. out of the Great
Depression. It was the truly massive government deficit spending
for World War II in the late 1930s and early 1940s that ended the
depression. And the characterization of Franklin Roosevelt as a
"friend of labor" is a rewriting of history.
Teddy Roosevelt's dishonestly crafted reputation as a "trust
buster" reformer is even a further stretch. Theodore "Teddy"
Roosevelt was one of the most racist, militaristic, imperial
expansionist presidents in U.S. history.
Today we are facing a world-wide crisis of capitalism. This
financial and political crisis is more fundamental and more
sweeping than the 1929 crash and depression. Nowhere in today's
world does capitalism have the room to maneuver or the options
that were available to F.D.R. and American capitalism in 1940.
This crisis is destined to become ever deeper and more brutal and
its only solution is a socialist solution.
Understandably, right now, such a solution is inconceivable to
Westen and other middle-class liberals. Liberals and liberalism
have never been an independent force in American society,
especially when there was no radical organized left and militant
trade union movement which they could piggy-back off of.
Historically their primary role has been that of working to assure
such movements remained in the confines of Democratic Party
Today capitalism, with the U.S.in the lead, has created an
unprecedented expansion of globalization. Never before has the
entire world working class been under such widespread and
simultaneous attack - encompassing advanced, emerging, and
underdeveloped countries. Workers will have to resist this
world-wide attack; they will have no other choice. That
resistance has already begun although for the most part in an
undirected and confused form. Any effective resistance is
dependant on the emergence of a revolutionary socialist
alternative. Where and how this develops (through the common
market crisis, the middle-east democracy uprisings, or somewhere
else) is hard to predict. But once it begins it will spread fast.
Capitalist globalization will produce and require working class
Such a movement, with the power of the working class behind it,
can and will win large numbers of middle-class liberals and
intellectuals to a socialist alternative. Hopefully Drew Westen
will be one of them.
August 19, 2011
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