[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 
it was.

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 
bipartisan operation.

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 
electoral politics.

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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