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Just as even the most bullish economists were
admitting the US is already in a recession, and indications were
mounting that it will be a long-lasting one that could become a
full-blown depression, the first domino in what could be a series of
failing financial institutions toppled.
On Sunday, March 16th, the Federal
Reserve agreed to loan JP Morgan Chase $30 billion to buy Bear Stearns,
and announced an open-ended lending program for the biggest investment
firms on Wall Street. It also lowered the rate for borrowing from its
discount window by another quarter of a percentage point, the latest in
a series of cuts.
The Fed loan protects Morgan from the loss of
value of the very mortgage-backed securities that had threatened Bear’s
survival. To protect its collateral, Fed officials said they would
exercise control over all major decisions. Nonetheless, the assumed
risk, plus the bargain basement price paid by Morgan, led a chief
executive of one bond trading firm to claim “the government is taking
all the downside and none of the upside.”
The initial price Morgan was to pay for Bear
was $2 a share, less than one-tenth the market's price the Friday
before, and only a third the price at which the firm went public in
1985. In 2007, Bear's shares sold for $170.
The Fed claimed it had no choice but to
arrange the deal to stop other, bigger Wall Street firms from failing.
Needless to say the mainstream media didn't question the propriety of
the Fed acting on behalf of one private firm in swallowing another.
Despite the sale, investors fear that other
banks threatened by losses on mortgage-related investments, such as
Lehman Brothers, could still fail.
Officials from the
Fed, the Treasury and bank regulators worked closely through the
weekend with bank executives to complete the deal Sunday night in time
to prevent a global panic Monday should Bear stay independent and
unable to meet billions of dollars in trading commitments. Most of its
clients had already stopped trading with it. At the same time, Fed
officials were talking to other troubled Wall Street firms.
Also on March 16th, the Fed
followed its previous week's commitment of $200 billion in loans to
investment banks with a new, open-ended commitment at wholesale rates.
Like the previous week's program, which had done little to reinspire
credit markets, this one lets banks dump on the government as
collateral hard-to-sell securities backed by mortgages.
Experts said they were stunned by the Fed's
moves, saying they were unprecedented – yet also expressed doubt that
they would stop huge losses from bad lending practices.
They also predicted the Fed's rescue efforts
would encourage "moral hazard," an economist’s term for
encouraging profligate behavior by private actors who know they won't
have to pay the price for investments gone wrong.
Bear’s employees, who own a third of the
company and many of whom have their entire life savings tied up in its
stock, are likely to face massive layoffs, as will some Morgan
employees as jobs are combined. Most of these are not fat cat traders,
but rather modestly paid office workers who, like workers around the
country, were seduced and/or coerced into tying up their pensions in
401(k) funds heavily invested in the company’s stock (the same fate
which befell Enron’s employees).
Agitation by Bear employees, as well other
shareholders who said they preferred bankruptcy to Morgan’s $2 offer,
forced it to raise its bid to $10 a share the following week (and
forced the Fed to knock a billion off its $30 billion guarantee).
James Cayne, Bear Stearns's former chief
executive and one of its largest individual shareholders, will walk
away with over $13.4 million in stock holdings. Cayne took home more
than $232 million in salary, bonus and other pay between 1993 and 2006.
In an editorial entitled "Socialized
Compensation," the New York Times said "there should be
financial accountability for the man who led Bear Stearns as it gorged
on dubious subprime securities. Some might argue he should have lost it
all."
"But," admitted the Times,
"that’s not how it works. The ongoing bailout of the financial
system by the Fed underscores the extent to which financial barons
socialize the costs of private bets gone bad. Not a week goes by that
the Fed doesn’t inaugurate a new way to provide liquidity to the
financial system.
"Bankers operate under a system that
provides stellar rewards when investment strategies do well yet puts a
floor on their losses… They won’t have to return money made when they
were making all the crazy bets that eventually took their banks down."
Nor, a Times reporter noted, will Bear have to return the tens of
millions in tax breaks it got for agreeing not to move jobs out of the
city.
Despite the Times’ whining about “socialized
compensation,” they would recoil with horror at the notion of socializing
the banks themselves. In fact the banking system socializes not only
compensation for its moguls, but has an entire institution – the Fed –
which represents the objective socialization of a key banking function:
that of providing, on a collective basis, liquidity and security. The
problem is that capital has done so for its own benefit, not for that
of the workers whose jobs and living standards depend on the decisions
made by private bankers who benefit from Fed-provided funds.
The Times also predicted
that without harsher penalties for executives, bankers would try to
make up their losses by finding new, equally speculative bets. But the
paper’s only proposal was “better regulation” and perhaps making
bankers’ compensation “contingent on the performance of their
investments over several years — releasing their compensation
gradually." Of course if they admit society has the right to set
such a rule for bankers’ compensation (as it does already for workers’
minimum wages and overtime), why stop there? We’ll return to that
question below.
Impact
of the Bear Buyout
The deal appeared to have eased anxiety
slightly on Wall Street. But underneath the surface calm in Monday
trading lay minute by minute swings as investors wondered if Lehman,
and perhaps even bigger dominoes, were still at risk of toppling.
Analysts noted that the Fed’s newest loan
program was the first time since the Depression that the central bank
had loaned directly to securities firms. Yet they were not optimistic
about its likely results, noting that the weekend moves were only the
latest in a series of steps which have achieved little, and predicted
that bankers would not know what to do with the new money the Fed is
offering to lend.
“The Fed can do no good at
all if they effectively print money and give it to banks, and the banks
dig a hole in the ground and put it in there,” said a hedge fund
president. This brings us back to the underlying roots of the crisis
outlined in our February issue: the longer-term decline in rates of
profit which interact in a negatively-reinforcing cycle with
overproduction and under-consumption, all of which limit outlets for
productive investment. The housing and financial crises are symptoms of
that more systemic crisis – while of course having their own autonomous
negative impact which worsens the underlying problems.
In the days following the bailout, stocks for
commodities continued their mad swings, the leading index of service
sector activity saw a huge fall, manufacturing jobs fell for the 18th
straight month, reports on retail levels dived again, and a huge
private equity buyout of Clear Channel Radio collapsed. The week before
a huge hedge fund affiliated to the Carlyle Group, one of the world's
biggest private equity firms, had collapsed.
In early March the Fed announced that in the
second quarter of 2007 homeowners' percentage of equity in their homes
fell below 50 percent for the first time since 1945 – and fell yet
again throughout the rest of the year. Homeowners are expected to eventually
lose between $4 trillion and $6 trillion, with a third of households
saddled with mortgages greater than the value of their homes.
High commodity prices are cited by some as
evidence that the rest of the world could help stop the U.S., and a
global market tied to its consumption, from sinking further. The
dramatic inflation in price of oil, food and many other necessities are
said to prove that growth abroad, particularly in China and India, will
sustain demand worldwide. Yet most analysts admit that these countries’
dependence on the US market is more likely to lead to a coordinated
global downturn – the first since the early 1970s. And in fact the day
after the Fed’s announcement, stock markets in China and India suffered
the biggest losses of any in the world.
Just as the US media and politicians
regularly bash other countries for exports which supposedly cost
“American” jobs, now they are threatening fast-growing countries like
China for driving up “our” prices by their swelling demand and for policies
promoting development. Jeff Currie, of Goldman Sachs, for instance,
denounced “nationalist governments” who impede Western investment “in
the most promising new mines and oilfields, forcing Western energy and
mining firms to spend lots of money developing less accessible and
profitable reserves.” Francisco Blanch of Merrill Lynch complained that
in “fast-growing emerging markets such as China and the Middle East,
governments try to insulate consumers from rising prices with subsidies
and price controls. So demand for raw materials from such places
continues to grow, despite high international prices.” This is the kind
of pointed "analysis" that under the right circumstances gets
translated into trade sanctions or even outright aggression.
But commodity prices are also rising because
of the dollar's decline – a decline due in no small part to decisions
by U.S. corporations to move their own facilities abroad, and by
Washington to prop up the economy with debt and military spending, and
to rely on foreign subsidy of its debt and trading deficit (all, again,
reactions to the underlying systemic crisis of falling profits, not, as
liberals claim, arbitrary policy decisions made by uncaring
politicians).
Although the U.S. share of the world economy
is now down to less than 25 percent of world GDP, it is still the most
important country for the health of world trade. Fifty-five percent of
all goods produced in Asia are exported, two-thirds of them to the
United States and other advanced industrial countries. The consumer
market in the U.S. is six times the size of China and India combined.
The Fed's latest cuts are expected to further
increase demand from emerging markets, and so increase prices even
more. That, in turn, will increase America's oil-import bills, which
will add to the current-account deficit and put further pressure on the
dollar, spinning the vicious cycle even faster.
But foreign holders of U.S. debt are swiftly
losing patience at the decline of their holding as the dollar sinks.
While eager to invest in desperate banks, they are tiring of propping
up the economy as a whole.
As the recession lengthens and deepens these
international economic tensions will inevitably spill over into
diplomatic and political wrangling, and even, if things get bad enough,
into war – if only, at first, through surrogate powers. The five-year
old war in Iraq, like the Gulf War in 1990-91 and the bombing of Serbia
in 1999, were all motivated in great part by a determination to show
rivals in Europe and Asia that the U.S.’s declining economic dominance
should not be taken for diminished political and military hegemony –
including the right to dictate terms of trade involving access to
resources.
Of course the U.S. itself shares much blame for
food price hikes through its absurd and ecologically irresponsible
decision to boost ethanol production, which will not only do nothing to
help the climate, but is driving up prices as corn is diverted to its
manufacture, as well as pushing up prices for other foods as land is
diverted from staples like wheat and soybeans to corn (and in fact
ethanol production will likely have a net damaging impact on the
climate as massive tracts of trees are cleared for corn growth).
Those suffering the most from soaring prices
are of course the working people here and abroad dependent on oil, food
and other goods for survival. The Washington Post reported that
"Inflation is walloping Americans with low and moderate incomes as
prices of staples have soared faster than those of luxuries. Prices
have risen 9.2 percent since 2006 for the basics that a middle-income
family has little choice but to consume... For goods on which it is
easier to scrimp – restaurant meals, alcoholic beverages, cars,
furniture, and clothing – prices have risen 2.4 percent. In that same
time span, earnings for a non-managerial worker rose about 5 percent.
This helps explain why American workers felt squeezed even before the
recent economic distress."
Of course those suffering the most in absolute
terms from price hikes are workers and peasants abroad – including
those left out of the boom in countries like China and India. Almost
half the world's population lives on less than a dollar a day – and
spend 80 to 90 percent of that on food.
According to the UN's World Food Program,
global food reserves are at their lowest in 30 years, a situation
exacerbated by the falling dollar, the currency in which all major
commodities are traded. Already riots over food prices and cuts in
government food subsidies have broken out in many African and Middle
Eastern countries, in Mexico, India, Italy, Uzebekistan and elsewhere,
and more and bigger ones are expected.
Back in the U.S., in late March the AFL-CIO
released the results of a survey showing that rising health care costs
continue to cripple working class budgets and force large numbers to
forego needed care, or choose between paying for care and basic
necessities.
Meanwhile state governments are announcing
new rounds of cuts in budgets and services as the recession slashes tax
revenues and aid from Washington decreases.
An Associated Press review of state budgets
shows coverage will soon be eliminated for hundreds of thousands of
poor children, pregnant mothers, the disabled and the elderly. More
than 10 million people will lose dental care and other benefits. About
20 million could see their care jeopardized by further cuts to
Medicaid.
Also being considered are further cuts to
schools and universities and layoffs of state workers. Teachers from
kindergarten on up are facing bigger classes, pay and benefit cuts and
layoffs.
Yet legislatures and governors from
California to New York, regardless of party, are rejecting proposals
for taxes on luxury yachts, private planes and motor homes, closing
corporate tax loopholes, taxing the rich, and similar measures.
Instead, most plan to increase lottery sales, promote Indian gambling
or raise taxes on cigarettes and alcohol – steps that would
disproportionately hit the very workers most affected by these same states’
spending cuts.
In a move symptomatic of the penny-wise,
pound-foolish nature of our commodified health care system, Gov. Arnold
Schwarzenegger of California is proposing cutting dental care for 3
million adults on Medicaid and foot checkups for diabetes patients to
detect infections that can lead to amputations. Both moves will lead to
high spending down the road for both types of patients who will need
emergency care and even surgery for failure to give them preventive
care – which is fine with the profiteers whose markets depend on
high-tech surgeries.
Adding to the agony of the downturn is the
uncertainty about how big are the potential losses just in the
financial sector – which makes impossible predictions of their
spillover into the broader economy. Comparing today’s crisis with the
S&L crisis, economist Robert Barbera notes that the latter involved
fewer lenders and fewer types of loans. "This time, the size of
the bad debts remains a mystery, with estimates reaching $400 billion.
Markets fret that the next Bear Stearns could pop up anywhere."
Other economists predict much higher losses –
but no-one knows for sure. Nonetheless many are making unrealistic
claims that the U.S. could be in recovery in a year or two. This rosy
view is in part a product of their narrow focus on the health of
financial markets – which is ironic considering that few of them have
confidence in any of the measures yet proposed to end those markets’
crisis.
The economists’ tunnel vision, focused on
financial markets threatened by the burst housing bubble, is countered
by some liberals and even radicals by the claim that these events have
their roots in the explosion of consumer debt which, they say, is just
a symptom of income disparities fueled by decades-old neoliberal policies.
They point to shrinking shares of income, despite increasing
productivity, for U.S. workers.
Again, this ignores the fact that such
policies, while having a drastic impact, are only the tools used by the
ruling class to try to shift the burden of its deeper crisis onto us,
rather than the cause of that crisis.
Reform the System?
From a furious debate about how to fix the
housing market, the mainstream debate has now moved on to how to reform
oversight and regulation of financial markets.
Journals closest to capital's way of
thinking, while caustically critical of the system's most egregious
flaws, insist that any reform not bind capital's never-ending search
for new and more lucrative profits. The British magazine The Economist
applauded the report of the President’s Working Group on Financial
Markets, made up of officials from Treasury, the Fed, the Securities
and Exchange Commission and the Commodity Futures Trading Commission,
for not throwing out the baby of “innovation” with the bathwater of
loose regulations. Rather than attacking the concept of securitization
(i.e. bundling of loans, like those backed by mortgages, into packages
spread in an opaque manner across multiple institutions), it applauded
the Group for concluding that “regulation needs to catch up with
innovation,” and proposing tougher licensing and oversight of mortgage
brokers and stronger safeguards against fraud.
It also approved the PWG’s contention that
“the job of steering financial behemoths rests ultimately with top
managers, not regulators. 'The ultimate success of any CEO is largely
determined by the answer to one question: do we have the right people
in the right jobs with the right incentive structure?'" said
Treasury Secretary Henry Paulson, a former boss of Goldman Sachs. The
group thinks reform is best left to the industry in other areas, too,
such as pay.’” The Economist cites as alleged proof of the need for
self-regulation the supposed failure of the Sarbanes-Oxley law passed
after Enron’s collapse, which was never seriously enforced yet brought
continual howls from executives claiming to be repressed.
Paulson himself, on behalf of the Bush
Administration, issued his own report March 31st with little
in the way of regulatory changes except shuffling and combining
agencies – and even proposed loosening many restrictions on investors!
The Economist admitted that securitization
has made it nearly impossible to track the money flowing within and
between firms. One result is that while a relatively small firm, in
Wall Street terms, like Bear
Stearns, may not have been too big to fail, “it was too entangled"
with global derivatives markets” to let it go under. The Fed’s
“$30 billion of public money went to shore up $10 trillion in
over-the-counter swaps." Yet no-one knows exactly where that $10
trillion is, nor as a result who stands to lose, not only in direct
investments (which include pension funds on which millions of workers
depend), but also in the ripple effects should they collapse.
Information technology, by allowing creation of increasingly complex
derivatives, reinforced this obscurity.
The Economist mocked one of the greatest
proponents of the “New Finance,” former Fed chair Alan Greenspan, who
said in 2005 that “'complex financial instruments have contributed to
the development of a far more flexible, efficient, and resilient
financial system.'” “Tell that to Bear Stearns,” the magazine smirked,
and compared today’s markets to one of history’s greatest swindles, the
18th Century South Sea Company.
And it notes the precarious state of other
banks: “Goldman Sachs is using about $40 billion of equity as the
foundation for $1.1 trillion of assets. At Merrill Lynch, the most
leveraged, $1 trillion of assets is teetering on around $30 billion of
equity.”
Even The Economist had to admit the
disconnection of the New Finance from the productive activities that
bourgeois ideology claims these markets serve. The financial services
industry's share of corporate profits grew from 10% in the early 1980s
to 40% last year, and its share of stock market value from 6% to 19%.
Yet financial services account for only 15% of gross value added and
only 5% of private-sector jobs. “A service industry that exists to help
people write, trade and manage financial claims on future cash flows
raced ahead of the real economy."
Nonetheless the lure of easy profits induces
a remarkable schizophrenia in bourgeois economic commentators. After
mocking Greenspan's claims, The Economist itself says "this system
still works, spreading risk, promoting economic efficiency and
providing cheap capital. (Just like junk bonds, another once-misused
financial instrument, many of the new derivatives will be back, for no
better reason than that they are useful.)”
Not surprisingly The Economist is perfectly
happy to have Washington prop up the New Finance by using even more
public money “to create a floor to the market” and thus “shock the
markets out of their mistrust in housing or asset-backed securities.”
Liberal and progressive analysts were less approving
of the idea of continuing to prop up the bulwarks of the New Finance,
but no less narrowly focused than The Economist on the financial system
in isolation from the broader economy. Thus the supposedly iconoclastic
revelation of liberal economist and New York Times' op-ed columnist,
Paul Krugman, that “Contrary to popular belief, the stock market crash
of 1929 wasn’t the defining moment of the Great Depression. What turned
an ordinary recession into a civilization-threatening slump was the
wave of bank runs that swept across America in 1930 and 1931.” Today’s
financial crisis is similarly rooted, he believes, in such bank runs
and the financial shenanigans behind them. But Krugman ignores all the
economic events of the quarter century preceding the Great Depression
which led up to and caused both the stock market crash and the bank
runs (a history which we will recount in a coming issue).
Still, Krugman provides valuable evidence of
how not just the sorcerers’ apprentices but the sorcerers themselves have
lost control of their own markets: “’We’re exposing parts of the
capital markets that most of us had never heard of,’ a top Lehman
Brothers economist said. Robert Rubin, former Treasury secretary and
current Citigroup executive, said he hadn’t heard of ‘liquidity puts’
until they started causing big problems for Citigroup.”
Krugman echoes his paper’s editorial board in
arguing for harsher financial consequences for bank executives, yet
agrees with the board (as does The Economist) that the main thing is to
bail out the system, arguing for something akin to the Resolution Trust
Corporation, which bailed out investors in S&Ls at taxpayer
expense. Yet he admits that a coming multi-institution bailout will
cost far more than the 3.2 percent of GDP spent in that earlier rescue.
Dean Baker of the progressive Center for
Economic and Policy Research, points instead to the takeover by the
English government of Northern Rock, another bank in trouble because of
bad mortgage debt. The government-owned Bank of England “replaced
Northern Rock's incompetent managers and brought in a new team to
straighten out the books.” Yet he admits that this too is a
taxpayer-financed cleanup on behalf of capital: “The plan is to resell
the bank to the private sector once the books are in order.”
What’s worse, Baker retains faith in the
ability of private banks to finance the broader economy: “When [these
banks] have written down their bad debts and are taken over by new
management, the banks will again be able to play a productive role in
financing growth.”
It's worth noting here that earlier
"nationalizations" in England – which in reality only
established a Bank of England akin to our Fed in order to better serve the
five major banks that stayed private, also left in private hands the
crucial control of information. Editors of Fourth International magazine reported in 1945 that, in
addition to handsomely compensating the Bank's stockholders, the
current Governor was left in control of the Bank. And just as today the
Fed claims it will oversee the Morganized Bear, so too the 1945
legislation claiming that the "nationalized" Bank of England
would carry out state financial policy in fact left control in the
hands of that Governor.
Nonetheless even this degree of intervention
was feared by the still-private banks who, said Fourth International, "fear that government control
over the banking system will lead to the exposure of their cherished
'business secrets,' those carefully concealed mysteries which cloak
their operations of robbing and fleecing the people. The Tories fought
most vigorously against the clause which empowered the Treasury to give
the Bank instructions and to authorize it to demand from commercial banks
information about the conduct of their own business.”
This service provided by the
"nationalized" Bank of England to the five private banks
continues today: the same week Morgan purchased Bear, the Big Five held
talks with the Bank of England seeking assurances that extra cash would
be made available to them in the event of a funding crisis.
Anticipating the need to serve their real masters, England's central
bank raised the weekly funds available to commercial banks to 22
billion dollars.
Labor's Response?
So far there has been no generalized response
by the working class to the crisis, but flashpoints of struggle, while
still isolated, can be discerned.
On April 1st, in a recreation of
actions last seen during the 1970s fuel crisis, hundreds of independent
truckers pulled off the road and joined rallies to protest high fuel
prices, and some blocked traffic on various highways by driving at very
slow speeds.
Meanwhile UAW members at American Axle, parts
provider to GM, have been on strike for weeks against demands for 50%
wage cuts. While this strike appears on the surface unconnected to the
housing and financial crisis, it occurs at the very heart of the
production system which as we've argued is the core of the problem.
The response of labor’s highest officialdom
has been typically inadequate. Change to Win limited itself to echoing
Barack Obama's vague but clearly pro-capital program. The AFL-CIO
reissued the demands that formed their rebuttal to Bush's stimulus
package (while of course expressing misguided confidence that either
Democratic President would enact their program). The Federation renewed
its calls for more spending on job-creating infrastructure projects
(roads, bridges, schools, etc.), for an extension of unemployment
insurance, expansion of the food stamp program, and federal aid to
states and cities. And it echoed those pinning the blame on neoliberal
policies of recent decades.
After conferencing with construction bosses
and liberal banker Felix Rohatyn, the Federation issued a report showing
that infrastructure investment could create 15 million jobs a year. It
hailed again the proposal of Senators Dodd and Hagel for a National
Infrastructure Bank, and only asked that such a bank “strike a proper
balance between public and private resources and interests.”
Clearly instead what we need is the use of
public money for public works and public jobs. That, however, will only
happen if such a Bank were controlled by unions and other working-class
organizations, starting with the ability to see not only its books, but
the books of all the executives, investors and corporations from whom
its funding should come (as opposed to from more taxes on us).
Taking
a Page from the Transitional Program
We’ve recounted above the varied ways capital
hides information about investment and spending from workers, and the
equally varied reasons we need access to that data. Rather than greater
government regulation and oversight of the banks, in order that they
can more “honestly” and “efficiently” fund their brother capitalists’
investments, we need greater workers’ control over how society
allocates its resources. That starts with the demand to see where those
resources are and who’s using them and how. This is necessary not only
to see what’s really wrong with the banks and where the money is
hidden, but, in line with our analysis of this crisis, to allow us to
expose the resources available to reorganize the broken system of
production at its root.
The new-fangled means of trickery evolved by
the financial system have if anything made the analysis in this area in
Trotsky’s 1938 Transitional Program for Socialist Revolution even more
relevant today.
In the section “’Business Secrets’ and
Workers’ Control of Industry,” Trotsky noted that the concentration of
banking and production into a few hands “not only does not mitigate the
anarchy of the market, but on the contrary imparts to it a particularly
convulsive character. The necessity of ‘controlling’ economy, of
placing state ‘guidance’ over industry and of ‘planning’ is today
recognized – at least in words – by almost all current bourgeois and
petty bourgeois tendencies.” Pale echoes of that are heard in today’s
calls for greater regulation, which will pass over to the broader
demagogy described by Trotsky as the crisis worsens. But, he adds, “In
their cowardly experiments in ‘regulation,’ democratic governments run
head-on into the invincible sabotage of big capital.”
Their unwillingness to challenge this
sabotage is displayed in the fact that “the gentlemen ‘reformers’ stop
short in pious trepidation before the threshold of the trusts and their
business ‘secrets.’… Projects for limiting the autocracy of “economic
royalists” will continue to be pathetic farces as long as private
owners of the social means of production can hide from producers and
consumers the machinations of exploitation, robbery and fraud. The
abolition of ‘business secrets’ is the first step toward actual control
of industry.”
“Workers no less than capitalists have the
right to know the ‘secrets’ of the factory, of the trust, of the whole
branch of industry, of the national economy as a whole.
“The immediate tasks of workers’ control
should be to explain the debits and credits of society, beginning with
individual business undertakings; to determine the actual share of the
national income appropriated by individual capitalists and by the
exploiters as a whole; to expose the behind-the-scenes deals and
swindles of banks and trusts; finally, to reveal to all members of
society that unconscionable squandering of human labor which is the
result of capitalist anarchy and the naked pursuit of profits.”
This will not happen, he continues, without
the mass pressure of an organized working class, including formation of
committees in factories, offices and neighborhoods to demand access to
the books of their particular exploiters, and, through committees
linking the former, the books of the exploiters as a whole.
Oversight of banking and other business
secrets is also needed to allow workers to plan the kind of public
works needed to provide jobs. “Public works can have a continuous and
progressive significance… only when they are made part of a general
plan worked out to cover a considerable number of years.”
Such a comprehensive project does not mean
putting off organizing against individual exploiters or sectors –
organizing which in fact will embolden workers to tackle economy-wide
targets.
As an example of a particular sector which
would have to be targeted right at the start, Trotsky called for the
“Expropriation of the Private Banks and Statization of the Credit
System.” Whereas under capitalism banks finance the activities of
private monopolies, whether productive or speculative, workers need the
banks’ funds “in order to create a unified system of investments and
credits, along with a rational plan corresponding to the interests of
the entire people.” To achieve this, “it is necessary to merge all the
banks into a single national institution. Only the expropriation of the
banks and the concentration of the entire credit system in the hands of
the state will provide the latter with the necessary material resources
for economic planning.”
The demand to “open the books” of the
exploiters is also key in foiling our rulers’ attempts to split us from
allies among the middle class, farmers, etc., who are told that high
wages are to blame for their high prices. Today this takes on an
international component, as access to the banks’ books is needed to
explain to the workers of the U.S. why rising prices are not caused by
workers in China, India or elsewhere, and vice versa.
Here too Trotsky advocates self-organization,
calling for creation of committees on prices, “made up of delegates
from the factories, trade unions, farmers’ organizations, housewives,
etc.”
An obvious place to start such organizing
today is with neighborhood committees of homeowners, linked nationally,
demanding access to the books of the banks holding their mortgages –
and of the banks holding the securitized packages based on those
mortgages. By the same token, workers whose pension funds are in danger
of collapsing in the crisis can organize to demand access to the books
of the banks, insurance companies and other firms holding them.
Demands for access to the books of insurance
companies and Big Pharma, already under attack by single-payer
advocates, could be another sphere in which such seemingly utopian
slogans could meet an immediate response.
To handle inflation, Trotsky wrote, workers
"can fight only under the slogan of a sliding scale of wages.”
Union contracts “should assure an automatic rise in wages in relation
to the increase in price of consumer goods."
The Program also calls for public works to
create jobs for every single worker needing one, and for the committees
described above to decide how to allocate equitably the hours and wages
involved, as well as to decide what goods and services would be
provided by such public works. Of course given today’s climate crisis,
at the core of such decisions would be a need for workers to
collectively and democratically plan the reorganization of production,
transportation, housing, etc., in order to stop the looming
catastrophe.
To advance on any of these fronts we need the
most class-conscious fighters in the labor movement, from the strikers
at American Axle to immigrant workers fighting exploitation and
repression to the independent truckers, to sit down with each other and
discuss how to organize a left wing that can unite their struggles and
apply these slogans concretely to their own enemies among the bosses
and then, by extension, to the ruling class as a whole.
During the independent truckers' strike,
participant Dan Little told the press:
“Somebody in Washington that’s a lot smarter than I am needs to
take a look at this industry.” Brother Little and his fellow workers
don't lack smarts – we just lack access to the information we need, and
the organization to seize it and use it!
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