The Debate That Wasn’t

The economic crisis of the past few years should have generated a much deeper debate about what has happened to American capitalism – now dominated by the financial sector and global mega-corporations – and about what alternatives are possible. With the exception of some good books and the little-seen, Academy Award-winning documentary Inside Job, the debate over the proper government response continues largely as an inside job among politicians and officials, particularly Treasury Secretary Timothy Geithner, who shares the mentality of the financiers who caused the collapse.

The CEOs responsible for the debacle have retained their power, regained their salaries and assets and been rewarded with new tax breaks. They have turned the crisis into a war against workers and the ​“middle class,” as depicted in this issue of In These Times. The government bailout mainly helped the big banks, which got even bigger. Despite promises, the bailout did next to nothing for threatened homeowners and the Main Street economy. Instead, it tainted the public’s view of President Barack Obama’s decent stimulus projects. 

Under the guise of budget-balancing austerity, conservatives at the national and state levels are doing their best to dismantle America’s relatively weak social assistance and security policies. They continue to divide workers with issues like immigration and abortion. Now conservatives’ central project is attacking public workers’ living standards, their unions and their right to bargain collectively – and the public sector itself. This is simply the latest inning of a game plan played out over several decades to redistribute income and both political and economic power to the rich, starting with attacks on blacks and the poor.

Business cycles and periodic crises are endemic to capitalism. But this near-collapse exposed how much finance capitalism and its many interrelated industries – banking, insurance, mergers and acquisitions, derivatives and ​“risk management” – dominate our lives, as Stephen Lerner argues. The solution involves establishing more democratic control over the finance sector, including breaking up the big banks, making finance less complex and more transparent, and establishing competing public institutions, like insurance providers. (The problems with mortgage giants Fannie Mae and Freddie Mac are not that they are public but that Congress partly privatized them and exposed them to private market pressure to offer sub-prime loans.)

Regulation is obviously necessary, but it is not enough without a comprehensive vision of finance as a public utility, like a highway (or other utilities that would better serve the nation if publicly owned). Regulated industries consistently capture their regulators, and the financial services have ideologically captured Republicans and many Democrats. Little can be accomplished with even a militant campaign if the public and politicians remain captive. The industry needs more than a traffic cop. It needs a new architect and greater democratic control, just as corporations in general should be more closely controlled through national charters.

The goal of any new movement to reform American capitalism should be more than restoring ​“the American dream” of homeownership and personal accumulation. It should also stimulate dreams of a new America, where people hold more power over the key institutions of our society, and their own lives.