Bernie Sanders campaign proves americans are willing to be more socialist.
How We Got Here
Perhaps most significant is the combination of these economic policies with a series of moves to deregulate the financial services industry – a combination that caused the Great Recession.
As wages began to stagnate, Americans started to borrow in order to afford increasingly costly expenses, such as education, healthcare, and housing. But this tsunami of credit did not come from nowhere: it came from a number of sources, including the recycling of capital from countries with which the U.S. held trade deficits, from American workers’ own surpluses, and from low interest rates (which also fueled asset bubbles, as in the real estate market).
As the Marxist economist Richard D. Wolff observed, “Without acknowledging the fact, [capitalists] had substituted rising loans to their workers in place of the rising real wages their workers had enjoyed for the previous century.”
For years, this substitution proved effective: credit, extended by the financial sector, provided the purchasing power consumers lacked necessary to prop up aggregate demand and keep the economy humming. But the financial sector, history shows us, overextended. Banks and brokers, chasing perverse incentives and believing in the inexorable climb in housing prices, recklessly produced mortgages; those next in line packaged these mortgages into spurious securities and sold them to duped investors; and those who saw the subprime lending crisis coming took out insurance policies on the whole house of cards collapsing and profited enormously as a result.
Marx, believing that value comes from productive labor, understood that financial wealth was “fictitious” and parasitic: while finance could play a positive role in directing surpluses toward productive enterprises, he recognized that some in the financial sector extract wealth from the economy through usurious loans and bonds and that the proliferation of debt would end up stifling rather than expanding productive output.
Why We’re Still Here
Since the recession, government policies informed by neoclassical and Keynesian economics – and heavily reliant on the financial sector – have failed to overcome the problems inherent in the system.
Countries that embraced austerity saw economic contraction, but countries that embraced stimulus have hardly fared better. Fiscal stimulus has barely made a difference, since most consumers saved their new discretionary income or used it to pay down their debts. And monetary stimulus in the form of low interest rates and quantitative easing has propped up asset prices (stocks and housing) but has not promoted significantly higher investment or consumer spending: instead, corporations have hoarded trillions in cash and engaged in short-term financial alchemy rather than invest in workers or research and development (which has been well documented by Rana Faroohar).
In short, these policies have failed: the wealth has not trickled down. Most new income generated since the Great Recession has gone to the top 1 percent. Income and wealth disparities are as wide as ever. Meanwhile, millions of people who were once part of the workforce prior to the crisis have since dropped out of it. And those who are fortunate to be working have had to take lower paying jobs, accept part-time and temporary work, and try to string together a living in the “gig economy” of freelance labor. Because of idle workers and capital, GDP is operating well below its capacity.
Many liberal economists have begun to realize that significant changes to the “rules” of the economy are needed. They recognize that it is through empowering the working and middle classes – roughly 95 percent of the country – that there will be greater shared prosperity.
The Need For Radical Change
But what many mainstream economists fail to consider is that radical changes are needed at the micro-level to avoid the standard trends in the capitalist system that produce wage stagnation, unemployment, and financial and economic crises.
Richard Wolff argues that what is needed is not government control in the form of state capitalism or a command economy, but the empowerment of workers in the workplace, or workplace democracy. Promoting what he calls “workers’ self-directed enterprises” (WDSE), Wolff argues that rather than receiving top-down corporate management, workers should manage themselves collectively by determining how the firm operates and how its surpluses are distributed.
Such a management style, he claims, would prevent many ills from arising: workers would not needlessly cut their wages or adopt technology that would drastically reduce their numbers; they would not allow the drastic inequality in income that prevails today between “makers and “takers;” and they would manage production so as not to harm consumers or the environment.
Such changes can come about through voluntary action as well as through constitutionally valid governmental policies. Countries from around the world have had successful experiments finding employment for workers by promoting innovative business models, especially cooperatives. WSDEs – in combination with increased government spending on education, training, and healthcare – can go a long way in reversing the trend toward economic insecurity and inequality and increasing opportunity and equitable growth.
Other measures, such as strengthening unions, must be taken to ensure that workers keep a greater share of their labor. Protecting their wages not only increases their income but also prevents the financial sector from converting surpluses into destabilizing investments.
It is precisely this kind of message that needs to penetrate the political discourse. The popular campaign of Bernie Sanders, a self-described democratic socialist, shows that many Americans not only recognize the perils of economic inequality, but also that they are willing to consider supporting radical measures to alleviate it. In an election where voters are being asked to choose between two candidates who embody the worst of what our neoliberal politics and economics represent, the socialist critique is needed now more than ever.
This article originally and is reprinted by permission.
This article was originally published on IVN.us, a non-profit news platform for independent writers, and is reprinted here by permission.
