Wednesday, September 24, 2008

A Socialist Response to the Financial Crisis

The National Committee of the Socialist Equality Party, along with its presidential and vice presidential candidates, Jerome White and Bill Van Auken, has issued a statement unequivocally opposing the plan to bail out Wall Street with hundreds of billions of dollars of taxpayer funds.

Proposed by the Bush administration, the plan has been described as the largest government intervention in private markets since the Great Depression. Democratic presidential candidate Barack Obama and the Democratic congressional leadership, by and large, support the plan.

I appreciate the historical perspective and critical analysis the Socialist Equality Party statement provides, including its incisive critique of capitalism. However, like so many political statements, from either the left or the right, it is long on rhetoric and short on specifics.

For example, what exactly would “democratic control” of financial institutions by “the working population” look like?

Have there been (or are there) successful models of such control?

What are the actual steps by which “the working people” can “assume control of the financial institutions and use them for the common good, not corporate profit and personal enrichment.”

And who defines “the working people”?

Don’t get me wrong, I definitely remain a “socialist-leaning” guy, and I agree with Ronald Aronson that “many of our key values and starting points are drawn from a common historical source: the socialist tradition.”*

Yet at the same time I’m open to an economic system that acknowledges and encourages the best aspects of both capitalism and socialism, open to considering capitalism and socialism as, in the words of Jeremy Rifkin, “complementary ‘visible hands’ that continually balance individual self-interest in the market with a collective sense of responsibility for each other’s welfare.” According to Rifkin, “the social market-economy model practiced across the member states of the European Union comes closest to this mechanism.”

Having said all of this, I share now excerpts from the Socialist Equality Party’s response to the current financial situation.


The plan, which is being rushed through Congress for passage this week, is the response of the government and the entire political establishment to what is acknowledged to be the greatest economic crisis since the Wall Street crash of 1929. It calls for an unprecedented transfer of public funds to the major banks and the American financial elite at the expense of the broad mass of the people.

Both the plan itself and the manner in which it is being imposed are deeply undemocratic. Exploiting the breakdown in US and global financial markets, the financial aristocracy, which is responsible for the crisis, is exercising its control over the government, both political parties, and the media to implement policies of the most far-reaching character without any genuine debate or discussion. As in the aftermath of 9/11, it is seeking to utilize the crisis to push through policies that would otherwise be considered entirely unacceptable.

None of the measures being carried out address the underlying causes of the financial meltdown, nor will they resolve the crisis. At most, they will only postpone the day of reckoning.

None of those who control the banks and finance houses are being held accountable, and not a penny is being provided to provide relief for millions of working class families who are losing their homes, their jobs, and their livelihoods as a result of the frenzied speculation that led to the crisis.

Make no mistake: The working people, who are the victims of the financial parasitism of the ruling elite, will foot the bill to bail out those who have enriched themselves by plundering the social wealth. The massive expansion of budget deficits and the national debt as a result of this plan will be used to justify a brutal assault on basic social programs, education, housing and the wages, jobs, pensions, and health benefits of the working class.

. . . The real source of the financial crisis is not and cannot be discussed by any of the official institutions or any of the political representatives of big business, whether Republican or Democratic. It is the capitalist system itself, which has for decades sought to overcome its fundamental contradictions by engaging in ever more parasitic and fraudulent forms of financial manipulation—piling up debt while dismantling the productive infrastructure of society.

American capitalism has become the global leader in the creation of personal wealth for the ruling elite entirely separated from the creation of real value in the process of production. The current economic breakdown, which threatens the world’s people with catastrophe, is the inevitable result.

The alternative to the naked dictatorship of capital and the impoverishment of the working people is socialism. The Socialist Equality Party insists that if the resources of the American people must be mobilized to avert an economic catastrophe, then the American working people should assume control of the financial institutions and use them for the common good, not corporate profit and personal enrichment.

We propose that the major banks and financial institutions be nationalized and turned into public utilities, operated under the democratic control of the working population. The vast financial resources that they control must be used to provide decent education, housing, health care, retirement benefits and good-paying jobs for all.

* Writes Aronson: “Socialism’s values continue to nourish community life. Much of our world continues to be organized collectively, democratically, and socially, operating according to need and not according to profitability – in schools and cooperatives; libraries and nonprofits; local, state, and federal government programs. September 11 and Hurrican Katrina showed the undying need for extensive and intensive structures of community. The socialist standards of fairness, democracy, equality, and justice for all are as much a part of daily life as are capitalism’s values of privilege, unequal rewards, and power.”

See also the previous Wild Reed posts:
R.I.P. Neoclassical Economics
Capitalism on Trial
A System That’s Not Going to Survive
The Wrong Type of Government Intervention
John le Carré’s Dark Suspicions
A Lose/Lose Situation
Reality Check

Recommended Off-site Link:
How Socialism Works -
Socialist Equality Party - Statement of Principles (Part 1) - World Socialist Web Site, September 25, 2008.


Anonymous said...

Socialists make a fetish of analysis and rhetoric. Lets talk about how our mixed economy works in practice, starting with how the private, public and mixed socialization of economic risk ACTUALLY works and doesn't.

An aside: a now-retired theology professor of mine (a brilliant, personable guy, to boot) used to crow about how "Socialism is the only way." He ended up with an endowed chair in theology. Well, that is interesting. WHO endowed his chair? The "People?" No, somebody, a wealthy, public serviced minded family, got their check book out. They used the fruits of a life-time of hard work to benefit others. Its illustrative of what "socialism" is in practice in the U.S. - someone choosing to be generous without being compelled to be, choosing what interests them freely without someone taking resources and proceeding according to some "plan." Planning has its place, but the kind of planning, say, an engineer does doesn't scale up very well.

Anonymous said...


Socialism, as an ideology of modernity, suffers from the fatal flaws of ideology - putting concepts ahead of people and their culture as lived. Academics tend to love ideology, the way so many love The People but not actual people. Reminds me of the old English caricature of French academics: "Zat may work in practissss, but it will not work in theeoreee...."

It amazes me that anyone spends any time dredging up socialist desiderata. They aren't Christian (socialism is, like capitalism, a property ownership system - Christianity is not a system of property ownership because it fundamentally is not predicated on the power of the state to enforce anything public or private in terms of ownership).

Now, I will also add that those who have tried to convert capitalism into an ideology - as opposed to its more fundamentally descriptive character in works by those such as Smith (that is, Smith was largely merely describing what tends to happen when human beings operate under certain conditions of freedom, more than prescribing a whole system in an ideological sense - which is not surprising, given that Smith was not French....), get a similar withering glare from me.

Socialism as such is no cure for our current ills. Nor is libertarianism. Nor is corporatism. Nor is [fill in your ism of choice].

Michael J. Bayly said...

Liam, your comment is more of a reaction to the word "socialism" than it is a response to anything actually shared in my post.

You dismiss much but offer little in return. I'd be interested, for instance, in hearing about what it is that you consider to be the "cure to our current [economic] ills."

And finally, it seems as if you harbor contempt for any property ownership system. If so then I take it you are all for the Vatican selling off its property and giving the money to the poor, as, I assume, you already have done.



Anonymous said...

Actually, given its numerous shortcomings (e.g., corporatism, cronyism, economic disparity, and poverty), Liam's French academic's words about "working in theory but not in practice" could just as easily apply to capitalism.

Anonymous said...


I was responding to Mark. That's why I put "Mark" at the head of my comment.

Your tu quoque fails. I am not advocating any property system as a cure for anything.

There is no silver materialist bullet to cure human frailty. Assuming there is is to ignore original sin. So any property system that tries ignore that dimension of things is doomed to ultimate failure.

Thus, we can usually devise systems to mitigate past creative approaches to being greedy. (Socialist systems are just as capable of being greedy in a way inconsistent with the public good as non-socialist systems, of course.) But the ability to predict and prevent future creativity is limited. I say this as someone with years of compliance experience - the most important thing is to always remember human nature and the limits of whatever system you devise.

Now, the current crisis might have been avoided in a variety of ways:

1. Deficit spending on a large scale makes the dollar weak, and thus puts pressure on domestic credit markets. There is no cure to get around this - the international credit markets have conclusive power over fiscal policy, whether that policy is socialist or not. No fiscal policy can escape the judgment of the credit markets and inflation. See, eg, Zimbabwe.

2. We could have decided not to increase access to home ownership by the marginally credit-worthy. The subprime home lending market that grew in the Clinton years was only sustainable in an environment of balanced fiscal budgets.

3. There is an insufficient alignment of risk and profit - profits are paid out in the short term and there is no ready way to cover risks that only manifest in the longer term. But any system that would retain corporate profits in some way to fix that would also mean lower current payouts not just to executives but to shareholders - which include investment vehicles that ordinary people rely on.

4. Greater transparency at many levels is desirable, but it will often involve costs, too. Private industry should have an incentive to require a better system of credit rating by the credit-rating agencies, but it should also have produced a viable electric car too....I'm not sure the government possess the skill to properly incentivize the process in terms of credit ratings (I have more faith about it in terms of electric cars...)

I could go on and on.

There is *no* cure in terms of government policy, because the illness is human nature. There are less bad choices.

This country is probably heading for a lower standard of living overall for at least the next half-generation.

Anonymous said...


I did apply the same to capitalism in its ideological form (as contrasted to its descriptive form - there is, so far as I am aware, no form of socialism that is merely descriptive).

Michael J. Bayly said...

Hi Liam,

My apologies for not realizing that your first comment was in response to Mark and not to the contents of my original post. I would still like to hear your thoughts on the latter.

I just have a few thoughts to share on your recent comment.

One problem with the “original sin” understanding of the events depicted in the Book of Genesis (as opposed, for instance, to interpreting this story as an attempt to account for a major development in human consciousness) is that it limits our capacity to see ourselves as agents of positive and constructive change in the world. I know few people who believe that rigid adherence to one economic theory or approach is going to be a “cure” for everything. One doesn’t need a doctrine of “original sin” to recognize that we are fallible human beings. Yet this shouldn’t stop us from aspiring to be the best we can be – as individuals and as a society.

I also think you’re limiting this discussion by defining socialism solely as a “property ownership system.” I think a better way of thinking about socialism is as a tradition of social organization with certain values, standards, and practices – many of which predate the word “socialism” itself – and are very much embedded in our Western culture. They are values, standards, and practices that are open to adaptation and evolution, and which have implications for all manner of things – including ownership of property.

Another thought: identifying as a Christian shouldn’t absolve us from recognizing that some “choices” are aligned with certain ways of thinking about economics and how society can best be organized for the benefit of all. (For instance, the various measures you mention that may have averted this latest crisis in US and global capitalism, can all be seen to align to various theories and approaches to economics and social organization.) Most Catholics I know identify with, or at least lean toward, one of these ways of thinking about economics or a combination of them. Some have been quite clear about their preferences. Dorothy Day, for instance, had no time for capitalism, which she termed “this filthy, rotten system;” while former Catholic priest Fernando Lugo, along with other advocates of liberation theology, clearly do not see core socialist values (such as fairness, democracy, equality, and justice for all) to be at odds with Christian faith.



Michael J. Bayly said...

Mark, I think both socialists and capitalists (indeed, any of the "ists", including papalists!) can make a "fetish of analysis and rhetoric". It's the flaw of any and all ideology. Still, that's not to say that they do not contain (or are built upon) some worthy ideas, concepts, and values.

I also think you're being a little too harsh on the theology professor you mentioned. We live in a society increasingly dominated by unfettered capitalism. Accordingly all of us who aspire to the socialist standards of fairness, democracy, equality, and justice for all, live compromised lives.


Anonymous said...


If you want to think about something vaguer like communitarianism, OK, but socialism is quite a distinct ideology with a specific modern meaning. I don't think it merits reviving as such any more than geocentrism. In specifically Christian context, I make this perspective more pungent than I might in a more secular context, because too many Christians have gotten gulled into assuming socialism is like early Christianity when it's not. Just so you know why the scorn is directed in this forum.

And again, I have a similar view of efforts of things like the Acton Institute that try to recast Christianity in proto-entrepreurial terms.

To your point about original sin: I completely agree that it is no excuse for a kind of political quietism. I do think, however, that it means we need to focus more on concrete situations in an opportunistic fashion rather than trying to waste time in developing and articulating over-arching conceptual ideologies. The temptation of ideology is a distraction from the work of the Christian discipleship, as Christ steadfastly refused to turn the Gospel into any sort of comprehensive political program as such (which, of course, does not mean the Gospel does not have implications for politics - it merely means it's not a political ideology in the modern sense).

Frank Partisan said...

When Michael talks about socialism, he is no way talking about Stalinism. Democracy is the life flow of real socialism. Both Stalinists and capitalists have interest in people not discussing or knowing, what socialism really entails.

Russia 1917 doesn't compare to the USA 2008. There is the abundance to feed everyone, not have homelessness, and be a source for development, rather than war.