19 Jul 2010

The Economic Crisis, US Progressivism, and West European Socialism and Social Democracy

by Norman Birnbaum on 16.07.2010 • Categorized [by the Social Europe Journal] as Social Democracy, Volume 5 Issue 1

It occasionally is rewarding to think of ideal solutions to current crises rather than of outcomes dictated by evident and immediate constraints. It is rewarding because it invariably teaches us humility about our current political capacities – and because, even in that lesson, we may find new ways of looking at our situation.

I designate as progressivism the US equivalent of European social democracy. I do so for historical reasons. The term emerged at the beginning of the last century to express the self identification of leaders, movements, thinkers who sought to substitute for the brutality of American industrial capitalism a considerable amount of regulation, and the provision of public goods. Progressivism drew upon Social Catholicism and Social Protestantism, upon large borrowings from European socialist ideas, brought to the US by immigrants, upon American traditions of social reform going back to the Abolitionist movement, upon even older residues of American politics having to do with local self-governance and extreme distrust of economic and political elites. The term progressive reminds us of the self-identification of the United States as a vanguard nation, engaged in the unfinished task of enlarging the autonomy of its citizens. Progressivism joined in a coalition, not without its internal contradictions, Christians and secularists, farmers and workers, older Americans and newer immigrants, often led by what the historian Richard Hofstadter termed “men of the Word,” the educated, distrustful of the culture and power of money.

The political history of the twentieth century, and indeed of the first decade of the present one, is the story of the life, and at times near death, of these ideas and their transformation under Presidents Theodore Roosevelt, Woodrow Wilson, Franklin Roosevelt, Harry Truman, John Kennedy and Lyndon Johnson. Projects as diverse as the first Roosevelt’s New Nationalism, Wilson’s New Freedom, the second Roosevelt’s New Deal, Truman’s Fair Deal, Kennedy’s New Frontier, and Johnson’s Great Society drew upon progressivism for moral continuity. Carter’s and Clinton’s Democratic Presidencies are understandable as compromises with the considerable resistance the tradition of progressive reform engendered—especially when its beneficiaries had acquired, thanks to the reforms, the sense of having become shareholders in the established order.

It is too early, of course, to draw conclusions about Obama’s Presidency. Still, it is possible to begin to situate him historically, to consider his responses to the crises he inherited, and to draw some inferences as to the continuing vitality of the tradition of which he is the somewhat ambivalent heir.

Viewed in the long term, that tradition rather than being adapted to conditions which are different, has been attenuated—with nothing much to replace it except manouvering, sometimes adept even elegant, sometimes crude, but rarely in the service of a long term national project. It is interesting that Obama has presented his two major legislative efforts, on behalf of health care reform and financial re-regulation, as responses to crises rather than in the language of social reconstruction. One understands why: the intellectual and social bases of progressivism have been constricted, and its proponents exhibit defensive anxiety rather than aggressive optimism.

Obama has smaller Congressional majorities than the Democratic reform Presidents working in the progressive tradition. Those majorities are divided and we can reckon at the most half of the Democrats as consistent adherents of reforms which would reinforce the capacity of the state to control the market, a number which halves again when the issue of redistribution is raised. Obama formed his government as the economic and financial crisis of 2008 induced (or allowed) the Bush government to use public funding for major grants to the larger banks and investment houses. The Secretary of the Treasury was Henry Paulson, who had been Chairman of Goldman Sachs – which, in the end was able to escape major damage as its clients and trading partners (especially the fragile insurance giant, AIG) were saved by state funding. His successor was Timothy Geithner, who as Chair of the Federal Reserve Bank in New York was notable for his close collaboration with the financial industry. Bernake, the Chair of the Federal Reserve, was unstinting in his own deployment of the resources of the central bank—which became a buyer of last resort of federal bonds, maintained historically low rates of interest, and functioned as creditor of last resort when ordinary banking seemed likely to stop. In the background, Robert Rubin (another former Goldman Sachs Chair) who had been Clinton’s Secretary of the Treasury, urged the President to follow the advice of Bernake and Geithner. The President’s coordinator of economic policy was Rubin’s successor in the last year of the Clinton administration, Lawrence Summers and Paul Volcker, who had been Chairman of the Federal Reserve under Carter was a very active advisor too.

This grouping (figures like Joseph Stiglitz and Paul Krugman were not consulted) did not, obviously, hesitate about using Federal resources to rescue the financial industry.

None proposed to use the temporary de facto nationalisation of the industry to enlarge the permanent role of the state in banking (the proposals for re-regulation about to be passed by the Congress came later) – or to set limits on the size of single firms and the scope of their operations. They did initiate an immediate economic stimulus program, which the Congress agreed to in the light of rapidly increasing unemployment and the obvious economic distress of many – but the program was, measured against immediate economic needs, rather small, and Obama has been unable to obtain a larger rather than a much smaller sequel. No doubt, the bank rescue measures made for the resumption of a certain amount of normal banking (with credit for smaller firms remaining extremely restricted.) No doubt, too, the economic stimulus package kept unemployment from leaping higher, but at the moment if it is officially at between nine and ten percent, it is realistically at least fifteen percent. The rate of recovery is very, very slow – which has not prevented, on account of Democratic defections, the Congress from failing to renew unemployment benefits for over a million displaced workers (the Democrats in the House of Representatives who blocked the renewal fear being accused in the fall electoral campaign of reckless spending) despite Presidential urging.

The measures passed in 2009 upon Obama’s taking office had some remarkable public repercussions. For one, a considerable undercurrent of mixed resentments made its way, noisily, to the surface. Ordinary citizens complained that their money was being used to rescue the banks and the bankers, whose high rewards were especially criticised. Since much of the crisis had to do with bank speculation in sub-prime mortgages, a large number of householders directed their rage downward as well as upward. Mortgages had been given (at the instigation of the redistributionist Democrats, argued the Republicans) to the financially improvident or impoverished, who were neither competent nor worthy of trust. To these complaints were added more enduring anxieties about deficit spending, fears of national bankruptcy concretised in predictions that neither the Medicare program of health insurance for those over sixty-five or the universal contributory pensions, Social Security, would remain sustainable. Obama attempted to meet this by appointing a National Commission on Fiscal Responsibility and Reform with a mandate to examine the situation and propose long-term solutions. An initial effort to remove it entirely from public scrutiny by making its recommendations mandatory on the Congress was rejected. The composition of the commission, however, combines conventionality and mediocrity, for the most part, in a higher or lower synthesis. Its Republican co-chair, the former Senator Simpson, has already distinguished himself by declaring that only ‘the lesser people’ worry about Social Security. Astonishingly for a nation which spends at least four times more on its military than China and Russia combined, the military budget has been specifically exempted from the Commission’s mandate. The American version of Keynesianism does not consist of building pyramids, it entails ordering any number of useless weapons systems for armed forces perennially unprepared for their missions.

Obama might have met the crisis, upon taking office, with something like the New Deal Works Progress Administration, and other projects, which restarted the economy and renewed and expanded the nation’s infra-structure. The deficits in Medicare and Social Security could be met by making the rate and incidence of contributions fully progressive. Instead, he presented a near opaque project for health care reform which became the focal point of opposition to his Presidency and the Democrats. The plan mandated insurance for every citizen. It left the insurance industry to provide it, and in return for providing it with some forty million new customers, made it impossible for the industry to limit its coverage to the healthy. The President was conspicuously reticent about supporting a public insurance option (which he had promised when campaigning for election) and those seeking it in the Congress had insufficient votes to pass it. The legislation is complex, will be taking effect by stages, and as it was presented aroused enormous anxieties and hostilities in considerable segments of the public. Most citizens do not grasp the complexities of the new system, and a majority have been persuaded by the Republicans (and Democratic opponents of the change) that they are sure to end up worse off than under their present arrangements.

Obama did not present the project as an extension of the principles of solidarity embodied in Medicare and Social Security, but as a measure of economic rationalisation which would reduce the deficit. Public discussion of it revealed abysmal levels of public ignorance—including ignorance of the fact that Medicare, which is very popular, is a government system with a single payer arrangement.

The debate on health insurance brought to the surface a complex of hatred of the new President which is difficult to analyse in view of its several layers. Clearly, the new Presidential majority (as well as the President’s mixed racial identity and his unusual international biography) disturbed a large group of citizens. They dislike having to share power with Afro-Americans and Latinos, and much of their repugnance for immigration is a consequence of their fear of being out numbered, sooner rather than later, in their own country. They expressed their sense of dispossession by accepting a series of falsehoods. One is that the President was not born in Hawaii but in Kenya, and is therefore ineligible for the Presidency. His birth certificate is deemed to have been forged. Another is that he is a covert Muslim. For many, it follows that he is working for the destruction of the US. The theme of strangeness connects with another: he is viewed as so much an advocate of state intervention in the economy that he can be termed a ‘socialist’.

Those who consider the President an unacceptable and alien figure, who in effect do not accept the legitimacy of his election, may amount to as many as a third of the electorate.

They include the ageing, overweight and white figures who clothe themselves in the costumes of the epoch of the American Revolution and proclaim that they belong to a “Tea Party” (the term used by the colonial subjects of the Crown who threw imported tea into Boston harbour rather than pay taxes upon it.) Quite apart from anxieties of ethnic and racial dispossession, what unites these persons is a strong sense of alienation from “government” and a very explicit rejection of taxes. They are frequently quite ignorant of their actual circumstances (they are often citizens of states which are net beneficiaries of the allocation of Federal funds) and are certainly negative about ideas of social solidarity and common responsibility. Consistency is not their strongest point. Many in the states now struggling with the consequences of the oil well disaster in the Gulf of Mexico voted against the President because he, allegedly, favoured extensive powers for the state – but they have rent the heavens with criticism of the Federal government for not doing more to assist them. Nearly all of the President’s antagonists exempt military spending (no small part of it wasted) from their strictures on government expenditure. Almost none have a picture of the economy which would encourage them to think in terms of the total allocation of resources over time. Their thinking in terms of simple categories makes them incapable of systematic analysis of the economy. No doubt, they often voice vulgar versions of the views of a certain number of academic economists.

It is striking that the conflict over health care reform legislation seemed to evoke more public interest and involvement than the argument, about to be concluded, on the Democratic proposal to re-regulate the financial industry. Arcane details and complex institutional arrangements do not lend themselves to the pathological simplifications evident in the health care debate (with its charges that the President favoured ‘death panels’.) Moreover, the banks and the financial services industry enjoy no large public trust: however inchoately, an American majority is suspicious of banks and bankers. The argument of the banks, that a return to the regulatory regime abolished under the Clinton presidency would hamper economic recovery by discouraging investment, has little public credibility: the (accurate) public impression is that the banks are not making investment easier. Moreover, although the banks and investment houses have been fighting the new legislation clause by clause, and line by line, they have concentrated their efforts on direct dealings with the legislators – by bribery (electoral contributions) and pressures (threats to mobilise opinion at local levels, in the legislators’ own districts and states). The economists and lawyers who work for the legislators (or in the government departments) are subject to other pressures. If cooperative now, they can be employed later by the industry at four to ten times their governmental salaries. That applies to the legislators themselves, who upon leaving office, frequently become lobbyists for the industries they once, as members of legislative committees, nominally controlled.

To a large extent, the industry has clearly decided to accept re-regulation in principle and then to seek to blunt its impact in practise, by reducing the scope of the legislation – or allowing important aspects of the new regime to be decided by regulators who can be influenced case by case. That is, the industry has accepted that it is not popular, and seeks to defend itself by stealth rather than open combat.

Meanwhile, the refusal of the Congress to vote for a large second installment of economic stimulus threatens the social fabric of the nation. That is a matter not only of the scourge of unemployment, or the fact that about one of every four homeowners may be economically incapable of continuing their mortgage payments. Federal payments to the states to supplement or replace their falling tax revenues are conspicuous by their absence. That means, across the nation, that normal governmental services ordinarily provided by the Federal states cannot continue. The list includes education at all levels, fire and police work, much health care, the maintenance of material infra-structure like water and sewage services, and of course, roads, as well as public transport systems.

It is possible that a Democratic victory (which means the retention even of reduced majorities in the two houses of the Congress) in the November elections will enable the President to convince the Congress to provide an ample and appropriate second stimulus package. That is possible, but not probable. More likely, in the probable event of a Democratic victory, we will see a continuation of the present alternation of advance and immobility. Lenin’s ‘three steps forward, two steps back’ has a contemporary American counterpart: ‘one step forward, one sideways’.

The distressed condition of the party of progress in the US is a result of several major and closely connected trends. One is the fragmentation of the party into a multiplicity of groups working for specific causes, certainly aspects of the construction of a more egalitarian, enlightened and rational society, but without an immediately compelling or visible common denominator. Access to health care, educational opportunity, environmental regulation, freedom from ethnic, racial, religious discrimination, the rights of homosexuals and women compete for attention and energy with larger issues of economic redistribution and security. The question of rights for immigrants merge into larger problems of the nation’s role in the world: aid to development and all the costs of an interventionist military policy. It was simpler when the agenda was mainly comprised of matters of economic justice, organised around extending the scope of the state to contain and reverse the most exploitative and socially destructive consequences of the primacy of the market. The single most effective agency for that struggle was the trade union movement, which had a determining role in the Democratic Party from 1936 to 1968. The decline of the unions (thirty percent of the labor force in 1968, somewhat more than ten percent now) is, then, the single most effective cause of the ideological and political vacuity of the Democrats.

With the union presence in everyday life so diminished, there is no effective educational agency to counter the incessant message of the media: capitalism in its American version is here to stay. One of the more obsessive fantasies of the American right is that schools, and even more post-secondary education, have been seized by cadres of radical administrators and teachers, intent on undermining traditional American values. These are depicted as combining deep deference to authority with obdurate individualism. The readiness of large numbers of citizens to believe the most lurid lies about our President, their ignorance of not only the world beyond our borders but much of American society, suggest that there is something defective about our educational system. It does not appear to include a surfeit of cultural and intellectual nuance. Meanwhile, much of the media landscape has been occupied by ambitious strivers for whom journalistic careers are high roads to economic and social status. The newer generations have little in common with those who, in the period of Franklin Roosevelt, did what they could to voice class antagonism to their own employers, decidedly hostile to the New Deal.

There is no evidence, meanwhile, that the widespread diffusion of internet commentary and news has resulted in a new wave of social criticism, a pluralisation of the perspectives of the medium. Communities of the like minded have formed, a pseudo-democratisation of culture, in which aesthetic and moral standards as well as serious criteria of truth have dissolved, is in process and it is impossible to be optimistic about a good end.

These events take place against the background of an increasingly diverse and divided society. Fourteen percent of the population are foreign born, and in many areas of the country immigration has replaced or rivals racial differentiation as a catalyst of prejudice. The obvious function of immigrant labor in reducing wages renders a common political front of segments of the labor force separated by culture, by type of employment, and by education and occupational skills very difficult. Some unions have had some success in organising immigrant labor in the lower levels of the labor force, but a white working class often suspicious of “big government” and redistribution is not ready to practise long-term solidarity.

In these circumstances, a pervasive process of depoliticisation dominates consciousness, interrupted by sporadic bouts of pseudo-politicisation. The trivialisation and personalisation of the media, the restriction of critical thought to the educated enclaves of society, combine with the disintegration of the forms of political mobilisation quite present even a generation ago. Only fifty-seven percent of the eligible electorate voted in the Presidential election of 2008 and in the November Congressional elections a very large decline in participation is likely. It is unclear that Obama can use his standing with large sectors of his original coalition (especially the Latinos and Afro-Americans and unionists, who failed to vote in the election for Kennedy’s Senatorial successor in Massachusetts) to induce them to turn out again in the numbers which made his election as President possible. Perhaps matters would be different had he pursued a clearer course with respect to issues of redistribution and social benefits. That was precluded, not least, by his own technocratic set of mind and in that sense, he is an heir of the Third Way.

It may be too early to write of an American disaster, but it is clear that we have a stalemate. Presidential and Congressional majorities differ, and what the social majority may be in a highly conflicted nation alters from day to day, issue to issue. What is striking are certain parallels with Europe, despite the grotesque spectacle of Obama urging on the other heads of government that they continue expansionary spending.

The parallels lie in the depoliticisation of citizenries, in the loss of a distinctive reform project which intends the ultimate transformation of large segments of social existence, in the grovelling refusal of the socialist and social democratic and social Christian parties to challenge the arrogance and open manipulativeness of capital. They are to be found in the emergence of new problems, like the control of science and technology, the co-existence of cultures, environment, immigration, for which received American progressive and European socialist and social democratic traditions have no answers, the more so as their resigned acceptance of the predominance of the market is so intellectually passive. It lies, too, in the inner differentiation of the capitalist societies which have made simple models of class division inapplicable. The possibility that a new idea of citizenship could be consolidated to overcome these differences remains, but little has been done to achieve it. Above all the inner attenuation of the idea of solidarity has denuded the progressives in the US and our comrades in Europe of a moral project.

It would be absurd to attribute all or even a major part of this to an Asian challenge. We would do well to ask ourselves why, in so many ways, neither the US or western Europe can claim to have social models which others are compelled to follow.

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