August 2011, Week 3


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Mon, 15 Aug 2011 20:54:08 -0400
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The Left's Crisis

by Leo Panitch

Socialist Project - The   B u l l e t
E-Bulletin No. 536 August 15, 2011 


A common response of the left to the financial crisis
that broke out in the USA in 2007-08 was often a kind
of Michael Moore-type populist one: Why are you bailing
the banks out? Let them go under. This kind of the
response was, of course, utterly irresponsible, with no
thought given to what would happen to the savings of
workers, let alone to the paychecks deposited into
their bank accounts, or even to the fact that what was
at stake was the roofs over their heads. On the other
hand, the even more common response was all about
asserting state responsibility: This crisis is the
result of the government not having done its duty:
governments are supposed to regulate capital, and they
didn't do so. But this response was in fact
fundamentally misleading. The United States has the
most regulated financial system in the world by far if
you measure it in terms of the number of statutes on
the books, the number of pages of administrative
regulation, the amount of time and effort and staff
that is engaged in the supervision of the financial
system. But that system is organized in such a way as
to facilitate the financialization of capitalism, not
only in the U.S. itself, but in fact around the world.
Without this, the globalization of capitalism in recent
decades would not have been possible.

It was indicative of the left's sorry lack of ambition
in the crisis that its calls for salary limits on Wall
Street executives and transaction taxes on the
financial sector were far more common than demands for
turning the banks into public utilities. It was, of all
people, the mainstream LSE economist Willem Buiter (the
former member of the Bank of England's monetary policy
committee, appointed in November 2009 by Citibank as
its chief economist) who in his Financial Times blog on
September 17, 2008 a few days after Lehman Brothers'
collapse endorsed the "long-standing argument that
there is no real case for private ownership of
deposit-taking banking institutions, because these
cannot exist safely without a deposit guarantee and/or
lender of last resort facilities, that are ultimately
underwritten by the taxpayer." And he went further:
"The argument that financial intermediation cannot be
entrusted to the private sector can now be extended to
include the new, transactions-oriented,
capital-markets-based forms of financial capitalism...
From financialisation of the economy to the
socialisation of finance. A small step for the lawyers,
a huge step for mankind." Credit in the Hands of the

Well, this sounds a little bit, if you've ever read The
Communist Manifesto, like the call that Marx made -
among his list of ten reforms - for the centralization
of credit in the hands of the state - which just goes
to show that in a crisis you don't have to be a Marxist
to have radical ideas if you have any sort of ambition
or self-confidence. Most Marxists don't have that
ambition and self-confidence today. But you do have to
be a Marxist to understand that this is not going to
happen by bringing some lawyers into a room and signing
a few documents. What Buiter was putting forward was
the technocratic notion of how reform happens. But
fundamental change can only really happen through a
massive class struggle, which would involve a massive
transformation of the state itself.

Even in terms of calls for better regulation, with a
working-class that is not mobilized to put pressure on,
you can't expect this state to simply follow policy
guidelines that come from technocrats, progressive
liberals or social democrats. So we at least ought to
be using our opportunity to do more than offer left
technocratic advice to a policy machine; we ought to be
trying to educate people on how capitalist finance
really works, why it doesn't for them and why what we
need instead is a publicly owned banking system that is
part of a system of democratic economic planning, in
which what's invested and where it's invested and how
it's invested is democratically decided.

The sort of bank nationalizations undertaken in the
wake of the fallout from the Lehman's collapse - with
the lead of Gordon Brown's New Labour government in the
UK being quickly followed by Bush's Republican
administration in the U.S. - essentially involved
socializing the banks losses while guaranteeing that
the nationalized banks would operate on a commercial
basis at arm's length from any government direction or
control. All they asked was that these nationalized
banks seek to maximize the taxpayers returns on their
'investment.' As sagely put in the 2010 Socialist
Register essay on "Opportunity lost: mystification,
elite politics and financial reform in the UK," this
really represented "not the nationalisation of the
banks, but the privatisation of the Treasury as a new
kind of fund manager."

The most important reason for taking the banks into the
public sector and turning them into a public utility is
that you would remove thereby the institutional
foundation of the most powerful section of the
capitalist classes in this phase of capitalism. That's
the main reason for nationalizing the banks in terms of
changing the balance of class forces in a fundamental
way. Build Socially Useful Commodities

A second socialist reason for nationalizing the banks
would be to transform the uses to which finance is put.
Let's take an example. Where I come from in Canada, the
backbone of the southern Ontario economy, apart from
banking, is the automobile industry. With the layoffs
that occurred and the plants that have been closed
(this has been going on for three decades, but it was
heightened during this crisis very severely) you are
not just losing physical capital you're losing the
skills of tool and die makers. A banking system that
was turned into a public utility would be centrally
involved in transforming the uses to which credit is
put, so those skills could be put to building wind
turbines, so they could be used to develop the kind of
equipment we need to harness solar energy cheaply
rather than expensively.

We cannot even begin to think seriously about solving
the ecological crisis that coincides with this economic
crisis without the left returning to an ambitious
notion of economic planning. It's inconceivable. It
can't be done. We've run away from this for half a
century because of command planning of the Stalinist
type, with all of its horrific effects - its
inefficiencies, but even more its authoritarianism. But
we can't avoid any longer coming back to the need for
planning. The allocation of credit is at the core of
economic planning for the conversion of industry. When
we on the left call for capital controls, we can't just
think about that in the sense of capital controls that
would limit how quickly capital moves in and out of the
country. We need capital controls because without them
we can't have the democratic control of investment.
It's not just capital controls at the border that
matter; what matters all the more for socialists is
control over capital to the end of directing, in a
democratic fashion, what gets invested, where it gets
invested, how it gets invested.

Now, people often say that socialists in the last 20 or
30 years have not laid out a programmatic vision. I
don't think that's true. As the Socialist Register 2000
volume on Necessary and Unnecessary Utopias showed,
there were more writings on what a future socialism
would look like in the last two decades of the 20th
century than probably ever before. But the detailed
pictures of a socialist order they painted - whether
involving some combination of plan and market or
participatory economic planning - have been exceedingly
sketchy on two crucial things. One is immediate demands
and reforms. And the other is how the hell would we get
there. What are the vehicles? What are the agencies?
How are the vehicles connected to building the

It is certainly very true that, whatever the vehicle or
the agency, you are never going to mobilize people
simply on the basis of the need to nationalize the
banks for economic planning, when they know that can't
come for decades, given the lack of political forces to
introduce it. People need to be mobilized by immediate
demands, as they were by the demands for trade union
rights, a reduced workweek, a public educational system
a welfare state, etc.

Some 15 years ago, when the FMLN in El Salvador after
the settlement of the civil war turned itself from a
guerrilla army into a political party, I was one of the
people invited to help them set up a party school. And
I had a conversation there with Fecundo Guardado who
had been subcommandante on the San Salvador Volcano,
and who later ran for president under the FMLN banner.
He said to me, everybody thinks that the long term is
the next election, (which since this was in 1995 would
have been in 1999 there). He said: they're completely
wrong - in fact, that's the short term. What we have to
hope is that by 1999 we will be strong enough, have a
strong enough base, to be able to make a decent showing
in the next election. The medium term is 2010, when we
have to hope that we will have a broad enough
representation and a deep enough development of our
members' capacities that we actually could have an
influence on the direction of the country. The
long-term is 2020, when we will be able to get elected
as a government that can actually do something, that
can transform the state. Angela Zamora who as the head
of party's educational program was hosting me, sat
there and listened to this and suddenly said, in that
case I'm leaving the party. I can't go back to the
people who I've been leading in struggle for 15 years
and tell them they have to wait for 2020 for immediate
reforms. It's impossible. I can't do it. Immediate
Demands and Longer-Term Vision

So one needs to figure out how to combine a clear,
ambitious sense of immediate demands with this
longer-term vision. But in the current crisis the
Left's immediate demand could and should have centered
around bringing the banks into public ownership. The
case for this could have been made in terms of the need
for a massive program for public housing. After the
Great Society program in the 1960s left-wing Democrats,
rather than calling for more public housing to rebuild
America's cities instead called for the banks to lend
money to poor black communities - in other words, for
the problem to be solved by letting black people, who
had been largely excluded from the banking system, into
it. It was similar to liberal feminism's demand that
women should be able to get credit cards, which they
were largely not allowed to do by the banks until the

Well, you should be careful what you hope for. One of
the effects of winning those demands was a channeling
of those communities more deeply into the structures of
finance, the most dynamic sector of neoliberal
capitalism. Clinton carried those reforms much further
in the 1990s, appealing to the Democratic Party
constituency (Clinton was known as 'the black
President' for this) on the basis of we're going to let
you succeed at the capitalist housing game. And then
Bush, of course, let every crook that he could find
into the mortgage business. Of course, there's no
reason why black people or women shouldn't want the
same rights as everybody else - why shouldn't they look
forward to their homes appreciating in market value?
But you need to understand the dynamics and
contradictions that are involved in trying to win
reforms for people through integrating them more deeply
into capitalist credit relations. And the results are
now clear.

We should be also demanding universal public pensions,
as the private pension plans won by trade unions now
are coming unraveled for both public sector and private
sector workers. And that would contribute to
strengthening the working-class, because it would
eliminate the kind of competition amongst workers that
employers have played on with their private pensions.
Indeed, increasingly we see that even the unions in
largest corporations today as well as unions of public
employees cannot sustain their member's pension plans.

We should also be calling for free public transit - to
be available like public libraries, public education
and public health care. All of this involves trying to
take a crucial portion of what we need for our
livelihood, our basic needs, and decommodify them as
far as possible within capitalism.

People respond positively to such demands even in North
America. The trouble with them, however, is that
there's not that much room for manoeuvre left for
reform in today's capitalism, because in order to have
a major program of public housing, in order to have
free public transit, you very quickly run up against
where are the funds going to come from? It's possible
to argue, given how cheap public bonds are today, that
you can go to the bond market, but that also means that
you become subject to the kinds of pressures from
bondholders that is requiring the Greek and the
Portuguese and the Spanish states to do what they're
doing to their public sector in order to guarantee that
they won't eventually default on those bonds. So you
come back fairly quickly to the need to at least begin
a process of socialization through taking the banks
into the public sector.

We need to try to see this moment of crisis from the
perspective of what openings it could create. The
limitations of a purely defensive response to the
crisis lie in not taking advantage of the opportunity
that the crisis creates. Despite the 'Another World Is
Possible' rhetoric, the left has been more oriented to
attempting to hold on to things than to taking things
in a new direction. Whether the struggle has been to
prevent water privatization, or whether it's been to
protest at G-7 and G-20 meetings, however militant the
action, it's often primarily defensive in the demands
that are articulated.

This is, oddly enough, one of the limits of a
perspective that says you can change the world without
taking power, without engaging on the terrain of the
state, without transforming the structures of the
state. What is on the agenda is mainly to prevent the
state doing certain things and what is off the agenda
is to change the state in such a way that ensures that
when new progressive reforms are won they lead on to
further structural reforms. We need to appreciate the
reasons for the anti-statism that is so on the Left
today; the suspicion of talking in terms of building
new parties or transforming the state is
understandable. But we need to go beyond protest, or we
will be trapped forever in organizing the next demo.

And as this current crisis is transferred down to the
regional and local levels, which every central state
will try to do, we will run up against the limits of
what can be secured in struggles at those levels. We
have to learn how defensive and localized struggles can
be linked up, and how they can be transformed so they
are directed into a struggle for state power.
Otherwise, all the protests will run up even more
quickly against the kind of limits of the immediate
reforms that don't lead on to more fundamental ones.

This is enormously important because we probably are
facing the destruction of public sector trade unionism
unless there's a shift in the balance of forces in the
context of this crisis. Capitalism can only go on so
long with the private sector being as limited in its
unionization, its density being so low, in terms of
collective bargaining rights and recognition, and the
public sector being almost universally unionized. It
can't continue. Part of the onslaught on state
expenditure that is taking place now is to destroy
public sector trade unionism. The ability of public
sector unions to resist in this crisis is being very
severely tested. That's how serious this is.

Speaking more generally, it is increasingly clear that
trade unions, as they evolved through the 20th century,
not only in the advanced capitalist countries, also in
most of the countries of the South, are no longer
capable of being more than defensive. They are not able
to win new gains, and they are not able to organize in
ways that develop the capacities of their members. The
challenge now is to build a trade unionism that is
actually a class organization, one that goes beyond
organizing people by the workplace alone and organizes
people in relation to the many facets of their lives
touched by this crisis. *

Leo Panitch is a political economist and theorist based
at York University, Toronto, and is co-editor of
Socialist Register. His most recent book is In and Out
of Crisis: The Global Financial Meltdown and Left
Alternatives (with Greg Albo and Sam Gindin). This
article is a revised version of a presentation at the
Delhi University symposium on "Globalization, Justice
and Democracy," November 11, 2010.


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