U.S. FINANCIAL MELTDOWN SPOTLIGHTS PROFIT SYSTEM’S FAILURE AND THE NEED FOR ECONOMIC DEMOCRACY
Adopted by the State Convention of the Socialist Party of Michigan
October 4, 2008
The collapse of the financial sector shows the failure of the capitalist economy. The inherent need of capitalist firms to expand their market shares and acquire new outlets for exploitation has reached a point at which capital concentration has created a roadblock to satisfying the system’s own expansionary needs. In seeking to prevent any reduction in their extraordinary profit margins, the capitalist firms have sought to drastically increase their rate of exploitation of labor, natural resources, and public assets. They have come to rely on the sheer market manipulation of financial assets, which must ultimately rely on investment in new sources of exploitation or public resource dispossession, in order to represent any genuine value of their own. In the most recent development along this trajectory, the nation’s top financial firms now seek a return on their enormous campaign contributions to federal politicians, through a taxpayer bailout of hundreds of billions of dollars….
For thirty years the leading recipients of the proposed bailout have attempted to justify their “Washington Consensus” on decimation of social safety nets, massive cuts to wages and benefits, and privatization of public services, in the name of mercilessly strict adherence to the “tough love” and “sacrifice” of the “free market.” But now that their ruthless exploitation has reached an impasse, American workers are being called upon to forget the principles that they so callously imposed since the Reagan/Thatcher era. These same Wall Street powerbrokers who demanded the near complete de-regulation of the financial sector under “free market” principles, are now calling upon all tax-paying U.S. workers to “come together as Americans” and take “collective responsibility” for their boundless greed and ultimate financial failure under the very standards they themselves imposed.
Congressional Democrats, through continuous pledges to reach a “bipartisan” solution to the financial meltdown, have predictably fallen over themselves to reaffirm their reliable role as one of the two great parties of capital. As Democratic House Speaker Nancy Pelosi proclaimed on September 26th, “We will not leave until legislation is passed that will be signed by the president. The markets need a message from us that we’re acting.” Barack Obama, whose $25 million dollars in campaign contributions from the financial industry in this election has exceeded the amount received by John McCain, has likewise urged bipartisian passage of the bailout package, “in the spirit of cooperation on behalf of the American people.”
The capitalists are trying to accumulate greater portions of the tax revenues paid by working people through bail-outs, corporate welfare, social-service cut-backs, privatization, and imperialist war. They are engaging in debt entrapment, predatory lending, and loan-sharking impoverished nations. They are gouging profits at the point of production through wage/benefit/pension cuts, attacks on unions, and race-to-the-bottom capital flight. As banking capital has developed from a mere medium between industrial capitalists, to the sovereign base of ruling class power, the concretely divided mechanisms through which surplus value was extracted in the past, have been replaced with a central vacuum. Through such a process of agglomeration, it has become largely indiscriminate to either the means or source, from which it is is accumulated, and heedless to the consequences that its unmitigated depletion presents to its own future needs.
Following this exposure of decades of ruling class lies, workers should reject the irrationality of the the “free market” and turn to the rational alternative, economic democracy. The need of the largest capitalist firms to wipe out competition has already led to a centralization of economic power, but in the form of private ownership by an increasingly reckless and completely unaccountable ruling class of professional speculators. Now that they have failed, what earthly justification can be given for bailing them out and handing the economy back to them? Ultimately, working people will have to decide whether we wish to maintain the system of production and finance with catastrophic consequences for ourselves and our families, or whether the time has come for us to take over the economy and democratically run it ourselves.
During the recent housing boom, speculators offered deceptively low interest rate loans on mortgages. As a result, millions bought houses they could not actually afford. Much of the funding for these loans came from some of the largest and most powerful financial institutions in the United States , and the world. For a brief moment, lending institutions and banks made huge profits, but then, as usual, the bubble burst, leaving the housing market, and, with it, the entire economy, in complete disarray.
With many of the largest banks and financial institutions on the brink of collapse, the proposed gigantic bail-out could very well cost taxpayers upwards of a half a trillion dollars. This staggering giveaway will bring higher taxes and further cuts in essential social services, no matter which of the corporate candidates becomes president. Once again, working people are being coerced into rescuing the wealthy few from the disastrous consequences of their own insatiable rapaciousness.
The Socialist Party of Michigan rejects the bail-out plan. Instead, we propose that the government take over the financial sector, and then delegate the distribution of home loans to a decentralized network of non-profit credit unions. These institutions are far less likely to push bogus loans than the financial institutions controlled by our corporate rulers. The federal government would also assume responsibility or forgiveness for defaulting mortgages while imposing a universal five year moratorium on all home foreclosures.
In the short-run, the costs of this debacle should be borne by those who benefited from the scam, both through a steeply graduated income tax and an estate tax levied at a rate of 90% for inheritances worth more than a million dollars. Such a tax structure, in conjunction with an immediate end to the war in Iraq and Afghanistan and a drastic cut in military spending, would provide the funds to prevent a financial collapse while also ensuring the needed expansion of vital social services.
Such a program to counter the immediate crisis is not enough. Housing is too important to be left in the hands of avaricious speculators and developers. The federal government should begin building millions of units of low-density, high-quality low-cost housing, integrated ethnically and across income levels. These housing units should be constructed by a unionized and ethnically and gender integrated workforce, designed to be energy efficient, and located near mass transit. These projects should be owned by the government, but should be operated by resident councils with the authority to set policy and to elect, re-call, and supervise managers.
We need to advance from capitalism to a socialist society, one in which housing is provided to all as a basic right, the financial sector and commanding heights of the economy are made publicly accountable through social ownership and worker control of the economy, and production is oriented toward the needs of working people, rather than maximizing the profits of a parasitic ruling class of multi-millionaires and billionaires. We, the majority who work for a living, must take control of our own destiny!