The Great Conversion
Obama’s Plan for Economic Immiseration
President Barack Obama spoke at length on the economy on Wednesday in the first of what is reported to be a series of speeches he will give around the country to push his economic ‘agenda.’ A question for his supporters is why Mr. Obama is now purporting to promote the interests of the middle class and working poor when he has remained silent for the last five years during the worst economic downturn since the Great Depression? If he cared one whit about these people the time to promote economic policies to help them was five years ago. And conversely, the economic policies he has pursued have decimated the very people he now claims to want to help.
Mr. Obama’s analysis of economic travails—globalization and its effects on an under-educated workforce, are the same neo-liberal pabulum the ‘Washington consensus’ has been serving up since Jimmy Carter was in office. And his economic prescriptions—public-private ‘partnerships’ to boost investment in technology, bringing corporate executives in to assess what is wrong with the educational system, building out lower cost ‘online’ education and community colleges to ‘boost American competitiveness,’ increased infrastructure spending and the creation of tax advantaged savings accounts for middle class families, are straight from the neo-liberal playbook as well. To ask the obvious question: if neo-liberal policies worked, why then the laundry list of economic travails?
Taking the speech at face value, the contention market forces (‘globalization’) are the central cause of the decades old downward mobility of the ‘American workforce’ leaves out the specific role Mr. Obama has played in pushing the monopoly capitalist coup forward with the Trans-Pacific Partnership agreement (TPP), the role he personally has played in reviving the Wall Street banks responsible for the ‘financialization’ of the economy, the bi-partisan effort by official Washington to diminish the lot of organized labor and the ‘privatization’ schemes he continues to push to hand the public economy over to corporate interests. Government policies in the service of capital are no more ‘market’ forces than the much derided ‘central planning’ is.
A recent paper by the International Labour Organization (ILO) presents a broad and reasonably nuanced effort that concludes financialization, and not ‘technology,’ is the central explanation for the increased, and still increasing, share of income going to corporations and away from labor. By changing the corporate motive from continuing economic production to ‘financialized’ production—the creation of corporate architecture designed for maximum extraction of previously existing value, the ‘balance of power’ between labor and capital was shifted to capital by its corporate agents (executives). A prime example can be found in Wall Street itself—individual firms willing to sink the entire financial system for short term trading gains. Additionally, through the permeation of debt-based leverage, rentier income is now drawn from every section of the economy.
Mr. Obama’s unconditional bailout of Wall Street, with upwards of $25trillion of public funds made available to ‘save’ the banks, is the single greatest gift from working people to the forces of their own demise in world history. The ILO paper articulates the role of Wall Street in the immiseration of the West’s toiling classes– not only was the transfer of public resources to ‘private’ banks in the bailouts taken from the working class, the financial economy Mr. Obama ‘saved’ is the absolute enemy of working people. Wall Street provided the tactic of immiseration of the working poor and middle class through financialization of economic production and it facilitated the process through financialization of the broader economy. In fact, Mr. Obama’s economic agenda can be read as the explicit continuation of this process.
Mr. Obama’s plan to ‘work with’ private technology companies to provide every college student in America with high speed internet service has particular irony as apparently the main capability to be boosted is the NSA’s ability to spy on students, long known to be periodically politically active, all the more quickly. As there was no mention of this ‘enhanced’ service being free—Mr. Obama is providing students the ‘right’ to buy products from private companies who then sell the information they gather from their ‘customers’ to the highest bidder while inventing ever more intrusive and corporate-totalitarian methods of controlling them. It is agreed that in theory high speed Internet service has value. That Mr. Obama’s actual corporate-state policies have made it a tool of totalitarian control shines a light on his true constituency. Conversely, it illustrates the destruction of actual economic value (high speed internet service) through strategies of domination by the same capitalists claiming they create economic value.
Asking business leaders to opine on the system of public education is more cynical still given Mr. Obama’s appointment of long-term public school privatizer Arne Duncan as Education Secretary. Business leaders’ interest is to shift the cost of training ‘their’ workforces onto the public dime. Even granting the dubious proposition education is to benefit capitalist enterprise, truly educating ‘the workforce’ provides for a broad set of potentially socially beneficial applications whereas training teaches skills that benefit certain employers. Given the history of American corporations trying to limit the mobility of workers, such as pensions with long vesting periods, providing specific training in lieu of broad education serves corporate interests against those of labor. And ‘education’ only creates ‘American’ jobs to the extent Federal government policies put certain classes of labor into faux ‘competition’ with more effectively exploited workers overseas. ‘Education,’ as Mr. Obama presents it, is a phony solution to an engineered problem.
Even in the dim corporate-state worldview of Mr. Obama’s patrons there must be interest in education outside rote training and inculcating maximum consumption—otherwise, who will create? Additionally, the basic arithmetic of privatized education is revenue – costs = profits. If profits are zero, as is the case with public education, then expenditures equal revenues. Why extracting profits–increasing public expenditures that go to capitalists rather than to education, adds value to education when it so clearly detracts is a mystery Mr. Obama should explain. And paradoxically, his ‘private’ model for education finds precedence in his health care ‘reform’ plan, the ACA, with the central difference being that Mr. Obama’s explanation for retaining a private healthcare system is that it is already ‘private’ whereas the educational system Mr. Obama now wants to privatize is largely public. And there is no grimmer view of human existence than corporations training human ‘consumption units’ in the empty ideology of capitalist consumption.
Mr. Obama’s ‘tax advantaged’ savings accounts for middle class families are a particularly cynical ploy. Middle class wages were stagnant for thirty years before declining in the economic calamity associated with the financial ‘crisis’ of 2008. What middle class (and poor) families need is income, not accounts to put income they don’t have into. With more details allegedly forthcoming, the initial read is through his ‘private accounts’ Mr. Obama hopes to effectuate George W. Bush’s plan for his own ‘private accounts’ as a step toward privatizing Social Security. And in his Wednesday speech Mr. Obama made coded comments about cutting Social Security that tie directly to his Hamilton Project (Robert Rubin) speech nearly a decade earlier. To be clear, the working poor would be hurt most were Mr. Obama to push ‘private’ savings accounts only the rich can afford while cutting the Social Security the working poor most depend on.
The infrastructure spending Mr. Obama advocates may or may not be a good idea depending on how it is financed. In the U.S., given its geography and geopolitics, infrastructure has unambiguously provided an economic benefit in the post-WWII period. But corporations formerly paid a substantial proportion of the costs of building infrastructure through taxes. Over the last fifty years taxes on corporations and the wealthy have been massively cut leaving the middle class to pay an increased share of public expenditures. And a significant proportion of this burden, in the form of municipal debt, is coming due.
The struggle currently underway in ‘bankrupt’ Detroit between ‘bondholders’ and pensioners has the Democratic Party of the last forty years supporting the immiseration of pensioners to pay financial speculators for financing infrastructure spending. To be clear, public (and private) pensions are deferred income negotiated in lieu of current income. Democrat Robert Rubin, with whose acolytes Mr. Obama has continued to fill his Cabinet, is an insistent advocate of Detroit’s bondholders being fully paid. And the only way to do so is to take the money, earned income that was deferred, from pensioners. Mr. Obama’s threat to appoint arch Rubinite Larry Summers—the man who bears significant responsibility for deregulating Wall Street and for the ensuing economic calamity, to Chair the Federal Reserve is a clear signal increased infrastructure spending is intended to transfer even more public wealth to ‘private’ hands.
Mr. Obama refers to the student debt ‘crisis’ as if he had no role in it. In fact, about half of the total student loan debt outstanding was accumulated while Mr. Obama has been President. Mr. Obama ‘removed the banks’ from making student loans in 2009 as part of his effort to shift bad bank debts and economic risk from the banks onto the public balance sheet, not in an effort to help middle class students as he now asserts. Under Mr. Obama student loan debt fraudulently incurred through bogus ‘for-profit’ colleges and trade schools has exploded with fully one-third of indebted students failing to receive degrees. With full knowledge that student loan debt is nearly impossible to discharge, Mr. Obama encouraged students to take loans as part of his education ‘initiative’ creating a new generation of debt slaves to a particularly pernicious type of debt.
The ‘middle class’ jobs Mr. Obama now claims to have created through the automaker bailouts is a particularly offensive sleight of hand. Before the bailouts a proposal had been floated to create a ‘tiered’ wage system where new autoworkers would earn approximately one-half what existing workers made. As a condition of the automaker bailouts Mr. Obama forced the issue by putting tiered wages in place while no restrictions were put on executive compensation. In large measure the same executives who had sunk the auto industry were left in their jobs at full pay and were left free to continue relocating autoworker jobs to low wage countries. And in fact, the bailouts Mr. Obama now claims were his were largely engineered by the George W. Bush administration before it left office. As with Mr. Obama’s healthcare plan, right-wing Republicans conceived the automaker bailouts.
On a positive note, it was refreshing to hear Mr. Obama correctly characterize his healthcare ‘reform’ plan, the Affordable Care Act (ACA), as a plan to provide health insurance, rather than health care, to those lacking it. The Democrat partisans who tried to draw such a stark line between Mr. Obama’s policies and the likely policies of his Republican rival in the last election, Mitt Romney, largely avoided the fact that Mr. Obama’s health care ‘reform’ was the same plan Republican Mitt Romney had implemented as Governor of Massachusetts. The right-wing Heritage Foundation originally conceived the plan as the radical right’s ‘solution’ to the ‘threat’ of national
health care. Under the guise of political feasibility Mr. Obama has pushed through the major policies of the radical corporate-right with his long-suffering constituents believing they got a good deal.
The genesis of the ACA as a corporate-right ‘solution’ to a public health crisis is what it is, but this alone doesn’t doom it to failure. What it leaves is a system that provides about two-thirds of the benefits of a functioning health care system at twice the cost. While implementation of the plan in Massachusetts initially reduced the number of medical bankruptcies —families that were bankrupted by medical costs, the number quickly recovered. The basic flaws of the existing healthcare system remain—monopoly power in pricing medical services and medical provision, a disjoint and ring-fenced system designed to maximize profits rather than to provide healthcare, and hugely asymmetrical political-economic power between insurance companies, medical providers and ‘the insured.’ The ACA’s liberal supporters believe against all history that private insurers will willingly provide the health care they are contractually obligated to provide when they only have when forced to in the past. The question then, with the unconditional bank bailouts as guide, is who is going to force them?
Again, the received wisdom amongst the self-described ‘liberal’ economists supporting the ACA is that it is all that was politically feasible. In fact, with poll results showing 75% of the American people initially supporting a national (single payer) health care system, Mr. Obama could have taken his case to the people. Alternatively, Mr. Obama could have represented popular disillusion as a potential threat to the extractive, dysfunctional private health care providers and won concessions. Instead, he had a health insurance lobbyist write the ACA and proceeded to pass the Republican plan conceived by the right-wing Heritage Foundation off as his signature achievement.
What Mr. Obama apparently hopes to accomplish in the remainder of his term, as evidenced by his economic ‘agenda,’ is the conversion of every remaining socially beneficial public institution into private enterprises designed to provide the highest profits for connected capitalists while converting their (public institutions’) ‘products’ into tools for the domination and control of the populace. Postmodernist insights notwithstanding, there is a difference between education and capitalist-corporatist propaganda. There is a difference between education and technical training in the service of industry. Savings account for people who have no income to save are a hoax. Infrastructure designed to extract ongoing fees for private interests at public expense is a cynical ploy. And as ACA supporters will soon be learning in excruciating detail, there is a difference between health insurance and health care. Finally, privatization isn’t efficient rationalization of public institutions; it is the replacement of the public interest with private interests. Lest the result remain unclear, replacement means elimination of the public interest.
Rob Urie is an artist and political economist in New York. His book, Zen Economics, will be published by CP/AK Press in 2014.