Republicans attempt to destroy capitalism

Thursday's events were extraordinary. The Paulson administration had basically come to terms with the Democratic Congressional leadership on a bailout plan, agreeing to give up Paulson's demand for dictatorship over the economy and include funds for non-ultra-rich people to make the far larger funds for ultra-rich people more palatable. Then, at a meeting called to finalize the arrangement (or so the Paulson administration and Democrats thought), the Congressional Republicans proceeded to reject the whole framework in dramatic fashion - while John McCain sat silently by:

once the doors closed, the smooth-talking House Republican leader, John A. Boehner of Ohio, surprised many in the room by declaring that his caucus could not support the plan to allow the government to buy distressed mortgage assets from ailing financial companies.

Mr. Boehner pressed an alternative that involved a smaller role for the government, and Mr. McCain, whose support of the deal is critical if fellow Republicans are to sign on, declined to take a stand. . . .

Thursday, in the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.

“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”

Mr. Paulson sighed. “I know. I know.”

Why would the Republicans do this? There are two explanations: because they really believe that the government shouldn't be involved so much in the economy, or because they're looking for short-term political advantage. The electoral advantages are obvious - a large majority of the country is opposed to the government bailout (55 percent vs 31 percent in favor).

But the changes that Republicans have demanded are revealing (tho completely unworkable), and they may actually believe their free market ideology. On September 18 over a hundred House Republicans wrote a letter to Paulson and Bernanke, arguing that “federal investment in such large amounts of private company stock has the appearance of a socialist and not a free market approach to managing our economy.” Representative Jeb Hensarling of Texas, speaking for many of his colleagues, referred to the bailout as “the road to socialism”. If only it were so!

This represents a stunning ignorance of the nature of both capitalism and authoritarian planned economies (which is what they actually mean when they say socialism) - an ignorance that could have disastrous consequences. Thruout the 20th century, “socialism” was the bogeyman of the American elite - but it was not a single thing. Rather, it was a polemical conflation of three things: the Soviet Union's threat to American global hegemony, the threat of workers to capitalists, and the inconvenience of government regulation and spending to capitalists' free pursuit of profits.

The first two problems were, in the end, solved thru a blood-drenched history of foreign intervention and labor repression. Both were real threats to the power of the economic elite over society and internationally. But the third issue is not a threat at all - it is a periodic necessity required by the crisis tendencies of capitalism itself.

Yet much of the right wing is incapable of analytically separating these three issues, and instead interpret the world thru this polemical slogan. Thus all government programs and interventions in the economy become “socialism”, and since socialism is the enemy of all that is true and just, it must be avoided at all costs.

This kind of thinking is what turned the crisis of 1929 into the Great Depression. For three years the Hoover administration, paralyzed by its laissez-faire ideology, refused to take the aggressive action necessary to mitigate the crisis. The result was nearly the destruction of capitalism.

We are unlikely to see a repeat of this disaster - the servants of capital in the government now have decades of experience with economic intervention to prevent the market economy from destroying itself, and agreement on the bailout now seems near. But we could be seeing the birth of a new right-wing myth of betrayal.

The right never forgave FDR for saving capitalism by using government spending to co-opt popular anger and stimulate the economy. Screaming "socialism" the whole way, they fought a bitter and mostly futile rear-guard battle against the emergence of the Fordist regime of accumulation (altho it is a tribute to their hysterical anticommunist campaigns that the United States remains the only rich country without universal government-provided or -guaranteed healthcare, itself a major drain on business). The resentment at their failure to reestablish the absolute freedom of capital combined with the major challenges to American supremacy and white privilege of the 1960s to fuel the rise of the right that we now suffer thru.

If the current crisis ushers in a new era of regulation and government spending, look for the right to cast the bailout as the moment that betrayed the promise of free markets to organize their utopia of inequality. This mythical association of market economics with individual freedom is the foundation upon which all rationalizations of inequality are based, and the rock upon which our attempts to deepen democracy and reduce social divisions have repeatedly been smashed. Of all the failures of the American left, the failure to counter this myth by spreading a realistic understanding of how capitalism works is perhaps the most fundamental.