The Wall Street Journal began the year (1-2-09) with a survey of the “Doomsayers Who Got It Right” in 2008. In the past, they relied upon the cheerleaders of Wall Street to forecast a bright future with only a few clouds on the horizon. But 2009 is different. The prevailing mood is pessimism and fear. And for good reason.

The most pessimistic in the Wall Street crowd (and their academic apologists) acknowledge that the current economic crisis is the worse since The Great Depression. The more optimistic among them call it the worse crisis in the post-War period, as though not mentioning the unmentionable makes it somehow less ominous.

No one can predict fully what lies ahead, but, unlike natural disasters, economic life is both the result of and its future direction determined by human action. In other words, policy makers – for better or worse – will decide our fate.

Worse or Better for Whom?

Lost in the ever-expanding, desperate recipes for “recovery” is the basic question of who deserves rescue and who does not. The popular picture, encouraged by the media, is that we face the crisis together with a common problem and a common solution. Certainly the Wall Street crowd and the big industrialists do not buy this view. They are fighting a feverish battle for the survival and prosperity of their class. The wealthy of the US –despite their frequent avowals of patriotism, sacrifice, and the common good – are pushing to the head of the line for relief. This fact should be apparent to even the most casual observer of the obscene Federal orgy of give-a-ways over the last nine months. Well over a trillion dollars of future taxpayer revenues have been dedicated to the financial sector, with little impact upon economic activity and the fate of millions of workers and the poor.

As the crisis has migrated to the productive sector, workers and tax payers have again been compelled to sacrifice billions of dollars in taxes and salary and benefit concessions to resuscitate rapacious monopoly capital enterprises. At the same time, unemployment, desperate impoverishment, foreclosures, and uncertainty confronts the majority of our fellow citizens, with economic hammer falling hardest on African-Americans, other minorities, children and seniors. Their plight is noted, but made reliant upon the “recovery” of monopoly capitalism.

Two Economies

Amiss in this account is the unspoken reality that we exist in two economies: the capitalist economy and the people’s economy. The capitalist economy turns on the stock and commodity market reports, the corporate profit statements, trade figures, and gross domestic product – measures that track the health of a global economic system which cares most about profit and less about the consequences for humanity. The people’s economy, on the other hand, is measured by the standard of living of the vast majority of people: their incomes, benefits, employment, health, life expectancy, general welfare, and future prospects.

For decades, the idea has been fostered that the two economies are linked: the fate of most US citizens rests upon the health of the capitalist system. When monopoly capitalist enterprises – financial institutions, industrial corporations, and privately-owned services – thrive, the rest of us will benefit as well, they tell us. This notion has sunk deep roots into the thought patterns of the masses. Monopoly capital, popular culture, most of the organized labor movement, the two-party farce, and the corporate media have absorbed and promoted this distorted view. I am reminded of the oft-quoted statement, popular in the Clinton administration, that “a rising tide raises all boats”, a slogan that obscured the tsunami of growth of the capitalist economy and the listing of the people’s economy. Today, as the capitalist boat sinks, the wealthy CEO’s and their minions are pushing workers and the poor aside to rush to the lifeboats.

The economic crisis exposes the claim of a common fate as an illusion. While millions were relying upon “generous” credit, overtime, and multiple jobs to hold their heads above troubled waters, thousands of smug, insatiably greedy speculators were reaping billions from the manipulation and exploitation of their economic subjects. And the two-party politicians aided and abetted this process, continuing to nurture the capitalist system despite its failings. It has been said that bourgeois economist John Maynard Keynes once mockingly remarked that “Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all”.


A distinguishing feature of Marxist analysis is the insistence upon the centrality of social class. Where class relations and power are not readily apparent, Marxists scratch below the appearances to locate the decisive classes that wield power and those that are subjugated to that power. We do not see a harmonious society enjoying a fair distribution of the fruits of economic life. Instead, our analysis reveals the class of exploiters that has created structures of power enabling the expropriation of wealth to that class’s advantage. The vast majority of the people constitute another class – a class of working people forced by these social structures to exchange productive work for wages. Private ownership, by legitimizing the monopoly of the tools and materials of economic activity, provides the foundation for the power structures characteristic of the capitalist system. Following Marx, we call the relationship between the dominant ownership class and their employees: exploitation.

Since Marx’s time, this relation has been obscured by complex divisions of labor, internationalization of production, and layers of cultural and educational mystification, only to be shattered at moments of capitalist crisis. Like the curtain in The Wizard of Oz, the placid, day-to-day façade of capitalism masks another reality: a mechanism that advantages a minority at the expense of human progress and social justice.

No crisis since The Great Depression has so completely ripped away this curtain of obfuscation, calling for a careful class analysis. Moving forward requires an understanding of what is at stake for the working class as well as a frank assessment of the balance of power between the wage earning masses and the ruling capitalist class.

A New New Deal?

Parallels between The Great Depression and the current economic catastrophe are striking. More and more, economists and policy makers are studying the massive world economic slump of the nineteen thirties for clues to reviving a sinking economy. Understandably, many see similarities between the Roosevelt election with its promise of a fresh approach to a crippled economy and the election of Barack Obama. In both cases, US voters wisely rejected the failed path of laissez faire capitalism after that course led the economy off a steep cliff. In both cases, a dynamic leader touted a new road of change, though neither leader bothered much with the details of the promised changes.

But it would be folly to press the parallels too aggressively. In the first place, liberal mythology has greatly distorted the New Deal legacy, presenting Roosevelt as both a savior of the capitalist economy and the mastermind of the welfare-state. Neither characterization bears careful scrutiny: massive armament spending and military mobilization revived the economy and solved the unemployment crisis with the break-out of World War II. And the significant social programs associated with the New Deal were pressed upon the Roosevelt administration by an historic peoples’ movement (for more on the legacy, see  The Real Lesson of the New Deal for the US Left ,).

In the second place, contemporary state-monopoly capitalism is much further developed today than in Roosevelt’s time; the mechanisms of popular manipulation and contrived consent are far more sophisticated; the labor movement remains on the defensive and shows little taste for class struggle; and no revolutionary movement has emerged as an independent force exerting pressure on the two-party system. These factors, coupled with the nearly complete corporate domination of the Democratic Party, place the gains associated with the New Deal even further out of reach.

Much has been made of the Obama stimulus program, a limited, but positive step beyond the desperate, but short-sided “trickle down” corporate bailouts of the Bush administration. Despite the commendable initial focus on infrastructure repair and expansion, there are profound flaws in the plan cobbled together by a team of contrite, but limited-vision neo-liberal economists.

As economist Paul Krugman has keenly noted, the stimulus budget is far too small to recover the 3.6 million jobs already lost, not to mention the expected losses in 2009 and the jobs necessary for those about to enter the job market. Obama has expressed a strong distaste for federal deficits, precisely the wrong attitude at a critical juncture when job growth can only be achieved by government spending. It is simply incredible that the fetish for balanced budgets – a lynchpin of the now thoroughly discredited neo-liberal philosophy – continues to obsess policy makers.

Furthermore, the pressure is mounting to make tax relief a larger and larger part of the stimulus package. This is a hold-over from the neo-liberal tactic of lowering taxes, starving the budget, and extracting the losses from entitlement programs. Already, Obama has made concessions in this direction by promising (threatening) to reduce federal expenditures on Social Security, Medicare, and Medicaid. Not only have tax reductions in the form of rebates proven ineffective in the past, but they count, in the political calculus, as a reinforcement of conservative doctrine.

Some Democrats, including John Kerry, have correctly objected to the tax breaks for corporations that are embedded in the Obama plan. Again, those breaks count against the overall cost, but would deliver far less impact than the same money spent on infrastructure projects.

Roosevelt sought job growth by directly employing the unemployed in Federal works projects. Obama, however, has pledged that 90% of his job-creating investments will be done though private firms. This raises many issues that Stanley Aronowitz perceptively explores in an article entitled “Facing the Economic Crisis” (Socialist Project, 12-26-08). He raises questions of wage rates, unionization, a living wage, and the technical composition of various kinds of projects. But most importantly, he notes that private sector job creation engages profits which siphon off the maximum impact of government expenditures; all things being equal, more jobs can be created from a given amount of dollars without awarding profits to a private firm. Aronowitz speculates that 30% gross profit would be a common return for a private firm given a government project. In fact, it is customary in bids for municipal and state government contracts for the private firm to offer estimates calculated at three times the cost of the hourly rate for the employees engaged in the project. Thus, for every three dollars of government stimulus, one dollar of hourly wages would be passed on for job creation. In any case, the Obama strategy would sharply reduce the impact of Federal expenditures designated for reducing unemployment, in sharp relief with the New Deal counterpart programs. Clearly, the economic advisors associated with Obama cannot escape their private sector fixation.

Mass Unemployment

From the perspective of the people’s economy and the working class, the pressing issue is unemployment (which compounds the issues of poverty, health care, social security, education, etc.). Borrowing a concept from academic economics, unemployment functions as a “multiplier effect”. Rather than multiplying expenditures, long term mass unemployment multiplies misery, racking havoc on the material and emotional conditions of working people and their families. Mental illness, criminal behavior, and physical neglect join with the material inadequacies of health care, nutrition, housing, and social and cultural life to leave scars that can persist for decades.

The “official”, politically motivated, unemployment rate has now reached 7.6% of the work force. Even The Wall Street Journal concedes that, when discouraged workers and the under-employed employees are included, that rate is 13.9%, totaling 21.5 million. At the peak of The Great Depression, there were less than 13 million unemployed. Of course there were far fewer in the work force then, so the rate was much higher – 24.9%.

Not included in the unemployment figures are the 2.3 million US citizens incarcerated in various penal institutions (There were 136,947 inmates of federal and state prisons in 1933.). This mass incarceration – disproportionately poor and minority – has served as a handy tool for the ruling class to dispose of the potentially unemployed in much the way that work houses served this function in early, capitalist England. The repugnant penal industrial-complex – judiciary, police, and institutional personnel – functions to absorb great numbers of those not engaged in productive activity into this sordid enterprise.

In addition, the massive “defense” industry – sustained with public funds – accounts for 3.6 million jobs in the wholly unproductive project of sustaining US imperialism. Military spending and employment was a tiny fraction of the current totals before the build-up to World War II.

Clearly, capitalism has hidden millions of the potentially unemployed by incarceration and through socially destructive, malevolent federal, state, and local pain-industries.

Despite the insidious efforts to mask the failure of capitalism to produce productive, socially useful employment, there is general agreement that 2009 will bring even greater unemployment. Academic and private sector economists envision the official rate meeting or exceeding 10% of the work force, estimates that may prove conservative.

To address this most pressing crisis of the people’s economy the Obama administration must shed all remnants of neo-liberal economics. But more importantly, it must establish employment as the first priority of national policy. Despite the hope invested in the new administration, this will not come easily. I have no way of looking into Obama’s soul, but the forces arrayed around his administration, in Congress, and in the media have a long history of standing most often on the corporate side of the barricades. Monopoly capital has for far too long harnessed the majority of the political strata and the opinion-makers to their interests. When they have departed from the corporate agenda, it has been in the face of mass pressure – class politics becomes a struggle only when both sides are fighting. Thus, any promise from the Obama administration – as with the earlier FDR administration – will only be realized with militant mobilizations of those dependent upon the people’s economy: working people.

For the Left, the charge is first and foremost to organize the unemployed. The rusty machinery of mass action – long overshadowed by electoral maneuvering – must be urgently restored. The unemployed must be found at the unemployment office, union halls, food banks, and in their communities and given the tools of class struggle: organization and agitation. Of course these are the old means utilized by the militants of the New Deal era; if there are better ways to reach the unemployed, they should be tried as well.

The lessons of the Great Depression confirm that there is a vast and deep public sympathy for those desperately and tragically out of work through the failings of capitalism. The potential for a vigorous movement resisting and, perhaps, defeating state-monopoly capitalism is at hand.

Repair, Restructure, Reform and Revolution

The depth and urgency of the economic crisis has muddied the conversation over both the meaning and the solutions to the unfolding disaster. Some misguided souls have hailed the financial bailout as a kind of incipient “socialism” based upon the government purchase of preferred shares in capitalist enterprises. The fact is that these injections of future tax-payer liabilities amount, in most cases, to unconditional gifts to broken corporations. Indeed, these gifts are, more often than not, greater than the current capitalizations of these rotten entities. The capitalization of all financial stocks in the Standard and Poor’s top 500 corporations is at $671 billion – far less than the public funds already dedicated to their rescue. The same massive injections could have bought out, at current market value, the privately held stocks of investors, leaving a government-owned financial sector that could have done no worse, and very likely better, in freeing up credit for productive activity.

Others have defended the bailout by arguing that failure to save the banking sector would have dire consequences. They remind us that during the Great Depression 10,000 banks closed in the US with a corresponding loss of financial confidence. This view ignores the underlying capitalist process of financial restructuring that emerged from these failures. Small banks disappeared, but much larger, stronger entities and combines assumed the business formerly conducted by these small, often family-owned, businesses. A careful study of the earlier period shows that this was the typical – capitalist-favored – product of the crisis. Moreover, this restructuring was the avowed intention of the first New Deal approach as embodied in the NIRA. Mature state-monopoly capitalism as we know it today, with its enterprises “too big to fail”, was the net result of the Great Depression and the New Deal. Saving the 10,000 banks, the small, family businesses, and the non-monopoly enterprises was never in the cards despite official lip-service.

The same restructuring process is occurring in today’s economy (with the help of massive amounts of public funds). Firms like Lehmann Brothers disappear; others like Bank of America and Merrill Lynch combine; and others, like Citigroup, both combine and sell-off assets. It is very likely that that the same process will advance to the productive sector, beginning with the auto industry and its affiliates. Chrysler and Fiat have announced a potential merger that would transfer 35% ownership of Chrysler to the Italian company with no exchange of cash, but – and this is outrageous – only if the government would give Chrysler an additional $3 billion on top of the $5 billion already extended! Within a year, Fiat could buy an additional 20% interest at $25 million. This would put the total capitalization of Chrysler at a mere $150 million dollars or so. Fiat would hold a majority interest in a $150 million dollar auto company backed with a loan from US taxpayers of over $8 billion!

Again, a look at the New Deal era is helpful. This intensification of monopoly, consolidation, and restructuring was clearly a pronounced feature of that period. Frederick Lewis Allen writes in Since Yesterday 1929-1939 (p. 268):

[I]t was the great corporations, generally speaking, which during the nineteen-thirties had been making whatever money was made in business. Look at these figures from E. D. Kennedy’s Dividends to Pay. In the year 1935 there were nearly half a million corporations in the United States, and they made, between them, a tidy profit of over a billion and two-thirds dollars – but if one omitted from the reckoning 960 of the biggest (the 960 companies with stocks active on the New York Stock Exchange, for which the Standard Statistics Company tabulated earnings) that collective profit turned into a deficit. In short, in 1935 the 960 big companies were, collectively, making a profit; the 475,000 or so smaller companies were, collectively, losing money. Mr. Kennedy was not able to show what happened in 1937 to the great mass of corporations because the government figures had not yet appeared, but he was able to trace the further fortunes of the 960 at the top, and his findings provided more illumination. Of all the money made in 1937 by these aristocrats of business, well over half – 60 per cent – was made by just 42 of them; and nearly a quarter – 24 per cent – was made by a mere six of the very biggest (You would like the names of these six? They were General Motors, American Telephone, Standard Oil of New Jersey, United States Steel, du Pont, and General Electric.)

Kennedy’s research and Allen’s keen observation demonstrate the structural changes that capitalism underwent in the Great Depression because of or in spite of New Deal policies. Similarly, today, a comparable process is unfolding, aided and abetted by the massive use of public funds from the TARP and other bailouts. Unrestrained, the results will be the same: a dramatic destruction of small and medium size businesses and the consolidation and strengthening of monopoly capital.

But what of the people’s economy?

Historian’s speak of the Second New Deal, a policy shift towards rescuing the people’s economy which had the salutary effect of both easing the destitution of the vast majority of US citizens as well as stabilizing an economic system collapsing from shrinking demand for its products. But it cannot be emphasized enough that this policy shift was largely the consequence of organized mass pressure. Paradoxically, capitalism was saved from complete extinction by the militancy of radical political movements. It was not only the Communist and socialist movements that created this pressure, but also populist movements and crackpot groups offering bizarre economic panaceas. But it was the Communist movement and its progressive allies that sank deep roots in the labor movement, spurring an intense fight to address the people’s economy and the desperate needs of working people. New Dealers acknowledge that they were constantly looking over their shoulders at the Communists as well as other groups. Most assuredly, the Communists saw the potential for socialist revolution on the horizon. They failed to achieve that goal. But their efforts spurred an administration dedicated to capitalist restructuring and recovery to attend to the people’s economy. Without their efforts there would be no Social Security, unemployment insurance, or even the remnants of a welfare system decimated during the Clinton administration (Imagine the sick cruelty of a radical reduction of poverty relief – costing, at most, tens of billions of dollars – in light of today’s trillion dollar rescue of the rich and powerful). History demonstrates no fundamental social change without a powerful people’s movement.

The contours of this movement can, and should, include other strata adversely affected by the onslaught of capitalist restructuring. Small business people and professionals have a stake in this struggle. They, too, are economic victims of monopoly capital’s drive to consolidate and dominate economic life. As in the nineteen-thirties, small economic units, from farms to local banks, are being swept away by a shrinking economy and the advantages of monopoly; there has been no bailout for them. They have an important role in the anti-monopoly movement.

African-Americans have an enormous stake in the anti-monopoly struggle. The election of Barack Obama has done much to open the doors to the top rungs of power, but the doors for good paying jobs, fair affordable housing, decent health care, and education remain blocked by racism and economic disparity. While monopoly capital is at ease with an African-American chief executive, it continues to leave the African-American masses disadvantaged. Symbolism will not change this, only struggle.

Immigrant workers, other minorities, women, seniors, and youth have gained little and suffered much from the capitalist economy. Their fate and our fate will depend upon uniting them in the fight to restrain and defeat monopoly capital.

It is about power – the balance of power. It is sheer foolishness to expect the Obama administration to fulfill the people’s long-denied hopes without a shift in the balance of power from monopoly capital to the people. It is naïve to think that capitalist “nationalization” or partial “public ownership” sponsored by a desperate ruling class is a victory against monopoly or a step towards socialism without people’s power standing behind these moves. If we are to advance in the face of a world economy straining to stay afloat and the ravages of imperialist slaughter in the Middle East, we must organize and unify independent movements unshackled from fealty to bourgeois political parties and the most conservative, cautious leadership of the labor movement. First, and foremost, we must revitalize the Communist movement to again organize and agitate the working class for advanced struggles. We owe that to our forbearers who struck a powerful blow for the people in the last great economic crisis.