Nationalize finance under democratic control!
After a year of gathering economic crisis, the financial panic that broke out in mid-September has made a new global depression, on the scale of the 1930’s or worse, all but inevitable. For years, capitalists have inflated their profits with a series of speculative bubbles, where the values of assets—stocks or mortgages or commodities—soar on the expectation that they will soar. For years, a huge portion of capitalists assets have been purely fictitious, based only on what other capitalists were willing to pay for them, not on any relationship to the real economy. The psychology that supported that fictional value broke last month, replaced with panic. Now, the entire financial sector is bankrupt, with fewer assets than debts.
Throwing their neoliberal, “free market” ideology of the last three decade overboard like so much ballast, the capitalists are relying on the government that they profess to despise to save them. They intend to socialize the huge losses they have incurred, while continuing to privatize their past profits. US Secretary of Treasury Paulson’s plan gives the losses to the workers, the profits to the shareholders.
The US Government’s rescue plan will not work to avoid a depression. If the US government simply borrows the $700 billion that they give to the financial corporations, interest rates will soar. This will further depress housing prices, lead to major bankruptcies in manufacturing, and create huge new losses. The downward spiral will continue. If on the other hand, the government massively slashes the budget, cutting Social Security pensions, working class consumption will collapse, again feeding a downwards spiral of falling prices and new losses.
In previous crises, global capitalism was able to recover by opening up new markets, like the emergence of the Chinese market during the past six years. Today this is not possible—there are no new Chinas out there. It is indeed this fundamental limitation of the market that is the underlying cause of the crisis. Capitalism now can only lead the world into a downward vortex of rising unemployment, collapsing wages and economic chaos.
But there is a workers’ alternative. Instead of socializing losses governments must socialize—nationalize—the entire finance industry and place it under democratic control. A demand that a few weeks ago would have seemed leftist utopianism is now entirely reasonable and indeed the only practical solution. If all the financial institutions—banks, insurance companies, saving and loans, pension funds—become state property, their worthless loans to each other can be wiped off the books as the mere paper that they are. As the sole holders of individual homeowner’s mortgages, the government-owned financial corporation can slash interest rates on the mortgages, instantly putting billions of dollars in working-class pockets. It can reorient financial investments toward the huge infrastructural and industrial projects needed in the United States, and indeed in every nation, creating millions of new jobs. It can wipe out the crippling international debt owned by developing countries that has sucked wealth from billions of people for decades.
Of course, this nationalization would be without any compensation to existing shareholders. Congressional Democrats have called for the government to take just “some equity” in the failed banks, leaving the wealthy shareholders in control and in the money. But the more than trillion dollars in losses already incurred have, even by capitalist reckoning, wiped out all shareholder’s equity. The financial intuitions are bankrupt and the shareholders, who profited in creating the crisis, hardly deserve a gift from the government.
This solution is equally valid in every other country. Such nationalized financial institutions, cooperating with each other globally, would have to be controlled democratically by freely elected boards at the local, regional and national level. This democratic control is the only way to prevent the money simply flowing back into private hands.
This nationalization is not by itself a solution to the crisis, but it is a large part. To stop the depression, working class incomes must be increased. Immigrants, in particular must be allowed the rights to organize and raise their wages and must be given the legalization needed to protect them for employer abuse. Public services like education and health must be expanded. Clearly, after this sudden appearance of $700 billion dollars, no one can rationally argue that the United States cannot afford universal single-payer health insurance and universal free university education or to rebuild its cities.
Only a vast mass movement could possibly win the nationalization of finance, for the capitalists will fight it tooth and nail. After all, the financial corporations own or control most of the other corporations. Nationalization of finance under democratic control poses the real question of which class is to run society. It would only take place as a transitional step in a revolutionary struggle to put control of society in the hands of all workers. But with millions soon facing the loss of jobs and houses, with no alternatives, a mass movement is possible. Already, an intense wave of anger is rolling over the US working class in opposition to the government bailout and Congressional offices are deluged with messages running 99% against the plan.
In the US, where workers organizations are weak, the first step is to call organizing meetings of immigrant rights, anti-war, labor and other groups to work out a common Workers’ Solution to the economic crisis. Many left organizations are already putting forward their own differing ideas, so activists may welcome the chance to formulate a common approach to a common solution. As support for such solutions emerges, as we think it can, then mass actions, mass organizing and eventually mass strikes will follow.