Bailouts are capitalist business as usual, not “socialism”

By Pete Dolack

One of the most amusing spectacles of the farce that passes for elections in the United States is the continual shrieking from the Right that Barack Obama is a “socialist.”

The most common basis for this most preposterous claim is that Obama bailed out the banks. Setting aside that the Troubled Asset Relief Plan was signed into law by George W. Bush, one certainly does not have to be a receptacle of “tea party” talking points to have opposed the bank bailouts and the additional largesse showered on financial institutions. Indeed, it is actual socialists who are among the most energetic opponents of the bank bailouts.

To summarize government response to the financial collapse that took root in 2008, banks were given huge sums of money with no strings attached in the hopes that the banks would again lend money, without which modern capitalism can not function. When the banks decided to hang on to the money instead of lending it, central banks gave them more money at nearly zero interest rates and asked them to buy government debt that would pay considerably higher rates. The banks, after a careful review, decided they could make a profit from this arrangement.

Such policies are not different from the stratagem known as “trickle down,” a policy under which governments cut taxes on the wealthy and on corporations. Popularized by the Reagan administration in the U.S., “trickle down” is an ideology that claims that giving more and more to the wealthy is good for everybody, because the wealthy will invest their windfalls, creating jobs for everybody, and we’ll all live happily ever after.

After three decades of such policies, it would seem, were we to peruse actual life, not to have worked out. The wealthy and large corporations have more money than they can possibly spend; more wealth is poured into increasingly risky speculation because the concentration of wealth outstrips outlets for productive investment. U.S. corporations are sitting on about $2 trillion of cash because they won’t invest in new production when the demand for their products continues to erode due to declining living standards.

The difficulty of maintaining profit margins results in capitalists moving production — often to developing countries, but sometimes from one region to another within a country or across the border of a neighboring country. The mere threat of a company moving frequently results in a local government giving large sums of money to induce the threatening company to stay put.

These subsidies for corporations can get to the point that tens and hundreds of millions of dollars are paid to prevent a move of a few miles. The government of New York City, for instance, two months ago handed a deliverer of fresh food more than $100 million to not move across the Hudson River but instead stay within the city. The company’s customer base is mostly within the city, so it is fair to dispute how likely such a move would have been because the company is dependent on fast truck deliveries, something rarely possible if a driver must drive on one of the Hudson’s jammed crossings.

The New York City government goes further by paying subsidies to companies moving from one Manhattan neighborhood to another or even within the same neighborhood — Goldman Sachs was given $175 million in direct subsidies to move into its new headquarters, about eight blocks from its previous location. That sum does not include another estimated $250 million that Goldman Sachs will save because the state will issue tax-free bonds on its behalf, meaning that the company does not have to pay the interest it would have been required to had it issued bonds on its own.

Not that there is anything unique about New York’s corporate subsidies. New Jersey Governor Chris Christie, for instance, has handed out nearly $1.6 billion in giveaways in the little more than two years he has been in office. These giveaways can amount to tens or hundreds of thousands of dollars per job, usually with no strings attached.

It gets worse. A report issued on April 12 by Good Jobs First reports that sixteen states within the U.S. have programs in which businesses retain the state income taxes they deduct from their employees’ paychecks rather than sending the collected taxes to the state government. Nearly $700 million a year of taxes are siphoned off by these corporations — taxes paid to bosses to fatten corporate profits instead of being used to support schools and social services.

Highly visible subsidies such as the 2008 Troubled Asset Relief Plan that showered money on banks differs only in the level of publicity; TARP is capitalist business as usual. Capitalists, thanks to the power concentrated by their amassing of wealth and their resulting ability to decisively influence their countries’ institutions and leverage their ownership of mass media, are able to bend government policies to their benefit. They are able to bend rules in their favor, and induce governments at all levels to provide giveaways and subsidies. And if one competitor receives government largesse, the pressure of competition dictates that others must get in line for some, too.

As I have previously written, it’s not useful to see such behavior as “evil” however distasteful it is; rather these elites are simply acting in their own interest in a system that allows full scope to their acquisitive personal traits such as greed. There is no such thing as a “free market” no matter how loud its proponents proclaim its wonderments; left undisturbed, the capitalist system must lead to concentrations of wealth and that concentration’s concomitant lowering of living standards for working people. That concentration of wealth, power and privilege naturally leads to more subsidies and benefits.

When someone on the Right condemns the Troubled Asset Relief Plan or any other bailout, it is not “socialism” that has so angered them – it is capitalism as usual.

What is socialism? It can be defined as a system not simply based on capitalist relations of production having been transcended but when a full democracy has been instituted with industry and agriculture built up during capitalist stages of development brought under popular control so that production is oriented toward meeting the needs of everyone instead of for personal profit by an individual owner. A system based on political and economic democracy — and political democracy is not possible without economic democracy.

Economic democracy is impossible without production being oriented toward human, community and social need rather than private accumulation of capital. Everybody who contributes to production earns a share of the proceeds — in wages and whatever other form is appropriate — and everybody is entitled to have a say in what is produced, how it is produced and how it is distributed. These collective decisions would be made in the context of the broader community and in quantities sufficient to meet needs, and that pricing and other decisions are not made without community involvement or without input from suppliers, distributors and buyers.

Nobody is entitled to take disproportionately large shares off the top because they are in a power position. There are no power positions because enterprise managers are elected and recallable by the workforce, which collectively makes all strategic decisions. Every person who reaches retirement age is entitled to a pension that can be lived on in dignity. Disabled people who are unable to work are treated with dignity and supported with state assistance; disabled people who are able to work can do so. Quality health care, food, shelter and education are human rights. Artistic expression and all other human endeavors are encouraged, and — because nobody will have to work excessive hours except those who freely volunteer for the extra pay — everybody will have sufficient time and rest to pursue their interests and hobbies.

In such a world, there would not be extreme wealth and the power that wealth concentrates — political opinion-making would not be dominated by a numerically tiny but powerful class perpetrating its rule. Without extreme wealth, there would be no widespread poverty — masses of people would not have their living standard driven as low as possible to support the accumulation of a few. This is also a world in which all oppressions are eliminated: Racial, gender, sexual-orientation, national, religious and other discriminations would have to cease to exist in order for equality to exist.

There is nothing in the preceding four paragraphs that bares any resemblance to trillions of dollars, euros, pounds and renminbi handed over to corporations and the already wealthy while everybody else is immiserated to pay for it.

Freedom and democracy are not gifts handed down from above, and never have been — they are goals that are won through struggle and determination.

8 comments on “Bailouts are capitalist business as usual, not “socialism”

  1. Anon says:

    If “modern capitalism” cannot function without government assistance then it’s not capitalism at all. When the government supports corporations, the definition is socialism.

    • Unfortunately, Anon, you have everything backwards. Capitalism is inseparable from government due to the simple fact that capitalists, as the dominant people in a capitalist society, hold decisive sway over the government. Just why do you think countries like the U.S. repeatedly invade other countries? The whole point of invading Iraq, for instance, was to create a blank slate for U.S.-based multi-national corporations to grab windfall profits and impose monopolies. That they didn’t achieve their some of their aims doesn’t disguise those aims.

      When the veneer of democracy is stripped away and dictatorial rule is imposed to boost corporate profits, that is called fascism. We need only recall Mussolini’s famous definition: “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”

      Socialism is a stage of development in which capitalist relations of production have been transcended and a full democracy had been instituted with industry and agriculture brought under popular control so that production is oriented toward meeting the needs of everyone instead of for personal profit by an individual owner. There are no top-down corporations; instead there is economic democracy, without which there is no political democracy.

      I strongly recommend that you shut off Fox News and resign from the tea party, and instead educate yourself.

  2. Mike says:

    Surely the point of capitalism is that bad business (banks) are allowed to fail to make way for new competition.

    • Actually, the point of capitalism is to make a profit. Period.

      Banks, you may have noticed, aren’t allowed to fail, and the executives and financiers who extract large sums of money out of banks, and all other large capitalist enterprises, don’t have to face any consequences for their actions. The fines that banks have paying of late are simply a cost of business to them; they remain quite profitable and with no real impediments to keeping the party going despite the destruction they wreak.

      • patbona says:

        Capitalism can be summed up as follows : Socialise losses and liabilities and privatize profit. It was always like this from the start. I would prefer an economical system where failed businesses , including banks and finance are not bailed out but let to die. At least it would make clear that there is no reward for failure. But that is not capitalism.

  3. tubularsock says:

    SD, another brilliant post. Tubularsock loves the simple, clear, straight forward information.
    You have convinced Tubularsock to follow-the-money and it ends up at Capitalism’s door. And so off Tubularsock goes in his new endeavor: The Tubularsock National Bank and Pawn Shop! “Where Cash Is King.”

  4. janet yellen says:

    There are no bailouts in capitalism only our fascism thank you ouch the truth hurts sooo much.

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