Socialism and the Current Crisis

Today, because of the crisis, the relevance of socialism can and must be addressed not simply as a desirable long-term goal but as a question of practical policy, focused on securing jobs, benefits, and social provision. After giving some examples of this I will look at what remains valid and what needs to be changed in classic socialist values.

In the weeks and months after September 2008, capitalism as we know it was saved from a near-death experience by massive state intervention that left the U.S. federal authorities with major assets that included a huge stake in Citigroup, the country’s largest bank; in A.I.G., the largest insurer; and in G.M., the world’s largest automobile concern. Fannie Mae, the mortgage giant, was returned to public hands. Although it is ridiculous to label these desperate—and temporary—measures “socialism,” it would be equally absurd not to see that public ownership on this scale presented an element of a distinctly socialist approach, especially given the rapid success of the intervention.

The visible bailout was huge but was greatly exceeded by the invisible bailout whereby banks could borrow money from the Federal Reserve’s discount window at only 0.5 percent interest, while lending out that same money at 4 percent or 8 percent or 16 percent. There was also a large—but not large enough—stimulus package, too much in the form of tax cuts and too little in the form of investment in infrastructure and new manufacturing. The rescue package staved off the crisis, and nearly all the direct investments have paid off, so that the Treasury and Federal Reserve actually made a profit. Unfortunately the inadequacy and inappropriateness of the stimulus means that unemployment is still above 9 percent, and the recovery is weak.

A weak recovery will mean weak revenues to cover ballooning deficits at both the state and federal level. Jobs and benefits will be trashed. The misery caused by weak revenues will lead state authorities to impose the sort of reckless cutbacks to vital programs already seen in California and New Jersey. Popular anger will be seen on the streets and at the ballot box. The countries of the European Union face an even stiffer fiscal crisis, one that could break apart the Eurozone. Trying to cure the problem and balance the budget via austerity rather than recovery will provoke an uproar as already seen in Greece. And who is insisting on these human sacrifices but the high priests of banking and finance whose blow-out created the problem in the first place and who continue to claim heroic levels of “compensation” when they are villains not heroes?

IN THIS CRITICAL JUNCTURE, saving capitalism is likely to require further drastic installments of state intervention. These can take two forms: First, and most probably, there is the neoliberal path of state authorities stepping in and using their fiscal powers to guarantee private sector business and profits. Th...