The Political Economy of the Trapped

YEAR ONE of the Obama era has been a disappointment for left-liberals. We are still impressed by the fact that our nation elected an elegant, intelligent, hardworking, and earnest young black man to lead us in these troubled times. We still swoon to his message of hope and justice—to his belief that we can use public power to right the wrongs of the past and prevent future catastrophes. But we are angry with Obama for being, well, a politician. We are upset by the many compromises he has had to make as he tries to help our country recover from a monumental failure of global finance, reform ... More

We Need a Permanent Solution for Our Banks

THE OBAMA administration has gone to great lengths to insist that if nationalization of banks is necessary, it will only be temporary—as if the general public thinks the U.S. government was planning to permanently nationalize banks.

Yet that’s exactly what should be done. Time and time again, our experiences in the United States and in the global economy have taught us that banks are like weapons of mass destruction: they can cause so much damage to our society that they have to be guarded by stable states rather than rogue private interests who will exploit them for t... More

Marx the Blogger: Alienated Labor on Wall Street

IF KARL Marx was still with us today he would be posting acid comments on his blog—www.loseyourchains.com—about the current mess with subtexts of “I told you so” and “It’s the system, stupid.” At the same time, he would no doubt be paying special attention to some stories in the New York Times about “greed” and executive bonuses that would have reminded him of some things he wrote in his younger days.

One story recounted the outrage experienced by “junior and midlevel executives” when told the “devastating news” that they would not receive their expected bonuses, which coul... More

Should We Still Make Things? A Symposium

SINCE THE 1970s, economists and sociologists have forecasted the inevitable decline of large-scale U.S. manufacturing and the birth of a post-industrial society dominated by service and high-tech economies. In his 1973 The Coming of a Post-Industrial Society, Daniel Bell observed that we are experiencing “a shift from manufacturing to services...a changeover from a goods-producing society to an information or knowledge society.” Now in the midst of a severe economic recession, two of our nation’s largest manufacturers are on the precipice of bankruptcy and many believe we should let ... More

After the Stimulus: Now What?

ON TUESDAY, February 17, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA).  Months will elapse before the legislation starts having the intended effect of generating new demand in the economy. But it is already time to start contemplating what more has to be done to restore prosperity. Some of the key steps are already in motion, but one essential issue has yet to be engaged or discussed: changing budget procedures to facilitate a long-term increase in government investment spending. 

At this point, the battle against the economic d... More

Interrogating the Great Depression

EVER SINCE September’s financial meltdown, the Great Depression has been on everybody’s mind. Suddenly, we’re all historians. Scholars have long pondered why the Great Depression was so prolonged. The right has an answer: It was the New Deal! A choice example is a recent N.Y. Times column by the economist Tyler Cowen. The only things FDR really got right, Cowen suggests, were his monetary and banking policies, although Cowen allows also for social security. Everything else was a mistake (and never mind why FDR did what he did) that made things worse. So the lesson for President-elec... More

Beyond the Abyss: America's Economic Future After the Financial Crisis

I.

Two Financial Crises: From Main Street’s Blues to Wall Street’s Panic

IT IS hard for Americans to think clearly about the economic condition of the nation ten years hence when we currently find ourselves on the brink of financial catastrophe.  Globe-straddling investment banks have been devoured by their own intricate financial schemes that had once transformed outsized risks into even larger profits. The titans of banking, insurance, pension funds, money markets, and hedge funds, who promised us all that they had mastered the balance between risk and r... More

Whatever Happened to the Commonwealth?

Presidential elections, systemic economic crisis, global challenges to the dominance of the established order:  2008 sounds more and more like 1932.  That was the year that the Dow Jones Industrial Average hit its Depression low of 42.11, Adolf Hitler became a citizen of Germany in order to lead the Nazis to power, and Joseph Stalin drew up his plan for the “Protection of the Property of State Enterprises, Collective Farms and Cooperatives and the Consolidation of Public (Socialist) Property.”

It was also the year that New York Governor Franklin Delano Roosevelt challeng... More

A Note on Greed: Who is Really to Blame for the Financial Troubles?

All of our politicians seem to agree that a major cause of the current economic crisis, or even the major cause, is “greed on Wall Street.” But I don’t understand how this could be so, since there has always been greed on Wall Street and the current crisis is only a recent one. Indeed, in the most general view of the capitalist system, greed is its crucial motor. Every individual, according to Adam Smith, employs his capital so as to produce the greatest possible value for himself: “He intends only his own gain.” I call that greed, and though the famous “invisible hand” supposedly tr... More

The Rescue: How Congress Should Fix the Paulson Plan

George W. Bush, the most ideological “free market” president since Warren Harding, has finally acknowledged today that a massive federal government initiative is necessary to rescue the nation’s—and the world’s—collapsing financial system. The plan is that a government agency would use taxpayer funds to buy up the bad mortgage debt that has wrecked the balance sheets of major financial houses. But Congress must insist that the rescue package provides major relief to homeowners and communities that were the initial victims of the systematic irresponsibility created by the deregulated mortgag... More

No Faith, No Credit: On the Brink of Economic Collapse

The current collapse of Countrywide, Bear Stearns, and commodities speculator MB Global has finally prompted the Federal government to begin re-regulating financial markets. Yet, it is doubtful that Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, President George Bush, or the politicians and business journalists, who enabled the captains of finance to bet their banks on neo-liberal ideology, have grasped the lessons of the past quarter century. 

Lesson #1:  Economies depend on faith and credit. Buyers will not buy, sellers will not sell, investors ... More

Mortgage Meltdown: Defining the Changes We Need

While the Presidential primaries have been dominated by vague calls for change, the escalating crises of the housing and financial sectors have the potential to concentrate our minds on the specific reforms that our nation urgently needs. This requires understanding how our current problems are a direct result of the policies pushed by Republican Presidents from Ronald Reagan to George W. Bush.

The story begins with systematic efforts by Ronald Reagan to dramatically reduce the regulation of financial markets and facilitate a huge transfer of income and wealth to the highest income ... More