Photo by Marlowe Mason
At a recent panel discussion at the Brecht Forum on the Wall St. financial crisis, from right, Naomi Klein, Arun Gupta, Frances Fox Piven, Doug Henwood and Chris Hayes.
Fathoming the financial crisis at the Brecht Forum
By Casey Samulski
The Web site’s introduction opens with the words of playwright Bertolt Brecht: “Everything changes.” Like the economy, for one.
Even for those unfamiliar with the playwright’s work, prominent quotations on the Brecht Forum’s Web site from Marx’s “Das Kapital” should leave no room for error when guessing which direction its politics lean. However, now perhaps for the first time, the forum and its contributors are not just being taken as a bastion of leftist intellectualism in the city, but rather, something much more: scarily prescient.
The crisis on Wall St. and the subsequent bailout have become the subject of much discussion and speculation over at 451 West St., at Bank St., home of the forum, and while the debaters strive to ground theory in reality, for many New Yorkers this reality has already become a painful one.
The Brecht Forum was founded in 1975 as the New York Marxist School. It moved into the Westbeth complex three years ago, where it occupies the ground floor of the former Serge’s Gym. The forum hosts more than 250 events each year, including Theater of the Oppressed Laboratory and the Institute for Popular Education. A discussion panel on Oct. 6 titled “An Offer We Can’t Refuse?” on the Wall St. crisis included such leading leftist intellectuals as Naomi Klein, Arun Gupta, Frances Fox Piven, William Greider and Doug Henwood.
In interviews with The Villager, none of the above panelists seemed particularly taken aback by the string of failures still shaking the financial markets. Each spoke of this outcome as something nearly inevitable — the trick, one might say, lies in reading the harbingers of its coming.
Gupta, an investigative journalist, called the near collapse part of a trend that dates back to the start of the Reagan presidency. He cited “The Gipper” as the beginning of the shift in America “from production-based consumption to debt-driven consumption.”
Gupta suggested watching the rise of the credit-card industry from the Reagan era onward: Debt had become the new purchasing power, fueling the average American. And this growing debt, one way or the other, had to be paid for.
Gupta also talked about the equity-based consumption of the ’90s, funding the Internet boom and bust. The housing bubble, he argued, was the next logical extension. And the numbers were even more mind-boggling for this go-round.
He cited Americans using home equity for “$3 hundred billion to $4 hundred billion per year to fund consumption” between 2004 and 2006. Leveraging figures like that, the damage that’s been done to the sub-prime loan industry thus far seems almost a light consequence (home foreclosures notwithstanding.)
Of course, it’s also these sorts of figures that make the unappealing $700 billion bailout seem like a reasonable course of action. And with Obama coming to power, perhaps there is the will to repair these problems?
Not so, says Piven, author and professor. Piven, who teaches at the CUNY Graduate Center, said the crisis was being used by the high-powered firms involved to “to stick the public” for their own dangerous investing.
“The election of Obama doesn’t really change that,” she said.
Former John McCain campaign adviser Phil Gramm helped deregulate the derivative markets during the Clinton administration, using the same tools Warren Buffett would later call “financial weapons of mass destruction,” the same mechanisms that led Lehman Brothers to bankruptcy and Buffett’s own AIG to a $70 billion rescue by the taxpayers. Thus, the legacy of these problems draws from decisions made by both Democratic and Republican presidencies.
So while Piven saw parallels between F.D.R.’s ascendancy and Obama’s, she said the only way to garner “a second New Deal” and a way out of the mess would be “if [Americans] become defiant and threaten the operations of major businesses.”
It was this kind of outcry during the run-up to F.D.R.’s first term, the growing chaos under President Hoover, she said, that spurred the new president into action.
Right now, there simply isn’t the right atmosphere for that kind of uproar.
“More than half the country are intoxicated, delighted [with Obama],” Piven said. But people who think everything is going to be O.K. when he takes office “are in for a disappointment,” she said.
The problem, as more specifically addressed by the panelists, isn’t that the bailout is happening — the consensus among panelists was that the bailout was necessary given the severity of the failures. The problem lies, according to David Harvey, in how that bailout is being used.
Harvey, another professor at the CUNY Grad Center, has been a longtime attendant and lecturer at Brecht Forum. In a theory he put forth, “Accumulation by Dispossession,” Harvey argues that the bailout is being used as a kind of “class warfare,” holding the taxpayers hostage in return for opportunities to further consolidate wealth. And while those phrases might seem like some kind of Marxist paranoia, the situation that Harvey is describing is exactly what is happening, he and the other Brecht intellectuals charge.
As Gupta explained, so far, those who have been bailed out “are sitting on the capital, using it to acquire weaker rivals.” The injected funds are, in fact, being used for “everything but lending,” and Gupta said that, as a result, the Federal Reserve has become “the lender of first resort.” This fact, he said, is why the bailout is “a complete failure.” In other words, the move is all but a flag of surrender by the free market, the ultimate admission of government into the banking sector.
Harvey spoke to this idea, as well, explaining that many of the world’s banking facilities are being “de facto nationalized.” This process indicates, as he believes, that finance should be treated as “a public good.” But the problem is that while all of this money is being poured into the recipient institutions, the Fed is voluntarily not giving itself voting rights over the shares it is buying.
“Can you imagine,” Harvey said, “any stockholder putting billions of dollars into an enterprise and then not having the rights?”
When asked if Obama could enforce these powers, Harvey said if he tried that “half of his party would revolt.”
And this is really the crux of the matter, according to Harvey and his colleagues. While a new Democratic administration offers some promise of addressing these problems, Gupta said he was waiting for Obama’s cabinet appointments to see if “the foxes are still in the henhouse.” He said Obama had surrounded himself with “all these Wall St. types,” the same ones asking to be bailed out and pushing for minimum oversight.
Politicians see Wall St. as the engine of the American economy and, as a result, the cascading deregulation of the finance industry has been largely dictated on big finance’s terms. Gramm, derivative deregulator extraordinaire, called Wall St. “holy ground,” and it is this reverence that has precipitated the market-knows-best attitude exuded by both parties.
But when the market in question weighs in at almost 25 times the annual budget of the U.S. government, perhaps a prying eye or two is warranted. And if the $62 trillion value of the credit-swap market doesn’t sound big enough, the Wall Street Journal pegged total value of the over-the-counter derivative market at $400 trillion in June of this year. That, as Harvey noted, is “ten times the total output of goods and services in the world.” In other words, enough to bankrupt the planet if even 10 percent were to undergo the failures that led to AIG’s bailout.
Harvey argues that this sort of extreme position and the wealth disparity seen in America today is the result of a political project by the wealthy. Money like that, Harvey argues, is power enough to buy congressmembers and ensure that proper regulation never ensues. According to Harvey, “mobilizing a class movement” against this phenomenon, from the bottom up, is the only solution.
Which brings one back to Piven’s original assertion that grassroots action is the only way to really begin the change Obama’s campaign has been talking about. She talked about “that sense that people would no longer obey the rules” as being the catalyst for F.D.R.’s aggressive measures in fighting the Depression.
“That’s why the Brecht Forum is so important,” Gupta said. The more people are educated and talking about these issues, he said, the more they can expect to see them addressed by those in power.
Piven agreed, saying Brecht Forum “presents a kind of vehicle for disseminating the ideas,” and helps people realize “their circumstances are not the inevitable result of market law.” She was encouraged by the “lively” turnout she saw for her panel.
Klein’s recent essay in Rolling Stone magazine is linked to by the Brecht Forum’s Web site and is a searing critique of the rampant cronyism in the current bailout. Comparing the government’s strategy to the mismanagement of the beginning of the Iraq War, “The Shock Doctrine” author exposes flagrant conflicts of interest that exist in the rescue plan’s current structure, writing, “Unless we get a good deal, there will be nothing left over after the banks are done feeding.” But Klein ends her criticism with a hopeful note about the Fed’s power in becoming majority shareholder of all these institutions:
“When a society no longer has enough money to pay for its most pressing needs, there are worse things than discovering you own the banks.”