Reports from the Economic Front

a blog by Marty Hart-Landsberg

A Teachable Moment: Capitalism And State Policy

We often hear about teachable moments.  Well, we are definitely at such a moment now when it comes to understanding the ways in which the logic of capitalism places structural limits on state policy that work to the detriment of the majority of working people.

Here is one example of the one-sided nature of capitalism: if workers decide that their wages and working conditions are unacceptable and strike, the media and government officials talk about the harm that these workers are doing to the economy and demand that they return to work.  If business leaders decide that the business climate is not favorable for profits and decide to strike (by shutting down production at their offices and factories), the media and government officials declare the result to be a recession and race to propose tax cuts and subsidies.

Think about the current period.  We generally tend to vote for those people or parties that we believe are capable of promoting a healthy economy, especially one that generates lots of jobs.  Governments, of course, depend on business leaders for the necessary investment and production.  However, if these leaders decide not to invest or produce and the economy slumps–who do we blame?  Well, the government, not business.  This is what is happening right now.  

Our banks and large corporations are holding trillions of dollars in reserve but making few loans or investments.  Yet, there is little public outrage directed at their decisions, only calls for more tax cuts and subsidies to create a more attractive business environment.  As a consequence, governments committed to a capitalist economy are always under pressure to be responsive to business interests.

So, what about the current teachable moment?  The Obama administration has been incredibly business-friendly.  Just think about it—it responded to the financial collapse by pouring trillions into recapitalizing the very same financial institutions that generated the crisis.  It responded to the health care crisis by promoting a health care reform that promises to further enrich insurance companies.  It is responding to trade problems by advocating ratification of a number of free trade agreements that will enhance corporate power.  At the same time, it has all but shelved any action on the Employee Free Choice Act. 

The outcome of all this has been a significant increase in profits.  For example: “Financial institutions on Wall Street are preparing to pay a record 144 billion dollars in compensation and benefits, according to a study published Tuesday in the Wall Street Journal.“  Oh, and working people?  They get more cuts in social programs, a stagnating labor market, and continued downward pressure on wages and working conditions.

Yet, is business happy?  Apparently not—they continue to claim that President Obama is anti-business.  And why not—an organized business community has the ability to blackmail a compliant president into making ever greater concessions.  So, not surprisingly, the President has voiced his willingness to try harder to make the owners and managers of large businesses happy. 

Don’t believe me?  Read the following Business Week article.  It illustrates that relying on business to serve the public interest has put us on a slippery slope heading downward. 

Obama Wants a Detente with Business
Once the midterm elections are over, the President plans to make up with business

 

Last fall, JPMorgan Chase Chief Executive Officer Jamie Dimon showed White House staff a chart comparing the percentage of Cabinet Secretaries and top aides with business experience under Administrations going back to Teddy Roosevelt. President Barack Obama had the fewest by far. The President’s sometime adversarial relationship with business wasn’t helped by the departures of Chief of Staff Rahm Emanuel and National Economic Council Chairman Lawrence H. Summers. Exasperated executives often consulted the two aides, even if the lines of communication weren’t always clear. “The fundamental problem,” says Steve Reinemund, former PepsiCo CEO and now dean of the Wake Forest University School of Business, “is the sense the President doesn’t consider business a noble profession.”

Democrats close to the Administration say the White House wants to make amends and will make its relationship with business a priority after the midterm elections. “I have every expectation as we go through the next several months that we are going to see a greater involvement with business than we have seen in some time,” says Tom Daschle, the former Senate Democratic leader and an Obama ally.

The changes could include Obama’s backing of proposals to cut payroll taxes temporarily, which could save companies billions, according to company executives, economic advisers, and White House aides. If his deficit commission in December recommends a debt-shrinking package of spending cuts and tax code changes, including corporate tax reform, Obama may support it, the people say. The White House may also consider naming a CEO to a Cabinet job if one opens up or may give someone business finds credible the role of counselor, with a wide-ranging portfolio, they say.

Daschle says Peter M. Rouse, Obama’s new chief of staff, who has few business connections after spending most of his career managing the staffs of Democratic lawmakers, plans to be more accessible to corporate executives. “I don’t think there’s any question that he’s aware of that criticism and aware of the need to be more interactive and engaged with the business community,” says Daschle, Rouse’s former boss. “I would not be surprised at all if you saw evidence of that quite soon.”

There is a lot more—I highly recommend reading the entire article.  If you don’t have time, here is my summary: without a movement capable of challenging the logic of the market and the purusit of private profit, we are in real trouble.

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One response to “A Teachable Moment: Capitalism And State Policy

  1. kathleen kazda October 18, 2010 at 4:45 am

    Hi,
    Really liked your article, think I will become
    a follower/reader.

    Like

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