Dean Baker’s book, False Profits: Recovering from the Bubble Economy, is a depressing book. Not through any fault of the author. It is an excellent book. It is not depressing because Baker offers no hope. He suggests technically simple and practical solutions to the economic problems he points out. It is depressing, rather, because history and any cursory review of the present political landscape suggest that there is not a snowball’s chance in Death Valley that any of his solutions will be put into practice – or any other solutions that would really help solve what are, for most of us, the underlying economic problems. The reason for this, like Dean Baker’s suggestions, is fundamentally quite simple: what is best for most of us is not best for the relative few who currently have power, both hegemonic and state, on their side.
Baker’s book, like his last one (Plunder and Blunder), has a simple premise: the current economic crisis was the predictable result of a bubble economy based on flagrant inflation of real estate prices (specifically, for owner-occupied homes). The bubble and the inevitability of the resulting crash were perfectly evident, to anyone who, like Baker, focused an unbiased analysis on the data. Yet through it all, those who were supposed to be responsible for guiding our economy ignored, and even actively denied it.
What makes Baker furious, in False Profits, is that the people who failed to see the bubble, who even acted as bubble boosters, have suffered no ill consequences from their actions. The same people have been left in charge of public and private management of the economy; the same people are reporting on the economy, and appearing as experts on television shows. Baker minces no words. These people should have been summarily fired. When one of these pundits appears on television, or before Congress, to warn (for instance) on why too much deficit spending is a bad thing, Baker says the first question they should be asked is, “Exactly when did you stop being wrong about the economy?”
Class differences are clearly visible in the government’s response to the crisis. The bailout to the banks came first and was almost infinitely generous. Baker points out that the much-touted TARP funds were only the tip of the iceberg; huge sums were made available, for free, or virtually so, by the Federal Reserve Bank, and other government agencies, with almost zero publicity. The result was that the financial industry, and other commanding heights of our economy were virtually made whole at the public expense. Meanwhile, the stimulus, intended to get the real economy going again – i.e., get people back to work – was relatively miserly, and was politically difficult, at that. Baker estimates that the federal stimulus was only about 1/10th of what was needed, based on technical measures, and in fact was so small as to little more offset the anti-stimulus of state and local cutbacks. (I have read other estimates that say the stimulus and anti-stimulus were in fact almost exactly equal.)
Baker is at pains to point out all the “bad science” arguments put forward against bigger stimulus and deficit spending, in favor of the bank bailouts, “too big to fail”, etc., etc., etc. The trouble is, Baker is a voice crying out in the wilderness. The bad science is repeated ad infinitum, becoming the “conventional wisdom” (to use the term coined by another liberal economist more widely read than Baker, but almost equally unheeded). The voice of reason never makes it to the airwaves.
I have one major quibble with Baker. (I have a few other minor ones, but only one that is systematic.) This quibble involves his constant implication of incompetence, “mismanagement”, and the like to those who steered the economy into the abyss.
My question to Baker is, from their point of view, where was the error? As a class, the chieftains of the economy made sure they were made whole. While some traders and speculators, and a whole lot of common shareholders, undoubtedly lost money, at least for a while, and some, perhaps, were ruined, the capitalists and especially the financiers as a class managed to make money throughout – hand over fist during the bubble, and at a quite respectable (if that is the right word) rate through the crash.
Meanwhile, the economy limps along with punishingly high unemployment. Is this accidental? A comrade of mine highly placed in organized labor talks of labor law reform (such as the ill-fated Employee Free Choice Act) as strategic reform, in contrast to the tactical battles we usually fight. It is strategic because it alters the terrain of the battle field, changes the balance of power between capital and working people. (Of course, capital realizes this, too, which is why EFCA had to be defeated.)
Similarly, high unemployment is strategic for capital, because it weakens the bargaining power of the labor force, and, especially if sustained, lowers the expectations of working people.
I can’t believe that only a few left-leaners like Baker, my friends and I can see these kinds of things. Which leads me to believe that at least some of the captains of industry (or princes of finance) saw the bubble, knew the crash would come, and calculated, all along, how best to profit through it. Perhaps Lloyd Blankfein of Goldman Sachs, for example – a very smart man, who, based on the way his company positioned itself before and in the early days of the crash, clearly had a better sense than many of the imminent risk inherent in mortgage-based derivatives.
Antonio Gramsci said, “In mass politics, to tell the truth is precisely a political necessity,” which sounds almost oxymoronic to those who believe that politics and truth are inherently strangers to each other. But Gramsci wasn’t talking about politics, in general, he was talking about the politics inherent, or which should be inherent, to the socialist movement.
It is all about hegemony. Hegemony is when one class leads society, not by raw force (which would be called dominance or authority), but by winning the consent of the other classes. We live in our society under bourgeois or capitalist hegemony. Since the capitalist system is designed to exploit us (working people) for the benefit of those who control property (capital), the capitalist class MUST lie to win our consent. If we knew the truth, we would rebel. Gramsci sought to replace capitalist hegemony with the hegemony of the working class (socialism, or as he would have said, communism). Doing this depends on telling radical truth, exposing capitalist lies, making people understand their true power and their true worth. "The truth will set you free," although (and actually because) as Gloria Steinem pointed out, first it will piss you off. A society that is not exploitive does not depend on, and in fact CANNOT be based on, lies. Or so Gramsci believed.
But to win, this way, we have to get the truth OUT.