David P. Hamilton : Sea Change

Sea Change.

Future debates will be over how fast and how far to push change, primarily involving the conversion of private to public, not whether change is desirable. Maintaining the status quo is almost an irrelevant position.

By David P. Hamilton / The Rag Blog / March 9, 2009

We now live in a new era. Since the stock market peaked in October, 2007, the world has fundamentally changed. During this period, the hegemony of unfettered capitalism has collapsed, especially in its heartland, the United States. Its demise was triggered by the maturation of capitalism’s fundamental contradictions combined with shockingly inept and corrupt leadership in Washington and on Wall Street.

Over the past 18 months, the world’s collective stock markets have lost over half their value. Tens of trillions of dollars in paper assets have vanished into thin air. Most major U.S. banks are technically insolvent, many in Europe as well. The U.S. gross national product (GDP) declined 6.2% in the last quarter of 2008, the steepest drop in decades. Tens of millions of Americans are losing their homes to foreclosure and tens of millions more are paying more for their houses than their current market value, which continues to drop rapidly. During this same period, roughly five million U.S. jobs have disappeared, with 50 million estimated worldwide. The official unemployment rate just hit 8.1%, a 25 year high, while the real rate is closer to 18% and rising at a rate of 20,000 jobs a day.

President Obama just hosted a conference to reform the U.S. health care system because the private for-profit one has failed, not covering nearly 50 million Americans, inadequately covering another 50 million and costing Americans 50% more per capita than citizens of any other nation. These events are unprecedented since the Great Depression. The New Deal and WWII bailed out capitalism then, but employing the same Keynesian measures today will be the economic equivalent of the classic military mistake of fighting the last war over again.

So far, Obama has resisted obvious and cheaper socialist solutions to the economic crisis. The government has poured $180 billion into AIG while its stock value has descended to les than a dollar a share with a total market value of less than one billion dollars. General Motors executives beg for twenty billion in loans while the corporation’s total stock value is less than five billion. Obama struggles to patch a broken, for-profit health care system that won’t really be fixed without a government run single payer system, while, by any objective measure, Americans receive care that is inferior to the socialist systems of Canada or most of Europe.

The evolution of the political consciousness of the American citizenry continues to run well ahead of its politicians, limited as the latter are by corporate patronage. Polls now show a growing majority of Americans favor nationalization of the banks and single payer health insurance. Unimaginable a decade ago, this leftward shift of American public opinion is itself evidence of a profound transformation. It was primarily the deepening economic crisis that propelled the public’s consciousness change that put an African American liberal in the White House with a mandate.

Capitalism will not disappear due to this crisis. Any desirable economic system features a mix of healthy public and private sectors. But, what Europeans have long called “the American model” of capitalist development has conspicuously failed and will never again dominate the economic landscape. It is no longer a credible option. This American model, ironically known by the French term, laissez faire (roughly translated,”let it happen”), featured minimal regulation and taxation of capital together with political rule by the upper echelons of the capitalist class greedily pursuing their own narrow interests.

These practices were sanctified by “supply side/trickle down” economists to justify greed as a public good. It also featured the exaltation of individualism and unbridled consumerism, the subjective component of which is the promotion of personal fulfillment through infinite consumption. This model depended on continuously expanding consumption and, in the absence of higher wages, ever greater debt. Unregulated capitalism must either grow or perish and some of the natural limits to its growth have been reached.

The resuscitation of the “American model” is impossible. Such a recovery is precluded by the inability of human society to survive on this planet given unrestrained capitalism’s continued onslaught on its resources. The hyper-leveraged financial sector, the auto industry and car-centric culture, the housing industry with its atomized sprawl, the exploitation of health care as a commodity, even the lifestyle of the ruling class itself have all fallen into widespread disrepute. The failure of these major private sector institutions will dictate that these sectors give up much of their role to the public sector.

The alternatives to the government taking over a bankrupt GM and running it in the public interest are becoming increasingly untenable. Neither idle factories with millions more unemployed nor perpetually pouring public money into essentially defunct operations is an outcome the Obama government can long allow.

Pumping ever more public money into corporate corpses like GM, Citibank and AIG will increasingly appear unreasonable. The U.S. government is now the 40 percent owner of Citibank whose stock is trading for less than $2 a share, yet so far it rejects exercising the control that the public rightfully owns. Public controlling ownership would cost significantly less than perpetual cash transfusions of taxpayers money to maintain the malefactors most personally responsible for the current debacle and their shareholders wishing to socialize their private loses.

Someday, parts of these institutions may return to private hands as the public-private equation is adjusted. But never again will we see the deification of the market as the solution for all economic issues taken seriously.

In the short term, the “American Model” will be replaced in the US by its principal alternative, the “European Model.” This model features partial government ownership of essential industries, more strict controls of capital and the more equitable distribution of wealth — social democracy, the concept that true democracy has both economic and political components. This model focuses relatively more resources on the development of the commons. It incorporates the concept of solidarity, i.e., that we are all mutually responsible for the group as a whole. The European Model has also been associated with pan-national integration and an aversion to militarism. These, too, are likely components of America’s future simply because the principal problems are global in scope and unilateral military measures typically don’t produce the desired political objectives. The cost of maintaining an empire has become unsustainable.

This conversion to the European model of development will, however, likely be insufficient to meet the very fundamental economic, climatic and ultimately lifestyle challenges facing us. Given the global magnitude of the issues, solutions will also have to be global and multi-national, leading to the possibility of an era of potential conflict between emerging international institutions and recalcitrant nations not acting in the general interest. Nationalism is henceforth increasingly obsolete and dysfunctional.

Merely changing from the American to the European model of development will also very likely be insufficient to address climate change. Climatic factors trump the perpetual growth required by unregulated market capitalism. The future must emphasize sustainability and conservation, if not austerity, but not growth. These requirements are only consistent with a more equitable distribution of wealth, the enhancement of public facilities and a return to greater simplicity in life style. Few Western politicians will as yet mention this likelihood.

One aspect of this sea change will be the demise of the Republican Party. Its ideology of racism, anti-feminism, homophobia, small government, unregulated capitalism and fealty to the very rich has been seriously eroded by the economic crisis and an African-American president with superstar political talent. In last November’s presidential election, they lost 2 to 1 among voters under 30. They face perpetual regional minority party status. The emergence of Rush Limbaugh as their de facto party leader is stark evidence of their diminution. The only way they could win national election again would be as a result of a split in the Democratic Party. But a possible left split from a Democratic administration that remained militaristic and excessively beholden to private sector interests is conceivable.

Future debates will be over how fast and how far to push change, primarily involving the conversion of private to public, not whether change is desirable. Maintaining the status quo is almost an irrelevant position. Change will continue to be propelled by the unfolding economic and climatic crisis. The challenges we face require global solidarity, collective and international solutions. Easily apparent realities will make ideologies that glorify individualism, private gain and the waste of resources increasingly be seen as selfish, unreasonable and outmoded

The Rag Blog

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3 Responses to David P. Hamilton : Sea Change

  1. Anonymous says:

    Such a thoughtful, information and balanced article, without the (albeit understandable) anger that characterises many commentaries on the US economy present & future. I’m not clear how “public controlled ownership” might function – perhaps Mr. Hamilton would explain further?

  2. While I wish David had it right, I am constrained to point out that recessions and booms have this in common: they draw people to proclaim the end of cycles.



  3. RogerB says:

    I agree with David Hamilton that we are in a new era of history in which the old rules and approaches no longer work.

    Top NASA scientist Jsmes Hansen says we have four years to save the planet from global warming, and this ought to tell us something has changed deeply.

    Barbara Ehrenreich’s essay at this link says much the same thing:


    Bottom line: we’re living a sick over-populated planet short of the oil and resources needed to keep the global economy expanding in the way is has expanded throughout previous human history.

    The mountain of bad paper issued by the investment banks can never be paid off. But that problem is a detail compared to the problem of a human population of 6 billion that has clearly overshot the sustainable global resource limits.

    Capitalism can create problems that not even socialism can solve when it comes to natural limits to growth on a finite planet.

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