Two vital lessons in American economics were reinforced this week:
First, you have absolutely no right to know how your tax dollars are being used.
Federal Reserve Chair Ben Bernanke, in response to a direct question from independent socialist Sen. Bernie Sanders, firmly maintained that disclosure of firms receiving governmental aid would embarrass them and make them less likely to draw upon the funds.
So we have the obligation to pay hundreds of billions to bail out major financial corporations who took enormous risks and often engaged in phony bookkeeping, but we have no right as citizens to discover who is receiving our money. So is our money going to Wall Street firms that lost money but
handed out $18.4 billion in bonuses last year? We”ll never know, if Bernanke prevails.
Meanwhile, Bank of America Corp. is also trying to keep the lid on our right to know. It contended that it will suffer "grave and irreparable harm" if Merrill Lynch & Co. employees —paid $3.6 billion in bonuses just before the firm’s acquisition by the bank –are publicly identified, its lawyers declared in federal court in Mahattan.
Second, the Obama administration’s top economic decision makers are committed to propping up the financial sector at any cost, but it remains to be seen how much they value manufacturing. The financial sector produced $313 billion in profits in 2003, compared with just $119 billion for manufacturing, as economist William Tabb (Z, 6/08) has pointed out.
Where the financial sector accounted for less than 2% of total domestic corporate profits in the mid-1950’s, it (until recently) provided about 40% of all domestic corporate profits.
Tabb aptly describes the seeming "magical" process behind the expansion of the financial sector:
"Money could be made solely out of money, without the intervention of actual production. The new secret was presumed to be leverage and risk management, which allowed the purchase of assets that promised higher returns even if they carried a higher risk.
"This was both a an economic and political development, as the financial sector gained leverage over the rest of the economy, in effect gaining the power to dictate priorities to debtors, vulnerable corporations, and governments." As its power grew, it could demand greater deregulation, allowing it to grow still further and endangering the stability of the larger financial system."
In the hopes of restoring the magic of the financial sector, Treasury Secretary Timothy Geithner and Federal Reserve’s Bernanke decided over a recent weekend that insurance giant AIG was too big to fail. So they decided to fork over another $30 billion. That makes the taxpayer stake in AIG now up to $170 billion. Even AIG’s previous show of open contempt for public concerns– a $440,000 weekend retreat for AIG’s top executives held at the St. Regis Resort in Monarch Beach, California less than a week after receiving its first installment of $85 billion–failed to ignite the outrage of Southern Republicans and Blue Dog Democrats.
Essentially, the dominant forces in both parties are far more committed to reviving the financial industry in intact a form as possible, while manufacturing–already depleted by the offshoring of jobs to low-wage, high-repression nations like Mexico and China–is regarded as far more dispensable. Admittedly, there are some critical differences between the Republicans and the Democrats, as when the Republicans demanded detailed recovery plans from GM while asking virtually nothing about what AIG plans to do with roughly six times as much money.
We will soon see a new phase in the struggle over America’s recovery. General Motors is now requesting $16 billion in additional federal funding to hold off bankruptcy, after previously receiving $13.4 billion. "Amid the automotive depression, GM is dependent upon the largesse and forbearance of the U.S. and foreign governments to sustain its various entities," S&P equity analyst Efraim Levy said in a statement for his clients.
Hopefully, progressives in Congress will broaden the issue from the narrow issue of more funds for GM, asking why the bailout debate has focused exclusively on simply maintaining GM and Chrysler as US nameplates with relatively tiny workforces left behind in America?. Even before the current sales nosedive, GM had already jettisoned 85% of its production workers since 1990–and by then it was already laying waste to communities like Flint (scene of "Roger and Me"), Detroit, Pontiac, and countless other cities. Jobs from those cities were being exported to Mexico en masse (later to China, where GM has tripled its capacity in recent years), leaving behind hollowed-out cities pockmarked by abandoned homes, empty factories, and new prisons filled to overflowing.
Essentially, the Republican stance might be characterized as an all-out nuclear war on GM and Chrysler jobs. Southern Senators–Alabama’s Richard Shelby and Kentucky’s Mitch McConnell, in particular- are eager to see a vast new field open before the foreign manufacturers who have generally located in mostly-white pockets of the South and lower Midwest. The prospect of losing the US auto industry–which has been particularly to the Midwest and accounts for some 3 million auto-related jobs nation-wide–is a trivial concern to the Right in Congress.
The Republicans have been so eager to see the demise of GM and Chrysler–and unconcerned about leaving their fingerprints all over the death of a signature US industry– that even hard-liner William Kristol warned them against sounding like "Marie Antoinettes with Southern accents." Moreover, Dick Cheney (yes, Dick Cheney) cautioned that total opposition to the auto bailout would forever make the Republicans "the party of Herbert Hoover."
Meanwhile, The Democrats, playing defense as usual, have tended toward a more limited "neutron bomb" approach: letting the GM and Chrysler institutions stand while requiring them to wipe out a huge swath of the bodies they now employ. As a condition of aid, the Democrats seem willing to go along with the notion that GM and Chrysler must go through another excruciating round of firings (GM has already discarded 85% of the production workers it had in 1990) so that we can still proudly claim that we have the vestige of a US-owned auto industry, no matter how few jobs it now provides.
Where’s the imagination? Why aren’t Democrats combining their talk saving the auto industry with creating "green jobs" and building up the nation’s infrastructure?
Highly-skilled but displaced ex-auto workers could be employed in vacant auto plants building equipment for environmentally-friendly mass transportation systems –along with high-mileage cars. This would also generate hundreds of thousands of good-paying construction jobs building new rapid-transit systems in our cities. This is far from a science-fiction fantasy, as we can see from looking at Western Europe and Japan.
But do the Congressional Democrats have the courage and vision to pursue this path? The preliminary signs are not encouraging, but they have yet to feel any significant "street heat" from labor and the Left.
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I'm teaching in Labor Studies at Penn State and the University of Illinois in on-line classes. I've been continuing with my work as freelance writer, with my immediate aim to complete a book on corporate media coverage of globalization (tentatively titled The Giant Sucking Sound: How Corporate Media Swallowed the Myth of Free Trade.) I write frequently for Z, The Progressive Magazine's on-line site, The Progressive Populist, Madison's Isthmus alternative weekly, and a variety of publications including Yes!, The Progressive, Foreign Policy in Focus, and several websites. I've been writing a blog on labor issues for workinginthesetimes.com, turning out over 300 pieces in the past four years.My work specializes in corporate globalization, labor, and healthcare reform... I've been a progressive activist since the age of about 17, when I became deeply affected by the anti-war and civil rights movements. I entered college at University of Wisconsin Milwaukee just days after watching the Chicago police brutalize anti-war demonstrators at the Democratic Convention of 1968. I was active in a variety of "student power" and anti-war activities, highlighted by the May, 1970 strike after the Nixon's invastion of Cambodia and the massacres at Kent State and Jackson State. My senior year was capped by Nixon's bombing of Haiphong Harbor and the occupation of a university building, all in the same week I needed to finish 5-6 term papers to graduate, which I managed somehow. My wife Carolyn Winter, whom I met in the Wisconsin Alliance, and I have been together since 1975, getting officially married 10/11/81. Carolyn, a native New Yorker, has also been active for social justice since her youth (she attended the famous 1963 Civil Rights march where Dr. King gave his "I have a dream speech"). We have two grown children, Lane (with wife Elaine and 11-year-old grandson Zachary, who introduced poker to his classmates during recess) living in Chicago and Rachel (who with her husband Michael have the amazing Talia Ruth,5, who can define "surreptitious" for you) living in Asbury Park, NJ. My sister Francie lives down the block from me. I'm a native of the once-heavily unionized industrial city of Racine, Wis. (which right-wingers sneeringly labeled "Little Moscow" during the upheavals of the 1930's), and both my grandfathers were industrial workers and Socialists. On my father's side, my grandfather was fired three times for Socialist or union activity. His family lost their home at one point during the Depression. My mom's father was a long-time member of UAW Local 72 at American Motors, where he worked for more than 30 years. Coming from impoverished families, my parents met through a very low-cost form of recreation: Racine's Hiking Club.