At the time of writing this, the Senate is preparing to vote on Bailout 2—after the first proposal got shot down in the House by progressive Democrats and conservative Republicans. Supposedly, this time the amendments made to the bailout proposal are going to receive enough bipartisan support to pass. However, this revised version does little to address the problems of an economy in recession and the increasing plight of working families and distressed homeowners; it is still very much a Wall St. welfare package for those responsible for getting us in this mess. Most economists agree that the approach being taken by Washington will do little to get us out of recession.
If that is so, then what is going to happen to the millions of families and ordinary people that were being adversely affected by our capitalist system before this crisis? And what, if any, attention and resources are going towards staving off the environmental crisis? First, a quick look at the bailout.
Dean Baker, from the Center for Economic and Policy Research (CEPR), has been one of the most vocal and level-headed voices on this matter. As he said, "We would still be facing a recession even if all our banks were flush with cash."i The real cause for the recent downturn in the economy was the bursting of the housing bubble and the ramifications it had for ordinary Americans. Baker states:
The main cause of the economy’s weakness is not insolvent banks and lack of credit; it’s the loss of $4 trillion to $5 trillion in housing equity as a result of the bubble’s partial deflation. Families used their equity to support their consumption in the years from 2002 to 2007, as the savings rate fell to almost zero."ii
Therefore bailing out the banks would give them ability to lend, but the problem is that they won’t lend to families that no longer have home equity as collateral: "It wouldn’t matter how much money the banks had, they are not going to make mortgage loans to people who have no equity."iii
So what should the government do? Well, without a doubt, people facing foreclosure should be able to renegotiate their mortgages allowing them to stay in their homes. Additionally, Baker suggests we need to find other ways to boost demand other than household consumption" by "reducing imports and increasing exports," in the longer run; and "rely on government stimulus to help spur growth and reduce unemployment," in the short run.iv He also has a much more detailed list of what progressive conditions for a bailout should be, including getting Freddie and Fannie Mac back under fully public control.
I, however, would like to focus on some aspects of a government stimulus that could both lift us out of recession and start down the path to an equitable green economy.
Green Economic Stimulus and Wage-led Growth
Before this current Wall St. crisis, millions of Americans were deal with their own crisis: the everyday crisis of living under capitalism. This crisis affects roughly 75-80 percent of the population and our global environment, and it occurs whether or not the Dow Jones is doing well or not. Michael Albert recently, in a blog post, put it perfectly:
"Tens of millions in poverty, millions homeless, an almost uncountable number pummeled by educational and health deficits, raging wars, and endless other grotesque deprivations on behalf of the top fifth, and even more so the top fiftieth of the society, up to and including destroying the planet we live on, would be an economic crisis in all eyes were we not living in a society that measures success and failure solely by examining effects on elites."
So, when looking how to get out of the recession, we also need to look at how we can do this in ways that will also positively affect those suffering under capitalism and steer us away from a worsening climate crisis. At the same time, these reforms should lead us toward a trajectory of change that brings us closer to the ultimate change we want to see.
What we need is a Green Economic Stimulus package that will be used to expand already existing green jobs and create new green jobs and build new infrastructure. Van Jones, president of Green For All, argues convincingly: ""It’s time to stop borrowing and start building. America’s No. 1 resource is not oil or mortgages. Our No. 1 resource is our people. Let’s put people back to work — retrofitting and repowering America. … You can’t base a national economy on credit cards. But you can base it on solar panels, wind turbines, smart biofuels and a massive program to weatherize every building and home in America." v
This can be done by giving those billions to state and local governments to support green infrastructure projects. Already, in 2007, the Green Jobs Act was signed. This gave $125 million for workforce training programs targeted to veterans, displaced workers, at-risk youth, and families in extreme poverty, and it will train people for jobs like installing solar panels and weatherization.vi The government needs to increase funding for the Green Jobs Act and expand its scope.
Furthermore, these jobs should be union jobs where possible and all of them should pay living wages.
A green stimulus of this sort will boost aggregate demand through infrastructure projects and through the higher wages workers will be receiving from the jobs created, trusting that capitalists would take advantage of profitable sales opportunities. This would result in a wage-led, high road to growth, that would tackle unemployment, stagnate wages, environmental catastrophe, and lift us out of recession and poverty
Down the Road Away From Capitalist and Environmental Crises
For those of us seeking to replace the economics of competition and greed with equitable cooperation, however, why would we support such reforms? The fact that the majority those suffering under our economic system would be better off, is enough to garner support for what I’ve laid out. Additionally, this would have enormous ramifications in strengthening the bargaining power of the working class, especially people of color and immigrants. All the while, it’s also a sound strategy to economic growth, so a large section on the population, crossing class lines, could be won over.
Of course, this alone will not be enough. There are other matters to take care of regarding our financial institutions—which we should demand be not only regulated but democratized. Others like Baker, as well as Sam Gindin and Leo Panitch have touched on these aspects.
With the further discrediting of the of markets as an economic tool that will come with this kind of intervention, along with the increased living standards and bargaining power of the most oppressed sectors of the population, democratization of financial institutions, and reversing the effects of climate change, such a green economic strategy would only leave us stronger in the long-term battle to build a new participatory economy and attain environmental justice.
John Cronan Jr. is a restaurant worker and organizer based in New York City. He can be reached at email@example.com
iBaker, Dean. "Bailout II: Adult Version." Center for Economic and Policy Research. 29 September 2008
vqtd. in Freidman, Thomas. "Green the Bailout," http://www.greenforall.org/media-room/press-clips/green-the-bailout
viGreen For All. "What Are Green Collar Jobs?" http://www.greenforall.org/green-collar-jobs