After the meltdown

On the eve of the US election, five critical writers and economists met to discuss the financial crisis - and what should be done. With Barack Obama heading for the White House, is this time for the left to think big? William Greider, Frances Fox Piven, Doug Henwood, Arun Gupta and Naomi Klein put their heads together

December 5, 2008 · 16 min read

William Greider

People are asking me where we are now – how the hell do I know? I’ve heard from several people who really are losing their retirement savings. It’s terrible, and their lives are going to change very dramatically. But our perception should be this is a rare opening.

The old order is crumbling. Politics right now is the fight of the old order, represented not just by Wall Street but other interests, to cling to their diminishing power. And up to now, they have been assisted and supported in that by both political parties and most ‘responsibles’, so called. But that, too, is changing rapidly.

So you have to now put aside the reflexive despair that people on the left usually experience, even about the election outcome and our new president, and look at it as a dynamic process that we can influence. It breaks all ideological and practical political barriers, and is a serious crisis for the nation and also the world, but is also liberating.

This is the moment when we talk about the society we want to help create, in the most ambitious terms. And I’m not being a pie-eyed optimist, I understand all the reasons why that may well fail, but this is a moment of history people rarely, rarely get, and we should try to make the most of it.

William Greider is the national affairs correspondent at The Nation and author of Secrets of the Temple, a history of the Federal Reserve

Frances Fox Piven

Like Bill, I think that there are a lot of unknowns. We aren’t quite clear about whether the government bailouts simply mean more redistribution of American wealth upward and more scapegoating of the poor for the crisis along the way – as, for example, mortgage lending to poor people is blamed for the collapse in the markets.

But I want to talk rather about the long-standing belief on the left that economic crisis, although it causes terrible things to happen, also generates new political possibilities.

Whenever we say that, we’re really thinking about the Great Depression, because it generated a lot of economic insecurity and real hardship, but that was combined with virtually a total discrediting of the economic ruling class. When the economy failed, we finally got a candidate, FDR [Franklin D Roosevelt], who railed against the economic royalists in his speeches, and then we got a Congress that hauled these people before Congressional committees and machine-gunned them with questions, and this had a huge impact on the political culture of the country.

For a big moment, maybe 10, 20 years, people were not in the grip of the ideas of the economic ruling class. Maybe something like that will happen now. The press, and Congress, have already moved away from their former idiotic worship of the Delphic statements of Alan Greenspan [ex-chairman of the Federal Reserve]. Now people are really angry about the terms of the bailout. And there was a Chicago sheriff who said he wasn’t going to evict anybody who defaulted on their mortgages. That’s what happens in this kind of crisis because who’s right, who’s wrong, the way the world is – everything is up for grabs.

So when the reigning ideas are questioned like this, deep economic reform becomes possible. Obama has brought out lots of new voters. And his election has got to be only the beginning of the period of transformation, not the end. In the New Deal, if that’s our model, it wasn’t FDR winning in 1932 that led to significant economic social and political change in the country; it was that FDR and his rhetoric – rhetoric designed to win elections – gave people a sense that they mattered, that they had influence, that they had hope. He created a climate which helped to encourage the great social movements of the 1930s: the movements of the unemployed, the farmers, the aged, and especially, of course, the labour movement. Those movements created a lot of social disorder, but also a lot of instability in the electoral system. And because they did, FDR responded to their demands.

Bill Greider said we should talk big, we should think big, we should think about how to reorganise the economy, we should think about the end of empire perhaps. I agree, but I don’t think we should overlook the more homely reforms that people will respond to. We don’t want a national health system that gives everything to the providers; we want to reign in the providers in our national health care system. We want good income support systems, a decent retirement system, and we want to regulate the unregulated economy.

In other words, if we really are in the middle of a new period of possibility, we should also be willing, not only to think big, but to take it one step at a time, building the institutional arrangements that empower ordinary people, and stand as levees, restraining the next episode of market plunder if it comes.

Frances Fox Piven is the author of The Breaking of the American Social Compact and Why Americans Still Don’t Vote

Doug Henwood

People say the credit crunch is not their problem; but it is ours, too. Some people say ‘let it all fall down’. I say that’s not politics, that’s nihilism. There is a temptation to echo what Edmund Wilson said after the 1929 crash: ‘one couldn’t help being exhilarated at the sudden, unexpected collapse of that stupid, gigantic fraud’. But the unemployment rate hit 25 per cent in 1933, and I don’t think we want to see a re-run of that.

But we can make the situation better.

First of all, equity infusions: the government should buy stock in the banks rather than asset purchases. There is a study by some IMF [International Monetary Fund] economists that looked at scores of banking crises around the world and they found that equity infusions, recapitalising the banks, is a much more effective way of dealing with this than buying bad assets and trying to sell them.

Next, financing it. Yes, it’s a giveaway to the bankers, but there is plenty of money at the top of society. The top 10 per cent of the population has 45 per cent of the income, the top 1 per cent about 16 per cent. The top 1 per cent has about $2 trillion in income – and we don’t have to take it all at once, but we can take bits of it over the course of several years…

Debt relief. The IMF study also showed that debt relief is an important part of getting out of any kind of financial crisis, so this is an instance in which economic efficiency and social justice coincide. So that is an important demand to make.

Re-regulate the financial system. The financial system is so sprawling, and complicated, global, and interconnected that it is a project that is going to take a long time, but has to be done so we don’t have a rerun of this nonsense five or ten years down the road.

If we are going to nationalise the banks, why not control them as well, and not just give them a blank cheque to run things as they were? There is an ideological opening; with the state getting so explicitly involved in rescuing the mess that finance brought on itself and us, there is an opportunity to push things in a better direction. Out of the wreckage we could create all kinds of new economic development institutions – non-profit, co-operative, locally owned. We can create institutions that provide low-cost financial services for people who are being fleeced at the moment.

And finally, just a few words on the politics at the moment. People are talking about the end of neoliberalism. Maybe so, though I see a lot more continuity between neoliberalism and the 400 years of capitalism that went before it than some people do. But that aside, there is an idea, popular among the left, right, and centre, that neoliberalism means that the state got out of the economy. The state never got out of the economy; markets are not the state of nature, they need to be established and maintained by state power. The nature of that state and what it does is what matters.

Doug Henwood’s books include Wall Street and After the New Economy. He is working on a study of the current American ruling class

Arun Gupta

I’m going to start with my conclusions first. I agree with Doug on nearly everything, though I think governments have got out of the markets. Their role is now only a supporting role, funnelling wealth to corporations – the crony capitalism that has run rampant.

Now we are in a severe economic crisis that requires dramatic action. It’s gone from the US to global and from the financial sector to the rest of the economy. The only institutions that can do anything about it are governmental, and there has to be global concerted action. Our role is to make sure that whatever the policies enacted, they are democratic, transparent, and accountable.

This failure and the need for systemic government interventions mean that our work is largely done on an ideological level in terms of arguing for the necessity of, for example, something like a green New Deal, or single-payer national health care, which are two proposals you hear a lot. That’s because it’s hard to argue against it when you have this massive intervention in the economy. This crisis might also end up doing what the anti-war movement hasn’t been able to do – bring about an end to the Iraq war.

But without a mass-based dynamic opposition with a clear vision, agenda and strategy, the neoliberal model will just reassert itself. And it is already reasserting itself. We see the US reportedly turning to the IMF for consultation, and Iceland going hat in hand to the IMF for a loan, and what they’ll get in return is a severe austerity program.

What we need is a poly-culture economy. Without it we’ll be vulnerable to other global contagions, and without diverse economic structures, whatever regulatory frameworks are put in place will just be undermined and overturned down the road. There is a huge opening for the left and anti-capitalists. I don’t think it’s that hard to come up with detailed programmatic proposals. What is much more difficult – and this is something we must tackle because the left does not like to think about it – is organisation and ideology.

I’ve been in a lot of meetings and discussions in the last few weeks around organising against the Wall Street bailout plan, and it comes up time and again. People don’t want to confront the need for organisation and the need to have a clear ideology because once you do it leads to political battles. But without it we can’t say who the agent of change is, and we don’t have anything to organise around.

Arun Gupta is the editor of the Indypendent, the newspaper of New York City’s Indymedia centre, and is currently writing a book about the decline of the American empire

Naomi Klein

One thing Arun didn’t talk about is the fact that he was the person who sent the email that led to the great protest on Wall Street – the email that made news all over before the protest even happened. Some of the signs at that demonstration, I think, give us an indication of where we might take this. My favourite was one which said ‘No socialism for the rich until the rest of us get some!’

As Doug said, crises are not new, and we may be in uncharted territory but we have experienced these bursting bubbles before. I have a chapter in The Shock Doctrine about the Asian financial crisis of 1997-98 called ‘Let it Burn’, because the very same banks that have been so anxious to get bailouts from US taxpayers now, at the time were saying, and this was a quote, that ‘what Asia needs is more pain’. Because, of course, Citibank, Goldman, Morgan Stanley, went into Asia after the crisis reached bottom and bought up the crown jewels of the Asian ‘tiger’ economies.

Anyway, what I wanted to quote to you from the book is something Alan Greenspan said at the time. He said that what he thought was being witnessed with the Asian financial crisis was ‘a very dramatic event towards a consensus of the type of market system which we have [in America]’. In other words, Greenspan thought that the crisis was a lesson being taught to the Asian tigers for daring to protect their national industry. And, of course, the IMF imposed structural adjustment programmes which forced them to lower those barriers – which allowed the very Wall Street firms at the centre of this crisis to go in and engage in what the New York Times Magazine at the time called ‘the world’s biggest going out of business sale’.

Michel Camdessus, the head of the IMF at the time, agreed. He saw the crisis as Asia being reborn into American-style free markets. He said economic models are not eternal: very sanguine! There are times when they are useful and other times when they become outdated and must be abandoned. Once again, he saw it as a lesson.

And I think what’s interesting about that is that maybe it’s time for progressives to think of themselves as a sort of people’s IMF, though in more democratic terms, as we now really have evidence that this market model is broken. And clearly what is needed is some dramatic structural adjustment in the USA. So let’s play IMF.

Again in Argentina in 2001 the IMF tried to use the economic crisis to push through more structural adjustment, but the problem was that just a few months earlier they had been holding up Argentina as their model student – and they had already privatised everything. Also, the country itself had been very much indoctrinated in the idea that they were the model student, that they had followed the rules. And so it was much harder to sell the idea that you needed more neoliberal structural adjustment, and instead what you had was a popular revolt – and I think this is really important in this moment – against the entire expert class.

The slogan which was in the streets is a really good slogan for this moment: ‘Que se vayan todos’ – all of them must go. This was the period where they went through five presidents in three weeks, but it wasn’t just the politicians who went, it was the pundits, the economists, and because they had boasted so much about the miracle of Argentina, they found themselves bereft of the usual tools. Now, I think the United States in this moment is experiencing something a little bit similar in the sense that there is this consensus, and Obama has turned his election campaign into a kind of referendum on Friedmanite economic policies. Whether or not he is actually going to do it I think depends very much on the forces that we’re talking about in this room.

I want to talk about some short-term structural adjustment – the kind of pressure that can be placed on Obama right now.

Bob Rubin, Larry Summers – recently implicated in a fantastic piece in the New York Times, which I never thought I would read, questioning the Greenspan legacy, and pairing Rubin with Greenspan at every turn in creating the crisis we have now – have got to go, this is really crucial. I’m not just trying to make a popular point here, these guys are advising Obama on a day-to-day basis. When he wants to say that he has great people surrounding him, he talks about Bob Rubin.

And then, of course, we need to make the best of a bad situation: this terrible piece of legislation [the bank bailout]. But as Doug said, there is room to be arguing for equity instead of the buying of billions of dollars of this terrible debt. One of the things that’s incredible that’s happening now is they’re handing out no-bid contracts to the very companies that created this mess.

I’ve been writing about the expanding economy, going from Iraq to Hurricane Katrina, just feeding off the next disaster – well, the next frontier of disaster capitalism is cleaning up after capitalism. It’s a $700 billion industry, and expanding.

We know that this crisis is being transferred from Wall Street to Washington, and that all of these bad debts that are now on the public books are going to be used by the right to argue that the next president can’t afford to keep their campaign promises. Think of this as Republican insurance against an Obama presidency.

Everything he’s saying ‘Yes, we can’ to, they say ‘No, you can’t’. You can’t because we just dumped this huge crisis on your lap, and Obama is already capitulating – huge surprise. He’s already said, well, maybe I can afford some things like green energy and so on, but we’ll have to phase them in.

Here’s a big idea: I’ve been calling for the nationalisation of Exxon. Because I think if nationalisation is on the table, let’s go big – let’s not just nationalise junk, let’s nationalise the biggest corporate criminals of them all, the people who have left us with the biggest crisis that we face, which is climate change. And now we’re going to hear that we can’t afford the investments to address this crisis, to change course, that addressing climate change is a luxury we can no longer afford. This is the fight we have to win.

And, actually, we can’t nationalise them, because how would you tell the difference between a nationalised oil company and what you have right now? So we need to internationalise them: there needs to be an international trust and these huge profits won by the oil and gas industry have to be the money that we use to transform to a sustainable economy.

Naomi Klein is the author of the international best seller The Shock Doctrine: The Rise of Disaster Capitalism, which discusses the harmful policies being asserted during moments of crisis

This is an edited transcript of ‘An Offer We Can’t Refuse? Progressives Respond to the Wall Street Crisis’, an emergency discussion at the Brecht Forum, New York, held by The Nation magazine on 10 October 2008 Transcription: Carole Ludwig and Mary Livingstone

Author photographs by Marlowe Mason (

Project Big Picture? Football needs the state

Without active protection from the state, the rejected Project Big Picture is a taste of things to come for English football, argues Alex Maguire

After the virus: no return to the old economy

As the Covid recession hits, Adam Peggs lays out alternative economic proposals the Labour left should be demanding

From dole to gold

Today’s welfare system is notoriously punitive, but in the 1980s it provided the basis of future Olympic success, argues Peter Goulding

Lower league football needs democratic ownership, not a salary cap

It is only through fundamental reform of how clubs are owned, bought, and sold that we can begin to return football to the fans argues Jonty Leibowitz

Debt cancellation is vital for global recovery

Cancelling debt for poor countries is desperately needed to shore up public health systems, social protections and address global structural inequality writes Claudia Webbe MP

Swords into ploughshares; planes into ventilator parts

The speedy switch in from producing airplane wings to ventilator parts at a north Wales factory holds out an example for a transition to a low-carbon economy, writes Hilary Wainwright