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Joseph A. Palermo

Joseph A. Palermo

Posted February 3, 2009 | 11:30 AM (EST)

Capital Strike?


After the huge infusions of tax dollars into the private banking industry one would think there would be money available for banks to start lending and begin the process of economic recovery. With real estate prices plummeting there are thousands of safe and profitable projects in the pipeline that banks are choosing to choke off. I know people who invest in commercial real estate in the Sacramento area and they tell me banks are not even lending for risk-free projects. The whole thing is beginning to smell like a "capital strike," a process whereby financial interests conspire to make an economy "scream" when they don't like which way the political winds are blowing.

President Barack Obama is today confronted with the same problem Franklin D. Roosevelt faced in the 1930s: There are huge numbers of people in need of work and a huge amount of work that needs to be done, yet capital is failing in to bring the two together. When capital goes on strike the only institution that is capable of bringing together workers and work is the federal government. FDR stopped short of seizing the banking industry when it froze up, but he tamed it by creating dozens of powerful new agencies to regulate it. FDR trussed the AIGs of his era with tough new rules backed up by the full force of the U.S. Department of Justice and the Internal Revenue Service. Capital capitulated faster than you can say the word "nationalization." The Republicans griped and accused Roosevelt of being a "communist," but with the economy in shambles and their economic prescriptions proven failures they had no choice but to go along.

President John F. Kennedy faced a similar situation, though in a period of prosperity. He had to tame the Steel Barons after they refused to stop using their monopoly power to arbitrarily raise prices and attack the unions, which hurt other industries (as well as Kennedy's base among organized labor). He unleashed his younger brother, Attorney General Robert Kennedy, who began twisting the steel executives' arms, threatening them with legal action, and even using the FBI to harass them. The Kennedy administration reminded Big Steel that the interests of the country superseded those of private capital no matter how large it had become and no matter how accustomed it had grown to buying off the political system. Republican newspapers compared Kennedy to Mussolini and called his actions "quasi-fascist." Republican Senator Barry Goldwater described Kennedy as trying to "socialize the business of the country." Soon there were even bumper stickers: "Help Kennedy Stamp Out Free Enterprise." Despite the loud Republican response the steel industry capitulated to federal power in short order.

President Obama, like Roosevelt and Kennedy before him, will never receive the blessing of the U.S. Chamber of Commerce or the National Manufacturing Association. These organizations have detected a lurking "Socialism" behind every sensible economic reform ever enacted, from the minimum wage and the forty-hour workweek, to ending child labor and Social Security.

The political discourse has changed profoundly over the last two years. But turn on a television or radio and you'll hear plenty of sound bites from the GOP's bottom-of-the-barrel personalities like John Boehner and Eric Cantor, decrying the "pork" in the stimulus bill and calling for more tax cuts for the rich and corporations as our only salvation. With all the talk of tax cuts and free market "solutions" to the economic calamity we face one would think the Republicans were still in power and the last two elections never happened.

Capital doesn't like Barack Obama and it probably never will. We get it.

Since Ronald Reagan's first term the Right has dominated our political discourse, especially on matters relating to economics. For twenty-six out of the past twenty-eight years the Republicans have controlled either the presidency or one of the chambers of Congress (or both). Today, the Republicans are out of power so they can no longer game the system from Washington. Without the House or the Senate or the presidency they must fall back on their national political networks of talk radio, Fox News, and the Drudge Report. That is the reason why Rush Limbaugh's power has swelled within GOP ranks lately and will continue to do so during the Obama years. Now is the time to challenge the Right's ideological hegemony over the political discourse with a counter message that supports progressive change. There is an opportunity to shift the debate but it will require some tough action from the Obama administration. The only way to bring about change is take actions that are sure to piss off the Republican Party, the Chamber of Commerce, the National Association of Manufacturers, the Club for Growth, the Heritage Foundation, the Cato Institute, Americans for Tax Reform, the American Enterprise Institute, and all the rest. The current fight over Labor Secretary Hilda Solis and the employee free choice legislation is a good indication of what's to follow.

At some point the vested plutocratic interests that have ruled us for decades will have to be tamed.

The giant "financial services" oligopolies that have shut down the nation's lending and borrowing system while receiving hundreds of billions of American tax dollars must be shown that they do not own this country. At some point, the sooner the better, President Obama will face the moment of truth. He is going to have to flex the power of the federal government over these giant corporations. The day will come when he will have no choice but to remind them via tough government action that the United States is not just another one of their wholly owned subsidiaries.