One major difference between the Great Depression and the Great Recession is the death of a visionary progressive movement. Yes, the Republicans and the media like to call liberal Democrats "Left," but that just means they are slightly more moderate than Attila the Hun.
Many in the 1930s believed that capitalism needed a major overhaul. From there it got vague and contentious. The Communist Party, of course, was in love with the Soviet Union, which seemed to be the workers' paradise on Earth, in part because it had avoided the worst of the Depression. American socialists and Lafollette progressives looked more to a mixed system where government would not eliminate private capitalism but instead would heavily control it, even to the point of setting up its own key enterprises.
In general, the consensus view was that capitalism had run amok. Wall Street and the failing banking system were under fire. Serious change was in the air and progressives provided the agenda: unionization, public enterprises like the Tennessee Valley Authority, social security, minimum wage and overtime laws, public housing, controls on banking, public employment projects like the Works Progress Administration and the Civilian Conservation Corps. In addition there were experiments in alleviating debilitating competition, controlling prices and overproduction, soil conservation and a host of others, many of which failed.
The reason we don't have bread lines now largely is due to programs that progressives jammed through the under the rubric of the New Deal.
But you would think our Great Recession might be severe enough to at least conjure up a coherent set of reforms. After all, 29 million are unemployed or underemployed and we have poured about $13 trillion in cash and asset guarantees into Wall Street. Only a few months ago, we were all aghast at the incredible casino that was Wall Street. We couldn't believe that billions poured into junk fantasy finance instruments that got AAA ratings. We were really going to do something about those astronomical compensation packages. Our outrage knew no bounds but had no focus, no organization. We were, and maybe still are deeply angered, but we do so in private.
The banks that were too big to fail have actually gotten bigger. No one is even talking about regulating specialty derivatives that were so instrumental in the crash. The consumer financial protection agency is getting watered down by bank lobbyists funded indirectly by our bailout. And to name just one overcompensated financier, Andrew J. Hall, an oil speculator working for CitiGroup, is about to make a mockery of wage constraints by walking off with a $100 million payday -- from a bank that we virtually own.
Still no progressive movement. Still no national agenda for reforms. Still no compelling vision for what needs to be changed. Still no collective action to build our sense of empowerment.
If we are ever to form a coherent reform effort, there are two fundamental changes that should guide us:
1. We must move money from the top of the income ladder to the middle and the bottom. This crisis was the result of near-sighted, selfish tax "reforms" that encouraged money to accumulate in the hands of the top fraction of one percent. Those folks literally ran out of real world investment opportunities that satisfied their demands for high returns, so they poured their excess capital into the fantasy finance casino. We have the worst income distribution since 1929 - no coincidence, I would argue. When money is more fairly distributed we will dry up much of the demand for fantasy finance.
2. We must also move money from the financial sector into the real economy. Wall Street is too large, too bloated with excess and therefore much too eager to play croupier with other peoples' money. Before the crash it accounted for more than 20 percent of corporate profits. Wall Street's cheerleaders said we could have a prosperous economy that moved money around rather than produced tangible goods and services. We can't.
You move money away from the super rich and away from Wall Street and you will put an enormous damper on fantasy finance. All the proposed rules and regs, and new agencies, and modified pay schemes have little meaning if we fail to move money away from the casino and the super-rich who play there.
How do we do that? There are many ways:
- A Tobin tax on speculative financial transactions
- Wage caps on financial salaries
- A real progressive income tax like we had during the Eisenhower years where those with adjustable gross incomes over1 million would see their top dollars taxed at 90 percent
- A significant rise in the minimum wage which must be indexed to inflation
- Enhanced unionization to place more upward pressure on wages
- Border adjustment taxes to level the global playing field on trade involving goods produced by child labor and under poor environmental conditions
- Direct investment in alternative energy development
- A new WPA for the unemployed
- A new Glass-Stiegel Act plus anti-trust measures to break up large institutions so that they are small enough to fail
Maybe the Great Recession isn't bad enough to generate a focused agenda and a new progressive movement. Maybe I'm completely off base and the stock market will go ever upward and, mirabile dictu, what's good for Wall Street will turn out to be good for Main Street with true full employment. But if the fundamental causes of our mess really are the mal-distribution of income combined with a bloated financial sector, then you can take it to the bank that we'll be bailing out the super-rich again in the near future, while millions go without work.
Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.