A New
Era Begins

By Sam Webb, National Chair, CPUSA

(From a speech delivered at a Peoples
Weekly World forum in Cleveland, Ohio, January 31, 2009)

I was standing on the Washington Mall on
Inauguration Day,
alongside nearly two million other people, and proudly watched the
first
African American take the oath of office in our nations history. That
alone
made the day deeply memorable, joyful, and historic. But I couldnt
help but
think and Im sure that millions of others had the same thought
that the transfer of power from Bush to President Obama not only tore
down a
barrier that once was thought near impenetrable, but also signified the
fading
away of one era and the beginning of another.

It was hard not to think on that cold day in our
nations
capital that the worst of the past 30 years of right-wing extremist
rule is
behind us and that an era of progressive change is within reach, no
longer an
idle dream.

Just look at the new lay of the land: a friend of
labor and
its allies sits in the White House. Larger Democratic majorities
control
Congress. A feeling of renewal and hope is in the air. Public opinion
polls
show a high favorability rating for our new President. And the labor
and
peoples movement that was so instrumental to the elections outcome,
after a
short holiday pause, is off and running.

Meanwhile, the Republican Party, notwithstanding
its efforts
to distance itself from arguably the worst president in our history, is
on the
defensive. Its grassroots constituency is dispirited. And, its
governing
philosophy of free markets, minimal government, fear, and division,
and
especially racist division, is discredited.

Now no one expects that the going will be easy in
the coming
months and years. There is, after all, eight years of extreme
right-wing
misrule to clean up. The multinational corporations and banks havent
gone into
hibernation. Right-wing Republicans, while badly weakened, still retain
enough
influence in Congress and elsewhere to block or slow down progressive
measures.
And the challenges facing the Obama administration are immense, and
none more
than the economic crisis.

If there were such a thing as an economic tsunami,
I would
say we are experiencing it. Not since the Great Depression has the
economy been
in such bad shape, which leads many economists to predict that the
downturn
will be L-shaped, that is, deep and prolonged.

Furthermore, the economic contraction is
worldwide. No
country or region will escape its pain and long reach. Nor can any
national
economy, ours included, hope to make a full recovery without global
coordination and cooperation. In an integrated global economy, we
either swim
together or sink together.

Financialization
two-edged sword

While the present economic turbulence was
triggered by the
collapse of the housing markets over the past two years, its underlying
cause
goes back to the mid-1970s.

At that time U.S. economy was rocked to its core
by the
interweaving of seemingly stubborn and contradictory economic problems:
high
inflation and unemployment, declining confidence in the dollar as a
means of
international payment, new competitive rivals in Europe and Asia, and a
falling
profit rate, all of which occurred in the context of overproduction in
world
commodity markets. Stagflation was the term coined to describe this
contradictory phenomenon.

Faced with this unraveling of the economy and a
crisis of
profitability, then-chairman of the Federal Reserve Paul Volcker
stepped into
the breech and pushed up interest rates to near 20 percent. This spike
in
interest rates threw the country into a deep recession, sending
unemployment
rates to the highest level since the Great Depression, forcing the
closing of
scores of manufacturing plants and a great number of family farms,
laying waste
to cities and whole regions, and bringing incredible hardship to the
working
class, and especially African-American, Latino and other racial
minorities and
women workers.

The rate hike also opened the door for a
many-sided attack
on labor and its allies, the likes of which hadnt been seen since the
pre-Depression era. Wage and benefit concessions were demanded. New
labor
saving techniques and computerization invaded the workplace. Rules
governing
seniority, job classifications, line speed, and safety were either
eliminated
or routinely violated. And, the relocation of production to non-union
and
offshore sites became standard fare.

If we thought this was only done to dramatically
increase
the corporate share of the value that workers create in the production
process
relative to what they receive, we would be wrong. It was also motivated
by the
overarching desire of corporate capital to cripple the social power of
the
labor movement and disrupt its alliance with its most durable and
powerful
allythe African American people.

Now we cant leave it at this, because, in addition to the
working class and its allies taking a pounding, there is another side
to this
intricate storyVolckers interest rate spike also wrung inflation out
of
the economy, restored confidence in the U.S. dollar in international
money
markets, and, especially important to us, redirected domestic and
foreign
investment capital (and there was plenty of it), abruptly and massively
from
the real economyauto, steel, machine tool, construction, and so
oninto
financial channels and speculative ventures where returns were markedly
higher.

Once in financial channels, money/speculative
capital stayed
there, but it did not sit on its hands. Its financial agents (banks,
investment
houses, hedge funds, private equity firms, mutual funds, and so on)
intent on
expanding their profits in an increasingly toothless regulatory
environment
raced at breakneck speed into a massive buying and selling and
borrowing and
spending speculative spree for the next three decades. And all this led
to an
explosion of the financial sector in terms of employment, transactions,
and
profits. Nearly 40 percent of corporate profits came from this sector
in the
early years of this decade not to mention the salaries, bonuses,
stock
options, and dividends of Wall Street insiders.

Capital that produces
little, destroys much

If this transformation of the U.S. economy into a
speculative casino run by the masters of the universe, hunkered down
on Wall
Street, has its roots in the unraveling of the U.S. economy three
decades ago,
what greased the skids during this period was the production and easy
availability, seemingly without end, of staggering amounts of
debtcorporate,
consumer and government.

Debt is as old as capitalism. But what is
different in
recent decades is that the production of debt and the accompanying
speculative
excesses and bubbles were not simply passing moments at the end of the
business
cycle, but essential to evolution, interrelations, and functioning of
the overall
economy.

Without the massive piling up of debt and
speculative
bubbles first in Internet technology, then in the stock market, and
most
recently, in housing, engineered by the Wall Street/Washington complex,
the
performance of the U.S. and world economy would have been far, far
worse.

But, as we are painfully learning, turning our
economy into
a financial casino built on the pileup of massive amounts of debt and
bubbles
that eventually burst is a two-edged sword. While it stimulates the
economy,
restores profitability and enriches the corporate class on a scale
never seen,
it also introduces enormous instability, economic insecurity, income
inequality, and imbalances and distortions into the arteries and
structure of
the U.S. and world economy.

In other words, the growth of the financial sector
and
bubble-driven economics were an unstable, bloodsucking, leech-like, and
temporary fix for a sluggish, underperforming economy and the vehicle
for the
financial titans of U.S. capitalism to reassert their power.

But as events have shown, it could not forever
mask and
compensate for stagnation tendencies, declining income of working
people, and
the shrinkage of the material goods sector of the economy. In fact, its
remedy
of rerouting capital into finance and turning the financial sector and
speculation into the main dynamo of the U.S. and global economy only
served to
postpone the crisis to a later day and, in doing so, assured that it
would be
on a much broader scale as we now see.

A Wal-Mart economy of low wages, even when
combined with
financial speculation and massive debt creation is unsustainable and
eventually
erupts into crisis. At some point, the chickens do come home to roost.

None of this, however, could have happened without
the
political ascendancy of the right-wing extremism 30 years ago. If
Volcker
struck the first blow in 1979, it was the Reagan administration,
entering the
White House shortly thereafter, and then successive administrations
that were
the decisive ideological and political/practical agent of this
reorientation of
the economy, upheaval in class relations, and current economic mess.

Reaganites
main agents of neoliberalism

At the ideological level, the Reaganites said that
government is best that governs least, that markets are self-correcting
and
efficient; that vast income inequality is a good thing, that
deregulation and
privatization are the best cures for what ails the economy and the
welfare
state, and that tax cuts for the wealthy trickle down to working
people and
lift all boats.

But the Reaganites didnt stop here. At the
political-economic level, they dismantled the model of economic
governance at
the state and corporate level, a model that had its origins in the New
Deal and
then was expanded on by successive administrations in the next three
decades. The
previous model rested on a measure of class compromise, social benefits
for the
unemployed, the elderly, the young and the sick, a legal environment
favorable
to union organizing, the removal of discriminatory barriers to
equality, the
expansion of democratic rights, and expansive fiscal and monetary
polices at
the federal level that favored broadly shared prosperity.

In its place, the Reaganites built another model
of
governance popularly called neoliberalism. If Roosevelts New Deal
favored
working people, then Reagans Raw Deal stripped working people of
income and
rights, turned racism and other forms of discrimination into an
instrument of
practical politics and ideological mystification, and provided a feast
of
riches to the wealthiest corporations and families.

It was no accident that the first actions of the
Reagan
administration were to bust PATCO (the air-traffic controllers union),
endorse
the interest rate hikes of Volcker, and cut taxes for the wealthiest
families
and corporations. This two-bit actor turned the agencies of government
that
were established to protect labor, civil, and other rights into attack
dogs
against these very same rights.

Neoliberalism, combined with an increased
readiness to project
military power globally, was designed to strengthen in a qualitative
way the
position of U.S. capitalism at home and abroad. But, as is said, the
best laid
plans of mice and men often come to naught, at least in the long run.

If I could sum up before moving on, the present
economic
crisis cannot be simply laid on the doorstep of the sub-prime leading
crisis.
Instead it was the result of the interweaving of a short-term cyclical
crisis
of the economy, especially in housing, with a longer term crisis of
overproduction
(too many commodities and too little purchasing power) and over
accumulation
(too much surplus value and too few ways to absorb it profitably), and
the
political ascendancy of the extreme right, dating back three decades.

It may go without saying, but the crisis in its
short- and
long-term form were driven by the system’s built-in objective of
amassing
maximum corporate profits and power through wage exploitation (the
process by
which a sizeable portion of the values that workers create in the labor
process
are appropriated by the capitalist class) and the dispossession
(usually
coerced) of peoples collective possessions (for example, social
security) and
rights, domestically and internationally.

A new New Deal

Given this situation, the Obama administration
faces
daunting challenges. Nevertheless, the new President, in my view, is
off to a
quick start. In less than two weeks he has:

• Issued
  an order to close Guantanamo prison and end torture – a
  practice that stains our image, violates our constitution, and
  endangers our
  troops in the field.

• Signed the Lilly
  Ledbetter bill that would give much greater
  scope to workers discrimination claims as well as a bill that would
  extend
  health care to millions of children.

• Released funds to
  clinics that serve womens heath care needs in
  developing countries.

• Expressed support for
  higher fuel efficiency standards for motor
  vehiclessomething the United Autoworkers Union (UAW) also supports.

• Opened up a greatly
  needed dialogue with the Muslim and Arab world.

• Dispatched George
  Mitchell to the Middle East in hopes of
  mediating the Palestinian-Israeli conflicta conflict that cannot be
  solved by military means, but only by negotiation between the Israeli
  government and the representatives of the Palestinian people with aim
  of
  establishing an independent and viable Palestinian state and the right
  of both
  states live peacefully and within secure borders.

• The President met with military generals to map out a withdrawal
  plan for Iraq.

Of course, the Obama
administrations immediate
challenge
will be to revive the economy. And the overarching question is: from
where will
the economic recovery come from in the near term? The only answer is:
through
the massive injections of money from the federal government into the
economy,
into the hands of people who will spend it. Lagging demand for goods
and
services is the problem.

In this regard, the President’s stimulus bill
passed this
week in the House should be welcomed and supported. Despite what
Republicans say,
it is a good bill that will ease the pain of this crisis, create jobs,
and
begin to re-inflate the economy. Some economists, like Paul Krugman,
say that
it isnt enough, that a trillion dollars plus and additional
infrastructure
spending would be better. I would agree with Krugman, but I also see
the
current bill as a first installment of the administrations recovery
plan. In
fact, Krugman may have the economics right, but the politics wrong.

President Obama in my opinion would make a mistake
if he proceeded
like a bull in a china shop. Hes the president of the country, not an
op-ed
writer for the New York Times, and
thus has a different set of considerations and pressures. On the other
hand, if
the President agrees to too many concession demands from the Republican
side it
will water down the bills stimulus potential and come back to bite him
later
on.

I would further add that even if Obama had
introduced and
passed a bigger stimulus package, there is no guarantee that a
full-blooded and
sustained recovery of the economy will follow. According to
conventional wisdom
and mainstream economists, high growth rates, near full employment, and
healthy
profit rates are the normal condition of a capitalist economy.
Departures from
this norm, it is said, are only passing moments during which capitalism
removes
barriers to future growth and creates the conditions for a new
expansion that
surpasses old peaks in production, employment and profits.

There is considerable evidence to question this
view.
Indeed, one has to wonder what the long-run prospects of U.S. and world
capitalism are. Was the golden age of U.S. capitalism from 1945-1973,
during
which economic growth rates, investment levels and living standards
steadily
increased, the norm or the exception to the norm? Will the last thirty
years of
sluggish and lopsided growth continue, but at a significantly lower
level?

If the answer is that U.S. capitalism is entering
a period
of long-term stagnation then the economic recovery plan must include
not only a
sizeable and sustained economic stimulus, but also far-reaching
political and
economic reforms in order to restructure the economy along new lines.
One
without the other is not enough. Both economic stimulus and
political-economic
restructuring are necessary if U.S. economy is to have any chance of
resuming a
developmental growth path that is robust, sustainable (in a double
sense: economically
and environmentally) and favors the interests of the working class and
its
allies.

If this is the case, the Obama administration and
the broad
coalition that supports him will almost inevitably have to considerand
they already arethe following measures:

• Public ownership of the financial system and the elimination of
  the shadow banking system and exotic derivatives.

• Public
  control of the Federal Reserve Bank.

• Counter-crisis
  spending of a bigger size and scope to invigorate
  and sustain a full recovery and meet human needssomething that the New
  Deal never accomplished.

• Strengthening
  of union rights in order to rebalance the power
  between labor and capital in the economic and political arenas.

• Trade
  agreements that have at their core the protection and
  advancement of international working-class interests.

• Equality in conditions of life for racial minorities and women.

• Democratic public takeover of the energy complex as well as a
  readiness to consider the takeover of other basic industries whose
  future is problematic
  in private hands.

• Turning education,
  childcare, and healthcare into no profit
  zones.

• Rerouting investment
  capital from unproductive investment
  (military, finance and so forth) to productive investment in a green
  economy
  and public infrastructure.

•  Changing
  direction of our nations foreign policy toward
  cooperation, disarmament, and diplomacy. We cant have threats, guns
  and
  military occupations on the one hand and butter, democracy, goodwill,
  and peace
  on the other.

• Full-scale
  assault on global warming.

• Serious and sustained commitment to assisting the developing
  countries, which are locked in poverty and misery.

New model of economic
governance needed

Or to approach the same issue in another way: Will
the
political-economic reforms be modest, or will they be radical in
nature, and
when taken together, constitute a new model of political-economic
governance at
the state and corporate levela new New Deal? By that I mean a
reconfiguring of the role and functions of government and corporations
so that
they favor working people, the racially and nationally oppressed,
women, youth,
seniors, small business people and other social groupings.

Such a model would draw from the New Deal
experience, but in
the end it has to be shaped by todays conditions and requirements for
political and economic advance for the broadest sections of the
American people
as well as people across the globe.

The new model of governance wouldnt be socialist,
but it
would challenge corporate power, profits and prerogatives.

Depression conditions prompted President Franklin
Roosevelt
and his advisersalbeit with a mighty assist from a powerful
all-peoples
coalition led by the industrial unions and the multiracial working
classto
reconfigure the role and functions of the state to the advantage of the
ordinary
people. This reconfiguration wasnt easy or done in a day.

Indeed, it was a hard-fought struggle that
combined unity of
the Roosevelt-led coalition at every turn, mass mobilization, and a
good dose
of experimentation. The broad peoples movement would do well to study
the New
Deal experience, not in a mechanical way, but with an eye to gaining
insights
for todays struggles and challenges.

New casting of
political actors

In the meantime, we have some immediate struggles
on our
hands. The good news is that the broad movement that elected President
Obama
and larger majorities in the Congress is up and running.

This movement, or if you like, this loose
coalition in which
labor plays a larger and larger leadership role, can exercise an
enormous
influence on the political process. Never before has a coalition with
such
breadth walked on the political stage of our country. It is far larger
than the
coalition that entered the election process a year ago; it is larger
still than
the coalition that came out of the Democratic Party convention in
August.

The task of labor and its allies is to provide
energy and
leadership to this wide-ranging coalition. Yes, we can bring issues and
positions into the political process that go beyond the initiatives of
the
Obama administration. But we should do this within the framework of the
main
task of supporting Obamas program of action.

We can disagree with the Obama administration
without being
disagreeable. Our tone should be respectful. We now have not simply a
friend,
but a people’s advocate in the White House.

When the Administration and Congress take positive
initiatives, they should be wholeheartedly supported and welcomed. Nor
should
anyone think that everything will be accomplished in one hundred days.
After
all, the main elements of the New Deal were codified into law in 1935,
1936 and
1937, years after FDRs first days in office.

Of course, change wont be easy. Powerful sections
of big
capital (energy, military, health care, pharmaceutical, financial and
others),
will resist going over to a new and robust growth path, resting on
green
industry, jobs and technology, on military conversion to peacetime
production,
on rising living standards and rights for working people, and on racial
and
gender equality?

That said, the opportunities for working-class and
people’s
gains are extraordinary. This is a once in a lifetime opportunity.

Staring us in the
face are some immediate challenges

First, we have to support the passage of the
President’s
stimulus bill in the Senate.

Second, we have to block any Republican efforts to
derail
the nomination of Hilda Solis, the nominee for the Secretary of Labor.
This is
the first round in the battle to pass the Employee Free Choice Act,
which will dramatically
expand the right to join a union in this country. Some may think this
is a
struggle of only the labor movement. But nothing could be further from
the
truth. A bigger labor movement in this country would strengthen the
struggle on
every front. No one expressed this point better than Martin Luther King
toward
the end of his life.

Third, we have to join others in resisting
evictions and
foreclosuresnot to mention cutbacks and layoffs at the state and city
level.

Fourth, the wars of occupation in Iraq and
Afghanistan have
to be brought to a close. As former President Lyndon Johnson realized
too late,
wars of occupation (in his case, Vietnam) can quickly ruin a presidency
that
has great promise.

In any case, we have our work cut out for us. But
I think we
can confidently say that change is coming. And we will build a more
perfect
union.

Yes, we can.