[rad-green] Left Business Observer: A few ambitious points on fighting the crisis

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*https://lbo-news.com/2020/03/20/a-few-ambitious-points-on-fighting-the-cri=
sis/
<https://lbo-news.com/2020/03/20/a-few-ambitious-points-on-fighting-the-cri=
sis/>Left
Business Observer          March 20, 2020*



*A few ambitious points on fighting the crisisBy Doug Henwood*

We are facing two crises at once, health and economic, that are related in
very important ways. The covid-19 epidemic has done major damage around the
world, but it=E2=80=99s highlighting some serious structural problems with =
the US
social model that better-run countries are not so afflicted by. We are
plagued by a deep economic polarization complicated by minimal social
protections; severely diminished state capacity, with eroded institutional
structures and extremely debased quality of personnel at the highest
levels; years of underinvestment in basic infrastructure, both broadly and
in health care particularly; and decades of neoliberal policies that have
shaped a common sense based on competitive individualism, with little sense
of social solidarity. That=E2=80=99s the longer-term context in which we fa=
ce the
acute crisis of this disease=E2=80=94which is almost certainly a portent of=
 what
we=E2=80=99ll face as the climate crisis worsens.

To recover from this, we need to do many things, both short- and long-term.
To deal with the health crisis, we obviously need testing kits and a rapid
mobilization to build hospitals, ICUs, and ventilators. It will take state
action to do that properly; The Market will never do it on its own. It may
not be socialism, but if we do it well, it will legitimate a public sector
badly in need of legitimation. If China can build hospitals in ten days,
there=E2=80=99s no reason we can=E2=80=99t. It=E2=80=99s nice Trump is depl=
oying a couple of navy
hospital ships but that=E2=80=99s barely a start.

But I=E2=80=99ll leave more detailed plans for the health emergency to peop=
le who
know the field. My expertise is in politics, economics, and finance, and I
want to make several points about that.

The financial crisis is real and potentially devastating. There are some
people on the left who doubt the wisdom of saving the banking system, but
to let it collapse would be to repeat the mistakes of 1929=E2=80=931932, wh=
en a
cascade of thousands of bank failures magnified a downturn into a Great
Depression. Actions like the Federal Reserve=E2=80=99s repos and securities
purchases are a bare minimum to prevent a replay of the slide into
depression 90 years ago. It=E2=80=99s important to point out that all these
trillions are not taxpayer money=E2=80=94it=E2=80=99s money created out of =
thin air by the
Fed. That=E2=80=99s not a financing strategy for all time=E2=80=94it can=E2=
=80=99t fund Medicare
for All or a Green New Deal. That will take real resources. But it=E2=80=99s
essential in this moment of crisis.

But I share the frustration with how the Fed is spending trillions in an
effort to restore the status quo before this latest crisis. That=E2=80=99s =
what
happened in the 2008=E2=80=932009 crisis: extraordinary measures were under=
taken,
but that left the long-term causes of that crisis, like income polarization
and unregulated financial buccaneering, unaddressed. Stronger measures are
called for this time, for example. Here are some ideas.

=E2=80=A2 Nationalize several of the largest banks=E2=80=94and unlike the n=
ationalizations
in Sweden in the 1990s and the UK a decade ago, they should not be
undertaken with the idea of returning them to private ownership as quickly
as possible, after the government eats the losses. They should be run on
entirely different principles. Shareholders will whine, but without a
state-led rescue, the value of their stock would fall close to 0 anyway.

=E2=80=A2 At the same time, severely rein in with an eye to abolishing, the=
 shadow
banking sector of private equity (PE) and hedge funds. PE has saddled
companies with crippling levels of debt, which enrich their investors but
put them at great risk of failure even in relatively good times. (A subset
of PE, venture capital, can play a more constructive economic role, but
it=E2=80=99s quite small: there was less than $10 billion in early-stage fi=
nancing
from the sector last year.) And hedge funds do little but destabilize
markets. The goal should be to turn finance into something like a utility.

=E2=80=A2 There=E2=80=99s no reason the nationalized banks couldn=E2=80=99t=
 be run to finance, for
example, the Green New Deal (GND). Some of the GND will have to be financed
with traditional tax- and bond-financed public spending, but there=E2=80=99=
s no
reason these socialized banks couldn=E2=80=99t participate.

=E2=80=A2 Along with the nationalized banks, we should create something on =
the
model of the Reconstruction Finance Corporation, to finance the GND. It
would be a publicly capitalized bank that would evaluate and fund projects
like clean energy generation and new models of food production.

=E2=80=A2 This would be a propitious time to nationalize the oil and gas se=
ctor,
undertaken with the idea of putting them out of business. We must move as
quickly as possible to stop the use of fossil fuels, and as long as these
entities exist, the political and economic obstacles to that necessity are
nearly impossible to overcome. Because the price of oil has fallen so
dramatically, the value of the major carbon producers has cratered. The
five biggest US-based oil companies (Exxon Mobil, Chevron, ConocoPhillips,
Phillips 66, and Valero) have a combined market capitalization of under
$350 billion, which is equal to about an eighth of JPMorgan Chase=E2=80=99s=
 total
assets and less than 2% of GDP. Again, shareholders will whine, but as the
financial world wakes up to the inevitability of carbon=E2=80=99s obsolesce=
nce, the
value of their investments will tend towards 0 anyway.

=E2=80=A2 Unlike earlier crises from the last few decades, this one is not =
centered
in the financial sector. It=E2=80=99s in what Wall Street like to call the =
=E2=80=9Creal
sector,=E2=80=9D the world of production and labor most people live in. Whi=
le
finance will suffer serious losses in a sharp downturn, the goal of policy
should be to prevent catastrophic failure. It will be unable to provide
even the modest stimulus quantitative easing did during and just after the
2008 crisis. A real sector crisis requires a much more fiscally centered
approach.

=E2=80=A2 The federal government must provide people with income support as=
 they
lose their jobs. It=E2=80=99s distressing that Republicans like Trump and R=
omney
are talking about sending every American a check for $1,000 while House
Speaker Nancy Pelosi shot down a similar suggestion from former Obama
economic adviser Jason Furman days earlier. This is a bare minimum. Why not
$2,000? Unemployment insurance must be expanded (and a lot, as I show here
<https://lbo-news.com/2020/03/19/why-ui-isnt-enough/>), as must Medicaid,
to take care of people who are about to lose their employer-provided health
insurance.

=E2=80=A2 We also need to invest in the physical and social infrastructure =
of this
country. For decades, civilian public investment net of depreciation has
hovered just above 0, meaning that we=E2=80=99re doing little better than r=
eplacing
things as they decay. This economic statistic can easily be confirmed just
by walking around anywhere in the US outside our richest neighborhoods. We
need massive investment in public infrastructure on the model of the New
Deal, both to fight the slump and to make this country habitable for the
bottom 80=E2=80=9390% of the population. That infrastructure investment mus=
t not
simply be more of the same. It needs to be part of a conversion of an
economy based on exploitation of workers and nature into something humane
and sustainable.

=E2=80=A2 We also need to get now-unemployed auto workers back to work but =
building
vehicles that don=E2=80=99t threaten life on earth. A model to think about =
was the
proposal
<https://socialistproject.ca/2019/03/gm-oshawa-lowered-expectations-unexplo=
red-opportunities/>
to
transform a plant in Ontario GM closed into something more earth- and
worker-friendly.

=E2=80=A2 Longer term, never has the need for Medicare for All been so clea=
r. And
the reason for that isn=E2=80=99t only the need of freeing people from the =
anxiety
of not being able to pay for essential care, but also because there is
little in the way of planning for the distribution of health care resources
beyond what The Market demands. A major part of the reason the US is so
unprepared to handle the coronavirus crisis is that hospitals are built and
outfitted according to where the money is, not where the needs are.
Hospitals in rural areas are broke and closing, and recently a hospital in
Philadelphia that served a largely poor clientele was closed because it
stood on land that developers would prefer to turn into condos. The
pharmaceutical industry, which has for decades been turning publicly funded
basic research into private profit based on its own priorities and not
human need, must be wrestled to the ground.

This is a terrifying moment, with sickness, death, and imminent destitution
haunting all of us. Things could get very ugly. But it=E2=80=99s also an
opportunity to emerge from this crisis a better country. The ideas I=E2=80=
=99ve
listed here are fanciful under the current political order. But we have to
think big to challenge that order. Over the last few decades, neoliberalism
has encouraged a consciousness of self-reliance. We need to articulate a
vision of solidarity and mutual care. Millions of lives depend on that.

*Thanks to Jerry Epstein, Leo Panitch, Bob Pollin, and especially Sam
Gindin for helpful comments on this little effort.*

--=20

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sid-l/CACKppcxm%3DJdJnyLcLEzGPbvQugO6BVMmc6VZedCpghrS4brVMA%40mail.gmail.co=
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<div dir=3D"ltr"><div class=3D"gmail_default"><b><font face=3D"times new ro=
man, serif"><a href=3D"https://lbo-news.com/2020/03/20/a-few-ambitious-poin=
ts-on-fighting-the-crisis/" target=3D"_blank">https://lbo-news.com/2020/03/=
20/a-few-ambitious-points-on-fighting-the-crisis/</a><br><br><font size=3D"=
4">Left Business Observer =C2=A0 =C2=A0 =C2=A0 =C2=A0 =C2=A0March 20, 2020<=
/font></font></b></div><div class=3D"gmail_default"><b><font face=3D"times =
new roman, serif"><font size=3D"4"><br></font><font size=3D"6">A few ambiti=
ous points on fighting the crisis</font><br><br><font size=3D"4">By Doug He=
nwood</font></font></b></div><div class=3D"gmail_default"><font face=3D"tim=
es new roman, serif"><b><br></b><font size=3D"4"><span style=3D"color:rgb(0=
,0,0)">We are facing two crises at once, health and economic, that are rela=
ted in very important ways. The covid-19 epidemic has done major damage aro=
und the world, but it=E2=80=99s highlighting some serious structural proble=
ms with the US social model that better-run countries are not so afflicted =
by. We are plagued by a deep economic polarization complicated by minimal s=
ocial protections; severely diminished state capacity, with eroded institut=
ional structures and extremely debased quality of personnel at the highest =
levels; years of underinvestment in basic infrastructure, both broadly and =
in health care particularly; and decades of neoliberal policies that have s=
haped a common sense based on competitive individualism, with little sense =
of social solidarity. That=E2=80=99s the longer-term context in which we fa=
ce the acute crisis of this disease=E2=80=94which is almost certainly a por=
tent of what we=E2=80=99ll face as the climate crisis worsens.</span><br></=
font></font></div><div class=3D"gmail_default" style=3D""><p style=3D"margi=
n:0px 0px 18px;padding:0px;line-height:1.4em"><font color=3D"#000000" face=
=3D"times new roman, serif" size=3D"4">To recover from this, we need to do =
many things, both short- and long-term. To deal with the health crisis, we =
obviously need testing kits and a rapid mobilization to build hospitals, IC=
Us, and ventilators. It will take state action to do that properly; The Mar=
ket will never do it on its own. It may not be socialism, but if we do it w=
ell, it will legitimate a public sector badly in need of legitimation. If C=
hina can build hospitals in ten days, there=E2=80=99s no reason we can=E2=
=80=99t. It=E2=80=99s nice Trump is deploying a couple of navy hospital shi=
ps but that=E2=80=99s barely a start.</font></p><p style=3D"margin:0px 0px =
18px;padding:0px;line-height:1.4em"><font color=3D"#000000" face=3D"times n=
ew roman, serif" size=3D"4">But I=E2=80=99ll leave more detailed plans for =
the health emergency to people who know the field. My expertise is in polit=
ics, economics, and finance, and I want to make several points about that.<=
/font></p><p style=3D"margin:0px 0px 18px;padding:0px;line-height:1.4em"><f=
ont color=3D"#000000" face=3D"times new roman, serif" size=3D"4">The financ=
ial crisis is real and potentially devastating. There are some people on th=
e left who doubt the wisdom of saving the banking system, but to let it col=
lapse would be to repeat the mistakes of 1929=E2=80=931932, when a cascade =
of thousands of bank failures magnified a downturn into a Great Depression.=
 Actions like the Federal Reserve=E2=80=99s repos and securities purchases =
are a bare minimum to prevent a replay of the slide into depression 90 year=
s ago. It=E2=80=99s important to point out that all these trillions are not=
 taxpayer money=E2=80=94it=E2=80=99s money created out of thin air by the F=
ed. That=E2=80=99s not a financing strategy for all time=E2=80=94it can=E2=
=80=99t fund Medicare for All or a Green New Deal. That will take real reso=
urces. But it=E2=80=99s essential in this moment of crisis.</font></p><p st=
yle=3D"margin:0px 0px 18px;padding:0px;line-height:1.4em"><font color=3D"#0=
00000" face=3D"times new roman, serif" size=3D"4">But I share the frustrati=
on with how the Fed is spending trillions in an effort to restore the statu=
s quo before this latest crisis. That=E2=80=99s what happened in the 2008=
=E2=80=932009 crisis: extraordinary measures were undertaken, but that left=
 the long-term causes of that crisis, like income polarization and unregula=
ted financial buccaneering, unaddressed. Stronger measures are called for t=
his time, for example. Here are some ideas.</font></p><p style=3D"margin:0p=
x 0px 18px;padding:0px;line-height:1.4em"><font color=3D"#000000" face=3D"t=
imes new roman, serif" size=3D"4">=E2=80=A2 Nationalize several of the larg=
est banks=E2=80=94and unlike the nationalizations in Sweden in the 1990s an=
d the UK a decade ago, they should not be undertaken with the idea of retur=
ning them to private ownership as quickly as possible, after the government=
 eats the losses. They should be run on entirely different principles. Shar=
eholders will whine, but without a state-led rescue, the value of their sto=
ck would fall close to 0 anyway.</font></p><p style=3D"margin:0px 0px 18px;=
padding:0px;line-height:1.4em"><font color=3D"#000000" face=3D"times new ro=
man, serif" size=3D"4">=E2=80=A2 At the same time, severely rein in with an=
 eye to abolishing, the shadow banking sector of private equity (PE) and he=
dge funds. PE has saddled companies with crippling levels of debt, which en=
rich their investors but put them at great risk of failure even in relative=
ly good times. (A subset of PE, venture capital, can play a more constructi=
ve economic role, but it=E2=80=99s quite small: there was less than $10 bil=
lion in early-stage financing from the sector last year.) And hedge funds d=
o little but destabilize markets. The goal should be to turn finance into s=
omething like a utility.</font></p><p style=3D"margin:0px 0px 18px;padding:=
0px;line-height:1.4em"><font face=3D"times new roman, serif" size=3D"4"><fo=
nt color=3D"#000000">=E2=80=A2 There=E2=80=99s no reason the nationalized b=
anks couldn=E2=80=99t be run to finance, for example, the Green New Deal (G=
ND). Some of the GND will have to be financed with traditional tax- and bon=
d-financed public spending, but there=E2=80=99s no reason these socialized =
banks couldn=E2=80=99t participate.</font><br></font></p><p style=3D"margin=
:0px 0px 18px;padding:0px;line-height:1.4em"><font color=3D"#000000" face=
=3D"times new roman, serif" size=3D"4">=E2=80=A2 Along with the nationalize=
d banks, we should create something on the model of the Reconstruction Fina=
nce Corporation, to finance the GND. It would be a publicly capitalized ban=
k that would evaluate and fund projects like clean energy generation and ne=
w models of food production.</font></p><p style=3D"margin:0px 0px 18px;padd=
ing:0px;line-height:1.4em"><font color=3D"#000000" face=3D"times new roman,=
 serif" size=3D"4">=E2=80=A2 This would be a propitious time to nationalize=
 the oil and gas sector, undertaken with the idea of putting them out of bu=
siness. We must move as quickly as possible to stop the use of fossil fuels=
, and as long as these entities exist, the political and economic obstacles=
 to that necessity are nearly impossible to overcome. Because the price of =
oil has fallen so dramatically, the value of the major carbon producers has=
 cratered. The five biggest US-based oil companies (Exxon Mobil, Chevron, C=
onocoPhillips, Phillips 66, and Valero) have a combined market capitalizati=
on of under $350 billion, which is equal to about an eighth of JPMorgan Cha=
se=E2=80=99s total assets and less than 2% of GDP. Again, shareholders will=
 whine, but as the financial world wakes up to the inevitability of carbon=
=E2=80=99s obsolescence, the value of their investments will tend towards 0=
 anyway.</font></p><p style=3D"margin:0px 0px 18px;padding:0px;line-height:=
1.4em"><font color=3D"#000000" face=3D"times new roman, serif" size=3D"4">=
=E2=80=A2 Unlike earlier crises from the last few decades, this one is not =
centered in the financial sector. It=E2=80=99s in what Wall Street like to =
call the =E2=80=9Creal sector,=E2=80=9D the world of production and labor m=
ost people live in. While finance will suffer serious losses in a sharp dow=
nturn, the goal of policy should be to prevent catastrophic failure. It wil=
l be unable to provide even the modest stimulus quantitative easing did dur=
ing and just after the 2008 crisis. A real sector crisis requires a much mo=
re fiscally centered approach.</font></p><p style=3D"margin:0px 0px 18px;pa=
dding:0px;line-height:1.4em"><font color=3D"#000000" face=3D"times new roma=
n, serif" size=3D"4">=E2=80=A2 The federal government must provide people w=
ith income support as they lose their jobs. It=E2=80=99s distressing that R=
epublicans like Trump and Romney are talking about sending every American a=
 check for $1,000 while House Speaker Nancy Pelosi shot down a similar sugg=
estion from former Obama economic adviser Jason Furman days earlier. This i=
s a bare minimum. Why not $2,000? Unemployment insurance must be expanded (=
and a lot, as I show=C2=A0<a href=3D"https://lbo-news.com/2020/03/19/why-ui=
-isnt-enough/" style=3D"margin:0px;padding:0px;line-height:1.4em;text-decor=
ation-line:none" target=3D"_blank">here</a>), as must Medicaid, to take car=
e of people who are about to lose their employer-provided health insurance.=
</font></p><p style=3D"margin:0px 0px 18px;padding:0px;line-height:1.4em"><=
font color=3D"#000000" face=3D"times new roman, serif" size=3D"4">=E2=80=A2=
 We also need to invest in the physical and social infrastructure of this c=
ountry. For decades, civilian public investment net of depreciation has hov=
ered just above 0, meaning that we=E2=80=99re doing little better than repl=
acing things as they decay. This economic statistic can easily be confirmed=
 just by walking around anywhere in the US outside our richest neighborhood=
s. We need massive investment in public infrastructure on the model of the =
New Deal, both to fight the slump and to make this country habitable for th=
e bottom 80=E2=80=9390% of the population. That infrastructure investment m=
ust not simply be more of the same. It needs to be part of a conversion of =
an economy based on exploitation of workers and nature into something human=
e and sustainable.</font></p><p style=3D"margin:0px 0px 18px;padding:0px;li=
ne-height:1.4em"><font color=3D"#000000" face=3D"times new roman, serif" si=
ze=3D"4">=E2=80=A2 We also need to get now-unemployed auto workers back to =
work but building vehicles that don=E2=80=99t threaten life on earth. A mod=
el to think about was the=C2=A0<a href=3D"https://socialistproject.ca/2019/=
03/gm-oshawa-lowered-expectations-unexplored-opportunities/" style=3D"margi=
n:0px;padding:0px;line-height:1.4em;text-decoration-line:none" target=3D"_b=
lank">proposal</a>=C2=A0to transform a plant in Ontario GM closed into some=
thing more earth- and worker-friendly.</font></p><p style=3D"margin:0px 0px=
 18px;padding:0px;line-height:1.4em"><font color=3D"#000000" face=3D"times =
new roman, serif" size=3D"4">=E2=80=A2 Longer term, never has the need for =
Medicare for All been so clear. And the reason for that isn=E2=80=99t only =
the need of freeing people from the anxiety of not being able to pay for es=
sential care, but also because there is little in the way of planning for t=
he distribution of health care resources beyond what The Market demands. A =
major part of the reason the US is so unprepared to handle the coronavirus =
crisis is that hospitals are built and outfitted according to where the mon=
ey is, not where the needs are. Hospitals in rural areas are broke and clos=
ing, and recently a hospital in Philadelphia that served a largely poor cli=
entele was closed because it stood on land that developers would prefer to =
turn into condos. The pharmaceutical industry, which has for decades been t=
urning publicly funded basic research into private profit based on its own =
priorities and not human need, must be wrestled to the ground.</font></p><p=
 style=3D"margin:0px 0px 18px;padding:0px;line-height:1.4em"><font color=3D=
"#000000" face=3D"times new roman, serif" size=3D"4">This is a terrifying m=
oment, with sickness, death, and imminent destitution haunting all of us. T=
hings could get very ugly. But it=E2=80=99s also an opportunity to emerge f=
rom this crisis a better country. The ideas I=E2=80=99ve listed here are fa=
nciful under the current political order. But we have to think big to chall=
enge that order. Over the last few decades, neoliberalism has encouraged a =
consciousness of self-reliance. We need to articulate a vision of solidarit=
y and mutual care. Millions of lives depend on that.</font></p><p style=3D"=
margin:0px 0px 18px;padding:0px;line-height:1.4em"><i style=3D"margin:0px;p=
adding:0px;line-height:1.4em"><font color=3D"#000000" face=3D"times new rom=
an, serif" style=3D"" size=3D"4">Thanks to Jerry Epstein, Leo Panitch, Bob =
Pollin, and especially Sam Gindin for helpful comments on this little effor=
t.</font></i></p></div></div>

<p></p>

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