'The Worst Recession for Over 100 Years'

If this is the case, why aren't governments around the world responding more forcefully to this crisis?

In any case, this is the assessment of Ed Balls, longtime top economic adviser and closest ally of British Prime Minister Gordon Brown, made at a Labour conference in Yorkshire. He was talking about both, the British and the global recession:

The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out. [...]

The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years. [...]

These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s, and we all remember how the politics of that era were shaped by the economy.

If the Obama administration had made this kind of assessment, its strategy for dealing with this crisis surely would have been more ambitious and hence more adequate.

If you believe James Galbraith, the US stimulus will only work if the bailout succeeds at getting credit flowing again, which is pretty unlikely, given that the Obama administration, just like the Bush administration before it, still seems to be determined not to confront some of the core problems characterizing this crisis.

Obama's Strategic Failure

This could be the beginning of the end.

Last Friday, Obama tried to pressure Congress by warning:

It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual, while millions of Americans are being put out of work. Now is the time for Congress to act. It’s time to pass an Economic Recovery and Reinvestment Plan to get our economy moving.

Yet arguably, this is precisely what Obama and his administration have done: They waited too long, failed to define the debate, and made unnecessary preemptive concessions. The result is too little, too late, and mostly wrong. In the worst case, this will not only fail to stimulate the economy, but might also lead to a weakening of the Democratic majority in 2010 and to Obama's premature exit in 2012.

As Paul Krugman points out in his latest column, 'The Destructive Center,' it was the failure of Obama's political strategy that led to the failure of his economic strategy, which the next few years are all too likely to most painfully confirm.

Shock and Awe!?

Is the eloquently and frequently promised 'swift and bold' action turning into 'too little, too late, and mostly wrong'? This worst-case scenario could come true. TARP was and remains fundamentally flawed, and the Economic Recovery and Reinvestment Plan (ERRP) does not look much better.

The stakes could hardly be higher. In order to have any chance of actually working, the stimulus needs to be huge (better to err on the too big rather than on the too small side under these conditions, as even Larry Summers now recognizes), very fast-acting and on target.

On Wednesday, Obama warned:

A failure to act, and act now, will turn crisis into a catastrophe and guarantee a longer recession, a less robust recovery, and a more uncertain future.

In his February 4 post, 'Shock and oy,' Paul Krugman again is pretty scathing in his critique of both the bailout and the stimulus. He quotes Martin Wolf, associate editor and chief economics commentator of the Financial Times:

First, focus all attention on reversing the collapse in demand now, rather than on the global architecture.

Second, employ overwhelming force. The time for “shock and awe” in economic policymaking is now.

…

Unfortunately, what is coming out of the US is desperately discouraging. Instead of an overwhelming fiscal stimulus, what is emerging is too small, too wasteful and too ill-focused. Instead of decisive action to recapitalise banks, which must mean temporary public control of insolvent banks, the US may be returning to the immoral and ineffective policy of bailing out those who now hold the “toxic assets”.

Krugman elaborates:

You know, it was widely expected that Obama would have a stimulus plan ready to pass Congress even before his inauguration. That didn’t happen. We were told that this was because the economic team was working flat out on the financial rescue.

In fact, when it comes to bank rescue it’s hard to see much evidence that anything was accomplished during all that time; the team is still — still! — running ideas up the flagpole to see if anyone salutes. And the ideas look remarkably bad.

On the 'bad bank' approach, Krugman refers to the critique of Yves Smith, who blogs at naked capitalism. Here is what he had to say about this proposal in yesterday's post, 'The Bad Bank Assets Proposal: Even Worse Than You Imagined:'

Dear God, let's just kiss the US economy goodbye. It may take a few years before the loyalists and permabulls throw in the towel, but the handwriting is on the wall.

The Obama Administration, if the Washington Post's latest report is accurate, is about to embark on a hugely expensive "save the banking industry at all costs" experiment that:

1. Has nothing substantive in common with any of the "deemed as successful" financial crisis programs

2. Has key elements that studies of financial crises have recommended against

3. Consumes considerable resources, thus competing with other, in many cases better, uses of fiscal firepower.

In a previous post, criticizing David Broder's talk about stimulus, draws a crucial distinction between Democrat. The 'best ideas' do not come from both parties:

But the part that really got me was Broder saying that we need “the best ideas from both parties.”

You see, this isn’t a brainstorming session — it’s a collision of fundamentally incompatible world views. If one thing is clear from the stimulus debate, it’s that the two parties have utterly different economic doctrines. Democrats believe in something more or less like standard textbook macroeconomics; Republicans believe in a doctrine under which tax cuts are the universal elixir, and government spending is almost always bad.

Obama may be able to get a few Republican Senators to go along with his plan; or he can get a lot of Republican votes by, in effect, becoming a Republican. There is no middle ground.

As noted many times before, this is the whole problem with centrism, aka 'pragmatism' today. The verdict is out: Neoliberalism has failed.

What has happened to the promise of competently executed change? What are the strategic implications of this impending disaster? TARP II continues the fundamental flaws and hence failure of TARP I and ERRP is too small, ill-focused, and might already be too late. Why does Obama still not govern as if he had won?

This reminds of former German chancellor Gerhard Schroeder's slogan when he came to power in 1998 with the help of the Green Party to not do everything differently but many things better. The US and the world desperately need Obama not only to do things very differently but also much better than his predecessor (which shouldn't be too difficult). So far, however, it is very disappointing. There is much more continuity than change, both in the inadequacy of the policies and the incompetence with which they are being carried out.

If this is not the moment to exercise audacious strategic leadership, I don't when it might be. What is the Obama administration waiting for?

'Make Him Do It' - But How?

In 'Moving the Political Center,' David Sirota, along with many other left-liberal progressives, argues that congressional Democrats should emulate their Republican colleagues under Bush, and start every policy initiative or modification from as far to the political left as possible. He gives some examples of successful progressive measures concerning the recovery package.

Unfortunately, he does not explore this further, for it is a central strategic question. For example, how could progressives systematically use the Overton window to shift public discourse and opinion even further to the left? More fundamentally, how best to articulate the relationship between progressives and members of Congress, so that the former can exert maximum influence on the latter? How do progressives need to build power in order to achieve that goal?

Trying to gain 'strength in numbers' is often insufficient and can even be misleading. For instance, the Congressional Progressive Caucus (CPC) is the biggest caucus in the House, and with 71 members represents about a third of the House Democratic Caucus. Yet it can't point to a single accomplishment on its website. The same is the case for state Houses around the country.

Clearly, simply electing more progressives, even if they are 'genuine,' is not enough. Progressives have to find a way to hold them consistently accountable, and to nudge them to the left.

Are We All Lemons Now?

'Lemon socialism' - it's the oldest political game in town: You privatize benefits and socialize costs.

In his post 'Bad' of January 29, Paul Krugman tells a joke about a very serious matter, which rings all too true:

As the Obama administration apparently prepares to launch Hankie Pankie II — buying troubled assets from banks at prices higher than they will fetch on the open market — it occurred to me that an updated version of an old Communist-era joke may be appropriate: under Bush, financial policy consisted of Wall Street types cutting sweet deals, at taxpayer expense, for Wall Street types. Under Obama, it’s precisely the reverse.

Update: Maybe I was too cryptic. The original joke was, “Capitalism is the exploitation of man by man. Socialism is the reverse.”

His initial impression seems to be confirmed. In his latest column, 'Bailouts for Bunglers,' he now gives what might be the best short description of Obama's approach to the second half of the bailout:

Question: what happens if you lose vast amounts of other people’s money? Answer: you get a big gift from the federal government — but the president says some very harsh things about you before forking over the cash.

More than a week ago, Robert Reich made the same argument in his post, 'How America Embraced Lemon Socialism.'

So if, by many accounts, Obama has shown some smart progressive leadership on the stimulus & recovery package - though the full extent of which still remains to be seen - why this centrist caving on the second half of th bailout? Is there a larger political strategy behind this?

In any case, since we are now in the midst of lemon socialism, might as well do the real thing, and do it right, because that might be the only adequate response: The nationalisation of quite a number of banks. But of course the question again will be an quintessentially political one: Who gets what, when and how?

Barack Obama, Ideologue-In-Chief? or What Centrists Fail to Understand

What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply.

So-called 'pundits' such as John Freehery, founder and CEO of the Freehery Group, 'a boutique strategic advocacy firm' in Washington DC, and blogger at The Hill's Pundits Blog, understands this to be the most important line from Obama's inaugural address for Republicans, for it is them for whom the ground has shifted. They now face a huge challenge to reposition themselves. The background to this interpretation is what could be called the archetype of the core centrist credo:

We are a centrist country with conservative leanings. And if you don’t appeal to the vast middle, especially that part of Middle America that lives in the suburbs, your party loses seats, influence, access to money, and perspective

The center revolted against the partisanship of the last 20 years. They threw their lot in with Obama because he talked to them, appealed to them, excited them and promised them a post-partisan world where all would work together for a more perfect union.

Who could possibly be against that ideal?

Obviously all those who don't share that 'ideal' to begin with and question the whole concept of 'centrism,' such as Thomas Frank below.

At the other end of the political spectrum, further to the left, Victor Navasky, along with many others, 'prefers to believe' that Obama might be 'a liberal wolf in centrists sheep's clothing.' The formulation 'prefer to believe' betrays a classic case of projection that sill seems all too common among progressives today. It's wishful thinking.

The reverse seems to make more sense: Obama appears to be 'a centrist sheep with a rather thin progressive veneer.' If this is the case, the key challenge for left-liberal progressives is to develop a strategy that allows them to nudge Obama to the left.

The above line from Obama's speech only needs to be slightly modified to more accurately describe what really has happened in the US and the world in the past 30 years and to begin to make sense and become politically useful for left-liberal progressives. For the ground that has shifted is nothing less than 'reality,' primarily in its economic and environmental dimensions, less so in its politics:

What the centrists fail to understand is that the ground has shifted beneath them — that the stale political arguments of centrism that have consumed us for so long no longer apply.

Progressives such as Glenn Grennwald, Paul Krugman, Robert Reich, George Lakoff, Christopher Hayes, Guy Saperstein, David Sirota, and Rick Perlstein - just to name a few - have argued for a long time that centrism is a sham. Reich explicitly did so back in 2004 in his book Reason: Why Liberals Will Win the Battle for America, in chapter 5, Winning: It Will Take More Than Reason, in the section appropriately named 'The Sham of Centrism,' (pp. 196-201). 'Centrism' is a particularly pernicious form of political ideology, precisely because it passes itself off as 'the reasonable and sensible middle,' or these days as 'pragmatism.' Plus, it is shifting all the time, and the right very successfully has shifted it in its direction. For the same reason, 'leading from the center' doesn't make sense, because picking people up where they are supposedly at, is the opposite of leadership.

According to Politico, Obama wants 80 Senate votes for his recovery plan. Given that there are 58 Democrats in the Senate now, why does he want an additional 22 Republicans? In order to get them, and all the Blue Dog Democrats, he will have to make a number of centrist/conservative concessions. In addition, this will likely delay the adoption of the bill, during a daily deepening crisis where time is of the essence. Why would he do that? Why doesn't he instead 'act like he won'?

Today, Obamaian 'pragmatism' and 'post-partisanships' are just new words for 'centrism,' which is now obsolete, having been surpassed by developments around the world. As Glenn Greenwald recently documented, 'centrism' is anything but new. In fact, this is what most Democrats have been doing, ever since Dukakis in 1988, who said 'this election isn't about ideology. It's about competence.' Greenwald explains:

The central tenets of the Beltway religion -- particularly when a Democrat is in the White House -- have long been "centrism" and "bipartisanship." The only good Democrats are the ones who scorn their "left-wing" base while embracing Republicans. In Beltway lingo, that's what "pragmatism" and good "post-partisanship" mean: a Democrat whose primary goal is to prove he's not one of those leftists.

Whatever else one might want to say about this "centrist" approach, the absolute last thing one can say about it is that there's anything "new" or "remarkable" about it. The notion that Democrats must spurn their left-wing base and move to the "non-ideological" center is the most conventional of conventional Beltway wisdom.

In his excellent column at the Wall Street Journal, 'Obama Should Act Like He Won,' Thomas Frank presents one of the best definitions and critiques of centrism that I have read in a long time. It is scathing and right on target:

There is no branch of American political expression more trite, more smug, more hollow than centrism. [...]

Centrism is something of a cult here in Washington, D.C., and a more specious superstition you never saw. Its adherents pretend to worship at the altar of the great American middle, but in fact they stick closely to a very particular view of events regardless of what the public says it wants.

And through it all, centrism bills itself as the most transgressive sort of exercise imaginable. Its partisans are "New Democrats," "Radical Centrists," clear-eyed believers in a "Third Way." The red-hot tepids, we might call them -- the jellybeans of steel.

The reason centrism finds an enthusiastic audience in Washington, I think, is because it appeals naturally to the Beltway journalistic mindset, with its professional prohibition against coming down solidly on one side or the other of any question. Splitting the difference is a way of life in this cynical town. To hear politicians insist that it is also the way of the statesman, I suspect, gives journalists a secret thrill.

Yet what the Beltway centrist characteristically longs for is not so much to transcend politics but to close off debate on the grounds that he -- and the vast silent middle for which he stands -- knows beyond question what is to be done

As this should remind us, the real-world function of Beltway centrism has not been to wage high-minded war against "both extremes" but to fight specifically against the economic and foreign policies of liberalism. Centrism's institutional triumphs have been won mainly if not entirely within the Democratic Party. Its greatest exponent, President Bill Clinton, persistently used his own movement as a foil in his great game of triangulation.

And centrism's achievements? Well, there's Nafta, which proved Democrats could stand up to labor. There's the repeal of the Glass-Steagall Act. There's the Iraq war resolution, approved by numerous Democrats in brave defiance of their party's left. Triumphs all.

Essentially, 'centrism' is a political ideology that combines and articulates neoliberalism and 'liberal' interventionism. It is all the more powerful the more it succeeds to delude people with its pretension that it is 'post-ideological.'

It cannot be repeated enough: 'Post-ideological' and 'post-partisan' politics is utter and dangerous nonsense. I am just waiting for the Obamaniacs to push it further and start talking about 'post-politics.' It is a myth, but a very powerful myth, that has served 'centrists' exceedingly well. It is high time to burst this pretentious bubble, especially right now that it is being vigorously reinflated.

Likewise, there is nothing 'radical' about the 'radical middle' or 'radical centrists.' And today more than ever the 'third way' is a deadend street, a slow-motion trainwreck, given the economic and ecological crises facing us. 'Centrism' means sustaining the unsustainable. It tends to reduce democracy to technocracy, a tendency that critical theorists have critiqued for decades, foremost among them Juergen Habermas.

Christopher Hayes, drawing pragmatist philosophy in his recent reflection on what kind of 'pragmatist' Obama might turn out to be, put it really well:

Dewey's pragmatism was reformist, not radical. He sought to ameliorate the excesses of early industrial capitalism, not to topple it. Nonetheless, pragmatism requires an openness to the possibility of radical solutions. It demands a skepticism not just toward the certainties of ideologues and dogmatism but also of elite consensus and the status quo. This is a definition of pragmatism that is in almost every way the opposite of its invocation among those in the establishment. For them, pragmatism means accepting the institutional forces that severely limit innovation and boldness; it means listening to the counsel of the Wise Men; it means not rocking the boat.

These two kinds of pragmatism, what I would be tempted to call the 'fake,' so-called 'common sense' pragmatism of the establishment, and the 'real' philosophical and historical pragmatism, are opposed to each other. Obama has staffed his administration almost exclusively with members of the now discredited ancien regime of neoliberalism and interventionism. His early positions on a whole range of issues, from the 'bailout' to 'entitlement reform,' and from Pakistan to 'clean coal,' also reflect these obsolete approaches. Many of his other policies represent only a return to the historical norm. Some progressives may be forgiven, after these exceptional eight years, for mistaking these changes for genuine progress. Doing less harm is not the same as doing good.

One can make the strongest case for the argument that for the US to adequately address not only its current crises, but also the ones that will be the defining challenges of the 21st century, it needs to radically change many of its major policies in a quasi-revolutionary shift to a sustainable environment, economy and society. Conservatism and 'centrism' have proven to be failures to even begin to address these challenges, only making them worse. Progressivism is the only viable alternative left that at least stands a chance of beginning to respond semi-adequately to systemic challenges such as catastrophic climate change, peak oil, a hyper-militarized foreign policy and an utterly unsustainable world economy, that threaten the very foundations of human civilization. This is how much the ground has shifted.

Even such a corporate outfit as the World Economic Forum, in its latest report, 'Global Risks 2009,' now acknowledges that global risks today are so 'interlinked,' that they necessitate much more coherent and effective global governance, which of course is a form of collective action at the highest level that, if anything, only progressivism can achieve, with its systematic emphasis on the need for more coordination, cooperation and integration.

Thomas Frank concludes his column by quoting from former House Majority Leader 'the hammer' Tom DeLay's 2007 memoirs that Republicans under his leadership learned 'to start every policy initiative from as far to the political right as we could,' thereby moving 'the center farther to the right.'

President-elect Obama can learn something from Mr. DeLay's confession: Centrism is a chump's game. Democrats have massive majorities these days not because they waffle hither and yon but because their historic principles have been vindicated by events. This is their moment. Let the other side do the triangulating.

Something tells me that Obama knows all this already. So why doesn't he act accordingly? The 'chump's game' of 'centrism' should insult both his intellect and his seriousness, assuming that he actually is serious about finding workable solutions to critical problems, and not primarily concerned with keeping if not expanding his majority in the 2010 midterm elections and getting re-elected in 2012.

And here's the rub: The crises we are facing now, and will continue to face in one form or another for the rest of the 21st century, can only be adequately addressed through radically changed policies, which must be consistently applied for decades. But in a political system that is geared towards winning elections every two to four years, this is almost impossible to achieve. But saying that we are already doomed and that it is too late to change guarantees that nothing will be done, and thus this assessment becomes a self-fulfilling prophecy.

Obama just got elected President in this political system, which will continue to severely constrain his actions, no matter how brilliant and well-intentioned he may be. It is for this reason that progressives must develop a strategy that allows them to change both the structure of the political system and the ideology that supports it.

In short, politics is inescapably ideological, 'centrism is for phonies,' and 'post-partisanship' is bogus. At least for the next four years, Obama will be, not Pragmatist-In-Chief, as he and others would like us to believe, but unavoidably Ideologue-In-Chief. If progressives don't manage to develop and act on a strategy that allows them to at least nudge him to the left, early indications are that he will turn out to be yet another triangulating Centrist-In-Chief, and the results cannot possibly be better than some version of Clintonism 2.0. Given the enormous challenges, they are almost guaranteed to be worse. The stakes could not be higher.

'Approximately the Bush Position'

In an interview with Democracy Now! today, Noam Chomsky characterized Obama's first substantive statements yesterday on the crisis in Gaza and Israeli-Palestinian relations more broadly as representing 'approximately the Bush position.' Likewise, he criticized the first statements by Obama's new Middle East envoy, George Mitchell, as basically continuing US policies that have been failing for decades to resolve the conflict.

Chomsky criticized them in particular for carefully omitting any serious criticism of Israel concerning its violation of international law, expansion of settlements in the West Bank and the fragmentation of Palestinians into what Ariel Sharon called 'bantustans,' and the brutal oppression of Palestinians. Until the US stops supporting Israel's policy and starts pressuring it to significantly change, Israel will continue doing what has been its official policy for decades:

JUAN GONZALEZ: Noam Chomsky, I’d like to ask you about the enormous civilian casualties that have shocked the entire world in this last Israeli offensive. The Israelis claim, on the one hand, that it’s the unfortunate result of Hamas hiding among the civilian population, but you’ve said in a recent analysis that this has been Israeli policy almost from the founding of the state, the attack on civilian populations. Could you explain?

NOAM CHOMSKY: They say so. I was just quoting the chief of staff—this is thirty years ago, virtually no Palestinian terrorism in Israel, virtually. He said, “Our policy has been to attack civilians.” And the reason was explained—you know, villages, towns, so on. And it was explained by Abba Eban, the distinguished statesman, who said, “Yes, that’s what we’ve done, and we did it for a good reason. There was a rational prospect that if we attack the civilian population and cause it enough pain, they will press for a,” what he called, “a cessation of hostilities.” That’s a euphemism meaning cessation of resistance against Israel’s takeover of the—moves which were going on at the time to take over the Occupied Territories. So, sure, if they—“We’ll kill enough of them, so that they’ll press for quiet to permit us to continue what we’re doing.”

Actually, you know, Obama today didn’t put it in those words, but the meaning is approximately the same. That’s the meaning of his silence over the core issue of settling and takeover of the Occupied Territories and eliminating the possibility for any Palestinian meaningful independence, omission of this. But Eban [inaudible], who I was quoting, chief of staff, would have also said, you know, “And my heart bleeds for the civilians who are suffering. But what can we do? We have to pursue the rational prospect that if we cause them enough pain, they’ll call off any opposition to our takeover of their lands and resources.” But it was—I mean, I was just quoting it. They said it very frankly. That was thirty years ago, and there’s plenty more beside that.

[...]

So, OK, we can have—in fact, you know, the first Israeli government to talk about a Palestinian state, to even mention the words, was the ultra right-wing Netanyahu government that came in 1996. They were asked, “Could Palestinians have a state?” Peres, who had preceded them, said, “No, never.” And Netanyahu’s spokesman said, “Yeah, the fragments of territory that we leave to them, they can call it a state if they want. Or they can call it fried chicken.” Well, that’s basically the attitude.

And Mitchell had nothing to say about it. He carefully avoided what he knows for certain is the core problem: the illegal, totally illegal, the criminal US-backed actions, which are systematically taking over the West Bank, just as they did under Clinton, and are undermining the possibility for a viable state.

At least so far, there is hardly any indication that any major change will occur in US policy concerning the Israeli-Palestinian conflict.

Like any communication, political communication is highly selective. Its selectivity is largely determined by the structure of the system in which it takes place. The structures of social systems are cognitive, normative, and reflexive expectations. Cognitive expectations are anticipations of what is likely to happen and how things are likely to work. Normative expectations express what should happen. If we understand, with Harold Lasswell, values as desired goals, we can understand both values and norms, and interests as normative expectations. Finally, reflexive expectations are expectations of expectations. Once you understand how systems are structured, patterns of communication and behaviour become pretty predictable.

If we apply this to Obama's and Mitchell's most recent positioning on the the Israeli-Palestinian conflict, we get something like this: Given the structure of US foreign policy, and the fact that the basic understanding of what constitutes 'US interests' in the Middle East has not changed, the result is the continuation of the traditional policy: Form follows function. To change the form (structure) of US policy, one needs to change its function. Yet this is very difficult to achieve, since structures have grown and solidified for many decades, and are full of vested interests and deeply entrenched positions.

It is this structure that determines the selectivity of communication and action. This explains how systems reproduce themselves over time, how they not only get from one moment to the next, but more importantly how they get from this position to that position. This is why Obama sounds very similar to Bush on the Israeli-Palestinian conflict, and Mitchell sounds basically like Dennis Ross, Director of Policy Planning in the State Department under Bush 41 and Middle East envoy Clinton, who was rumored to also take up that position under Obama as well, and now is one of his top advisers on Middle East policy.

Here is what Chomsky has to say about Ross:

And you can understand it [the continuity from Bush to Obama] when you look at his advisers. So, say, Dennis Ross wrote an 800-page book about—in which he blamed Arafat for everything that’s happening—barely mentions the word “settlement” over—which was increasing steadily during the period when he was Clinton’s adviser, in fact peaked, a sharp increase in Clinton’s last year, not a word about it.

What is important to understand is that US policy has continued not because of the continued presence of people like Ross (that would be getting cause and effect reversed), but because the overall structure of US policy has not changed. 'Ross' and 'Mitchell,' just like 'Bush' and 'Obama' are just names, and what, after all, is in a name? What matters are not so much individuals and their differences (which can be considerable, of course), but structures and their continuity. This raises the fundamental question to what extent individuals can change social structures such as function systems, organizations, and networks.

The implication of all this for progressive strategy is that it should concentrate its efforts on changing those organizations in which resources and decision-making power is concentrated, i.e. governments and corporations. Organizations are by far the most powerful social actors because they can mobilize and bundle resources in collective action. This requires progressives in turn to strengthen their own organizations and networks and better coordinate their activities.