Existential Crisis at the G20 Summit

Existential Crisis at the G20 Summit. By Ruth Conniff
The Progressive, April 2, 2009

The global financial crisis has created an existential problem for American capitalism. The theory that deregulation, free markets, and policies that serve the interests of big banks and multinational corporations are best for all of us has never looked so weak. Protesters at the G-20 summit in London are driving home this point.

As the activist group G20 Meltdown puts it: "While two million are now out of work in Britain alone, the G20 ministers still resist nationalizing the banks, instead continuing to pour trillions into the black hole of bankers' bad gambling debts." Various groups, from Save the Children to the Stop Climate Chaos Coalition are pushing to expose the global trade club as the insider group for the wealthy that it is. And they are insisting on democratic policy changes that put needs of people--especially the poor and vulnerable-- ahead of the needs of hedge fund managers and corporations.

Talking openly about class is not as taboo in the rest of the world as it is here in the United States. Americans have been living for decades with what European Marxists like to call "class transference": the idea that the interests of multimillionaire bankers and businessmen are exactly the same as the interests of line workers and school teachers. After all, we all plan to be millionaires one day, right? This mentality allows us to accept the idea that a CEO who presides over the collapse of a major corporation should be "punished” by being pushed out with a $35 million golden parachute, but family-supporting wages and benefits are "fat" that needs to be trimmed so companies can become more competitive and profitable.

Favoring Wall Street at the expense of Main Street is nowhere more obvious than in our government's very different treatment of the banks and GM. Why is it that we see the need to spend tax money to protect bondholders from losing money on risky bets, but massive job loss from the collapse of the auto industry is an acceptable price to pay for GM's poor management?
Why is AIG "too big to fail," but the entire American auto industry is not?

Don't get me wrong. There is no greater example of American hubris than the story of GM. It reads like Shakespearian tragedy--the rise and fall of this giant company that once bragged, "What's good for General Motors is good for America." That our country was still building giant showrooms for Hummers and consumers were blithely trading in 10-mile-per-gallon SUVs for newer models even as war raged in Iraq is incredible. At some point we were going to start paying for this monumental shortsightedness. It turns out that point is now.

But there is a lot that government can do to decide who will suffer the most from the excesses and hubris of unsustainable business practices. Businesses can be counted on to look out for their own interests: to seek higher profits and to push and lobby federal and international government for the best possible deal. But it is government's job to look out for the taxpayers, homeowners, line workers, and school children who are going to bear the brunt of the financial crisis. The more we recognize that our interests as human beings are not the same as the interests of the big companies that want to maximize their profits, the more effective we can be as citizens pushing our government to change its ways.

The Obama Administration needs to be held to account.

As mutual fund manager John Hussman puts it: "Make no mistake - we are selling off our future and the future of our children to prevent the bondholders of U.S. financial corporations from taking losses. We are using public funds to protect the bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own. All our policy makers have done to date has been to squander public funds to protect the full interests of corporate bondholders. Even Bear Stearns' bondholders can expect to get 100% of their money back, thanks to the generosity of Bernanke, Geithner and other bureaucrats eager to hand out the money of ordinary Americans."

Meanwhile, by threatening GM with bankruptcy, the Obama Administration is toying with massive job loss throughout the industrial Midwest. With hundreds of billions already pledged to save the banks, there is neither political nor economic capital left for a massive bailout of the bloated auto industry. Still, human needs--and protecting the homes, health care, retirement funds, and childrens' future of the auto industry's workforce--must come ahead of a toxic asset plan that protects investors against feeling the downside of their risky bets.