By Mike Davis
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US elections – the new deal?

This article is over 15 years, 5 months old
The US ruling class are desperate to rescue their system from catastrophe. Mike Davis looks at what the new incumbent of the White House faces and what this means for ordinary Americans.
Issue 330

Let me begin, very obliquely and strangely, with the Grand Canyon and the paradox of trying to see beyond cultural or historical precedent. The first European to look into the depths of the great gorge was the conquistador García López de Cárdenas, in 1540. He was horrified by the sight and quickly retreated from the South Rim. More than three centuries passed before Lieutenant Joseph Christmas Ives of the US Army’s Corps of Topographical Engineers became the second visitor. Like García López, he recorded an “awe that was almost painful to behold”. Although his expedition included a well known German artist, the official sketches of the canyon were wildly distorted in scale and perspective.

Neither the conquistador nor the army engineer, in other words, could make sense of what they saw. They were overwhelmed by primitive horror and awe. In a fundamental sense, they were blind because they lacked the concepts to organise a coherent vision of an utterly new landscape.

Accurate portrayal of the canyon only came a generation later when it became the obsession of one-armed civil war hero John Wesley Powell and his celebrated teams of geologists and artists. They were like Victorian astronauts on another planet, the Colorado Plateau. It took years of brilliant fieldwork to construct a conceptual framework that finally brought perception into accord with the actual landscape.

The result of their work, The Tertiary History of the Grand Canyon published in 1882, is illustrated by masterpieces of draftsmanship that, as historian Wallace Stegner once pointed out, “are more accurate than any photograph” because they reproduce details of stratigraphy usually obscured in camera images. When we visit one of the famous viewpoints today, most of us are oblivious to how profoundly our eyes have been trained to see the canyon’s structure through these iconic images or how much we have been influenced by the idea, popularised by Powell, of the canyon as a museum of geological time, dramatically revealed in a mile-deep layer-cake of sedimentary strata.


But why am I talking about geology? Because, like the Grand Canyon’s first explorers, we are looking into an unprecedented abyss of economic and social turmoil that confounds our previous perceptions of historical risk. Our vertigo is intensified by our ignorance of the depth of the crisis or any sense of how far we might ultimately fall.

Let me confess that, as an aging socialist, I suddenly find myself like the Jehovah’s Witness who opens his window to see the stars actually falling out of the sky. Although I’ve been preaching Marxist crisis theory for decades, I never believed I’d actually live to see financial capitalism commit suicide or hear the International Monetary Fund warn of imminent “systemic meltdown”.

Thus my initial reaction to Wall Street’s infamous 777.7 point plunge a month ago was a very 1960s retro elation. “Right on, Karl!” I shouted. “Eat your derivatives and die, Wall Street swine!” Like the Grand Canyon, the fall of the banks can be a terrifying but sublime spectacle.

But the real culprits, of course, are not being trundled off to the guillotine; they’re gently floating to earth in golden parachutes. The rest of us may be trapped on a burning plane without a pilot, but the despicable Richard Fuld, who stands accused of using Lehman Brothers to loot pension funds and retirement accounts, merely sulks on his yacht.

The US left has no time to waste. In the face of a new depression that promises folks from Wasilla to Timbuktu an unknown world of pain, how do we reconstruct our understanding of the globalised economy? To what extent can we look to either Barack Obama or any of the Democrats to help us analyse the crisis and then act effectively to resolve it?

If the 9 October Nashville presidential “town hall” debate is any guide, we will soon have another blind president. Neither candidate had the guts or information to answer the simple questions posed by the anxious audience: What will happen to our jobs? How bad will it get? What urgent steps should be taken?

Instead the candidates stuck like flypaper to their obsolete talking points. McCain’s only surprise was yet another innovation in deceit: a mortgage relief plan that would reward banks and investors without necessarily saving homeowners.

Obama recited his four-point programme, infinitely better in principle than his opponent’s preferential option for the rich, but abstract and lacking in detail. It remains more a rhetorical promise than the blueprint for the actual machinery of reform. He made only passing reference to the next phase of the crisis: the slump of the real economy and likely mass unemployment on a scale not seen for 70 years.

With baffling courtesy to the Bush administration, he failed to highlight any of the other weak links in the economic system: the dangerous overhang of credit-default swap obligations left over from the fall of Lehman Brothers; the trillion dollar black hole of consumer credit card debt that may threaten the solvency of JP
Morgan Chase and the Bank of America; the implacable decline of General Motors and the US auto industry; the crumbling foundations of municipal and state finance; the massacre of tech equity and venture capital in Silicon Valley; and, most unexpectedly, sudden fissures in the financial solidity of even General Electric.

In addition, both Obama and his vice presidential partner, Joe Biden, in their support for secretary of the treasury Paulson’s $700 billion bailout, avoid any discussion of the inevitable result of cataclysmic restructuring and government bailouts: not “socialism”, but ultra-capitalism – one that is likely to concentrate control of credit in a few leviathan banks, controlled in large part by sovereign wealth funds but subsidised by generations of public debt and domestic austerity.

In supporting Obama, an unprecedented number of ordinary Americans have made a conscious choice for economic solidarity over racial division. Yet Obama’s campaign’s slogans barely address the existential priorities of his most fervent supporters: single women trapped in low paid service jobs, hospital and hotel workers facing job cuts, students struggling with soaring tuitions, school teachers unable to pay their mortgages, and inner city families who can’t afford winter heating bills.

But a close friend, exasperated by my chronic pessimism, chided me the other day, “Don’t be so unfair. FDR [Franklin D Roosevelt] didn’t have a nuts and bolts programme either in 1933. Nobody did.” What Franklin D Roosevelt did possess in that year of breadlines and bank failures, according to my friend, was enormous empathy for the common people and a willingness to experiment with government intervention, even in the face of the monolithic hostility of the wealthy classes. In this view, Obama is‘s reimagining of our 32nd president: calm, strong, deeply in touch with ordinary needs, and willing to accept the advice of the country’s best and brightest.

But even if we concede to the Illinois senator a truly Rooseveltian or, even better, Lincolnian strength of character, this hopeful analogy is flawed in at least three principal ways:

First we can’t rely on the Great Depression as analogue to the current crisis, or upon the New Deal as the template for its solution. Certainly, there is a great deal of deja vu in the frantic attempts to quiet panic and reassure the public that the worst has passed. Many of Paulson’s statements, indeed, could have been directly plagiarised from president Herbert Hoover’s secretary of the treasury Andrew Mellon, and both presidential campaigns are frantically cribbing heroic rhetoric from the early New Deal.

But just as the business press has been insisting for years, this is not the Old American Economy, but an entirely new-fangled contraption built from outsourced parts and supercharged by instantaneous world markets in everything from dollars and defaults to hog bellies and disaster futures.

We are seeing the consequences of a perverse restructuring that began with the presidency of Ronald Reagan and which has inverted the national income shares of manufacturing (21 percent in 1980; 12 percent in 2005) and those of financial services (15 percent in 1980; 21 percent in 2005). In 1930 the factories may have been shuttered but the machinery was still intact; it hadn’t been auctioned off at five cents on the dollar to China.

On the other hand, we shouldn’t disparage the miracles of contemporary market technology. Casino capitalism has proven its mettle by transmitting the deadly virus of Wall Street at unprecedented velocity to every financial centre on the planet. What took three years at the beginning of the 1930s – that is the full globalisation of the crisis – has taken only three weeks this time around. God help us, if, as seems to be happening, unemployment tops the levees at anything like the same speed.

Second, Obama won’t inherit Roosevelt’s ultimate situational advantage – having emergent tools of state intervention and demand management (later to be called “Keynesianism”) empowered by an epochal uprising of industrial workers in the world’s most productive factories.

If you’ve seen any of the sad parade of economic gurus on US television, you know that the intellectual shelves in Washington are now almost bare. Neither major party retains more than a few enigmatic shards of policy traditions different from the neoliberal consensus on trade and privatisation. Indeed, posturing pseudo-populists aside, it is unclear whether anyone inside the Beltway of DC, including Obama’s economic advisers, can think clearly beyond the indoctrinated mindset of Goldman-Sachs, the source of the two most prominent secretaries of the treasury over the last decade.

Keynes, now suddenly mourned, is actually quite dead. More importantly, the New Deal did not arise spontaneously from the goodwill or imagination of the White House. On the contrary, the social contract for the post-1935 Second New Deal was a complex, adaptive response to the greatest working class movement in US history, in a period when powerful third parties still roamed the political landscape and Marxism exercised extraordinary influence on US intellectual life.

Certainly I would be the last to foreclose the possibility or necessity of labour’s resurgence but even with the greatest optimism of will, it is difficult to imagine the US labour movement recovering from defeat as dramatically as it did in 1934 to 1937.

The third problem with the New Deal analogy is perhaps the most important. Military Keynesianism is no longer an available miracle cure. Let me explain.

In 1933, when FDR was inaugurated, the US was in full retreat from foreign entanglements, and there was little controversy about bringing a few hundred marines home from the occupations of Haiti and Nicaragua. It took two years of world war, the defeat of France and the near collapse of England to finally win a majority in Congress for rearmament. But when war production finally started up in late 1940 it became a huge engine for the re-employment of the US workforce, the real cure for the depressed job markets of the 1930s. Subsequently, US world power and full employment would align in a way that won the loyalty of several generations of working class voters.


Today, of course, the situation is radically different. A bigger Pentagon budget no longer creates hundreds of thousands of stable factory jobs, since significant parts of its weapons production are now actually outsourced, and the ideological link between high wage employment and intervention – good jobs and Old Glory on a foreign shore – while hardly extinct is structurally weaker than at any time since the early 1940s. Even in the new military (largely a heredity caste of poor whites, blacks, and Latinos) demoralisation is reaching the stage of active discontent and opening up new spaces for alternative ideas.

Although both candidates have endorsed programmes, including expansion of army and marine combat strength; missile defence (aka “Star Wars”); and an expanded war in Afghanistan, that will enlarge the military-industrial complex, none of this will replenish the supply of decent jobs or prime a broken national pump. However, in the midst of a deep slump, what a huge military budget can do is obliterate the modest but essential reforms that make up Obama’s plans for healthcare, alternative energy, and education.

In other words, Rooseveltian guns and butter have become a contradiction in terms, which means that the Obama campaign is engineering a catastrophic collision between its national security priorities and its domestic policy goals.

Why don’t they see the Grand Canyon? Perhaps they do, in which case deception is truly the mother’s milk of US politics.

In case anyone has missed the coverage of the US debates, the Democratic candidate has chained himself, come hell or high water, to a global strategy in which “victory” in the Middle East (and Central Asia) remains the chief premise of foreign policy, with the Iraqi-style nation-building hubris of Dick Cheney and Paul Wolfowitz repackaged as a “realist” faith in global “stabilisation”.

True, the enormity of the economic crisis may compel president Obama to renege on some of candidate Obama’s ringing promises to support an idiotic missile defence system or provocative Nato memberships for Georgia and Ukraine. Nonetheless, as he emphasises in almost every speech and in each debate, defeating the Taliban and al Qaida, together with a robust defence of Israel, constitute the keystone of his national security agenda.

Under huge pressure from Republicans and Blue Dog Democrats alike to cut the budget and reduce the exponential increase in the national debt, what choices would president Obama be forced to make early in his administration?

More than likely comprehensive healthcare will be whittled down to a barebones plan, “alternative energy” will simply mean the fraud of “clean coal,” and anything that remains in the treasury, after Wall Street’s finished its looting spree, will buy bombs to pulverise more Pashtun villages, ensuring yet more generations of embittered mujahadeen.

Am I unduly cynical? Perhaps, but I lived through the Lyndon Johnson years and watched the War on Poverty, the last true New Deal program, destroyed to pay for genocide in Vietnam.

It is bitterly ironic, but, I suppose, historically predictable that a presidential campaign millions of voters have supported for its promise to end the war in Iraq has now mortgaged itself to a “tougher than McCain” escalation of a hopeless war in Afghanistan and the Pakistani tribal frontier.

In the best of outcomes, the Democrats will merely trade one brutal, losing war for another. I fear we attend not the resurrection of hope, but its wake.

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