Columnists

Ellen Russell
What financial crises teach us about economic democracy

| August 15, 2011
What financial crises teach us about economic democracy

The left can learn an important lesson from the financial upheavals that are becoming routine these days. As elites scramble to confront each successive crisis, they prove by example that which they consistently deny: there is an alternative to the dictates of the free market.

One of the most politically disempowering aspects of neoliberal capitalism is the mantra that we were powerless to resist economic forces. We are constantly told that there is no help for our economic complaints. The free market created the situation, and market forces reign supreme.

In particular, governments are portrayed as powerless to override the dictates of the market. Politicians supposedly have no power to resist the punishing discipline of the invisible hand. Sorry for your troubles, have a nice day.

The lesson we are meant to learn from this is that the left should just sit on their hands when it comes to challenging economic arrangements. It isn't a question of political organizing, or having a cracker-jack argument, or proposing a better way to organize an economy. Whatever critiques or alternatives the left presents are not taken seriously, since resisting the market is futile.

We have paid a heavy price for the prevalence of this "nothing-can-be-doneism". Why go out in the streets, why attend a political gathering, why vote the so-and-sos out of power if nothing can change? Why even articulate aspirations for a different kind of economy if no alternatives are possible?

This current financial instability teaches us a valuable lesson. When capitalism is in crisis mode, this position of "hands off market forces" is immediately thrown out the window. If a crisis looms that threatens elites, any number of new arrangements are negotiated in very short order.

I need hardly point out that this is hypocritical: when regular folks are losing their jobs and government services, and much of the third world is circling the drain (economically speaking), then we are supposed to remain silent in deference to market forces. When elites are threatened by market forces, suddenly they believe that political will should govern market forces. As German Chancellor Angela Merkel said during the first Greek debt crisis last year, "We must re-establish the primacy of politics over the markets."

Consider the Tea Partiers' efforts to play chicken with American public finances. Most corporate leaders -- and many reasonable politicians -- grasped that this silly debt ceiling business was threatening to unleash incalculable punishment as market forces reacted to the possiblity of a default by the U.S. on its debt obligations. Corporate bigwigs (who are tight with the Republicans and usually are reluctant to take on Tea Party zealots publically) had had enough of rattled financial markets ass the deadline was approaching. Phone calls were made. A letter went out from Wall Street banks demanding some sort of solution. After a little more grandstanding, the politicians cobbled together something.

Of course there is a mind-blowing double standard at play when elites take action to forestall market punishment. Supremacy of the market is good enough for the rest of us, but they never take this pabulum seriously if it means that they should sacrifice their wellbeing for this principle. They are quite clear that arrangements can be changed to safeguard their interests -- regardless of what outcome might be produced by market forces.

But beyond this obvious hypocrisy, there is a more profound political lesson. Elites know that something actually CAN be done.

Take the most recent financial crisis concerning Greek debt, for example. If Greece's debt was considered to be in freefall, that would trigger a whole series of market reactions that might have done incalculable damage to the banks and other financial market players that had lent money (wisely or not) to the more heavily indebted European countries. Markets would have severely punished debt holders and other financial market participants, and ultimately the carnage would have extended to other European countries and the global economy more generally.

Did the European Union issue a press release saying that unfortunately the market was going to have to take its course, and (by the way) you financial market hotshots may wish to huddle in the nearest bomb shelters for the duration? Not on your life. The major players got together and started negotiating. People comprised. New arrangements were discussed. Suddenly all kinds of innovative thinking was possible. In other words, they showed us that a group of people can get together and do things differently, regardless of what market discipline might require.

This is not to say that the Greek debt problem is solved or that money lenders will not feel pain. There are still tough times ahead. But they showed us that people can get together to manage the tough times.

We have to recognize free market ideology for what it is: a tool to persuade us that we cannot stand up for what we want. The mantra that the market must govern all of economic life has encouraged us to believe that democratically determined priorities have no relevance in economic matters. But if collective decision making can trump market forces during a crisis, then the cat is out of the bag: economic democracy is possible.

Capitalist systems have consistently maintained that democracy can only exist in the political sphere. Because markets rule the economic sphere. Economic democracy is so radical that we are usually not permitted to see the extent to which economic affairs are orchestrated by some very human influences.

We've seen elites gather to problem solve in a crisis, in flagrant disregard of their purported obedience to market forces. When the doo-doo hits the fan, we catch glimpses that it is possible for society to rule markets.

Economist Ellen Russell is a research associate with the Canadian Centre of Policy Alternatives. Her column comes out monthly in rabble.ca.

Comments

There can be no economic democracy until sanity is restored to both wealth distribution and income distribution.  The gaps in both have been growing rapidly since 1981 (Reagan Presidency in the US) and today are at the levels seen just at the start of the Great Depression.

The middle class has been disappearing, particularly in this new milennium, and the wealthy elites with the corporatocracy they control have been buying our governments in both Canada and the US.  What everyone should be particularly wary of is their attacks against our social safety nets, while they have managed to avoid paying their fair share of taxes.

They have managed to manipulate the stockmarket by using hedge funds, and have lobbied extensively for all sorts of deregulation, especially of the financial sector, labour rights, the environment and pollution.

I don't see sufficient signs of a popular counter movement to give me hope for the change we need.

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