TheAgitator.com
The Rise of Disaster Socialism
Sunday, September 21st, 2008This financial crisis is a great opportunity for progressives to gain some leverage over a set of economic problems that it’s normally difficult to devise a workable method of addressing. I’m not holding my breath out for congress to make the most they could out of this opportunity, but for the moment progressives out to be drawing attention to the fact that the opportunity exists.
I’ll echo this guy: Will Naomi Klein denounce this shameless attempt to use a crisis to impose otherwise unpopular economic policies on an unwitting public?
For shame!
We’re doomed as a race. People love being lied to, manipulated, and being someone’s slave. I liberty.
I haven’t read the book yet, but in one of her articles she specifically states that taking political advantage of disasters is not a unique strategy for the Right, and she does mention socialist / communist opportunism.
Finally, someone who believes that Naomi Klein got it exactly backwards.
While we’re at it, anybody else suspicious that the $700B bailout is more for incumbency than for banks and taxpayers?
I don’t think I really agree with Radley here. Regardless of whether you agree with Yglesias or not, as long as Yglesias himself feels that his ideas and solutions are for the best then I would not consider it shameless for him to “take advantage” of the current crisis to get those ideas enacted.
The point here is not whether the ideas are correct or not. I’m simply saying that if you believe you have the best solution it’s not shameless to propose it during a crisis because presumably you really do believe that your ideas would have avoided the crisis if only you could have gotten people to agree with you earlier.
He may be wrong, but I wouldn’t call him shameless.
The mistake made by most socialists is to assume that procedures which are a good idea in an emergeny are also a good idea in non emergency situations.
In an emergency you need rapid decision making by people with the power to make their decisions stick. The maket cannot provide this. Its decision making is too decenteralised and the decision makers lack the authority to enforce their decisions. Some aspects of decision making are the proper function of government. And yes, you certainly can criticise some of the responses of some governments to disasters. I would suggest most of these failures are the results of burocracy. We have organizations that spend most of their time in a stand by mode waiting for something to happen. Sometimes they fail to dith the stand by mode procedures when they need to.
In non emergency situations you dont generally need this centeralized decision making. You need the decisions to be made by someone with more familiarity witth the problem at hand. The market provides this better than the government ever could.
IOW, when will Klein write a book denouncing an unacted-upon policy suggestion made by a 20-something year old blogger?
Disasters always lead to some kind of government atrocity. 9/11 helped usher in a larger American police state. The great depression brought in the welfare state. The explosion on the USS Maine led to the Spanish American War. Global Warming will take away our sovereignty. We’re not heading towards a socialist society, we’re heading towards a fascist society. There is even a modern form of eugenics is occurring. The make believe obesity epidemic and second hand smoke ordinances are basically making second class citizens out of people based on their habits and activities as opposed to their race.
Just for the record, Matt D is the not-crazy Matt…
I think we can rest assured that Klein won’t critically examine expansions of state power brought on by the left during times of crisis. She criticizes the contracts won by companies supplying airport security equipment, but she doesn’t seem to care that airport security was largely nationalized after 911. And the elephant in the room: She already wrote this polemic and failed to address the New Deal as disaster socialism in the same light (if one could call it that) that she used on disaster capitalism. She is too blinded by ideology to turn her own thesis on the left, even when the application is so obvious that she should make an effort to address it if only to try to show how it doesn’t apply.
She comes closest only to describe the New Deal as an attempt to “address the desperation of the Great Depression” [p. 316], and that’s not in the context of examining disasters used to advance an ideological agenda, but only as an aside in a discussion of why there was no Marshall Plan for post-Cold War Russia. And, Klein combines even that indirect acknowledgment with the tired old saw that the New Deal was the “acceptable compromise” [p. 318] that saved capitalism because voters (a small fraction, as it turns out) during the Great Depression were questioning capitalist economics.
She never addresses the use of people’s economic fears as a tool to greatly increase the power of the state and the hard-fisted tactics employed to do that, such as like court-packing threats or false promises when selling parts of the program, such as the temporary nature of the withholding tax or idea that parts of the New Deal program would be privatized once the economic crisis ended.
It’s a real weakness in her book. If someone on the right were writing a book that discussed the exploitation of disasters to advance leftist expansions of government power, it would be a serious weakness never to address the obvious question of “Is the agenda of the right advanced in the same way?” Things like the use of 911 to advance the surveillance state or to promote neocon interventionism overseas, etc. need to be addressed. Even a discussion of those things combined with an attempt to show how they aren’t really part of the conservative agenda would at least be an acknowledgment that they appear to fit the pattern. Failing to do so would be a serious weakness.
I think it’s entirely proper to criticize Klein’s book on similar grounds. Of course, for one criticizing The Shock Doctrine, there is sort of an embarrassment of riches, as people like Johan Norberg and Jonathan Chait have amply demonstrated.
Gary, it doesn’t matter that the person increasing power really thinks their ideas are best. Good intentions don’t improve bad policies. It’s not as though the people that Klein criticizes actually intended to make the country worse. Hell, I’m sure that even Stalin thought that by quelling potential dissent he was increasing the long-term strength and security of the Soviet state. He thought that those millions of people who starved to death were just the price of that improvement. Good intentions. Pfeh.
And, the fact that people act immediately after a disaster to exploit people’s fear and need to “do something” and use that fear to pass policies that they know wouldn’t pass under calmer circumstances is shameless, in this context. That is the sense in which Klein criticizes the right and I think its appropriate for Radley to parody her by using it in the same sense when the left wants to slip more of its agenda under the door.
This whole situation arose because of the nature of humans. When humans are faced with a problem, we seek to solve the problem to get what we want. Whatever the rules of the situation, we will work hard to overcome them. The rules lead to the outcome. When we see that the situation is intolerable, we will only change the outcome and arrive at a better place if we change the underlying rules. The rules are ultimately to blame. Contrast the US approach on mortgage and loan deductibility with the policy in Canada. In the US, when you buy a home for your family, a cottage at the lake or a new car or boat, you can deduct the interest from your taxable income. That way, you are encouraged to spend money, and the economy flourishes as a result. In Canada, we are not allowed to deduct any of that interest. Only on investments which have a probability of profit. Therefore, we are encouraged to pay down our mortgage and loans as quickly as possible. Here is the scenario; A few years ago, a young American couple bought a home,started a family, etc. They paid $100,000 for the home and put on a $110,000 mortgage, got a car with a loan, bought a boat and a truck to tow it, all on a loan, etc. All the interest is deductible which they see as a justification for all that debt. After about 5 years of living beyond their means, they found themselves in a financial crisis with $50,000 of debt they couldn’t pay on. Their banker increased their mortgage because the house was by then worth $150,000. They went on living beyond their means, and in 3 years they were $50K in debt, they went to the banker and he increased the mortgage to $200K because their house was then worth that. They continued living beyond their means, with the added expense of higher mortgage payments. Now, 18 months later, $50K in debt and with their home worth only $180,000, they can’t borrow. If they sell their home they can’t pay the capital gains tax as well as their debts, and they can’t pay the payments on the car, boat, cottage, etc. Their only way out is bankruptcy. Contrast that with Canada, where you must put a down payment up at the time you buy, so you start off with a mortgage of about $98,000 on your initial purchase, and because the interest is not deductible, everyone encourages and expects you to pay it down as quickly as possible, and young families are further discouraged from getting themselves into debt, because none of the interest on your car, boat or cottage is deductible. Nobody wants debt. The young couples do sometimes live beyond their means, however when they get into trouble, the bank will only lend them up to 80% of the house value, so they are not going to get in too deep, and if they finally are forced to sell home to settle up, there is no tax on principal residences. In the US system, the economy is artificially stimulated by people going into unreasonable debt. In Canada, the citizens end up with a tax-free profit on their homes and a much safer environment to buy. The homeowners get the benefit here, the merchants get the benefit there. In other words, the outcome you are living with today is entirely the fault of the rules underlying the system, and has led to the bailout of Fannie Mae and Freddie Mac whereas in Canada, Canada Mortgage and Housing or CMHC which is our equivalent to them, is flush with cash. And, we allow private enterprise to compete with CMHC and they are making money here too. If you want to change the outcome, you must change the rules. So long as you are encouraged to go into debt, you will have these situations forever.
Matt D,
You can call me crazy if you want. If you pay attention to what is going on, it’ll drive you a little crazy. It’s that or ignorant bliss and denial. Don’t worry, I don’t want anyone to confuse me with you either.
primus,
(For a minute, I thought I was in the wrong thread. :))
Wait, so this couple got an car, boat, and truck for an extra $10,000? Not bad. ;-)
I agree that the mortgage interest deduction is bad social engineering (if you’ll forgive the redundancy). It might be okay if the interest deductions were more even-handed, but having a special deduction just for certain kinds of mortgage interest creates a distortion and it is responsible for some of the instability we’ve seen in housing credit. (I tend to think that lending rules and the implicit guarantee that the fed would bail out Freddie and Fannie were more destabilizing, though.)
In addition to incentivizing debt, it has become one of the biggest obstacles to income tax simplification and reform. Many of the best reform plans would get rid of that deduction, but that is unpopular because it is hailed as the great middle-class tax loophole.
freedomfan, yeah I think my point wasn’t made in the right context. I was jumping to the defense of Matt Yglesias who I don’t always agree with but who I think is a principled and well articulated person.
As a sarcastic jab at Klein, I agree with Radley completely. Klein is a complete farce and Radley’s point with respect to her is well made.
> We’re not heading towards a socialist society,
> we’re heading towards a fascist society.
In principle, they’re the same thing.
I know some folks around here don’t like Gingrich, but this is an interesting read:
Getting Answers From D.C.
>> We’re not heading towards a socialist society,
>> we’re heading towards a fascist society.
>In principle, they’re the same thing.
I thought they were only the same thing in practice. At least that’s what all the advocates of socialism I’ve talked to have told me — socialism is awesome, it’s just never been done right.
Is it just me or are there many parallels with this financial disaster and the Iraq War? First, there is a crisis that has not and cannot be proven if the proposed action is taken. People must not question the plan, because every second we wait will only bring us closer to armageddon. This sounds familiar: Iraq has weapons of mass destruction and possibly nuclear capabilities; if we don not act now it may be too late. Oh yeah, it turned out that just trusting those in power is not always a good idea. So maybe this time Congress will take the time to assess the situation properly and decide that patience in a crisis, as opposed to immediate action, will serve the public better. I guess that Congress will probably enact this devastating legislation, and then blame the current or former president for misleading them. Wait, I thought it was Congress’ job to lead, and the president’s to enforce the laws of Congress. It is a lot of fun when someone changes the rules in the middle of the game. This is truly a dark period for America. We have sold the last shred of democracy in America for a chance at stabilizing of the current system. I guess America still doesn’t get it, America is run by the rich. It doesn’t matter the political affiliation of a candidate, they will be elected by the money of the rich. These people will donate to any candidate, so its a win-win for them. Lobbyists are busy making sure that this system will not change, so I guess since I do not have enough money or celebrity to accomplish change I will continue to suffer in silence. This suffering will eventually rot inside enough people to cause some type of revolution, but unfortunately I will probably not live long enough to see it. I will continue to do as I am told and accept my scraps in return for my freedom. Liberty use to be a virtue respected by all, but in today’s parental government approach it has become an after thought. Thank goodness my government will be there to get me out of this mess, even though they were the people who created it. I hope that one day I will taste the freedom, sacrifice and rewards that our fore fathers’ tasted. But, the current public landscape espouts to be allergic to sacrifice. We will all sink in this ship together, but the painful part is while we are sinking there will be the realization that we should have seen it coming. Fool me once, shame on you; fool me twice, shame on me.
I do not like the part of this $700 billion bail out that says Paulson will get to hand out the dough how he sees fit with no oversight. Let all of them fail, all the banks, all the people living on over extended credit, all the risk takers, let them all fail. I think in the long run the country will be better off. When your choice is between spending your few dollars on a yellow ribbon magnet manufactured by slave labor, and a loaf of bread, the country will be better off.
Touche!
Hey, how about about that global warming crisis?!?
I got an approving nod on Klein’s book from a liberal friend of mine, but I can’t bring myself to buy a copy and read it; it seems like dreck and I don’t want to take a chance she’d make any money off it. Or spend a precious minute of my life on it.
Naomi Klein was on Real Time with Bill Maher and had a spirited discussion with Andrew Sullivan about the bail-out. (video). Klein coined a new phrase I haven’t heard so far — “crybaby capitalism”.
Sullivan: So you are in favor of real capitalism?
Klein: Well, I just want to see… where is it?
Sullivan: You don’t believe the government should be socializing all these industries?
Klein: This is socialism for the rich. Look, if we’re socializing things, let’s nationalize something profitable. Let’s go for Exxon. They’re socializing junk.
primus,
If your point is that sub-prime, fixed-rate, no-money-down, 30-year mortgages are a horrible idea, then I wholeheartedly agree. However, your example misses some details. First, bankers can’t just renegotiate your mortgage because your property value goes up. Second, you don’t have to pay capital gains on your primary residence. So, the couple in your example could have sold their house after the financial crisis and ended up back to even, and hopefully bought a cheaper house the next time.
I think the lesson to be learned from this is that we (well not me personally) vastly overestimated the value of home ownership, especially homes that are overpriced/beyond your means.
A modest economic proposal
You may have heard that the federal government is preparing to bail out AIG and other companies to the tune of about 800 billion dollars. [Actually, the AIG bailout is already a done deal.] The plan is to buy up their bad debts and then try to profit from them by selling these debts to a third party when the time is right. The government can do this, not only because it has become unacceptable and unpatriotic to criticize them but also because they are in charge of printing the money so basically, they can print as much cash as they would like. There is, of course, the unfortunate side effect of making the dollar more worthless than it already is. If the government prints dollar bills fast enough, we could find ourselves in an economy like the one Zimbabwe enjoys, where it takes a million bucks to buy a gallon of milk. This would fit in perfectly with the Bush administration which has been spending like drunken sailors, which is partly why the national debt is somewhere around 11 trillion- that’s 11,000,000,000,000- Dollars as of now. (If we play our cards right it can be twelve trillion by the time you’re done with this article. Have faith!)
But since, as I mentioned, it is considered unseemly to say no to our Dear Leaders, might I make a small suggestion? You seem determined to spend money we don’t have. I don’t only mean money on the Iraq war (which may become the Iran war and then the Syrian war) but also on such delights as the $600 per household tax rebates of a few years ago. It fit in perfectly with the Republican vision that government is a monstrous evil that must be starved of funding. (Left unsaid is why Republicans want so desperately to be in control of an entity they despise.) Also, throwing a nearly-trillion dollar lifeline to companies who are near bankrupt due largely to their greed and bad business decisions, seems a bit at odds with the bootstrapping, responsibility-first philosophy of a Republican party which recently called Americans “a nation of whiners.” And so, allow me to propose an alternative- one that’s not only almost as economically foolhardy as your bailouts but will also take the wind out of the sails of John Edwards and other leftist populists who talk about “two Americas.”
True, John Edwards is a liar, an adulterer and a champion of the poor who gets four hundred dollar haircuts, but his central message can’t be ignored- not when, just before Lehman Brothers went down the tubes, its top executives were paid somewhere around twenty million dollars each. This, along with the “nation of whiners” crack- and the attitude it betrays- leaves many to rightly wonder what happened to the American Dream, the idea that we live in a meritocracy where everyone can make it with a bit of determination. The fact that this dream was always at least partially false and self serving is not the point. The point is that many who hear of these bailouts- and who hear about the amazing level of corruption inside certain corporations which preceded the need for these bailouts- are left shaking their heads in disbelief that we have so much in resources and elect to use them so poorly.
In addition, we don’t have that much by way of resources any more- not since we decided to bend over for every third world nation who is willing to be a source of cheap labor and also not since we decided to spend gazillions of dollars we don’t have. (Reaganeconomics anyone? If I told you, in 1979, that we can increase government spending and at the same time decrease th revenues the government spends, you would have thought I was nuts- and not only because I was a two year old Hungarian infant at the time.) The above-mentioned eight hundred billion dollars is probably coming from Beijing, not D.C. And before we throw that money at a slew of bad debts, hoping irrationally that throwing good money after bad is a sound economic policy, maybe we should consider an alternative.
The basic idea behind capitalism is that everyone makes their own decisions- on a levelish playing field- and will succeed or fail on their own merits. Of course, most capitalists merely pay lip service to this idea. Anybody out there who thinks that George W. Bush got to where he is based on his own smarts, grit and ambition raise your hands. Now slap yourselves. And he is not alone. If Donald Trump’s daddy hadn’t been a famous developer, he may never have had a tower named after him. I’m not even getting into the fact that about 13% of this country’s population descended from people who built this nation from scratch, did so for free, and usually at gunpoint. So its safe to say that we have probably gotten away from that wonderful idea of what capitalism is. It may even be safe to say that we never really gave capitalism a fair shot. But now we can. Here’s how.
Currently, about three hundred million people live in the U.S. legally. Taxpayers or not, they are all American citizens living in the land of the free and the home of the brave. And they need moolah- most do anyway. So I propose the mother of all rebates. Every American, here or abroad, gets a million dollars. It doesn’t matter who you are or where you are from or what your lot in life is. If you are legally entitled to it as an American, you get the cash. All told, this would be monstrously expensive if done in one shot but the savings will be invaluable. The second every American gets this cash infusion, we can say goodbye to bailouts, social security, grants based funding and so forth. Lobbyists, while not eradicated, will be vastly reduced. The drug war, which is essentially about economics not public health will be fought far less ferociously. Public health will feel the impact as well- addictions, often born of desperation [show me a well fed lottery player or a self-assured alcoholic] will decline. A diet high in carbs (because carbs are cheap) will be altered. Republicans will be happy (or will profess to be happy) since government will shrink. Democrats can finally stop talking about two Americans, thus freed to look for actual ideas and an actual platform that goes beyond a desire to be inoffensive to imagined swing voters in Omaha. Whats more, it will be an instant guilt reliever. In a society where 99% of human interactions and emotions revolve around cold hard cash, we will finally be equal. Of course this will force us to treat each other accordingly: whether your name is Donald Trump or Donald Smith, you are all granted an equal platform from which to achieve. After that, the guy uses that platform to reach the highest peak wins. Which is how capitalism is supposed to work anyway.
“We’re not heading towards a socialist society, we’re heading towards a fascist society.”
What do you mean “heading toward”?!?!?!
Definition: Fascism — corporate/government partnership
Totalitarianism is where we’re headed, for you who still think under the statist paradigm. IMO, any government with authority over the individual is totalitarian.
Lloyd Flack — “In an emergency you need rapid decision making by people with the power to make their decisions stick. The maket cannot provide this. Its decision making is too decenteralised and the decision makers lack the authority to enforce their decisions.”
Really? It’s amazing what you don’t know of what you’re talking about. Let me show you something:
In the early 1920’s, Colonel Ned Green…
“…admired to have adequate funds available in the form of pocket money in case emergency should arise. Emergency arose on one of his frequent trips to Texas while he was breakfasting at the Adolphus Hotel in Dallas with Edward Harper, president of the Security National Bank. Just as the sausages were being served, a pallid and shaken emissary arrived to apprise the banker that there was a run on his institution and that additional funds were in urgent request.
Unwilling to see his guest inconvenienced, Green pulled out his wallet and counted out its contents, twenty $10,000 banknotes. This being insufficient for the emergency, Green sent a bellboy to his suite with instructions to fetch a battered valise which was on the bed. It turned out to be almost entirely filled with $10,000 bills from which the Colonel counted out another thirty and handed them to Harper without requesting a receipt. Half a million dollars proved sufficient to stop the run and the bank was saved. Green sent the valise back to his apartment with instructions to the bellboy to put it in the closet where it would be safe.”
(Lucius Beebe, 1966, “The Big Spenders”, p. 87)
Now, what were you saying?
Sorry about the tag. I didn’t mean to do that, but now I actually think the point can stand the emphasis.
Klein’s worst fault is theoretical incoherence in distinguishing the neoliberal and Washington Consensus policies she documents in her book, of which Pinochet’s regime is the star example, from genuine free markets. At times she herself points out that the present system, which neoliberal politicians love to refer to as “the free market” or “laissez-faire,” is really corporatist. At other times she, like Thomas Frank, takes the neoliberal rhetoric at face value and refers to such policies as “free market fundamentalism.”
But her actual account of the adoption of such policies throughout the Third World, and of their effect, is largely on the mark. Her book is an excellent reference source on that subject, a sort of economic version of Blum’s *Killing Hope*.
What’s more, she hardly denies that corporatism–the active intervention of the state in the economy to privatize profit and socialize risk–is a very bad thing. And I can’t imagine her objecting to the inclusion of the bailout in that general category.
So I think you’re attacking a strawman here.
[...] use this crisis to push his proposal for global controls on the flow of capital. That would be disaster socialism at its [...]
Kevin, you missed the point. Radley isn’t calling the bailout disaster socialism. He’s calling Matt Yglesias’s call to push progressive policies in the wake of the financial crisis disaster socialism. It has exactly as much accuracy as Naomi’s Klein’s claims of disaster capitalism, which is none. Both sides think their view is correct, and both puth their policies in both good times and bad. Neither side tries to create a crisis in order to enable a policy change, but both know that things are more fluid immediatly after one.
Billy, I love that excerpt. Thank you.
[...] Balko puts a nice spin on Matthew Yglesisas perversely calling the financial crisis “a great opportunity for [...]