After the Great Crash of 1929, Andrew Mellon, one of the wealthiest men in America as well as Secretary of the Treasury, gave President Hoover a bit of advice right out of the playbook of laissez-faire capitalism.
Liquidate, liquidate, liquidate.
Liquidate banks, liquidate factories, liquidate commercial and private real estate, liquidate farms and liqudate ranches. Let it all collapse and then the economy would correct itself, slowly but surely, as those still in possession of capital scooped up undervalued assets, cranked up the wheels of commerce and industry, and hired back workers now willing to work for a fraction of what they used to make.
Hoover, a conventional though not cruel or even callous man, turned a deaf ear to Mellon’s advice; like our current President, he tried to steer the country out of crisis by adopting fiscal and monetary policies informed by the “best minds” of the day.
As we all know, those policies either proved to be too little, too late or – in the case of his trade policies – aggravated the downtown. By 1932, unemployment peaked at 24 percent and the nation’s GDP had shrunk by more than 40 percent from its high point in 1929.
Now, it must be pointed out that, in a crude and almost autistic fashion, Mellon was correct. Allowing the country simply to go bankrupt would, eventually, have resulted in economic recovery. Certainly it was not the only road to that recovery, and surely not the one most likely to provide a decent living for the overwhelming majority of Americans.
An amped-up version of the somewhat tepid policies of the New Deal would also have achieved full economic recovery. In the end, the version of the New Deal that was implemented helped ameliorate the worst effects of the Great Depression – at least enough to prevent revolution — without quite marshalling the resources to end it.
In the confrontation taking place right now in Madison, Wisconsin Governor Scott Walker seems to be channeling the ghost of Andrew Mellon in his attempt to liquidate that state’s public employee unions. His budgetary arguments are, of course, a sham, a cover-up for long-held ideological opposition to the union movement. At the same time, it should be pointed out that neither side is directly addressing the foundational cause of the Great Recession that lies behind the standoff: the fact that, as it “matures” (if that is the right word!), capitalism can only survive by creating ever more frequent – and desperate — crises of the kind we’re struggling with right now.
From its beginnings in 16th and 17th century England and Holland, capitalism has depended upon a minimum 3 percent accumulated growth rate year in and year out. If growth exceeds that 3 percent – as it has lately in China and India – so much the better.
But if the rate of growth falls below 3 percent, even for one or two quarters, capitalism, which, like the stock market, is absolutely dependent upon a faith that defies logic and anesthetizes memory, begins to sputter. Each time that faith is shaken, it becomes harder and harder to restore.
Of course any organic system that cannot live without endless growth is ultimately doomed. Critics sometimes like to refer to capitalism as a cancer; they are closer to the truth than perhaps they realize. Another name for endless growth is malignancy. In the end, a malignant entity cannot help but cannibalize its host body. This is the process we see at work today, both in the implosion of the “American Dream” and in the spreading destruction of the global ecosystem upon which all life depends.
Scott Walker’s assault on collective bargaining – on, in fact, the whole union movement – is no doubt driven by a mix of motives, including simple political payback. Whatever the immediate outcome, he has already lost the political war; it’s one thing to offend public school teachers, an altogether different matter to find the Governor of Wisconsin on the receiving end of opposition from members of the Green Bay Packers. As a bonus Walker has also driven one of the first nails into the coffin of the faux-populist Tea Party Movement.
More importantly, the protests he has sparked mark some of the first death throes of American capitalism, a political economy that is no longer even particularly interested in providing meaningful work for 98 percent of the population, and manages to stagger along largely by creating speculative bubbles from which only banksters and hedge fraud managers profit.
As the World Social Forum likes to say, “A better world is possible.” No one can foresee what might replace American capitalism when – not if – it inevitably falls. But one thing the protestors in Madison have demonstrated is that the transition need not be violent or even psychically traumatic. An effective antidote to the alienation that, along with false consciousness, is one of the only commodities produced in abundance by Stage 4 capitalism is to act in solidarity with others to bring about a better world for everyone – not just oneself.
Certainly the public employee union members who have poured into Wisconsin this past week have, as their primary concern, the protection of hard-won rights to collective bargaining. At the same time, they may very well be in engaged in something of far greater significance.
It is possible – very possible – that they have, with Scott Walker’s unwitting help, initiated the peaceful transformation of that part of the earth occupied by the United States of America into a better world for all its citizens.
RICH BRODERICK lives in St. Paul and teaches journalism at Anoka-Ramsey Community College. Rich is a writer, poet, and social activist. He can be reached at: firstname.lastname@example.org
This essay originally appeared in TC Daily Planet.