Financial Meltdown Highlights Need for Populist Green Economic Restructuring
Howie Hawkins for Congress
25th District, New York
www.howiehawkins.org
For Immediate Release: Tuesday, September 16, 2008
For More Information: Howie Hawkins, 315-425-1019, hhawkins@igc.org
Howie Hawkins, the Green Populist candidate for Congress in the 25th district, said today that the collapse of three of Wall Street's biggest financial firms over the weekend "highlights the need for a populist and green restructuring of the economy so it serves the interests of the vast majority, not the privileged few."
Hawkins said that this restructuring should focus on a new green industrial policy and populist economic policies. The industrial policy would transfer much of the federal budget now spent on the military-industrial complex to investments in a new green infrastructure for the economy. The populist economic policies would focus on democratic regulation of the financial sector and tax and spending policies that promote a fairer distribution of income and wealth.
"This crisis is what you get when politicians bought and paid for by rich corporate interests radically deregulate the economy and allow capitalists to speculate like compulsive gamblers. It's not just the rich who are losing wealth with the collapse of securities inflated by highly leveraged speculation backed up by few underlying real assets. Working people's homes, pensions, retirement savings, and overall living standards are collapsing, too" Hawkins said.
Hawkins added that it was unfair for the politicians to continually rush to bail out the rich whose reckless practices and greed created the latest financial meltdown, while doing little to help the average person who sees their jobs, pensions, health coverage, and savings disappear through no fault of their own. "Congress' failure to adequately supervise Wall Street and the various financial scam artists is rapidly turning the US into a second rate economic power while greatly devaluing the dollar, which then further pushes up the price of oil and other imports," Hawkins noted.
Hawkins said the financial meltdown is more serious than the major party politicians are admitting. "The U.S. government may find itself in bankruptcy if the corporate bailouts it has promised cannot be financed by global capital markets. China, Russia, and the Gulf States bought much of the debt the US issued to finance its military occupation of the Middle East even though they opposed these wars. In recent weeks they have declined to step up and finance the failing financial firms when asked. It is now an open question whether their central banks and sovereign wealth funds will finance US government deficits to pay for the bailouts," Hawkins warned.
Hawkins attributed the crisis to underlying structural problems in the U.S. economy that the deregulatory policies of recent decades made worse. "The US and indeed world economy have had excess capacity in most industries since the 1970s. There is no reason to build new production plans when existing plants can produce more than can be sold. The tax and regulatory cuts for the corporations and wealthy individuals promoted by both ruling parties in the US for 35 years were supposed to stimulate investment in the real economy of production and thus create jobs and benefits for all. The reality is that without many opportunities for profitable investments in production, the rich have taken their tax cuts and invested the money to rearrange ownership of existing real assets. Mergers and acquisitions, speculation in securities, subprime mortages, usurious credit card lending, hedge funds, and commodity speculation are all part of it. Profits in the financial sector accounted for around 15 percent of total profits in the post-war period before 1970 and had grown steadily to over 40 percent of total profits by the 2000s. The financial sector used to facilitate production. Now it is a parasite on the real economy of labor and industry," Hawkins said.
"We need to re-regulate the financial sector so it can serve the real economy of production and supplement private investment with a substantial increase in strategic public investment in the real economy. Every economic boom in the history of industrial economies has been founded on building infrastructure and manufacturing associated with a new set of technologies, like steam-powered manufacturing and railroads, electrification and mass consumption of automobiles, suburban housing, and home appliances, and, more recently on a lesser scale, the information technologies associated with computers and cell phones. The way to get the economy going again and put people back to work is massive investment in a new real economy based on green principles of ecologically sustainable production. We need to rebuild or retrofit every thing on a green basis, from renewable energy and solar-powered railways to our buildings and manufacturing processes. We need to do that for climate stability and energy security as well as economic revitalization," Hawkins said.
Hawkins said that populist economic measures were needed along with green economy investments. "Economic regulation should begin by restoring such New Deal era regulations as the Glass-Steagall separation of investment and commercial banking. But we have to go further and now bring the Federal Reserve System under democratic control by making it part of the Treasury Department," Hawkins said
"The Federal Reserve system was the original privatization of an essential public service, the central banking function. It was a perverted response to the popular demand of the nineteenth century Populists' for democratic regulation of credit and the money supply. Instead, we got the Populists worst nightmare with the Fed: a central bank controlled by the private bankers that were exploiting the farmers and workers of the Populist movement. Today, the banking elite is using their inside track to the Fed to get bailed out at the expense of the little taxpayers," Hawkins said.
Hawkins also cited the maldistribution of wealth and income as an underlying structural problem for the economy that makes the financial crisis worse. "The polarization of wealth and income leaves the working class majority, whose incomes have stagnated for 35 years, at record levels of debt and unable to sustain demand to keep the economy going. Meanwhile, a tiny parasitic minority at the top that has too much wealth, finds few opportunities for productive investment, and hence succumbs to the compulsion to speculate instead of contribute to society productively," Hawkins said.
Hawkins said this economic inequality needed to be reduced through more progressive taxation of wealth and income, a federal full employment policy that guaranteed the right to a job at a living wage, a guaranteed minimum income above poverty built into the progressive income tax, national health insurance through a single public payer, and increased public housing.
"It's time to drop the dogmatic faith in unregulated markets and get practical. Public spending should be focused on directly serving public needs, not continuing to follow the disproven theory of trickle-down economics that expects tax breaks for the rich to indirectly benefit working people with jobs and economic security. That doesn't work. It's time to get realistic," Hawkins said.
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