The Obama Letdown

The Neo-Yeltsin Administration?

The Obama Letdown

By MICHAEL HUDSON

Reality had to raise its ugly head. Barack Obama was elected with overwhelming approval to inaugurate an era of change. And at his November 25 press conference, he said that his decisive victory gave him a mandate to change the direction in which America is moving. But his recent economic and foreign policy appointments make it clear that when he chose “change” as his campaign slogan, he was NOT referring to the financial, insurance and real estate (FIRE) sectors, nor to foreign policy. These are where the vested interests concentrate their wealth and power. And change already has been accelerating here. Unfortunately, its direction has been for the top 1% of America’s population to raise their share of in the returns to wealth from 37% ten years ago to 57% five years ago and an estimated nearly 70% today.

The change that Mr. Obama is talking about is largely marginal to this wealth, not touching its economic substance – or its direction. No doubt he will bring about a welcome change in race relations, environmental regulations, and a more civil rule of law. And he probably will give wage earners an income-tax break (thereby enabling them to keep on paying their bank debts, incidentally). As for the rich, they prefer not to earn income in the first place. Taxes need to be paid on income, so they take their returns in the form of capital gains. And simply avoiding losses is the order of the day in the present meltdown.

Where losses cannot be avoided, the government will bail out the rich on their financial investments, but not wage earners on their debts. On that Friday night last October when Mr. Obama and Mr. McCain held their final debate, Mr. Obama was fully on board with the bailouts. And this week’s appointment of the “Yeltsin” team who sponsored Russia’s privatization giveaways in the mid-1990s – Larry Summers and his protégés from the Clinton’s notorious Robert Rubin regime – shows that he knows his place when it comes to the proper relationship between a
political candidate and his major backers. It is to protect the vested interests first of all, while focusing voters’ attention on policies whose main appeal is their ability to distract attention from the fact that no real change is being made at the economic core and its power relationships.

This is not what most people hoped for. But their hopes were so strong that it was easier to indulge in happy dreams and put one’s faith in a prince than to look at the systemic problems that need to be restructured in order for real change to occur. Individuals do not determine who owes what to whom, who is employed by whom or what laws govern their work and investment. Institutional economic and political structures are the key. And somehow the focus has been on the politics of personalities, not on the economic forces at work.

This is as true abroad as it is in the United States. Two weeks ago I was at an economic meeting on “financialization” in Germany. Most of the attendees with whom I spoke expressed the hope – indeed, almost a smug conviction – that Obama would be like Gorbachev in Russia: a man who saw the need for deep structural change but chose to bide his time, seeming to “play the game” with the protective coloration of going along, but then introducing a revolutionary reform program once in office.

Instead, after resembling President Carter by running a brilliant presidential primary campaign to win the nomination (will a similarly disappointing administration be about to come?), Obama is looking more like Boris Yeltsin – a political umbrella for the kleptocrats to whom the public domain and decades of public wealth were given with no quid pro quo.

Obama’s ties with the Yeltsin administration are as direct as could be. He has appointed as his economic advisors the same anti-labor, pro-financial team that brought the kleptocrats to power in Russia in the mid-1990s. His advisor Robert Rubin has managed to put his protégés in key Obama administration posts: Larry Sommers, who as head of the World Bank forced privatization at give-away prices to kleptocrats; Gaithner of the New York Fed; and a monetarist economist from Berkeley, as right-wing a university as Chicago. These are the protective guard-dogs of America’s vested interests.

If you are a billionaire, your first concern is simply to preserve your wealth, to avoid having to take a loss in the value of your financial claims on the economy – claims for repayment of loans and investment, as well as interest and dividends, and enough capital gains to compensate for the price inflation that erodes the spending power of more lowly income-earners.

This year has changed the typical fate of financial wealth in the face of bursting financial bubbles. Traditionally, business booms culminate in a wave of bankruptcies that wipe out bad debts – and the savings that have been invested on the “asset” side of the balance sheet. This year has changed all that. The bad debts are being kept on the books – but transferred from the banks to the federal government, mainly the Federal Reserve and Treasury. The bank bailouts have aimed not so much to protect the banks themselves, but to enable them to pay off on the bad bets they made vis-à-vis the nation’s hedge funds and other institutional investors in the derivatives market.

To participate in a hedge fund, one needs to prove that one can afford to lose their money and not be much the worse off for it in terms of actual living conditions. So the $306 billion in federal guarantees of the junk mortgage packages sold by Citibank, and the $135 billion bailout of the insurance contracts written by A.I.G. to protect swap contracts from loss, could have been avoided without much impact on the “real” economy.

In fact, writing down these financial claims ON the economy would have paved the way for writing down its debt burden. If the subprime and other mortgage debts had been permitted to decline to the neighborhood of 22 cents on a dollar they were trading for, this would have made it possible to write down debts to match the price at which mortgage holders had bought these loans for. But the financial overhead of American wealth “saved” in the form of creditor claims on indebted homeowners, industrial companies and junk-insurance companies such as A.I.G. has been protected against erosion by this year’s federal bailout program.

Bloomberg has added up these programs and finds that they $7.7 trillion dollars – nearly half an entire year’s GDP. By acting to support the market for bad-mortgage loans (but not for real estate itself), the seemingly endless series of Paulson bailouts seeks to be to keep today’s debt overhead intact rather than writing it down. Service charges on this indebtedness will divert peoples’ income from consumption to paying creditors. It will help financial investors, not labor or industry. It will keep the cost of living and doing business high, preventing the U.S. economy from working its way out of debt by becoming competitive once again.

With all these trillions of dollars of bailing out the wealthy, one might easily forget to ask what is being left out. For one thing, the government’s Pension Benefit Guarantee Corp, whose $25 billion deficit is not bailed out. This year, underfunded corporate pension plans are supposed to “catch up” to full funding so as to protect the PBGC, in accordance with a law passed by Congress two years ago. If underfunded plans don’t meet the scheduled 92% coverage for this year, they have to bring their set-asides fully up to the 100% funding level. The stock market plunge has dashed their hopes to do this. The result will be to force many industrial companies into a financial bind.

On the auto front, the Bush Administration has brought pressure to force the big three Detroit companies into bankruptcy as a way to annul their defined-benefit pension plans – with no plans at all bail out money owed to labor by restoring the PBGC to solvency. State and local pension plans are almost entirely unfunded, and are at even more risk as their tax revenues plunge and property tax payments are stopped on housing and commercial buildings that have foreclosed.

And speaking of state and local finances, what role is local government to play in Mr. Obama’s promise to rebuild infrastructure, headed by transportation? Given their strapped position, one is hearing a surge of Wall Street plans to spend enormous sums. Whereas Obama’s economic team made fortunes for Russian kleptocrats by giving them public-sector assets already in place, their American counterparts are going to have to get rich by actually building new projects. In such cases the benefits are as large as the total amount of money being spent – but not in the way that most people understand at first glance. Construction contracts for new public transport systems, bridges and roads and urban or rural modernization may be entirely honest and provided at a fair cost. But it is a byproduct of such investment that it creates an amount that is of equal or often even greater magnitude in the form of rent-of-location – that is, vast windfall gains for well-located real estate.

This is where Mr. Obama’s Chicago political experience comes in so handy. It is in fact a game tailor-made for his team. Hundreds of millions of dollars were made in gentrifying Chicago’s notorious but conveniently centrally located public housing for low-income families. The developments sponsored by Mr. Obama’s mentors, the Pritzker family, the University of Chicago and assorted real estate reverends opened up vast new land sites, with public support to boot. (The house where I grew up in Hyde Park-Kenwood, a block or so from Mr. Obama’s house, was torn down along with the rest of the entire block as part of Mayor Daley’s urban renewal program in the late 1950s – after the University’s block busters had run down the neighborhood, then panicked the whites into selling to the blacks at extortionate price markups and mortgage rate premiums, then tearing down the houses into which the blacks had moved. It’s an old real estate game that one learns quickly in Chicago politics.) As Thorstein Veblen noted, any American city’s politics is best understood by viewing it as a real estate development.

The gains from providing better transport infrastructure typically are so large that transportation investment could be self-financing by taxing these property gains – recapturing the added rental value in the form of property windfall taxes. London’s tube extension to Canary Wharf, for example, cost the city £8 billion – but increased real estate values along the route by some £13 billion. The city could have financed the entire project by issuing bonds that would have been repaid out of taxes levied on the windfall gains created by this public expenditure.

Likewise in New York City, the transport authority has just announced that subway and bus fares will be jacked up (adding no less than $10 to the monthly commute card) and services cut back sharply. Mayor Bloomberg has just stopped work on the 2nd Avenue subway, its completion will add at least as much to upper East Side property values as the subway costs itself. The city thus could finance its construction not by issuing bonds to be paid off by city and state taxpayers in combination with user fees paid as fares. Taxpayers wouldn’t have to pay, and riders could enjoy subsidized fares simply by taxing the real estate owners.

But I see no prospect of this being done. Real estate is still the name of the game, because it remains the largest asset category in every economy today just as much as under feudalism. The difference from feudalism is that whereas landlords received the rental value of their lands in centuries past, today’s property owners acquire ownership not by military conquest (the Norman invasion of 1066 in England’s case) but by borrowing from the banks. To a mortgage banker, a commercial developer or real estate company is a prime customer, the bulwark of bank balance sheets. It is hard to imagine a new American infrastructure program not turning into a new well of real estate gains for the FIRE sector. Real estate owners on favorably situated sites will sell out to buyers-on-credit, creating a vast new and profitable loan market for banks. The debt spiral will continue upward.

The fact that state and local budgets are too burdened to afford infrastructure spending themselves will lead to it being privatized from the outset. Probably London’s notorious public-private partnerships (a Labour Party refinement more Thatcherite than even Margaret Thatcher herself could have got away with) probably will become the basic model. Users will pay higher fees rather than enjoying the subsidized or free access typical in public infrastructure spending during the Progressive Era. The main purpose of public enterprise back then was to keep prices down for basic services, thus lowering the cost of living and doing business in America. But today, infrastructure spending will be just one more item adding to America’s debt overhead to make its economy even less competitive with foreign ones than it is.

The moral is, next time a candidate promises change, ask him to say just what changes he has in mind. During the Presidential debates, only Dennis Kucinich came out and said each specific law that he had put before Congress to implement each change he promised. But most of the public didn’t want to know the details – they simply liked hearing the word “change.”

Here are some purely fiscal and financial changes that a future presidential candidate might propose – changes that I don’t expect to be hearing any more about during the next four years. Just to get the discussion going, why shouldn’t these merely marginal changes within the existing system be implemented right now by a presidential candidate who is still bragging about his “mandate for change”:

* Regarding fiscal policy, re-introduce the estate tax, along with (at the very least) the Clinton era’s progressive-tax schedule.

* Tax capital gains at the same rate as wages and profits, rather than at half the rate; and make these taxes be paid at the point of sale of real estate or other assets, not deferred ad infinitum if the gains simply are invested in yet more wealth.

* Require a cost-benefit analysis of any publicly backed infrastructure spending so as to recapture all “external economies” (such as windfall real estate price gains) as the first line of financing such investment.

* Tax corporate borrowing that is used merely to pay stock dividends or buy back one’s own stock at least at 50%.

* Close the practice of offshore tax avoidance, and bring criminal cases against accounting firms abetting this practice.

* Only let a building be depreciated once, not repeatedly as a tax writeoff.

* Refocus state and local taxation on the property tax, remembering that whatever the tax collector relinquishes is simply “freed” to be paid to the banks as interest.

* In the sphere of bad-debt banking, when a government agency takes over a bank or company that has negative net worth, the stockholders must be wiped out as their stock has lost all market value. Bondholders must stand in line behind the government in case of insolvency.

* Write down mortgage debts to the ability of property owners to pay and/or the present market value. Banks that have made loans to these borrowers must take responsibility for their decision that the owners could afford to pay. Even better, apply New York State’s existing Fraudulent Conveyance law, and simply annul loans that are beyond the ability of debtors to pay.

None of this involves real structural change. It is simply more economically efficient under existing laws and practices – something like actually enforcing environmental law, anti-fraud and anti-crime laws, and the original intent of our tax legislation. It is a small step back toward the Progressive Era a century ago – the era that set America on the path of prosperity that made the 20th century the American century.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

http://www.counterpunch.org/hudson11262008.html

Obama’s “left” cheerleaders and the right-wing transition

Obama’s “left” cheerleaders and the right-wing transition

22 November 2008

The increasingly right-wing character of the transition being organized in preparation for President-Elect Barack Obama's inauguration in January has elicited expressions of concern from the middle-class "left." This milieu, whose views are reflected in publications like the Nation magazine, played a significant role during the election campaign in promoting Obama's candidacy and the Democratic Party as vehicles for fundamental political and social change.

The past ten days have served to expose the real content of Obama's "change you can believe in." First came the appointment of Rahm Emanuel, the right-wing Democratic congressman and millionaire investment banker, as chief of staff. No sooner was he tapped for the post than Emanuel pledged to the Wall Street Journal that the Obama White House would "stand up to" the strengthened Democratic majorities in Congress.

Then came news that the transition teams at the Pentagon and CIA were headed, respectively, by supporters of the Iraq war and CIA veterans who were complicit in policies of torture and extraordinary rendition as well as in fabricating the phony intelligence used to promote the war against Iraq.

On Friday, persistent reports that Obama has tapped Senator Hillary Clinton whom he pilloried on the campaign trail for her vote in favor of the Iraq invasion, for his secretary of state, and that he intends to retain Robert Gates, the champion of the "surge" in Iraq, as defense secretary, were joined by reports that he will shortly announce his choice of New York Federal Reserve President Timothy Geithner for treasury secretary. The news that one of the key architects of the government bailout of the banks will head Obama's Treasury Department sent stock prices on Wall Street soaring.

These developments, combined with the coterie of bankers and Washington insiders that is heading Obama's transition, and the army of ex-Clinton-officials-turned-corporate-lobbyists who are trooping back into official Washington, are providing a preview of the administration that will take office just two months from now.

What is taking shape is a government that represents continuity with the last eight years far more than change. Its personnel and the policies with which they are identified spell a continuation of wars of aggression abroad and domestic policies that defend the interests of America's financial elite at the expense of the broad mass of working people.

The conditions are being created in which illusions fostered by Obama's rhetoric about "hope" and "change" will be dashed and a period of tumultuous struggles, driven by the economic crisis, will inevitably arise.

Of course, there are illusions and there are illusions. Millions of American working people went to the polls November 4 and voted for Obama with the aim of putting an end to two criminal wars and to express their anger over policies at home that have led to unprecedented social inequality and the deepest economic crisis since the Great Depression.

Then there are those who make a political profession out of deluding themselves and fostering illusions among others in order to support the Democratic Party and the profit system which it defends. This is the political specialty of the Nation, which has long been a central organ of left liberalism in America.

Its columnists are finding the job of peddling illusions in Obama more difficult in light of the appointments and statements surrounding the transition, and are expressing concern. At the heart of their worries is the fact that Obama is moving sharply and openly to the right even as the crisis gripping American capitalism is creating conditions for a sharp turn to the left among American working people, students and youth.

Nation columnist Tom Engelhardt makes the observation in a piece published Wednesday that, given the appointments thus far, "you might be forgiven for concluding that Hillary Clinton had been elected president in 2008." He cites a Politico.com article reporting that "thirty one of the 47 people thus far named to transition or staff posts have ties to the Clinton administration, including all but one of the members of his [Obama's] Transition Advisory Board."

Nonetheless, Engelhardt goes on to describe Obama himself as "nothing short of a breath of fresh air" and voices the "hope that, as the good times roll (or even in bad times) for Democrats, he keeps his equilibrium amid the usual Washington consensual pressures."

Similarly, Robert Scheer, the former Los Angeles Times columnist who writes for the Nation, voices concerns over the role of Obama advisor Zbigniew Brzezinski in setting policies pointing toward escalating confrontation with Russia. "It is disquieting in the extreme that some of his [Obama's] closest advisers are inveterate hawks with a history of needlessly provoking tension with the Russians during the Cold War days," writes Scheer. He goes on to express anxiety over the reported offer to keep Gates, a former Brzezinski aide who has supported a hard line against Russia, as Pentagon chief.

"I know, Obama is not yet in office," writes Scheer. "I voted for him with enthusiasm in part because he does seem to have transcended the preoccupations of the cold war. But as a buyer, I have to beware of those unrepentant Democratic hawks now hovering."

The essential conception expressed in both columns is the same: that in the aftermath of the election, the "progressive" Obama is in danger of falling under the sway of right-wing aides and advisers, shifting him off the path of "change."

This is nonsense. Obama's entire candidacy was crafted by these "advisers" as a means of effecting tactical changes in the pursuit of US imperialist interests while masking the right-wing character of the political agenda that they now intend to foist upon the American people.

To anyone who paid serious attention to what Obama was saying and doing in the course of the election campaign—his vote to expand domestic spying and grant immunity to the telecoms, his statements threatening war against Iran and Pakistan and vowing undying fealty to Israel, his admission that his Iraq withdrawal plan would leave a "residual force" of tens of thousands of troops in the country, while its pace would be set by commanders on the ground, and his support for the $700 billion Wall Street bailout—the character of the transition should hardly come as a surprise.

The thrust of the political campaign being waged by the likes of the Nation is to subordinate any emerging struggles by American working people to the incoming Obama presidency.

This is spelled out by another long-time Nation columnist, Frances Fox Piven, in a November 13 article entitled, "Obama Needs a Protest Movement." While hailing Obama's victory at the polls as a "rightful cause for jubilation," Piven takes a somewhat more clear-eyed approach to the president-elect's character.

"Let's face it: Barack Obama is not a visionary or even a movement leader," she writes. Rather, she describes him as a "skillful politician" who "has to conciliate ... in realms dominated by big-money contributors from Wall Street, powerful business lobbyists and a Congress that includes conservative Blue Dog and Wall Street-oriented Democrats." It's not Obama's fault, she adds, "It's simply the way it is."

One could not ask for a clearer statement of the prostration of these not-so-left liberal circles before the corporate-controlled two-party system.

Piven suggests that, Obama's limitations notwithstanding, popular expectations of change upon his taking office can create conditions for "authentic bottom-up reform."

She goes on to draw a parallel between Obama's election and that of Franklin Delano Roosevelt in 1932, making the point that FDR took office based upon a conventional, conservative Democratic Party program. Referring to the mass strike movements and social struggles of the 1930s, however, she argues that "the rise of protest movements forced the new president and the Democratic Congress to become bold reformers." Protest, she suggests, can produce similar results from Obama.

There are two obvious problems with this argument. The first is that the objective position of American capitalism is far weaker than it was in the 1930s, when Washington remained a creditor nation, enjoying trade surpluses, while US manufacturing dominated the global markets. It was from this position of relative strength that Roosevelt was able to grant limited reforms in the face of such mass, and at times semi-insurrectionary struggles as the Toledo Autolite strike, the Minneapolis general strike and the San Francisco general strike in 1934 and the subsequent sit-down strikes in the auto industry.

The present crisis is the outcome of the protracted decline of American capitalism, which is massively indebted, has seen a decades-long decimation of its manufacturing base and whose financial system has become the destructive engine of a deepening worldwide slump. There is no modern New Deal forthcoming from an Obama administration.

Moreover, the one implemented by Roosevelt more than 70 years ago failed to overcome the Depression. That was achieved only through a second world war that annihilated millions of people. With the political assistance of the trade union bureaucracy and the Stalinist Communist Party, however, the Roosevelt administration did succeed in staving off the threat of socialist revolution.

That period holds stark lessons for the coming struggles of the American and international working class. Unless working people are able to advance their own, socialist alternative to capitalism, the "solution" to the present crisis will be found along similar lines of a re-division of the world market through mass slaughter.

This is what makes the politics of the Nation and similar political tendencies so pernicious. The struggle against war and deepening attacks on social conditions can be advanced only through a decisive break with the Democratic Party and the political illusions promoted by tendencies such as the Nation.

Not by mere protest and pressure, but only by building its own political party, armed with a socialist program aimed at uniting workers in a common international struggle against capitalism, can the working class advance its own progressive solution to the catastrophe that the unfolding capitalist crisis threatens to unleash upon humanity.

Bill Van Auken

http://www.wsws.org/articles/2008/nov2008/pers-n22.shtml

The Undiagnosed “Cancer” that Has Killed Capitalism

by Doug Page / November 22nd, 2008

In the 1920s, Henry Ford perceived a fundamental flaw in capitalism and when he suddenly started paying his auto workers the then extremely generous sum of $5 per day. A unilateral raise of this magnitude was shocking at that time. Ford did this so that his employees would have enough money to buy his Fords. Ford had recognized a fundamental fatal defect of capitalism:

Capitalist Employers throughout the capitalist market can not pay their employees enough so that employees are able to purchase all of the products that capitalism can produce and still make a profit. Without profit there can be no capitalism.

Think about this. If we have an economic system, capitalism, where almost all humans are employees, who, if not employees, will purchase capitalism’s products? Hunters and gatherers? Self employed farmers? What group in society has cash to purchase what capitalism produces? Are there enough money lenders and capitalist employers with enough profit and earned interest to purchase all of the production? Experience now clearly demonstrates that there are not. These sources have far more money than they have needs so their wealth simply is held in multiple dwellings, jet airplanes and other luxuries, investments, loans, and cash. This is not a left-right problem, nor a conservative- liberal ideological problem. It is simply a fact. It is an inevitable, unavoidable result of the core dynamic of capitalism. That core dynamic is:

A person with money hires a person with little or no money for the lowest possible wage to earn as much profit as possible for the person who already has money.

It is this profit generating dynamic over decades of time and repeated by hundreds of employers that has created the immense disparity of wealth and power between the top 1% of our nation and the 95% of us at the bottom. This top 1% has as much wealth and income as the bottom 95% of us. The purchasing power of the bottom 95% of us would be vastly enhanced if the wealth of the top 1% was spread more equitably among us all. The fatal defect of capitalism would be bridged. We employees could then purchase all of the products that our labor produced. The fact of the almost unimaginable wealth of the top 1% is little known and is largely suppressed by the capitalist media. The capitalist media ridicules as “class warfare” any thoughts we may have about the injustice and pain we experience because of this disparity of wealth.

So we have many millions of persons on the planet who have legitimate needs, and these same persons are willing and anxious to work. Why cannot our work meet our needs? There are insufficient jobs because employers cannot hire all of us and still make a profit. Capitalism gives us only one way to meet our needs. We must go to work for somebody who can make a profit on our labor. This fundamental flaw of capitalism perceived by Henry Ford is now causing our capitalism to implode, to destroy itself. Henry Ford was unique among the planet’s employers in perceiving this flaw and acting to correct it within his own company.

So why do not all employers follow Ford’s example? One reason is that the competition by those employers who continued to pay the lowest possible wage would quickly drive the generous employer out of business. Another reason is the simple greed by capitalists to get as much profit as they can as quickly as they can. Employers as a group would have to act together cooperatively and all of them would have to pay enough wages so that employees could buy capitalism’s products. However even if all employers cooperated and paid high wages, capitalism would implode sooner or later because of the large sums drawn out by private employers in the form of profits, CEO compensation, and dividends, and the large sums drawn out by private money lenders for interest on the money loaned for the production process. It is interesting to note that the very successful Mondragon Co-ops of Basque Spain have sustained themselves and expanded over the last 40 years in part because the workers are the owners and they limit the pay of the top managers ordinarily to no more than 3 times the pay of the production workers. The Mondragon Co-ops also have their own Co-op bank to supply their credit.

Capitalism can thus produce far more than can be sold at a profit. Capitalists curtail production to avoid loss of profit. If there is no profit to be made, there can be no capitalism. There remain millions of people with legitimate needs who are anxious to work, but there is no work, because there is no profit to be made. For example, the world wide auto industry has the capacity to produce far more cars than can be sold at a profit. This defect of capitalism existed long before the current mortgage bubble and crisis. Auto plants around the world were operating at less than full capacity because there was not a demand by buyers for all of the cars that could be produced. We have some human needs, for example health care that simply cannot be adequately met by capitalists and still make a profit. If there is no profit to be made, capitalists will simply not provide health care.

This fundamental defect of capitalism that has caused it to implode is a truth that is totally suppressed in our capitalist culture. We do not learn of this truth in Econ 1 or even in Econ 101. We do not learn of this truth from our capitalist media.

Given this truth, and the culture wide failure to diagnose the problem we must look at the false solution that capitalists select for us.

Secretary Paulson, Fed Chairman Bernanke and our elected Democratic leaders identify the problem as a “credit crisis,” or a “liquidity crisis,” and they propose that we employees tax ourselves so as to pay billions of dollars to the bankrupt Wall Street investment banks in the hope that they will again extend credit to employers and liberal credit cards to consumers. They seek to supply the credit to enable capitalists to seek profit making opportunities. (The fact that the Wall Street investment banks have not chosen to use the gifts of our tax money for this purpose so far, while criminal, is irrelevant to the larger problem.) That larger but totally ignored problem is Henry Ford’s 1920s problem. That problem is that there is insufficient sustainable demand for all capitalists can produce at a profit. Human wants are insatiable, and if we humans had the money to buy, credit would flow like a quickly melting glacier. The proposed solution does nothing to provide jobs and wages, and nothing therefore to create demand for capitalism’s products. If we were not so scared, we consumer employees could borrow more money for a short time and thus be able to buy products, but this could not go on very long. Most of us are already maxed out on credit. Sooner or later we have to pay the borrowed money back.

Wall Street and our Democratic elected officials are vainly trying to rejuvenate a dead system. Lending or giving the dead system more money simply does not solve the fatal defect. The fatal defect is neither diagnosed nor dealt with. The truth is hidden behind a culture wide taboo so that it cannot be discussed in the main stream.

The solutions so far advanced seek only to create profit making opportunities for capitalists. These solutions ignore capitalism’s fatal defect. They do absolutely nothing to correct the fatal defect. Capitalism cannot solve the dilemma identified by John Steinbeck in his 1939 book, Grapes of Wrath: “there is work to do, and people to do it, but them two cannot get together, and there is food to eat and people to eat it, but them two cannot get together either.” Even Franklin Roosevelt failed to diagnose this fatal flaw of capitalism in his New Deal when he sought to save capitalism with its profit making opportunities while providing temporary “band-aid” type remedies for those who had no work.

We human being can work together to meet our needs, on a small scale by simply bartering. We can meet our sustainable needs on a larger community scale with Mondragon Co-ops, and on a nation wide scale by causing our government to act solely in our interest to be our lending bank at little or no interest, to supply co-ops, small businesses, partnerships, and self employment, and as our employer of last resort. We can no longer afford profit making employers and money lenders who siphon off the increase in value that our work creates. Because of this fatal defect, our capitalism can be thought of as a huge tornado which having sucked us dry, then dies itself. Or it can be thought of as a cancer that kills those of us who are its workers and consumers, and having killed its host, and then dies itself.

http://www.dissidentvoice.org/2008/11/the-undiagnosed-%e2%80%9ccancer%e2%80%9d-that-has-killed-capitalism/

"Brand Obama," "Brand Usa," And "The Audacity Of Marketing": Some Candid Reflections at Advertising Age

November 19, 2008 By Paul Street


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The election and nomination process is the brand re-launch of the year. Brand USA. It's just fantastic.

-- David Brain. CEO of the global public relations firm Edelman Europe, Middle East and Africa

The last eight years broke faith in Brand America, and people want that faith restored.

-- Carolyn Carter, London-based president and CEO of the global public relations firm Grey Group Europe, Middle East, and Africa

To my campaign manager David Plouffe, my chief strategist David Axelrod, and the best campaign team ever assembled in the history of politics - you made this happen, and I am forever grateful.

-- Barack Obama, Victory Speech, November 4, 2008

Twenty-three years ago the clever anti-television writer Neil Postman dissected the authoritarian nightmare that is modern political advertising in the United States. The television commercial, Postman noted, is the antithesis of rational popular consideration, which leading early philosophers of western economic and political life took to be the desirable and enlightened essences of "capitalism" and "democracy."

"Its principle theorists, even its most prosperous practitioners," Postman observed, "believed capitalism to be based on the idea that both buyer and seller are sufficiently mature, well-informed, and reasonable to engage in transactions of mutual self-interest...The theory states, in part, that competition in the marketplace requires that the buyer not only knows what is good for him but also what is good. If the seller produces nothing of value, as determined by a rational marketplace, then he loses out. It is the assumption of rationality among buyers that spurs competitors to become winners, and winners to keep on winning. Where it is assumed that a buyer is unable to make rational decisions," Postman elaborated, "laws are passed to invalidate transactions, as, for example, those which prohibit children from making contracts. In America, there even exists in law a requirement that sellers must tell the truth about their products, for if the buyer has no protection from false claims, rational decision-making is seriously impaired."

"The distance between rationality and advertising is now so wide," Postman argued, "that it is difficult to remember that there was once a connection between them. Today, on television commercials, propositions are as scarce as unattractive people."

The modern television commercial, Postman noted, makes "hash" out of the capitalist assumption of intelligent and informed consumer sovereignty. It undercuts the notion of rational claims, based on serious propositions and evidence. In the place of cogent language and logical discourse it substitutes evocative imagery and suggestive emotionalism.

When political success came to revolve largely around the same manipulative anti-enlightened methods prevalent in commodity advertising, Postman observed, the same sorry fate fell to "capitalist democracy's" assumption of rational and informed voters. Like the bamboozled commodity purchasers propagandized by radio and television ads, voters are subjects of persuasion through deception instead of through respectful and sensible communication. Candidate marketing makes hash out of the myth of voter sovereignty in "democratic" politics [1].

"A CASE STUDY IN AUDACIOUS MARKETING"

This is why you won't hear Barack Obama's progressive and educated supporters saying much about the interesting fact that Obama was recently selected by Association of National Advertisers (ANA) as the "Marketer of the Year." According to ANA trade journal Advertising Age two weeks before the presidential election, "Sen. Barack Obama has shown he's already won over the nation's brand builders."

Angus Macaulay, the vice president of Rodale Marketing Solutions, told Advertising Age that Obama's campaign was "something we can all learn from as marketers." AOL "Platform A" President Linda Clalirizio praised Obama for doing "a great job of going from a relative unknown to a household name to being a candidate for president." [2]

Six days after the election, Advertising Age heralded "Brand Obama" as a "case study in audacious marketing." The journal praised Obama's "messaging consistency" and "communications success," placing special emphasis on the Obama campaign's "boldness, that trait that happens to be the most important for anyone trying to build a brand now, in a chaotic time when many will be tempted to shelve innovation and creativity to take u defensive postures."

"And at same time Mr. Obama was building his brand with grand gestures," the journal added, "his campaign demonstrated an understanding of ground-level marketing strategies and tactics, everything from audience segmentation and database management to the creation and maintenance of online communities."[3]

"A MAN FOR ALL SEASONS"

"The result," Advertising Age exults, "was a brand that was big enough to be anything to anyone yet had an intimate-enough feel to inspire advocacy that raised funds at record-breaking, almost obscene levels..."

Quite right. Early in his campaign, Obama pretended to complain that he had become "a blank sheet on which people of vastly different political stripes project their own views." Reflecting on his apparent ability to win approval from people of wildly divergent perspectives, Obama claimed to worry that "everybody's projecting - particularly the way I came in - everybody's projecting their own views onto [me]."[4] The danger, he sensed, was that that some of his fans were going to become disappointed when they found out that he did not in fact represent an indefinite spectrum of viewpoints and interests and actually held positions many of them rejected. A related risk was that people would jump off "Senator Good Vibes'" ship of "Hope" once they realized that his real-world version of "change" and "unity" would mean some difficult decisions, choices, and sacrifices in accord with his underlying commitment to existing domestic and global disparities and institutions.

The irony behind Obama's reflection was that Obama and his media-savvy handlers deliberately and naturally pursued universal appeal in pursuit of victory under America's winner-take all electoral system, where corporate- and media-crafted candidate image tends to trump substantive policy positions and ideological identifications. As Rolling Stone political writer Matt Tabbai noted in a February 2007 article bearing the provocative title "Obama is the Best BS Artist Since Bill Clinton:"

"The Illinois Senator is the ultimate modern media creature...his entire political persona is an ingeniously crafted human cipher, a man without race, ideology, geographic allegiances, or, indeed, sharp edges of any kind. You can't run against him on the issues because you can't even find him on the ideological spectrum. Obama's ‘Man for all seasons' act is so perfect in its particulars that just about anyone can find a bit of himself somewhere in the candidate's background, whether in his genes or his upbringing...his strategy seems to be to appear as a sort of ideological Universalist, one who spends a great deal of rhetorical energy showing that he recognizes the validity of all points of view, and conversely emphasizes that when he does take hard positions on issues, he often does so reluctantly... His political ideal is basically a rehash of the Blair-Clinton ‘third way' deal, an amalgam of Kennedy, Reagan, Clinton and the New Deal; he is aiming for the middle of the middle of the middle." [5]

Acting in accord with the longstanding dance of America's Winner Take All politics, the media-savvy Obama Team cultivated his "blank sheet" appeal by tailoring Obama's message in flexible, chameleon-like accord with his own shifting audiences. Claiming to stand above "ideology" and partisan conflict, Obama bashed Wal-Mart and upheld the right to organize unions when talking to labor audiences but extolled free trade," "free markets," and entrepreneurial values when addressing "the business community." He invoked the legacy of the Civil Rights Movement when talking to black audiences but downplayed racial justice when speaking to white farmers and workers. He embraced capitalism's supposed virtues when talking to the rich and powerful but seemed stress its "drawbacks" when addressing the working class and poor. He told liberal and progressive primary voters that they could "joint the movement to end the war [on Iraq]" and shift U.S. policy towards peace and negotiation but made sure to tell The Council on Foreign Relations of his belief in the essential nobility of U.S. war aims and empire and of his desire to advance American global supremacy through gigantic military expenditures and a ready willingness to use force, unilaterally when "necessary," to "protect the American people and their vital interests." [6]

He suggested to progressive Iowa and New Hampshire voters that he was a populist outsider out to change the nation's corrupt, corporate-dominated culture but his campaign was staffed by and linked to Washington and corporate insiders. His current transition team is loaded with Washington political and policy veterans and his cabinet and administration more broadly will be packed with big players from the Bill Clinton regime. [7]

Hillary Clinton was a "polarizing insider" in Obama's campaign rhetoric. The President-Elect is courting her to be the next Secretary of State.

The campaign and candidate's conscious pursuit of "universalist" ideological hermaphroditism was strongly displayed in Obama's book The Audacity of Hope. Released in the fall of 2006, this bestselling marked the unofficial beginning of his presidential candidacy. In Steve Sailer's words, it "show[ed] his wordsmith's facility at eloquently restating the views of both his liberal supporters and his conservative opponents, leaving implicit the suggestion that all we require to resolve these wearying Washington disputes is to find a man who understands us - a reasonable man, a man very much like, say, Obama - and turn power over to him." [8]

At the same time, the Obama campaign clearly spent a considerable amount of time, money, and energy cultivating their candidate's pure celebrity. It relished and profited from his emergence as a "BaRockstar" - a mass-cultural as well as mass-political persona crafted around the vague and amorphous symbols of "Hope," "Change," and "Unity" to absorb the diverse and often confused aspirations and dreams of a mass constituency containing numerous and often contradictory values and positions.

"NOT BUSH": THE SELLING OF THE PRESIDENT

It worked, to say the least. As mainstream journalist Ryan Lizza recently noted in an interesting New Yorker reflection on "How Obama Won," Obama's media and campaign managers took the "tactical view" that "all that was wrong with the United States could be summarized in one word: Bush." Further:

"The clear alternative, then, was not so much a Democrat or a liberal as it was anyone who could credibly define himself as ‘not Bush.' [Obama's legendary media strategist David] Axelrod had a phrase he often used to describe this approach: America was looking for ‘the remedy, not the replica.' The appeal of this strategy was that, with only minor alterations, it could work in the primaries as well as in the general election, and that, in turn, allowed Obama to finesse the perpetual problem of Presidential politics: having one message to win over the a party's most ardent supporters and another when trying to capture independents and ‘up-for-grabs' voters - the voters who decide a general election." [9]

The key to success is deception and mushiness through mass marketing. Obama's media strategist David Axelrod and Obama's campaign manager David Plouffe performed masterfully well in blazing this path to victory.

The most genuinely accurate thing Obama said in his highly nationalist and propagandistic November 4th acceptance speech was that he owed his victory to Axelrod, Plouffe, and the rest of his top campaign staff. "You made this happen," Obama rightly told them, "and I am forever grateful." [9A]

Obama's handlers sold him as a "new" brand. They brilliantly advertised him as the "not Bush" just like Pepsi once expanded as the "not Coke" or like Burger King was once the up-and-coming "not McDonald's." They did it with the latest and best selling techniques.

"The 2008 Obama presidential run," noted Bruce Dixon in February of 2008,"may be the most slickly orchestrated marketing machine in history." [10] According to the campaign's financial report to the Federal Election Commission. Obama had by then spent $52 million on "media, strategy consultants, image-building, marketing research and telemarketing." As Pam Martens noted in early March of 2008:

"The money has gone to firms like GMMB, whose website says its "goal is to change minds and change hearts, win in the court of public opinion and win votes" using ‘the power of branding - with principles rooted in commercial marketing,' and Elevation Ltd., which targets the Hispanic population and has ‘a combined experience well over 50 years in developing and implementing advertising and marketing solutions for Fortune 500 companies, political candidates, government agencies.' Their client list includes the Department of Homeland Security. There's also the Birmingham, Alabama- based Parker Group which promises: ‘Valid research results are assured given our extensive experience with testing, scripting, skip logic, question rotation and quota control ... In-house list management and maintenance services encompass sophisticated geo-coding, mapping and scrubbing applications.' Is it any wonder America's brains are scrambled?" [11]

Besides contracting with sophisticated big client corporate marketing firms like GMMB and the Parker Group, the Obama operation grew its own considerable internal, sophisticated, and vertically integrated mass market research and sales capacities for identifying and seducing political consumers (voters) susceptible to "brand Obama." When ABC News anchorman Charles Gibson visited Obama's sprawling Chicago office seven days before the Ohio and Texas primaries, he observed the quiet hum of a corporate sales office. "The tone of the campaign headquarters," Gibson noted, was "strikingly serene." He observed "33,000 square feet of downtown Chicago office space and no one is sure exactly how many staff....The 20-somethings in the New Media department," Gibson said, "are responsible for everything from designing merchandise sold on the Web site to blogging to unloading videos and managing chat rooms." By Gibson's account, "the money flows through the computers, a steady infusion of cash in $10, $25, and $50 dollars. Obama's media maven Axlerod told Gibson, "It's strange that a computer terminal can make politics more intimate, but that's what happened." [12]

In Dixon's judgment, however, the Obama campaign's massive investment in selling their candidate was "not a good thing. Marketing," Dixon noted, "is not even distantly related to democracy or civil empowerment. Marketing is about creating emotional, even irrational bonds between your product and your target audience." [12A]

It's nothing new. Astute commentators since at least the Progressive Age (1890-1914) have noted that campaigns market U.S. candidates like they sell cars, candy, and toothpaste.

But as Lizza suggests, the problem has origins prior to the corporate and mass consumerist age. "By 1840," distinguished American historian Eric Foner has noted, "the mass democratic politics of the Age of Jackson had absorbed the logic of the marketplace. Selling candidates and their images was as important as the positions for which they stood."[13]

The two-party political system that emerged from the U.S. Republic's blueprint does not encourage the development of parties with clear ideological and policy differences or strong relationships between voter choices and citizens' actual positions on key policy issues. It leads rival candidates to blur their policy and ideological distinctions in the quest to win those all-important voters in the middle, focusing instead on personal qualities rather than hard policy and ideological differences. [14]

This harsh reality, combined with the almost complete absence of serious left political choices and furthered by the corporate and visual-imaginary takeover of much of the U.S. electoral process in the 20th century, goes a long way towards explaining why substantive policy issues tend to be badly downplayed in U.S. campaigns. It also explains much of the desperation and myopia that leads many ostensibly progressive voters and activists to back corporate-imperial candidates guaranteed to betray populist and peaceful promises "upon the assumption of power." [15]

CHE GUOBAMA: REBRANDING AMERICA WITH "A CLEAN SLATE"

Before he could be in a position to be sold (brilliantly) on the mass American electoral market, of course, Obama first needed to sell himself to the national political and business elite that controls much of the political action behind the scenes. That sales job did not involve deceptive one- or two-message commercials and slogans. It was about candid, up-close meetings in which the candidate made it clear that he posed no substantive challenge to dominant domestic and imperial structures and doctrines. That earlier marketing project, ably recounted by Ken Silverstein and David Mendell [16], took place in late 2003 and 2004 and made possible the first great rolling out of Brand Obama during the senator's instantly famous keynote address to the Democratic National Convention in late July of 2004.[17] It has continued behind the scenes ever since, with Obama continually reassuring his many big-money sponsors and corporate media enthusiasts that he is not some sort of starry-eyed idealist about to seriously question the interrelated hierarchies and ideologies of corporate-managed state capitalism, empire, and inequality.

The basic Obama message to the nation's ruling class - NOT advertised to the electorate - is that he is safe to concentrated power centers even if occasional populist-sounding slivers make their way into the construction of "Brand Obama." More than that, the campaign's message to the elite has included the promise that Obama will wrap reigning institutions and dogma in fake-progressive rebel's clothing and help repair the damage done to the United States' global public relations image by the vicious and clumsy post-9/11 excesses of the brazenly imperial Cheney-Bush gang.

Consistent with that hope, Advertising Age hails President-Elect Obama for producing "An Instant Overhaul for Tainted Brand America." The journal quotes David Brain, CEO of the global public relations firm Edelman Europe, Middle East and Africa, on how "the election and nomination process is the brand relaunch of the year. Brand USA. It's just fantastic." [18]

Nick Ragone has an interesting resume. He is both "a presidential historian" and the senior VP of client development at the leading global advertising firm Omnicom Group's Ketchum. "We've put a new face on [America] and that face happens to be African-American," Ragone told Advertising Age. "It takes a lot of the hubris and arrogance of the last eight years and starts to put it in the rearview mirror for us." [19]

Rigone might want to review Orwell's dystopian novel Nineteen Eighty Four on the deletion of unpleasant history - sent "down the memory hole" - by totalitarian communication authorities. "Rearview mirror" is code language for Orwellian revisionism.

Then there's the interesting commentary of Harvard Business School professor John Quelch. Quelch is a former "WWP Group" (a global advertising firm) board member and the co-author of a recent book with an oxymoronic title: "Greater Good: How Good Marketing Makes for Better Democracy."

According to Welch, echoing Orwell, "The election result zero-bases the image of the United States worldwide. We have a clean slate with which to work," Welch told Advertising Age. "Let us hope the opportunity is not squandered the way it was after 9/11." [20]

According to Carolyn Carter, the London-based president and CEO and Grey Group Europe, Middle East and Africa (creator of the popular teeth-rotting "Coke Zero" ad campaign for Northern Europe), "The last eight years broke faith in Brand America, and people want that faith restored." [21]

Enter the openly imperial Obama, who is "almost like Che Guevera, in a good way," according to Foreign Policy magazine's web editor Blake Hounshell. "He has icon status," Hounshell explains, "with the all the art around the world of his face." The difference, of course, is that Che boldly inspired radical challenges to the American Empire but Obama inspires captivation with the corporate-imperial U.S. and its supposed self-reinvention as a land of progressive democracy and endless possibility. According to Scott Kronick, global marketing firm "Ogilvy PR's" Beijing-based president, Obama's triumph "send a strong message to the world that despite what many people believe and feel...America can be very open, democratic, and progressive."[22]

"EXPECTATION CALIBRATION AND EXPECTATION MANAGEMENT"

It's not all good for the masters of American Empire and Inequality, however. The Obama-based "rebranding of America" in the wake of the long proto-fascistic, arch-plutocratic, and messianic-militarist Cheney-Bush nightmare comes with heightened popular product expectations at home and abroad. The risks and likelihood of disappointment and betrayal are high. Many American and other world citizens can be counted on to take "Brand Obama" and the refurbished "Brand USA" and give them meanings that do not accord very well with the U.S. power elite's agenda. Rising and betrayed expectations are the stuff of actual social revolutions (something rather different than marketing revolutions), as the left historian Barrington Moore once argued. For these and other reasons, Obama will be relying heavily on his marketing and public relations experts to keep the bewildered citizenry's hopes and dreams properly constrained and downsized. Popular thought coordination through mass marketing will be important to the governance period as well as the election phase of the Obama ascendancy. As Obama's early and excessively candid foreign policy advisor and Harvard ally Samantha Power told the power-worshipping public affairs talk-show host Charlie Rose last February, "Expectation calibration and expectation management is essential at home and internationally."[23].

Chilling words but they signify nothing new in the long history of the dark science of "Taking the Risk out of [American] Democracy". [24]

Paul Street is a writer and activist in Iowa City. He is the author of

Empire and Inequality: America and the World Since 9/11 (Boulder, CO: Paradigm, 2004); Segregated Schools: Educational Apartheid in the Post-Civil Rights Era (New York: Routledge, 2005); Racial Oppression in the Global Metropolis (New York, 2007), and most recently Barack Obama and the Future of American Politics (Boulder, CO: Paradigm, September 2008), which can be ordered at http://www.paradigmpublishers.com/Books/BookDetail.aspx?productID=186987.

Paul can be reached at paulstreet99@yahoo.com.

NOTES

1. Neil Postman, Amusing Ourselves to Death: Public Discourse in the Age of Show Business (New York: Penguin, 1985), 126-132.

2. "Obama Wins...Ad Age's Marketer of the Year," Advertising Age (October 17, 2008), read at http://adage.com/print?article_id=131810

3. "Barack Obama and the Audacity of Marketing," Advertising Age (November 10, 2008), read at http://adage.com/print?article_id=132351

4. As quoted in David Mendell, Obama: From Promise to Power (New York: HarperCollins, 2007), 12, 310.

5. Matt Tabai, "Obama is the Best BS Artist Since Bill Clinton," RollingStone.com. posted on AlterNet (February 14, 2007), read online at http://www.alternet.org/story/48051.

6. For many details and sources, see Paul Street, Barack Obama and the Future of American Politics (Boulderm CO: Paradigm, 2008), 1-163.

7. For a useful summary of Obama administration insiders, see Stephen Lendman, "Obama Mania," ZNet (November 17, 2008).

8. Steve Sailer,"Obama's Identity Crisis," The American Conservative (March 26, 2007).

9. Ryan Lizza, "Battle Plans: How Obama Won," The New Yorker (November 15, 2008).

9A. Barack Obama, "Remarks on Election Night," read at www.barackobama.com/2008/11/04/remarks_of_presidentelect_bara.php. For reflections on Obama's speech as a form of system-legitimizing propaganda, see Paul Street, "Barack Obama: Empire's New Clothes," Black Agenda Report (November 12, 2008), read at http://www.blackagendareport.com/index.php?option=com_content&task=view&id=879&Itemid=1

10. Bruce Dixon, "Holding Barack Obama Accountable," Dissident Voice (February 15, 2008), read at www.dissidentvoice.org/2008/02/holding-barack-obama-accountable/

11. Pam Martens, "The Obama Bubble: Why Wall Street Needs a Presidential Brand," Black Agenda Report, March 5, 2008.

12. ABC News, "Backstage at Barack Obama's Headquarters," February 28, 2008.

12A Dixon, "Holding Barack Obama Accountable." I would argue (somewhat differently from Dixon) that the mass-marketing of candidates is in fact intimately related to democracy in that it is a natural effort on the part of concentrated power to pervert and subvert it.

13. Eric Foner, Give Me Liberty! An American History, volume 1 (New York: WW Norton, 2005), 377.

14. G. William Domhoff, Who Rules America? Power, Politics, and Social Change (New York: McGraw Hill, 2006), 139.

15. Edward S. Herman, "Democratic Betrayal," Z Magazine (January 2007).

16. Ken Silverstein, "Barack Obama, Inc.: The Birth of a Washington Machine," Harper's (November 2006); Mendell, Obama, 248-49.

17. A very conservative speech by the way. See Paul Street "Keynote Reflections," (Featured Article), ZNet Magazine (July 29th, 2004), available online at http://www.zmag.org/content/showarticle.cfm?SectionID=41&ItemID=5951.

18. "An Instant Overhaul for Tainted Brand America," Advertising Age (November 10, 2008), read at http://adage.com/print?article_id=132352

19. Quoted approvingly in "An Instant Overhaul."

20. Quoted approvingly in "An Instant Overhaul."

21. Quoted approvingly in "An Instant Overhaul."

22. Quoted approvingly in "An Instant Overhaul."

23. The Charlie Rose Show, PBS, February 21, 2008. See www.charlierose.com/shows/2008/02/21/2/a-conversation-with-samantha-power

(accessed March 1, 2008). For some dark reflections on Charlie and Samantha's chat, see Paul Street, "‘Calibrating' HOPE in the Effort to ‘Patrol the Commons': Samantha Power and the Hidden Imperial Reality of Barack Obama," ZNet (February 26, 2008), read at www.zcommunications.org/znet/viewArticle/16640. Thanks to David Peterson for alerting me to the Power comment.

24. To steal the title of Alex Carey's important book: Taking the Risk Out of Democracy: Corporate Propaganda versus Freedom and Liberty (Urbana, IL" University of Illinois Press, 1997). "The twentieth century," Carey noted, "has been characterized by three developments of great importance: the growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy."

WALTER BENN MICHAELS

AGAINST DIVERSITY

The importance of race and gender in the current us presidential campaign has, of course, been a function of the salience of racism and sexism—which is to say, discrimination—in American society; a fact that was emphasized by post-primary stories like the New York Times’s ‘Age Becomes the New Race and Gender’.1 It is no doubt difficult to see ageism as a precise equivalent—after all, part of what is wrong with racism and sexism is that they supposedly perpetuate false stereotypes whereas, as someone who has just turned 60, I can attest that a certain number of the stereotypes that constitute ageism are true. But the very implausibility of the idea that the main problem with being old is the prejudice against your infirmities, rather than the infirmities themselves, suggests just how powerful discrimination has become as the model of injustice in America; and so how central overcoming it is to our model of justice.

From this standpoint, the contest between Obama and Clinton was a triumph, displaying, as it did, both the great strides made toward the goal of overcoming racism and sexism, and the great distance still to go towards that goal. It made it possible, in other words, to conceive of America as a society headed in the right direction but with a long road to travel. The attraction of this vision—not only to Americans but around the world—is obvious. The problem is that it is false. The us today is certainly a less discriminatory society than it was before the Civil Rights movement and the rise of feminism; but it is not a more just, open and equal society. On the contrary: it is no more just, it is less open and it is much less equal.

In 1947—seven years before the Supreme Court decision in Brown v. Board of Education, sixteen years before the publication of Betty Friedan’s The Feminine Mystique—the top fifth of American wage-earners made 43 per cent of the money earned in the us. Today that same quintile gets 50.5 per cent. In 1947, the bottom fifth of wage-earners got 5 per cent of total income; today it gets 3.4 per cent. After half a century of anti-racism and feminism, the us today is a less equal society than was the racist, sexist society of Jim Crow. Furthermore, virtually all the growth in inequality has taken place since the passage of the Civil Rights Act of 1965—which means not only that the successes of the struggle against discrimination have failed to alleviate inequality, but that they have been compatible with a radical expansion of it. Indeed, they have helped to enable the increasing gulf between rich and poor.

Why? Because it is exploitation, not discrimination, that is the primary producer of inequality today. It is neoliberalism, not racism or sexism (or homophobia or ageism) that creates the inequalities that matter most in American society; racism and sexism are just sorting devices. In fact, one of the great discoveries of neoliberalism is that they are not very efficient sorting devices, economically speaking. If, for example, you are looking to promote someone as Head of Sales in your company and you are choosing between a straight white male and a black lesbian, and the latter is in fact a better salesperson than the former, racism, sexism and homophobia may tell you to choose the straight white male but capitalism tells you to go with the black lesbian. Which is to say that, even though some capitalists may be racist, sexist and homophobic, capitalism itself is not.

This is also why the real (albeit very partial) victories over racism and sexism represented by the Clinton and Obama campaigns are not victories over neoliberalism but victories for neoliberalism: victories for a commitment to justice that has no argument with inequality as long as its beneficiaries are as racially and sexually diverse as its victims. That is the meaning of phrases like the ‘glass ceiling’ and of every statistic showing how women make less than men or African-Americans less than whites. It is not that the statistics are false; it is that making these markers the privileged object of grievance entails thinking that, if only more women could crash through the glass ceiling and earn the kind of money rich men make, or if only blacks were as well paid as whites, America would be closer to a just society.

It is the increasing gap between rich and poor that constitutes the inequality, and rearranging the race and gender of those who succeed leaves that gap untouched. In actually existing neoliberalism, blacks and women are still disproportionately represented both in the bottom quintile—too many—and in the top quintile—too few—of American incomes. In the neoliberal utopia that the Obama campaign embodies, blacks would be 13.2 per cent of the (numerous) poor and 13.2 per cent of the (far fewer) rich; women would be 50.3 per cent of both. For neoliberals, what makes this a utopia is that discrimination would play no role in administering the inequality; what makes the utopia neoliberal is that the inequality would remain intact.

Worse: it is not just that the inequality remains intact but also—since it is no longer produced by discrimination—that it gets legitimated. Apparently American liberals feel a lot better about a world in which the top 20 per cent are getting richer at the expense of everyone else, as long as that top 20 per cent includes a proportionate number of women and African-Americans. In this respect, the ability of the Obama campaign to make us feel pretty good about ourselves while at the same time leaving our wealth untouched, is striking—as emblematized in his tax proposals which are designed to ask more of the ‘well-off’, but not of ‘the middle class’. Who are the well-off? ‘I generally define well-off’, says Obama’s website, ‘as people who are making $250,000 a year or more’. Which means that people making, say, $225,000 (who are in the 97th percentile of American incomes) are middle class; and that they deserve to be taxed in the same way as those in the 50th percentile, making $49,000. The headline of the website on which this appears is ‘I’m Asking You to Believe’. But asking the 40 per cent of Americans who live on under $42,000 to believe that they belong to the same middle class as the approximately 15 per cent who make $100,000–$250,000 may be asking too much. It is, however, what the Democratic Party has been asking them to believe for the last twenty years. Economic inequality did not grow as fast under the Clinton Administrations as it did under both the Bushes, but it grew. In 1992, when Clinton was elected, the bottom quintile made 3.8 per cent, the top quintile 46.9 per cent of all money earned; in 2000, at the end of his second term, the bottom quintile made 3.6 per cent, the top quintile 49.8 per cent.

The point, then, is that the nomination of Obama is great news for American liberals, who love equality when it comes to race and gender, but are not so keen when it comes to money. Liberals are the people who believe that American universities and colleges have become more open because, although they are increasingly and almost exclusively populated by rich kids, more of these today are rich kids of colour. (Obama’s popularity on college campuses is no accident—he is diversity’s pin-up.) And having helped keep the poor out of college and thus made sure they remain poor, liberals are now eager to point out that white voters with only a high-school education (the very people who do not go to Harvard) are disproportionately sceptical of Obama; they are happy to deplore the ignorant racism of people whom they have kept ignorant, and whose racism they have thus enforced. The Obama candidacy is great news, in other words, for a liberalism that is every bit as elitist as its conservative critics say—although not, of course, quite as elitist as the conservative critics themselves.

There is a real difference between Obama and McCain. But it is the difference between a neoliberalism of the centre and a neoliberalism of the right. Whoever wins, American inequality will be left essentially untouched. It is important to remember just how great that inequality is. A standard measure of economic inequality is through the Gini coefficient, where 0 represents perfect equality (everybody makes the same), and 1 perfect inequality (one person makes everything). The Gini coefficient for the us in 2006 was 0.470 (back in 1968 it was 0.386). That of Germany today is 0.283, that of France, 0.327. Americans still love to talk about the American Dream—as, in fact, do Europeans. But the Dream has never been less of a reality than it is today. Not just because inequality is so high, but also because social mobility is so low; indeed, lower than in both France and Germany. Anyone born poor in Chicago has a better chance of achieving the American Dream by learning German and moving to Berlin than by staying at home.

Whether debates about race and gender in American politics involve self-congratulation, for all the progress the us has made, or self-flagellation over the journey still to go, or for that matter arguing over whether racism or sexism is worse, the main point is that the debate itself is essentially empty. Of course discrimination is wrong: no one in mainstream American politics today will defend it, and no neoliberal who understands the entailments of neoliberalism will do so either. But it is not discrimination that has produced the almost unprecedented levels of inequality Americans face today; it is capitalism.

Put that way, however, it is clear that the characterization of the race–gender debate as ‘empty’ needs to be qualified. For the answer to the question, ‘Why do American liberals carry on about racism and sexism when they should be carrying on about capitalism?’, is pretty obvious: they carry on about racism and sexism in order to avoid doing so about capitalism. Either because they genuinely do think that inequality is fine as long as it is not a function of discrimination (in which case, they are neoliberals of the right). Or because they think that fighting against racial and sexual inequality is at least a step in the direction of real equality (in which case, they are neoliberals of the left). Given these options, perhaps the neoliberals of the right are in a stronger position—the economic history of the last thirty years suggests that diversified elites do even better than undiversified ones. But of course, these are not the only possible choices.