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Confronting Capitalism's Crisis

Kate Griffiths, Rachel Parsons, and Isaac Silver
Date Published: 
December 22, 2008

The financial crisis of the last two months is the most dramatic since the stock market crash of 1929. Bubbles have burst, Wall Street institutions “too big to fail” have fallen hard, and the entire financial system has been remade in a period of weeks. But by the time these events made headlines, an economic crisis was already well underway and being felt around the world. Those most vulnerable to upheaval in the real economy have faced loss of jobs, homes, and access to food and services for decades.

These two crises—the widespread reality of low-paid, hard-to-find work, increasing food prices, evictions, and foreclosures, and the more sudden implosion of the seemingly miraculous financial system—have produced a third: a political crisis for the elite as pro-capitalist ideologues have scrambled to rebuild the infrastructure of profit-making and global dominance.

The credibility of neoliberalism as the ruling ideology of contemporary capitalism has been severely undermined by the government’s response to Wall Street’s dramatic collapse. In the pages of popular magazines, daily newspapers, and ruling-class policy journals, journalists and politicians are clambering to piece together explanations for the failure of the “free market” and the need of a massive taxpayer bailout of the banking system.

Disgust at this hypocrisy has led larger numbers of people to question the wisdom of corporate rule, and even capitalism itself. For radicals and activists in the US, this provides an even greater need for grassroots organizing which can develop into a more coordinated, broad-based anti-capitalist movement.

Everyday crisis

The economic crisis didn’t start in September of 2008 for most people in the US or for poor people around the world. In February and March of this year, food riots broke out in more than thirty countries as prices for basic commodities soared. Within the borders of the United States, working-class communities of color were the first affected when a wave of foreclosures on subprime mortgages hit in the summer of 2007.

While food prices have not caused riots in the US, rising costs have put added pressure on working-class people over the past year. In Milwaukee, the need for federal food assistance resulted in nearly 3,000 people waiting for help in chaotic lines last June. It left Milwaukee Common Council President Willie Hines incredulous. “We expect long lines for free food in Third World countries,” he said. “We don’t expect a line of 2,500 people waiting for food vouchers [here in Milwaukee].” Even government officials recognized that this scramble for disaster relief was not a response to flooding earlier that month, but to decades of de-industrialization that had eaten away at the region’s economic base.

Symptoms of crisis in the housing market have been more widely reported, gripping the nation’s attention as hundreds of thousands are losing their homes. The subprime mortgage swindle had its foundation in federal policies that cynically promoted “minority home ownership” while relaxing regulations that safeguarded homebuyers. Lenders specifically steered African Americans and [email protected] into subprime loans with promises that the housing market had nowhere to go but up. Though many have tried to name “unqualified” borrowers as the primary reason for the staggering number of foreclosures and evictions, three-fifths of these subprime loan buyers would have qualified for safer mortgages but were not offered the option because of the high profits made by mortgage brokers on these deals.

As the housing bubble burst, risky loans were the first to default. Repossession of homes in communities of color created one of the most rapid upward transfers of wealth in history—a “Financial Katrina,” in the words of geographer David Harvey. The southwest Atlanta neighborhood where, in 2002, George Bush rolled out his goal of 5.5 million minority homeowners by 2010 now has one of the highest rates of foreclosure in the nation. Foreclosures have continued to soar in 2008, with expectations of more than one million homes repossessed by year’s end.

At the same time, national rates of unemployment and forced part-time work have increased steadily over the last ten months, reaching their highest levels in sixteen years. As a result, workers are increasingly caught between shrinking incomes and increased costs of basic necessities like food and housing. This painful squeeze represents the latest shock in a long period of increasing economic insecurity for working and poor people in the US.

Just a generation ago the Rust Belt was the industrial core of the US. Now, the area’s major cities—Detroit, Buffalo, Gary, Cleveland—read like a list of urban casualties, hollowed out by neoliberal restructuring. This year’s expected mass layoff of autoworkers comes after decades of job cuts and slashed wages, pensions, and benefits for those lucky enough to keep a job. Detroit has been one of the worst hit by the recent foreclosure crisis. Along with job losses and deteriorating city services, over 40,000 of Detroit’s poor and working-class residents have had their utilities cut off. This is a result of an aggressive debt collection scheme and inaccurate billing as part of the city’s failed (thanks to the organizing of city residents) privatization scheme that started back in 2005.

These ongoing attacks on working people did not qualify as a “crisis” in the mainstream media. This long-term economic crisis, even in its most recent, dramatic form, made it to the national stage only sporadically, with few serious solutions proposed by lawmakers and candidates.

Profit problems

Bankers, politicians, and the mainstream media weren’t nearly as quiet when trouble hit Wall Street. The failure of the major investment banks Bear Sterns and Lehman Brothers, followed by the insolvency of insurance giant AIG and deposit banks like Washington Mutual and Wachovia, fixed attention on a growing financial crisis and the inability of bankers or regulators to predict or stem the bankruptcies. The packaging of bad debt from subprime mortgages into new investment vehicles ignited the fiscal firestorm. Meanwhile, a collapse of confidence moved from balance sheet to boardroom as the consequences of Lehman’s failure spread, causing short-term credit to dry up as banks and other companies stopped lending to one another.

These dramatic events signaled a severe shock that would be more difficult for Wall Street and government to manage than past banking crises, like the Savings and Loan debacle of the 1980s. Six weeks after Lehman Brothers’ failure, the financial sector has been transformed: investment banks are largely a thing of the past, while deposit institutions have consolidated into a few mega-banks, now partially owned—though not governed—by the US Federal Reserve. Though it seemed to many—including a “shocked” former Fed Chairman Alan Greenspan—to come from nowhere, this financial meltdown, like those of the recent past, has its roots in the unavoidable problems of a capitalist economy and in the specific neoliberal policies that have gone global over the last three decades.

Neoliberalism began its ascendancy when corporate profits declined in the 1970s, ending the postwar boom of rising wages that had persisted since World War II. To increase their profits, employers shifted well-paying manufacturing jobs to non-unionized areas of the US and overseas and pushed workers into increasing numbers of insecure, part-time, low-wage jobs that helped employers get more for less. Entrenched union officials failed to respond and accepted endless demands for concessions while corporate profits rebounded. Without an organized fight against cuts to wages and benefits, wages stopped growing and workers’ purchasing power declined. Workers maintained a standard of living through working longer hours, sending more household members to work, and buying extensively on credit.

Meanwhile, politicians and global financiers reorganized the rules of the market, pushing for liberalization of trade and privatization of public sector services through trade agreements and international financial institutions. The globalization of US capitalism and the expansion of credit fueled the US financial sector, where fluid economic resources could be quickly moved and re-invested. Massive global markets emerged for trading novel financial instruments like derivatives. These markets, at their peak, were “worth” ten times the value of the real economy, those sectors--manufacturing, farming, housing, etc.—which the financial sector is built on. The massive sums moving through the financial sector were largely illusory, representing claims on anticipated future profits bought and sold many times over, profits which will never materialize.

It is this crisis of profitability—not simply the bad management on Wall Street and in Washington—which explains the severity of the meltdown this fall and ties today’s problems to the capitalist system as a whole. Despite the last three decades of violently enforced global austerity and insecurity, which have eroded standards of living and access to basic needs around the world, the global profit engine is now unable to meet even its own needs for greater profit or work on its own terms.

Neoliberalism exposed

For decades, rhetoric of “personal responsibility” was used to justify privatization of state resources, dismantle welfare, and attack unions. The past several months of mega-bailouts and state intervention have shown the “free market” to be a god that failed. Greenspan, who suggested in 2004 that “American consumers might benefit [from] alternatives to the traditional fixed-rate mortgage,” admitted to Congress in September 2008 that his “whole intellectual edifice collapsed in the summer of last year because the data inputted into risk management models generally covered only the past two decades, a period of euphoria.” This quick abandonment of austerity and the neoliberal ideal of “small government” is a slap in the face to everyone who has had to make due during thirty years in which there has been no money to build schools, repair infrastructure, or provide job training.

As a result, neoliberalism has lost face, but it is not automatically coming to an end. Capitalism has always found new ways to continue making profits for the rich. Even in the worst crises, the masters of the economy will not give up on a system that enriches them under normal circumstances and protects them from the consequences of their failures in the worst. The layoffs and cuts to government funding announced in the midst of the financial crisis suggest that Wall Street intends to solve their problems using many of the same neoliberal strategies that have long created and compounded ours.

In reality, there is not one crisis, or a singular economic reality. The “decades of euphoria” Greenspan referred to were an age of increasing disparities in wealth: a euphoric rise in profits for multinational corporations and a nightmare for communities devastated by economic restructuring. A return to the “normalcy” of profitable capitalism will not be a solution for most people, because those profits come directly from our exploitation and the destruction of our environment and infrastructure.

An opportunity

But this moment—as the emperor has come knocking on the door without a thing on—should be seen as an opportunity for activists and radicals to enter the debate and challenge the neoliberal ideology that has fueled the 30-year backlash against workers, the poor, women, immigrants, people of color, and queer people. The surge in support for Barack Obama’s presidential campaign—seen in mass rallies, unprecedented advance voter turnout, and the registration of millions of new voters—indicates a broad desire for change. The historic nature of his campaign, the mobilization of a large percentage of African Americans, and the experience of many white Obama supporters forced for the first time to confront white racism are building a potential basis for more effective grassroots organizing outside of the framework of electoral politics.

While this sense of hope and heightened expectations are a progressive step, activists shouldn’t view even basic reforms as inevitable under an Obama presidency. Though McCain and his campaign added accusations of “Marxist” and “socialist” to their battery of racist slurs, Obama treated the argument as a joke, and so should we. That doesn’t mean that progressive—even radical—change is off the table, but that it isn’t going to happen on its own. Nationwide organizing to address the crisis in the real economy of housing, wages, jobs, education, healthcare, and retirement needs a democratic, grassroots structure, independent of corporate political parties. This year, the Democratic Party, which will assume control of both the legislative and executive branches of the government in 2009, has received the highest percentage and total amount of Wall Street campaign contributions in history.

A movement structure led from the grassroots, not by Wall Street, is the basis for a clear political vision. Decades of defensive struggles and the rise of nonprofit, professionalized social movements have marginalized the mere idea of an independent Left. Such a Left might develop leadership, strategy, and theory while building unity among existing organizations and collectives. Discussions begun at the US Social Forum in Atlanta and the example of membership-based social movement organizations such as Iraq Veterans Against the War, union reform caucuses, workers’ centers, and base-building community groups are some ingredients of such an independent political force.

In the present moment, the strength of social movements and community organizations is grounded mostly at the local level. A community group in Chicago’s Albany Park neighborhood forced the Cook County Sheriff to halt all evictions of renters in foreclosed buildings. The Boston organization City Life, discussed elsewhere in this issue, has organized blockades against home foreclosures. A two-year struggle in Detroit has fought for a moratorium on foreclosures. Activists must work to connect these struggles to ongoing fights for immigrant rights and union representation and against cuts to education and health care funding.

We’re facing a critical moment. The need for solutions to the economic crisis for working people is increasingly acute. Widespread hope that such solutions can be found is on the rise, and the legitimacy of the Neoliberal worldview is at its weakest point in decades. The basic building blocks for a radical response are growing. Left Turn readers and activists already involved in the US Social Forum and in independent grassroots organizing are in a unique position to coordinate and build the movement we need. Let’s get to work.

Kate Griffiths is a student and labor activist in Brooklyn, NY, and a member of Solidarity. She can be reached at kategrif (at)

Rachel Parsons is a public school teacher and media justice activist in Brooklyn, NY. She can be reached at rachel.e.parsons (at)

Isaac Silver is a community activist in Atlanta, GA, and a national staff organizer for Solidarity, Isaac can be reached at redwedge (at)