Recently, economist Joseph Stiglitz called the current crisis “avoidable.” He blamed it on “ideology, special-interest pressure, populist politics, and sheer incompetence.” In tune with the norms of his profession, he proposed “policies” to fix the problem. Debates over the worsening economic crisis increasingly turn on which “policies” to use to stop, reverse and “avoid” them. Conservatives and liberals again rehash their old debates over their different policies as McCain and Obama did. The crisis will deepen some more, and then a compromise policy will emerge from the new President and Congress aimed to “solve the problem.” Instead, we ought to question the very idea of policy; that questioning would be a real change from past practice.
The problem is this: today’s economic crisis was caused by an immense accumulation of factors, far too many for any policy to manage. Here is a partial list. Workers’ wages stopped rising since the 1970s; thereafter, they accepted rising loans instead of rising wages as compensation for their greater work and productivity. Corporate profits exploded because they got ever more output per worker (via computerization, etc.) while not paying their workers any more. Corporations deposited their rising profits in banks who then loaned part of them back to workers, another part to investors for stock and then real-estate speculations, and yet another part to businesses for mergers. Other factors included low taxes, expensive wars, and resulting US government deficits. Then, too, China‘s industrialization flooded the US with inexpensive products as that country accumulated our massive dollar payments for them. China then lent those dollars back into the US to finance the government’s deficit and further increase banks’ loanable funds. All these very different factors helped build up the house of credit that has now crashed the entire economy.
Still other factors also shaped the crisis. New mortgage brokerage practices and credit card promotions induced more debt than borrowers could afford. Competition among rating companies yielded incorrect assessments of financial risks of trillions in newly invented financial instruments (derivatives). This led to staggering global misallocations of scarce resources. Homebuilders’ competition yielded excess construction. The Federal Reserve increased the money supply and lowered interest rates to offset the dot.com bubble burst in 2000.
Nor is this list of factors even nearly complete. No policy emerging from deals between conservative and liberal legislators beset by armies of lobbyists could ever begin to control or manage the immense diversity of the causes of the current crisis. Indeed, no policy of any kind — whether imposed by a dictator, produced by democratic consensus, or anything in between — can “fix the problem.” No policy ever did. There are just far too many causes of crises that one can see and list — and too many more not yet seen.
The whole idea of policy is bizarre. The “right policy” represents an absurd claim that this or that law or regulation can somehow undo the many different factors that cumulatively produced this crisis. Policies are “magic potions” offered to populations urgently demanding solutions to real problems. Whether cynically advocated for ulterior motives or actually believed by the politicians, promoters, and professors themselves, policy is the secular cousin of religion.
These days, the conservative policy amounts, as usual, to “let the private economy solve the problems” and “minimize state intervention because it only makes matters worse.” Conservatives protect the freedoms of private enterprise, market transactions, and the wealthy from state regulations and controls and from taxes. The liberals’ policy, also as usual, wants the state to limit corporate behavior, control and shape market transactions, and tilt the tax system more toward benefiting middle and lower income groups.
Both policies can no more overcome this economic crisis than they overcame past crises. Historically, both conservative and liberal policies fail at least as often as they succeed. Which outcome happens depends on all the factors shaping them and not on the policy a government pursues. Yet, both sides endlessly claim otherwise in desperate efforts at self-justification. Each side trots out its basic philosophy — dressed up as “a policy to achieve solutions.” Conservatives and liberals keep debating. Today’s crisis simply provides an urgent sort of context for the old debate to continue. Each side hopes to win converts by suggesting that its approach will “solve the economic crisis” while the other’s approach will make it worse. Thus the liberals displaced the conservatives in the depths of the Great Depression, the reverse happened in the recession of the 1970s, and the liberals may now regain dominance. In no instance were adopted policies successful in solving the crises in any enduring way. The unevenness and instability of capitalism as a system soon brought another crisis crashing down on our economy and society.
The basic conservative message holds that the current economic crisis is NOT connected to the underlying economic system. The crisis does NOT emerge from the structure of the corporate system of production. It is NOT connected to the fact that corporate boards of directors, responsible to the minority that owns most of their shares, make all the key economic decisions while the enterprise’s employees and the vast majority of the citizenry have to live with the consequences. The very undemocratic nature of the capitalist system of production is NOT related to crisis in the conservative view. The basic liberal message likewise disconnects today’s crisis from the capitalist production system. Rather, each side insists that all crises would have been and would now be “avoidable” if only the right policy were in place.
Conservatives and liberals share more than a careful avoidance of connecting the crisis to the underlying capitalist system. They are also complicit in blocking those who do argue for that connection from making their case in politics, the media, or the schools. While conservative and liberal policies do little to solve crises, the debate between them has largely succeeded in excluding anti-capitalist analyses of economic crises from public discussion. Perhaps that exclusion — rather than solving crises — is the function of those endlessly rehashed policy debates between liberals and conservatives.
Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick) New Departures in Marxian Theory (Routledge, 2006). Be sure to check out the video of Rick Wolff’s lecture “Capitalism Hits the Fan: A Marxian View”: <vimeo.com/1962208>.