Financial socialism or progressive corporatism?

The American people are furious about Treasury Sec. Henry Paulson's requested $700 billion bailout of Wall Street. But it appears Congress will pass the plan in some form, as everyone believes government intervention is required to prevent the credit market seizure from causing a recession. The crisis has brought the system to a turning point.

"Gone is the faith, shared by the nation's leadership with varying degrees of enthusiasm, that the best road to prosperity is to unleash financial markets to allocate capital, take risks, enjoy profits, absorb losses. Erased is the hope that markets correct themselves when they overshoot.... Also scrapped is the notion that government's role is to get out of the way," wrote Wall Street Journalist columnist David Wessel.

"The government will be much more active in economic management (pleasing a certain sort of establishment Democrat). Government activism will provide support to corporations, banks and business and will be used to shore up the stable conditions they need to thrive (pleasing a certain sort of establishment Republican). Tax revenues from business activities will pay for progressive but business-friendly causes — investments in green technology, health care reform, infrastructure spending, education reform and scientific research," predicted David Brooks of the
New York Times, who called the emerging stage "progressive corporatism". By "progressive", Brooks did not mean the anti-capitalist, pro-people's needs sense in which the term is often used today, but was referring to the Teddy Roosevelt model of bringing activist management to control capitalism's excesses and deflect popular unrest.

The left opposes the bailout and demands the funds be redirected to human needs. For example, the National Priorities Project's handy calculator reports that Massachusetts's $19.8 billion share of the bailout would build 68,703 affordable housing units. That project would provide an alternate and effective solution to the housing problem which caused the financial crisis. The antiwar coalition United for Peace and Justice called for local actions tomorrow afternoon to "Stop the Bush Bailout".

But due to the weakness of the left, the strongest opposition to the bailout plan is coming from the free-market right, who are calling the bailout "financial socialism". Mainstream liberal Democrats such as Chuck Schumer, Barney Frank, and Barack Obama are looking for ways to attach conditions to the plan, exemplified by Obama's feeble proposals, as window dressing before they capitulate and push it through. On the other hand progressive Democrats such as Dennis Kucinich and Sherrod Brown are too few to block the bailout.

Since the left cannot stop the emergence of progressive corporatism at this time, the best option is to struggle for influence within it and transform it into financial socialism. In the current situation we should demand the Schumer/Frank/Obama liberals attach a demand for equity ownership of financial firms to the bailout. (Nationalize the banks, in short) This "Swedish model" of financial bailout allowed the Swedish state to obtain an ownership stake and board seats when Swedish banks had a crisis in the 1990's. The U.S. left would then demand that the government not return the financial shares to the private market after the crisis, but rather use them to drive towards investment in health care, green energy, public/worker control of businesses, and international cooperation, i.e. towards a highly regulated U.S. capitalism instead of another round of free market cowboy capitalism in the next business cycle.