“We are free, truly free, when we don’t need to rent our arms to anybody in order to be able to lift a piece of bread to our mouths.”—Ricardo Flores Magón

Globalized Contradictions of Capitalism and the Imperative for Epochal Change

John Asimakopoulos

According to the Congressional Budget Office, as of summer 2009 the United States has approved $787 billion in “stimulus spending” with trillions in additional commitments and calls for a second package to save capitalism for/from the capitalist lords on the backs of neo-serf taxpayers. Now that we face a new globalized Great Collapse, the time has come to show objectively why all of this was easy to predict and why capitalism must be replaced by a new socioeconomic system. This new egalitarian system is not assured based on deterministic-mechanistic Marxist economic theory. It is possible for capitalism to survive regardless of the global catastrophe required to save it given the use of state violence to protect it. Thus, the question becomes: do we accept the perpetual downgrading of working-class living standards or do we resist? Before asking people to resist, we must first demonstrate why things simply will not get better with objective analysis. Then we must demonstrate what would be a superior system and how it would work. Finally we need to show people how to resist in order to usher in a new epoch of social justice, love, and brotherhood and sisterhood. This must be part of anarchist economic analysis if we are going to argue convincingly for the need and, importantly, possibilities for system change. This chapter focuses on why capitalism is destined to collapse repeatedly.

According to Social Structures of Accumulation (SSA) theory, multiple social and historical factors, rather than mechanistic economics, determine economic growth. Specifically, capitalists invest on expectations of return that are shaped by external economic, as well as political and ideological, conditions. This external environment is referred to as the SSA, which determines economic expansion and the class distribution of economic gains. Important features of the institutional environment are the system of money and credit, the pattern of state involvement in the economy, and the structure of class conflict.[159]

The structure of class conflict is of particular importance because it determines the shape of institutional arrangements and whether they will be conducive to investment. SSA also holds that expansionary periods eventually end due to institutional relations becoming ossified, relative to the demands of new economic realities.[160] This is the Marxist argument of the relations of production (institutional relations) becoming fetters to the forces of production (industrial capacity).[161] Lastly, this approach views the development, internal dynamics, and decline of each SSA as historically contingent.

It is argued that a global SSA is forming based on the solidifying regimes of financialization, neoliberal trade, and a new global segmentation of labor resulting from, and intensifying, the defeat of developed nation working classes. But as the historical process of capital concentration is intensifying, occurring at the international versus national level, the fundamental mechanics of capitalism remain unchanged. However, this presents a qualitative break from the past in that corporations have severed the flow of a national business cycle by outsourcing production to nations with authoritarian labor and civil rights conditions for cheap disciplined workers while depending on market-based consumption in advanced nations. This leads to reductions in purchasing power without a mechanism to restore income flows back to the worker-consumers of developed nations. Consequently, the class contradictions of the new system have resulted, and will continue to result, in global economic stagnation, if not collapse. The reason is that the new regime of global production lacks a corresponding regime for consumption. Inevitably this will cause stagnation due to the classic contradiction of overproduction and underconsumption emanating from capitalist private property relations. Therefore, a structural solution is not reform, but altering property relations toward libertarian socialist/anarchist forms of societal organization, allowing for the uninterrupted flow of production-consumption.

Components of the Global SSA

Given the declining rate of profit since the 1970s within developed nations, capitalism has pursued surplus value through globalization. As a result, we are witnessing the formation of a new US-led global SSA based on three emerging regimes. The first is the financial regime based on the World Bank and International Monetary Fund (IMF) functioning as (de)regulatory institutions for the global economy.[162] The second is a neoliberal trade regime expressed by the World Trade Organization (WTO) and free trade agreements (FTAs).[163] The third involves globally segmented labor markets made possible by, and intensifying, the defeat of national working classes. The origins of these regimes can be traced back to developed nations, in particular the hegemonic United States and to a lesser degree the European Union.

The financial regime

The formation of the new financial regime centered on the IMF, World Bank, and transnational banks can be traced to the 1980s. Its creation came out of the collapse of the Bretton Woods regime in the 1970s. At that time transnational banks were forming, providing offshore tax havens without controls on capital flows for transnational corporations. The banks accumulated massive reserves from corporate accounts which were then lent to developing nations creating the foundation for the 1980s debt crises. These developments and corporate behavior were also a major cause for the demise of the Bretton Woods regime (which had institutionalized the old colonial relations) and financial deregulation (e.g., of capital flows and currency exchange rates, causing the Mexican currency crisis in 1994 and Asian in 1997). In the wake of the 1980s debt crises which followed, the role of the World Bank and IMF changed qualitatively by adopting neoliberal principles leading to the formation of new financial and trade regimes. The adoption of neoliberal ideology by these institutions was assured given that the United States has 16.79 percent of the vote at the IMF and 16.38 percent at the World Bank—shares multiple times more than that of any other single nation; the United States and European Union have 48.88 percent of the vote at the IMF and 44.94 percent at the World Bank; and traditionally the World Bank is headed by an American and the IMF by a European.[164]

Panitch and Gindin argue that the financial regime is not new.[165] Rather, it is a continuation of forces dating to the formation of Bretton Woods when the financial sector was requesting policies associated today with neoliberalism such as free capital flows. That financial or any other capital was opposed to regulation that it did not control should not be surprising. What is important is that at the end of the day Bretton Woods did not include these demands. Therefore the liberalization of capital flows is more properly dated to the 1980s although it has its origins in the prior system. Interestingly, Panitch and Gindin seem to acknowledge this qualitative shift: “The impact on American financial institutions of inflation, low real interest rates, and stagnant profits in the 1970s accelerated the qualitative transformations [italics added] of these years, which increasingly ran up against the old New Deal banking regulations.…This was what prompted the global ‘financial services revolution.’”[166]

Specifically, the first major shift occurred when in its World Development Report 1980, the World Bank changed the definition of development from “nationally managed economic growth” to “participation in the world market.”[167] This was a move away from what in essence was nationally managed economic growth practiced by developing nations toward neoliberal global trade (meaning capital mobility) controlled by and privileging transnational corporations. Second, the World Bank and IMF went from providing project loans to reorganizing the economies of poor nations in crisis through policy/structural adjustment loans. For example, when poor nations are forced to seek help from the IMF (as a lender of last resort) they must agree to neoliberal reorganization of their economy—especially privatization—before obtaining assistance from the World Bank and transnational banks. In addition to privatization of state resources, these measures, which reflect the 1980s Thatcher-Reaganite ideology, include severe reductions in public spending, currency devaluation, and wage reductions to attract “foreign investment” as a result of decreased export prices.

Therefore, the emerging financial regime is designed to facilitate global capital mobility in search of profits via cheap labor. The importance of capital mobility and privatization is that it makes possible the financing of production and ownership of national resources in developing regions. This is demonstrated by the record level of net foreign direct investment (FDI) inflows to China which have intensified upon its WTO entry in 2001.[168] In fact, the implementation of such policies has been followed by intensification in FDI flows to extremely poor nations given no restrictions on profit repatriation. Prior to such liberalization, nations imposed restrictions on the levels of FDI flows and foreign ownership of domestic industries to maintain control over their economy. However, this made it difficult for transnational corporations to engage in their investment strategies. More important than rock-bottom prices for national resources, the regime secures the repatriation of profits from production in developing nations.

In terms of interstate rivalries, the financial regime is the most stable out of the three which constitute the emerging SSA. This is true because it institutionalizes US global financial interests tying the economies of other nations to it. According to Panitch and Gindin, “the globalization of finance has included the Americanization of finance, and the deepening and extension of financial markets has become more than ever fundamental to the reproduction and universalization of American power.”[169] However, this was not sufficient to stabilize the global system of which financialization is but only a component. More specifically, as argued by Frank:

financial instruments have been ever further compounding already compounded interest on the real properties in which their stake and debts are based, which has contributed to the spectacular growth of this financial world. Nonetheless, the financial pyramid that we see in all its splendor and brilliance…still sits on top of a real world producer-merchant-consumer base, even if the financial one also provides credit for these real world transactions. …As world consumer of last resort…Uncle Sam performs this important function in the present-day global political-economic division of labor. Everybody else produces and needs to export while Uncle Sam consumes and needs to import.…[a significant reduction in US consumption] may involve a wholesale reorganization of the world political economy presently run by Uncle Sam.[170]

Therefore, the Achilles’ heel of the system remains consumption. This is true even if nations such as China and Japan have no choice but to participate in the financial regime through purchases of T-bills to prop up the value of the dollar and thus US consumption/imports. In other words, even a global financial regime is dependent on a balance between production and consumption leading us back to purchasing power and aggregate demand.

The neoliberal trade regime

While the financial regime secures capital mobility, the global trade regime centered on the WTO and FTAs is needed to secure mobility of production. The blueprint was the 1994 North American Free Trade Agreement (NAFTA). NAFTA allowed the free flow of goods and investment but not of people between an industrialized high-wage region and a developing one with extremely low wages. Furthermore, NAFTA did not include any labor or environmental standards, leading to a race to the bottom.[171] It was predicted by proponents that NAFTA would lead to a US trade surplus with Mexico. Instead, from 1993 to 2004, it rapidly led to a $107.3 billion trade deficit and a loss of 1,015,291 US jobs.[172]

The establishment of the WTO in 1995 extended these dynamics to a global scale. For example, the US trade deficit with pre-WTO China averaged $9 billion per year from 1997 to 2001 (Scott 2007). When China entered the WTO in 2001, the deficit began to average $38 billion per year from 2001 to 2006. As a result of these investment flows, Robert Scott reports,

The rise in the U.S. trade deficit with China between 1997 and 2006 has displaced production that could have supported 2,166,000 U.S. jobs. Most of these jobs (1.8 million) have been lost since China entered the WTO in 2001. Between 1997 and 2001, growing trade deficits displaced an average of 101,000 jobs per year…. Since China entered the WTO in 2001, job losses increased to an average of 441,000 per year.[173]

Furthermore, between 1948 and 1970 there were only six FTAs, thirty-four from 1971 to 1991, but after the establishment of the WTO in 1995 the number of FTAs reached 181 by 2002, spreading neoliberal trade far and wide.[174]

This neoliberal trade regime allows corporations to safely move production around the globe in search of low labor costs and financial incentives without fear of tariffs or barriers in order to boost historically declining profits. In addition to lowering transaction costs for globalized production, FTAs also guarantee that once the goods are produced in low-wage regions they can be exported unhindered into developed nations like the United States for market-based consumption. Barriers to trade would have made this unprofitable, thus limiting the extent of globalization.

Moreover, FTA rules are typically designed in secret by corporations and their governments, often with little to no participation of any citizen, environmental, or labor groups. A prime example of this is the WTO proceedings.[175] Not surprisingly, the trading rules disproportionately privilege capitalist interests, which pit high-income workers of developed regions against those of underdeveloped regions through outsourcing and export processing zones (EPZs).[176] For example, Mexican real wages have remained flat despite NAFTA’s promises as employment increased in EPZ’s or maquiladoras together with declines in US jobs and real wages.[177]

Globally segmented labor markets

These policies shift national labor market segmentation, a concept developed by Gordon et al. to a new artificially created global segmentation of labor without corresponding limitations on capital flows.[178] The origins of the new labor regime can be traced back to the 1980s when the United States had to contain inflation to stem capital outflows and balance the international financial system. At the time, taming inflation meant increasing interest rates through the Volcker shock (by reducing the money supply and later increasing federal rates) and containing wage-led inflation from a US labor and civil rights movement on its last gasp. The latter was achieved by crushing what remained of the labor movement exemplified by Reagan’s firing of the air traffic controllers. This cleared the way for financial capital to expand its global outreach (by securing international confidence in the value of the dollar) and its merging with production capital.[179]

Although the new labor accord had been initiated by Reagan defeating US workers in the 1980s, it could not be fully developed into globally segmented labor markets without first the financial regime to secure capital mobility (1980s) and, second, the neoliberal free trade regime (1995) to secure mobility of production but not of people. For this reason the emergence of globally segmented labor markets can be dated to 1994–1995 with the establishment of NAFTA and the WTO, the final element in the equation. In essence neoliberal globalization, and the emergence of globally segmented labor markets, re-institutionalizes the old Bretton Woods core-periphery relations, which it had institutionalized in turn from the pre–world war colonial system. Effectively, the world’s poor are trapped in regions of absolute-poverty wages, creating a modern serfdom.

More importantly, global segmentation of labor markets presents a qualitative change in that it institutionalizes and intensifies a 1970s labor accord based on defeated national working classes by updating the traditional core-periphery divide of colonialism and neocolonialism.

Figure 1. The Global Production-Consumption Model

This creates high-income regions (figure 1) of democratic market-based consumption, where consumers are given greater sovereignty and consumption opportunities. However, as workers, they experience flat real wages, increasing inequality, and the erosion of social safety nets such as pensions, health-care benefits, and job security.[180] Low-income regions of authoritarian production such as China are also created where the great majority of people remain subsistence-wage consumers. For example, “it has been estimated that wages in China would be forty-seven to eighty-five percent higher in the absence of labor repression.”[181] According to the National Labor Committee (NLC) these workers experience flat and extremely low incomes, violations of basic human and labor rights, and sweatshop conditions while independent monitors and the media are prohibited in such factories and EPZs.[182]

Furthermore, although the Bureau of Labor Statistics does not track Chinese wages, it estimated the hourly factory compensation in China to be sixty-four cents including wages, benefits, and social insurance.[183] By contrast, in 2004 the hourly factory compensation in Mexico and Brazil was $2.50 and $3.03 respectively, compared to $21.90 in Japan, $23.17 in the US, $23.89 in France, $24.71 in the UK, and $32.53 in Germany.[184] In addition, wages for China, Mexico, and Brazil have remained relatively flat since the 1990s as other parts of the world have been able to offer even cheaper labor. For example, the average hourly wage for apparel workers in Guatemala is thirty-seven to fifty cents, twenty to thirty cents in India, ten cents in Indonesia, with Bangladesh coming in at a mere one cent.[185]

In general, the macroeconomic picture that the three regimes are painting is very clear. The role of the IMF and World Bank changed to that of facilitators of capital mobility by the 1980s with the collapse of the Bretton Woods accord. In the 1990s, the neoliberal trade regime began to solidify with the transformation of GATT into the WTO (1995) and the formation of NAFTA (1994) a year earlier. Once the basic neoliberal trade structure was established, it set the stage for the formation of additional FTAs.

Having secured the mobility of capital and goods through the trade and financial regimes, corporations then began to outsource investment into developing nations for extremely low labor costs while suppressing workers at home. This explains why from 1993 to 1998 the top three recipients of FDI among developing nations were China (25.7 percent), Brazil (7.6 percent), and Mexico (6.5 percent), with India also gaining in recent years.[186] The preceding nations all have very large labor pools in absolute poverty combined with relatively stable political structures. As a result, 2004 net FDI inflows to China reached record levels at $53 billion, while net FDI outflows from the United States exceeded $145 billion compared to previous net FDI inflows of $11.3 billion in 1990.[187]

As FDI inflows to low-wage regions reached record levels, so did America’s trade deficit as corporations shipped back the output of outsourced production to developed regions for consumption. For example, the US trade deficit with China reached $201 billion in 2005, compared to the pre-WTO levels of $10.4 billion in 1990 and $6 billion in 1985.[188] The declining growth rates of real GDP per capita in developed nations is the mirror image of these trade deficits as corporations relocate production (and now services) to developing ones, with the most significant drop after the 1990s when the emerging regimes began to solidify (table 1). Panitch and Gindin argue that theoretically the privileged position of the US in the global system could allow it to experience perpetual trade deficits that nations like China have no choice but to accept.[189] This is possible given that the international reserve and trade currency is the US dollar. Thus, the United States can purchase global goods denominated in its own currency by printing money at a cost of a few cents for paper and ink.[190] Panitch and Gindin, though, ignore that these deficits have real consequence for US workers. According to Scott:

Growth in trade deficits with China has reduced demand for goods produced in every region of the United States…. Workers displaced by trade from the manufacturing sector have been shown to have particular difficulty in securing comparable employment elsewhere in the economy. More than one-third of workers displaced from manufacturing drop out of the labor force…. Average wages of those who secured reemployment fell 11% to 13%. Trade-related job displacement pushes many workers out of good jobs in manufacturing and other trade-related industries, often into lower-paying industries and frequently out of the labor market.[191]

Such outsourcing has contributed to flat and even reduced real wages for the US working class as incomes of the upper class rise, leading to growing inequality. For example, the Gini ratios for US households in America were .397 in 1967, .419 in 1985, .450 in 1995, and .466 in 2004.[192] Furthermore, these shifts lead to reduced purchasing power and hence, aggregate demand.

Table 1. Average Yearly Percent Growth of Real GDP per Capita (using PPP in 2002 dollars) Author’s calculations based on data from the US Department of Labor, 2009.

	1960–9	1970–9	1980–9	1990–9	2000–8
US	3.33	2.53	2.49	1.99	1.21
UK	2.25	2.31	2.8	2.11	1.86
France	4.56	3.3	1.83	1.36	0.97
Germany*	3.46	2.8	1.79	1.54	1.22
Japan	9.13	3.44	3.23	0.81	1.2

(*Data for Germany for years before 1991 pertain to the former West Germany)

In other words, globalization has constructed a finely tuned system that focuses on the efficiency of SSAs related to production. But economic activity is based on a production-consumption model and it is consumption that globalization is undermining. In the typical workings of a national business cycle, capitalist accumulation is equivalent to a siphoning of surplus value, and thus purchasing power, away from the working class into the pockets of the capitalists. But unless the capitalists invest that wealth in activities that generate jobs and adequate income, the economy will stagnate due to overproduction-underconsumption.

As figure 1 demonstrates, globalization is short-circuiting the income flow in the developed regions between production and consumption more so than nationally based business cycles. Thus, globalization with its combination of an SSA for democratic market-based mass consumption (upon which it depends) and the SSA of authoritarian organization of production is siphoning purchasing power from producers and consumers in the developed regions at a greater rate. According to Kotz “the result tends to be a high profit/stagnant wage expansion [for developed nations] that faces a contradiction between the conditions for creation of surplus value and those necessary for its realization.”[193]

Toward Collapse: A Global SSA without Income?

If consumers’ purchasing power is insufficient to clear markets, then stagnation is inevitable. Therefore the new global SSA could not sustain an expansionary period.[194] This is supported by the data on declining or flat GDP growth rates for the world’s five largest economies prior to the Great Collapse of 2008 (table 1). This is true because the mode of capitalist accumulation and thus economic growth depends on market-based consumption, described by Marxist critiques of overproduction and underconsumption.[195] Specifically, most global goods and services are consumed by the wealthiest nations. This implies that the production of the new global SSA depends on consumption primarily by the United States, as Frank argues,[196] followed by the EU and Japan. Thus, although the financial system may be stable according to Panitch and Gindin, the overall global SSA, of which it is a component, is not, given a severely defeated US working class.[197]

Could high US consumption needed by the global system be derived from shared productivity gains between capital and labor? The answer is no; businesses have kept virtually all of the productivity gains.[198] What is even more troubling is that the gains themselves were derived not by technologically induced productivity growth, but by corporate savings, compliments of flat wages and a disciplined contingent labor force due to neoliberal restructuring of the economy.[199] Thus by definition it would be impossible to talk of shared productivity gains between labor and capital when they are derived at the expense of the former. Therefore, the historical trend of shared productivity gains that was expressed in the past Fordist expansionary SSA is no longer operative. But how did Americans continue to consume at high levels while real wages declined before the Great Collapse of 2008–2009?

The answer is debt. Harrison and Bluestone had argued that the growth of the 1980s and 1990s was fueled in large part by consumer credit/debt and government deficit spending.[200] Leicht and Fitzgerald also show how the disappearing US middle class continued to maintain its high consumption levels through debt.[201] They argue that as real wages started to stagnate from the 1970s, credit became easier to obtain. According to Kotz, growth in the mid-1990s was fueled partially by the wealth effect of the stock market bubble, especially in technologies.[202] Most of the growth, though, was accounted for by consumer spending due to low interest rates making borrowing more affordable. For example, in 2003 the real average credit card debt per household reached $9,000, up from $4,000 in 1990.[203] Once consumers maxed-out their credit cards at historic levels, new sources of debt continued to emerge, such as home equity loans that also reached historic levels.

In 2001 a severe recession was avoided thanks to continued strength in consumer spending. Kotz explains this was partially due to the temporary effect of the Bush tax cuts, which benefited some middle- and upper-middle-income households. He found most of the consumer spending, however, was accounted for by still-growing household debt.[204] From 2003 to 2007, the US economy has been driven by a continued rise in consumer spending despite flat incomes. This spending had been financed by historically low interest rates given the glut of liquidity/credit by the Fed’s easy monetary policy, contributing to the housing bubble. The illusion of wealth generated by the housing bubble coupled with low interest rates and flat incomes led to an explosion of home equity loans. For example, home equity loans in 1990 amounted to $150 billion versus over $300 billion in 1998 and $439 billion in 2006, while overall household debt (including credit cards and mortgages) as a percentage of after-tax income went from thirty percent in 1950 to over ninety percent in 2000 and 120 percent by 2005.[205] Thus, the middle layer of the working class has treated debt as income to continue an unsustainable level of consumption while the lower sections of the working class depended on debt to get by, given stagnant and even declining real income. Therefore, the question remains how goods and services produced under globalization are going to be consumed now that US consumer debt is maxed-out, the equity bubble burst, and interest rates after the housing meltdown of 2007–09 finally bottoms out. Consequently, globalization and the Great Collapse of 2008–2009 are the realization of the classic problem of overproduction and underconsumption.

Reform versus Structural Solutions to Boom and Bust

The problem is that globalization is developing the forces of production beyond the limits of the existing relations of production.[206] Therefore the current relations of production are becoming “fetters” to the full realization of the new productive forces. Stated differently, the emerging global SSA (unlike the Fordist model) lacks the necessary mechanism for consumption that can result in severe economic downturns. One solution would be to apply Keynesian stimulus policies on a global scale. Ironically, this does not seem feasible because the neoliberal ideology behind globalization includes privatization, minimal government spending, and tax cuts. These policies result in undermining the fiscal ability of states to engage in large-scale Keynesian spending. Even if this were possible, it would not resolve the class contradictions inherent in the capitalist mode of production as it relates to distribution and purchasing power.

Another alternative proposed by theorists is to promote re-regulation of national economies. For example, Harrison and Bluestone argued that “red-hot” growth would be the best way to reduce inequality.[207] They proposed a “Main Street” versus Wall Street model of Keynesian high-wage, pro-union, and anti-poverty programs to stimulate aggregate demand. They also advocated new growth theory, favoring supply-side growth through technological innovation to spur productivity growth. This, though, is not possible for the same reasons that prohibit a global Keynesian strategy. In addition, technologically driven productivity growth has not worked either.[208] As mentioned earlier, growth in the 1990s and early 2000 was driven by savings from a low-paid and disciplined contingency workforce made possible by outsourcing and anti-labor neoliberal policies.

Wolfson proposed a re-regulation of the economy by government to balance the power between capital and labor.[209] His suggestion was based on the observation that stagnation was caused when either capital or labor obtained an upper hand. In periods when capital had the advantage, it led to low wages and a flexible workforce, causing stagnation due to inadequate aggregate demand. In periods when labor had the advantage, it led to higher wages, lower profit margins, and stagnation due to a profit squeeze. However, anarchists would point out that government is part of the problem and cannot “solve” the contradictions inherent in capitalism as the state itself represents a classing of society that works in its own interests. In addition, it must be tacitly acknowledged that capital will always have a built-in advantage under capitalism in that it owns the means of production. And although not overtly stated by Wolfson, it is implied that private productive property is the problem.

Another important fact is underscored by Wolfson’s argument of a profit squeeze. Even if labor obtains an upper hand through revitalized movements and pro-labor government policies, it still would not provide a solution. Instead this would lead to a temporary illusion of prosperity and ephemeral gains. Such an arrangement would inevitably result in a profit squeeze—thus recession and a realignment of class power anew. Such a seesaw between inadequate aggregate demand and a profit squeeze will continue as long as class conflict takes place within a capitalist framework.

Thus, all of the suggestions by various theorists are ultimately unworkable in that they do not state what is clear: stagnation is caused structurally by private ownership of the means of production. Therefore, their policy suggestions are aimed at softening the natural outcomes of capitalism’s class contradictions, while maintaining the capitalist mode of production. This point becomes more so important if this new capitalism includes the normalization of ever deeper crises and growing domestic and global inequalities, which Panitch and Gindin argue should be accepted as here to stay.[210] Either way, all this makes the need for structural change rather than a cycle of crisis–reform–crisis imperative.

The alternative must be to create new economic models. But to create new models of production, distribution, and consumption, one would have to alter the fundamental relations in both production and consumption so as to allow a mechanism through which global output can be consumed. How can these relations be altered to achieve market clearing? This is where libertarian socialist/anarchist forms of societal organization have a solution: alter the relations of production in t₁ through direct action to achieve self-organization, self-direction, and private productive property elimination, ushering in a new epoch versus a new capitalist stage in t₂ (figure 2).

Figure 2. Dialectical Change

Such a fundamental restructuring of national and global socioeconomic organization will not occur from impending collapse as Panitch and Gindin correctly pointed out, although I argue collapse is highly probable.[211] The reason is that brutal oppressive regimes that are better armed than a national citizenry have proven capable of staying in power many years despite running their economies into grinding poverty as demonstrated by many African dictatorships such as Zimbabwe’s. Therefore, direct action by a renewed transnational working-class movement will be required for fundamental structural changes. If labor can obtain hegemony and accept the cataclysmic social changes ushered in by the forces of globalization based on human needs considerations instead (figure 2), we could experience not a dystopia but a renewed golden age of social and scientific evolution resulting from a historic epochal change in the mode of production-consumption.

Today workers in developed nations (particularly the United States as the hegemonic power) must demand initial structural changes that can eventually evolve into deeper socioeconomic changes leading to a new global model. Such demands can only be met by challenging the dominant ideology with a radical counter-ideology; creating mass support and solidarity through societal education disseminated by worker- owned and-operated media; and engaging in direct action with civil disobedience, militant resistance, and even full-scale revolts.[212] These strategies are based on my prior analysis of US labor and civil rights history showing that this was how workers and people of color obtained most, if not all, their fundamental gains. Such actions, though, would require a renewed and militant labor movement with actual blueprints for an alternative form of socioeconomic organization (or as Gramsci called it a counter-hegemony).

This is why counter-ideology and societal education are needed to offer a new model of society to be achieved with militant direct action fueled by global solidarity and independent worker institutions, e.g., media, schools/universities, and activist political organizations.[213] In conclusion, things are getting worse for the “workers of the world.” However, resistance is possible based on the classic call for “workers of the world to unite” and challenge the legitimacy of the existing system. We need to reassert ourselves and not be intimidated into accepting an emperor with “new clothes” every time capitalism goes through a transformation.

The Economic Crisis and Libertarian Socialists

Robin Hahnel

This chapter is based on an invited speech given by Robin Hahnel at the Anti-Authoritarian B-fest in Athens, Greece, on May 27, 2010. The talk addressed the origins of the global economic crisis that struck in the fall of 2008, and critically evaluated early responses by ruling elites in the United States and Europe. However, a great deal has happened since then. Rather than rewrite a speech which stands well on its own through May 2010, a short addendum follows, updating analysis through May 2011.

Why Libertarian Socialists Reject Capitalism

Libertarian socialists reject capitalism because it is authoritarian and exploitative not only in bad times but in good times as well. Libertarian socialists know that ordinary people are perfectly capable of managing and coordinating our own economic activities without self-serving elites to tell us what to do. Libertarian socialists who are more than armchair critics work tirelessly to replace the economics of competition and greed with the economics of equitable cooperation. Some work creating pockets of equitable cooperation wherever possible even while capitalism persists. Other libertarian socialists organize politically to build mass movements necessary to replace the capitalist system with an entirely different economic system in which workers and consumers manage their own economic affairs without bosses or commissars, and autonomous worker and consumer councils coordinate their interrelated activities themselves, through participatory planning, without recourse to markets or bureaucratic planning.

But if libertarian socialists did not need the worst financial and economic crisis in over eighty years to teach us that capitalism is an albatross around our necks, why is the current economic crisis of any particular importance to us? Why should libertarian socialists say or do anything differently than we were before the crisis struck?

The answer is very simple: Because we are too few … and the crisis opens important new opportunities for us to convince others of things we know—provided we can get them to listen.

The Problem Libertarian Socialists Must Solve

All too often libertarian socialists focus on other people’s problems rather than our own. Too many libertarian socialists think other people’s problem is that they fail to listen to and join us. Wrong! Our problem is that too few listen to us, much less join us. We need to remember in everything we do that this is our problem, which we must solve.

Our vision of a better world is thoroughly democratic. It is a vision that is much more deeply participatory and democratic than has even occurred to most people. But an important implication of a profoundly democratic goal that too many libertarian socialists conveniently ignore is that before our goal can be achieved a substantial majority of people must be ready to abandon the economics of competition and greed and embrace the possibility of an economics of equitable cooperation. So until we solve our recruiting problem there is little point in arguing over other issues, such as how to topple capitalist governments or defeat reactionary forces who will maneuver to maintain elite rule even when a majority of the population is ready to free themselves from all masters.

We will not solve our problem by yelling at people: See, we told you so—capitalism sucks! See, we told you so—mainstream politicians have betrayed you again! We will certainly not convince people that workers and consumers can manage their own affairs and organize and coordinate an efficient and equitable division of labor among themselves by simply repeating that we believe this is possible. We have been repeating that people can live better through self-government and free association for close to 200 years. Why should we expect more people to believe us if we offer no more compelling arguments than we have in the past? Why should we expect to recruit more people if we do no better job of addressing people’s doubts about how self-managing, autonomous councils of workers and consumers can actually solve real problems that will arise once capitalist overlords and market forces have been banished? Leftists will never recruit enough people to support our vision as long as libertarian socialism remains a faith-based initiative.

Rhetorical flourishes about the virtues of free association that fail to go beyond what great libertarian socialist forebears preached a hundred years ago begin to sound hollow when unaccompanied by concrete solutions to problems sensible people know will arise. We need to learn to communicate in ways designed to convince those who are not already anti-capitalist rather than please ourselves. Too much of our discourse is designed to make us feel good. Too often we preach to our own small choir and ignore the fact that by doing so we further alienate those whose minds we must change and whose trust we must earn. This is why we must go beyond assuming our conclusions when we explain what is wrong with the economy today and why it is not working. This is why we must be much more concrete than we have been in the past, and present our case remembering that our primary audience are people who do not already agree with us and who paid us no heed in the past, but just maybe, due to recent events, may now lend us an ear.

Explaining This Crisis

When leftists explain this crisis as a predictable crisis of capitalism we convince nobody who was not already convinced that capitalism is prone to crisis. If we want to make people sit up and take notice of what we have to say we have to offer more insightful explanations than others do of exactly how such a terrible event—which does not occur every day—could have happened. In many ways the financial crisis of 2008 is a truly astounding story of greed and incompetence beyond anything even the most hardened critics of capitalist finance imagined. Leftists who learn to tell this story well will find ears that continue to listen.

The principal causes of the “perfect economic storm” that broke in the fall of 2008 were (1) the dramatic increases in economic inequality which made the system less stable as well as less fair, and (2) the reckless deregulation of the financial sector. In the United States both trends began in earnest with President Reagan in 1980, continued under Bush I and Clinton, and accelerated during Bush II. These trends were the result of a steady increase in corporate power, and the power of mega financial corporations in particular, and a dramatic decrease in the countervailing power of workers, consumers, and governments.

But it is important to add more detail because there are important lessons we need to help people relearn. I say relearn because many of these lessons were learned once before in the aftermath of the Great Depression of the 1930s, but unfortunately were unlearned by the economics profession, the major media, and politicians, who then conspired to ensure that the general public forgot important, hard-learned lessons as well.

1. The financial crisis today is not simply the result of some mortgage loans that should never have been made. Less than 20 percent of mortgages were in arrears when the financial crisis broke, which means that 80 percent of mortgagees were current with their payments. Only because prudent regulation of the banking industry dating back to the Great Depression was systematically dismantled by politicians in both the Republican and Democratic parties under pressure from the financial industry, only because people like Larry Summers and Timothy Geithner intervened on numerous occasions in the past to prevent regulation of highly speculative Wall Street investment banks and hedge funds, only because lack of competent regulation created opportunities for financial players to make huge profits in socially dangerous ways, and only because European banks and the US government prevailed on European governments to imitate these disastrous trends was it possible for the worst financial crisis in eighty years to unravel when a housing bubble in the US—which had to come to an end at some point—finally did.

A short list of a few of the perverse incentives incompetent deregulation permitted—and continues to permit—is enough to boggle the mind.

(a) Local banks no longer hold the mortgages whose applications they approve. Instead, they immediately sell those mortgages to large banks and institutional investors. Clearly this leaves little incentive for local banks processing mortgage applications to care if applicants are really credit-worthy or not.

(b) Wall Street banks created securities composed of tiny fractions of the monthly payments due from thousands of different home mortgages, which they sold to institutional investors and also kept on their own books as assets. However, the agencies responsible for rating these mortgage-based securities are paid by the banks whose securities they are rating. The pressure on rating agencies to routinely stamp securities as triple-A for their paymasters, i.e., rate them of high quality and low risk, should be obvious to anyone.

(c) Securitization is not primarily a way to spread risk, as its creators assured us. More importantly it is a way to hide risk from outside detection, allowing banks to pass off low-quality securities as if they were high quality. However, since prospective buyers could not distinguish low-quality from high-quality mortgage-based securities, once mortgages started to fall in arrears, the market for all mortgage-based securities, even the good ones, dried up. Those are the so-called toxic assets we hear so much about on the books of the big Wall Street banks, and that is why the banks discovered, to their surprise, they could not sell even the good ones for more than a song once the housing bubble burst.

(d) CEOs’ pay is often linked to the value of their company stock in the short-run. But CEOs have many ways to manipulate the price of their company stock in the short run to their advantage, even if by doing so they weaken the company and endanger the economy.

(e) When a financial institution is so important that its failure might trigger a financial panic, it creates a perverse incentive known as moral hazard. An institution that is “too big to fail” can engage in risky behavior knowing it will reap high rewards from risky investments when they prove profitable, but be rescued by the government with taxpayer dollars whenever they prove otherwise. Wall Street is the best example of “lemon socialism” the capitalist world has ever seen. When things go well Wall Street wins. When things go badly the taxpayer, not Wall Street, loses.

(f) And of course, last but not least: More leverage, i.e., playing with more of other people’s money and less of its own, means higher rates of profit for any financial institution. But it also means greater financial fragility for the system as a whole, and a bigger collapse when a crisis materializes. Every attempt to restrict leverage for financial institutions that were “too big to fail” was defeated by the industry and its defenders, like Larry Summers.

Lesson 1: Unregulated, freemarket finance is an accident waiting to happen.

If the credit system is going to be left in private hands, not only must regulations over traditional financial institutions be restored and strengthened, but the new financial sector of Wall Street investment banks and hedge funds that grew up outside the old regulatory structures must be subjected to regulations that prohibit behavior that has proven detrimental to the public interest. A public takeover of the financial sector is the best option, not only to prevent further crises, but also to steer investment into energy conservation and developing renewable energy sources necessary to make our economies carbon neutral by mid-century, rather than into more unproductive asset bubbles. But short of nationalization, prudent regulation is an absolute necessity.

1. Large inequalities of income and wealth are not only unfair, they also increase the likelihood of economic crises for the simple reason that more of the income of the wealthy is not automatically turned into consumption demand. The poorer you are, the more likely you are to spend what little income you have relatively quickly, and thereby provide adequate demand for all that was produced. The richer you are, the more likely you are not to consume all your income. Unless the savings of the wealthy are successfully channeled into spending on goods and services by someone else, the demand for goods in general will fall short of the supply. When this happens, businesses unable to sell all they are producing cut back on production and lay off workers, which of course, further aggravates the problem. This self-reinforcing, downward spiral is what we are now experiencing, more strongly than at any time since the Great Depression eighty years ago.

Lesson 2: We need a massive fiscal stimulus because there is no other way to stem the recessionary slide that has become the overriding economic problem.

Household income is falling, few have any equity left in their homes they can borrow against, and most people’s credit cards are maxed out. Clearly the increased spending needed right now is not going to come from the household sector. Nor will it come from the business sector since businesses are not going to invest in new plants and machinery when they cannot sell all they are making already. For now the only way to stem the downward recessionary spiral is for government to spend more than it collects in taxes—a lot more!

Yes, this means we need a big government budget deficit right now. Bigger deficit now, good. Smaller deficit now, bad. Even if all one cares about is minimizing the size of the national debt five years from now, the best policy is to run a larger deficit now. The logic is simple enough: nothing increases the national debt more than a recession because tax receipts go down when income goes down—which is what a recession is, falling production and incomes.

1. However, the underlying problem that created the conditions for the macroeconomic imbalance and also make it difficult to reverse is the dramatic growth of inequality over the previous decades, leaving too little purchasing power in the hands of those who use it fully and quickly. This problem must be rectified as well.

Lesson 3: Wages must keep pace with productivity increases or the economy will not only become more unfair it will also become more unstable.

What can be done to protect wages immediately? In the United States passage of the Employee Free Choice Act—which was stalled in 2007 by a Republican filibuster in the US Senate—would remove barriers preventing workers from forming unions, eliminate incentives for employers to stall negotiations over a first contract, and increase penalties for employers who break the law during union organizing campaigns. Eliminating tax breaks for companies that outsource jobs abroad and insisting on adequate and enforceable labor standards in all international trade agreements would help reduce downward pressure on US wages and working conditions. The Trade Reform, Accountability, Development and Employment Act of 2009 (HR 3012) would move us in the right direction.

Of course, passage of these bills would only be a beginning. Much more is needed to increase income equality. But new legislation to empower unions, new legislation to undo the damage wreaked by neoliberal international economic treaties, increasing the minimum wage, and strengthening the social safety net through funding increases for unemployment insurance, social security, and welfare programs are all necessary steps that would increase income equality and make economic crises like this one less likely in the future.

Explaining the Abysmal Response

The worst economic crisis in over eighty years has generated many words but few concrete actions that will improve matters. All we have to do is review the list of what needs to be done to realize how little our leaders have accomplished.

• Either take over or regulate the financial sector.

Instead the approach taken by the Obama administration was to continue the Bush administration policy of having taxpayers pay much more than the going market price for as many toxic assets as the banks told us they needed to sell off before they felt they could begin lending again. Before leaving as treasury secretary, Hank Paulson got Congress to pass TARP I, which gave the Treasury $700 billion of taxpayer money to use to purchase toxic assets through a “reverse auction” that was so hampered by perverse information asymmetries and conflicts of interest that Paulson could not achieve liftoff for his plan before leaving office. In TARP II Geithner and Ben Bernanke disguised and expanded the subsidy in the form of “private public partnerships” where the Federal Deposit Insurance Corporation and Federal Reserve Bank provide free insurance against downside risk to induce private party participation and continue to subsidize the banking industry by lending them as much as they want at effectively a zero rate of interest. In other words, Obama fully endorsed the “No Banker Left Behind” approach of his predecessor in the White House: keep applying ever larger doses of taxpayer bailout funds to banks deemed too big to fail even when those banks refuse to begin lending again in earnest, and stonewall pressure to renegotiate terms of mortgages that are unpayable.

Now we are hearing speeches from Obama and Democrats in Congress designed to assuage a furious public, followed by legislation designed to please their paymasters on Wall Street. When all is said and done, whether the Democrats do or do not pass their pathetic financial reform bill, the big holding banks will be even bigger and therefore less likely to be permitted to fail; commercial and investment banking will still be tied at the hip; trading in highly profitable, esoteric financial products, that have no social value whatsoever but put the financial system at great risk, will continue; and regulatory powers will be more concentrated in the hands of the Federal Reserve Bank, which Wall Street captured long ago. In short, financial reform will be a fig leaf in the United States, leaving the financial system just as prone to crisis as it was before September 2008. The only question will be what the next asset bubble looks like, and how long it will take to grow and burst.

• Launch a massive fiscal stimulus emphasizing spending increases over tax cuts, and spending on education, healthcare, and green jobs because these are not only the most socially useful investments but also provide more jobs per stimulus dollar.

Instead of implementing the single most important lesson Lord Keynes taught the world eighty years ago, the conservative government in Germany is tragically committed to a penny-wise and pound-foolish notion of “fiscal responsibility” for itself and for others; the Republican opposition in the United States is fanning the flames of concern over the national debt in a deliberate and cynical attempt to prolong the recession to reap short-run political gain in the congressional elections of 2010 and the presidential election of 2012; Obama’s economic advisers, Laurence Summers and Timothy Geithner, have also stirred up deficit fears, and are responsible for preventing the administration from shooting for a larger fiscal stimulus in 2009, and killing any chance for a second stimulus in 2010. The Japanese government has done better on this score but cannot sufficiently stimulate the global economy on its own. Meanwhile, governments of smaller economies like Greece, Ireland, Portugal, Spain, Latvia, and all the smaller Third World countries have no choice but to practice fiscal austerity, because instead of protecting their ability to borrow on reasonable terms, those running the neoliberal international financial system have thrown the smaller economies to speculator dogs who jack up the interest premiums on their borrowing whenever their budget deficits increase.

In a global economy where new business investment may follow but certainly will not lead us out of recession, and where consumers in all the advanced economies are tapped out, there is nobody left except governments to prime the proverbial pump. Unfortunately, more than eighteen months into the recession the needed fiscal stimulus is still not forthcoming, and consequently we are headed for a jobless recovery at best, but more likely for a double dip as recessionary dynamics take root again.

•Reverse the trend toward greater inequality of income and wealth.

Instead the neoliberal trend continues unabated as inequality of income and wealth increase during the economic decline and Obama presidency, just as it did during the asset booms that preceded it and the presidencies of Reagan, Bush I, Clinton, and Bush II. The only sector of the US economy to have “recovered” is the financial sector whose profits are swollen again thanks to an open-ended bailout at US taxpayer expense, with none of the “conditionalities” demanding changes in behavior the IMF requires of its Third World clients in exchange for their bailouts.

An early indication that Obama was not going to do anything to change the balance of power in America came when he reneged on his promise to organized labor to prioritize the Employee Free Choice Act to begin to even the playing field for labor organizers. Labor helped Obama beat first Hillary Clinton in the Democratic primaries, and then John McCain in the general election. Hillary Clinton had the early advantage with organized labor during the primary campaign. A surprising number of unions came out for Obama over Clinton because he promised to champion the Employee Free Choice Act and they did not trust that Clinton would follow through no matter what she promised. During the general election Obama reaffirmed his pledge in return for all-out support from all of organized labor, and organized labor delivered. But the Employee Free Choice Act was the first piece of legislation Obama abandoned after being elected. Obama slapped organized labor in the face even before he told single-payer health advocates that their proposal was not worthy of consideration, and had guards turn Congressman John Conyers and a delegation of AMA doctors supporting single-payer away at the White House door when they tried to attend a meeting to discuss health-care reform being attended by CEOs from the insurance and pharmaceutical industries. Ironically, the feeble excuse he offered was that because of the severity of the economic crisis there were more important pieces of legislation he had to prioritize than the Employee Free Choice Act. Organized labor was “had” and knows it.

The reason for the abysmal failure to respond to the economic crisis effectively is that those responsible for creating the crisis are still in charge of the response. Politicians and political parties beholden to corporate interests and neoliberal ideology have not been replaced. And as a result, necessary financial reforms have been stonewalled, fiscal stimulus to stem the recessionary slide has been obstructed, worker, consumer, and citizen counterweight to corporate power continues to weaken, and consequently the economic crisis festers and worsens.

While the initial crisis was a tragedy caused by thirty years of brazen neoliberalism, the abysmal response to the crisis is a second human-made tragedy. Instead of choosing from a long list of distinguished economic advisers who warned against financial deregulation and the bankruptcy of trickledown economics, and who have excellent ideas about how to put our economic house back in order, President Obama instead chose as his advisers the very people responsible for the policies that brought on the economic crisis in the first place.

The advice of economists such as Dean Baker, Jamie Galbraith, Jane D’Arista, Robert Pollin, and Marc Weisbrot—not to speak of Nobel Laureates Joseph Stiglitz and Paul Krugman—is still being ignored. Instead, President Obama has unwisely chosen Lawrence Summers as his chief economic adviser and Timothy Geithner as his secretary of the treasury, neither of whom has a Nobel Prize to his name, and both of whom were key sponsors of the disastrous policies which got us into the mess we now find ourselves in. A very wise man once said: “We can’t solve problems by using the same kind of thinking we used when we created them.” President Obama had better hope that Albert Einstein was wrong, because so far he has chosen to follow the advice of a team of economists with close personal ties to Wall Street whose discredited ideas bear a major responsibility for creating the perfect economic storm that is by no means over. Lawrence Summers is not change; he is Clinton redux. Timothy Geithner is not change; he is a shill for Wall Street. And Ben Bernanke who Obama renominated and the Democratic Congress just confirmed for another term as chair of the Federal Reserve Bank bears much of the responsibility for the policies that led to the greatest financial crisis in over eighty years we are still suffering from.

Of course, the underlying question is why Obama chose the economic advisers he did, and why he continues to listen to them despite overwhelming evidence that their advice has failed to produce desirable economic results and has now revitalized a Republican Party that was in hopeless disarray only fifteen months ago. I am not particularly inclined to speculate about motives, but I suspect the answer to that question lies in where Obama has gotten his campaign finance support in the past, and continues to plan to raise money in the future. The answer lies in a political strategy that came to be known in the Clinton administration as “triangulation.” And the answer lies in the fact that Obama personally is a centrist and not a progressive, and Obama is cautious not audacious—even though present circumstances would reward boldness and will punish timidity. Finally, people I trust who have taken the time to examine his career carefully tell me Obama always “talks the talk” but seldom “walks the walk.”

In sum, two years into the crisis, insiders have only been replaced by other insiders who were equally culpable, and nowhere in the world have “insiders” yet been replaced by outsiders. Leftists who learn how to explain why the response of discredited leaders is woefully inadequate, and what governments should be doing instead, will find even more ears willing to keep listening.

Greece and the European Union

While I am much more familiar with the crisis in the United States and the status of our failed response than I am with the situation in Europe, I feel sufficiently informed to make a few observations about the crisis in Greece and problems unique to the European Union. Aeschylus, Sophocles, and Euripides created tragedy for the stage thousands of years ago, and now modern Greece is living through a real tragedy. The popular image of Greeks as unproductive, lazy workers who brought on this crisis by trying to live beyond their means is pure nonsense and a blatant attempt to blame the victims in order to exonerate those who are truly guilty.

The list of real villains begins with international financial speculators who have made it much more expensive and difficult for the Greek government to roll over its debt than it should be, and greatly magnified the size of the bailout package the European Commission and IMF had to put together. Banks and hedge funds that trade credit default swaps, currency traders, and rating agencies have perfected a speculative game that is extremely profitable for them but extremely detrimental to attempts to solve the Greek debt crisis and protect the euro. Libertarian socialists here in Greece would do well to learn to tell this story well to those they organize and work with.

First, Goldman Sachs advised the right-wing government that preceded PASOK how to hide its true debt from view so it could continue to borrow more and at lower interest rates than it would otherwise have been able to. Most of that hidden debt went to pay for corporate welfare and enable massive tax evasion by wealthy Greek supporters of the government. Then Goldman Sachs, knowing full well that Greek debt was higher than it appeared, began to play what former general counsel of Long-Term Capital Management Hedge Fund James Rickards calls the Whack the Piñata Game, and other players were soon to follow:

Greece’s travails are often measured by reference to the market in credit default swaps (CDS), a kind of insurance against default by Greece. As with any insurance, greater risks entail higher prices to buy the protection. But what happens if the price of insurance is no longer anchored to the underlying risk? When we look behind CDS prices, we don’t see an objective measure of the public finances of Greece, but something very different. Sellers are typically pension funds looking to earn an insurance premium and buyers are often hedge funds looking to make a quick turn. In the middle you have Goldman Sachs or another large bank booking a fat spread. Now the piñata party begins. Banks grab their sticks and start pounding thinly traded Greek bonds and pushing out the spread between Greek and the benchmark German CDS price. Step two is a call on the pension funds to put up more margin, or security, as the price has moved in favor of the buyer. The margin money is shoveled to the hedge funds, which enjoy the cash and paper profits and the 20 percent performance fees that follow. How convenient when this happens in December in time for the annual accounts, as was recently the case. Eventually the money flow will be reversed, when a bail-out is announced, but in the meantime pension funds earn premiums, banks earn spreads, hedge funds earn fees, and everyone’s a winner—except the hapless hedge fund investors, who suffer the fees on fleeting performance, and the unfortunate inhabitants of the piñata. What does any of this have to do with Greece? Very little. It is not much more than a floating craps game in an alley off Wall Street.[214]

The unfortunate inhabitants of the Greek piñata include the PASOK government, which, because it can no longer roll over the debt at the interest rates now demanded by buyers of Greek government bonds, must convince the European Commission, the European Bank, and IMF to be its underwriters and provide emergency loans. It includes the citizens and taxpayers in the EU who must assume risk they should not have had to bear as underwriters of new Greek borrowing. But most importantly, because those who run the global economy refuse to stop ridiculously counterproductive financial market shenanigans and force banks to write off unpayable debt, and instead impose increasingly draconian austerity measures in exchange for their financial backing, the most unfortunate inhabitants of the Greek piñata are ordinary Greeks who are being asked to suffer through ten years of depression conditions.

You here in Greece don’t need me to tell you what those austerity measures consist of and how they will affect people. But perhaps I can be of some help by reassuring you (1) that the claim that workers are to blame because they are too lazy and too greedy is patently absurd; (2) that the austerity measures the European Commission and IMF has imposed and PASOK has agreed to administer will be completely for naught; and (3) that there is a much better and fairer response to the crisis.

Some Greek workers have longer vacations than some German workers. And some Greek workers can retire sooner than some German workers. All available evidence indicates that Greeks have made the right choice and Germans have made the wrong choice. We have long known that leisure is kinder to the environment than more consumption. So the Greek choice is the environmentally responsible choice. And new research suggests that once basic needs are satisfied, increases in average consumption have little positive effect on how satisfied and happy people are. So the Greek choice of leisure over more consumption is the wise choice as well.

However, because they are less well-equipped, Greek workers are less productive than German workers on average. This is certainly not the fault of Greek workers. If it is anyone’s fault, it is the fault of their employers who fail to provide state-of-the-art equipment and working conditions. In any case, the solution is to prioritize improving the circumstances Greeks work in so their productivity increases. Unfortunately the PASOK austerity program will have the opposite effect.

Meanwhile, in the short run there are only two ways to prevent differences in Greek and German productivity from producing an unsustainable trade deficit between the two countries. PASOK has chosen to administer the first—drive down Greek wages. By agreeing to share a common currency with Germany, the second, better way, currency devaluation, was eliminated. Why is currency, or external devaluation, preferable to wage repression, euphemistically called internal devaluation? It can be done more quickly without causing domestic strife. And more importantly, it solves the trade problem with Germany without increasing income inequality within Greece. Devaluation means all Greeks must pay more for German imports. Wage repression means that Greek workers must pay more for German imports and also pay more for domestically produced goods, while wealthy Greeks pay no more for German imports than they did before; wealthy Greeks pay even less for domestically produced goods as lower labor costs lower domestic prices somewhat, and Greek employers are rewarded for failing to provide their employes with state-of-the-art equipment by getting away with paying their workers even less.

And what will be accomplished if Greek workers agree to shoulder the entire burden of solving the Greek debt problem? According to the projections of the same economists working for the European Bank, European Commission, and IMF who negotiated the agreement to provide up to $960 billion of support for the so-called PIGS in exchange for the austerity program PASOK will now administer in Greece, even if the program works exactly as planned—and no bailout program ever has—Greece’s debt will rise from 115 percent of GDP today to 149 percent in 2013. In other words, the best that can be hoped for is that after three years of horrific sacrifice Greece will face an even worse debt crisis three years from now. Moreover the economy will be mired in a much deeper depression, giving employers even less incentive to upgrade equipment in Greek factories.

There Are Much Better Options

(1) There are both advantages and disadvantages to being inside the euro zone. For a country like Greece it is becoming more and more apparent that the disadvantages outweigh the advantages. But even if the advantages outweighed the disadvantages, it is better to leave the euro now rather than agree to damage the economy severely for three years and have to leave the euro zone in any case—which is what current policies will lead to. If the EU/IMF will not offer Greece a way to grow out of the crisis, Greece is better off leaving the euro zone. Argentina tried what PASOK is trying—internal devaluation—from 1998 to 2001 only to drive half its country into poverty. After defaulting and devaluing, Argentine GDP dropped for one more quarter and then climbed 63 percent over the next six years.

(2) There are both advantages and disadvantages to defaulting on sovereign debt. But in the immortal words of former US treasury secretary Hank Paulson, who told the US Congress in October 2008 that they had no choice but to approve his $700 billion bailout request for US banks because Congress was “already on the hook,” this time Greece had the stronger countries in the euro zone “on the hook” and needed to take more advantage of its leverage. Much of Greek debt is owed to banks from other European countries, Germany in particular. And as everyone knows, the euro would take a serious hit if Greece defaulted. After incompetent delays which multiplied the size of the necessary bailout several times, Germany finally agreed to save its own banks and protect its precious euro—certainly not to help Greek workers, who German newspapers slander as lazy and greedy. Had PASOK hung tough and defended the Greek economy against demands for greater austerity, it could have gotten financial backing on much better terms than it did. PASOK was a lousy negotiator on behalf of Greek citizens and deserves to be fired for incompetence as well as for siding with Greek capitalists against Greek workers who must tighten their belt.

(3) Instead of imposing wage freezes, reducing vacation and retirement benefits, and laying off public employes providing useful services and public goods, taxes should be raised on the wealthy and on financial corporations doing business in Greece. Raising the value-added tax is highly regressive. Going after taxi drivers for tax evasion is small change and petty. Tax evasion by wealthy Greeks is notorious and that is where fiscal austerity should begin—and end!

(4) Greece needs fiscal stimulus not fiscal austerity to pull its economy out of the recession. Moreover, the world needs fiscal stimulus not fiscal austerity to end the Great Recession. Governments everywhere, including Greece, should engage in aggressive fiscal stimulus. Greece has every reason to be angry at Germany for not engaging in more fiscal stimulus, while Germany has no reason to criticize Greece for running a budget deficit, since it should be. All the PIGS should unite and refuse to accede to counterproductive demands that they engage in useless fiscal austerity, and demand that the stronger European economies like Germany launch even stronger fiscal stimuli. Otherwise Europe and the world will suffer through a decade like the “Lost Decade” Japan suffered through in the 1990s, or worse. If all the governments in Europe do this, and the larger countries back up the debts of the PIGS when the financial markets try to smash their piñatas, what are international lenders going to do? They can’t make money if they make no loans. The only way to save the EU is if the EU learns to act like a government, and uses its considerable powers to do what its citizens need it to do to engineer an economic recovery. The EU has the power to stare down financial markets. What it lacks is the will to do this. The reason it lacks the will is because so far EU governing institutions are more beholden to those financial interests than they are to their citizens.

Greeks who say no to austerity today are right. They are doing no more than insisting that their government serve their interests and not continue to serve the interests of global capital instead. The more loudly, longer, and more powerfully that Greeks say no, the better off they and the rest of the world will be. Portuguese, Irish, Italian, and Spanish workers are watching, and I hope will start to say no as well. Who knows, maybe even the American people will eventually wake up from our lethargy and make our silver-tongued president, who asked us to vote for change, deliver the change he promised.

Hasta la Victoria Siempre

Addendum: Recent Events

It has been exactly one year since I gave the above lecture in Athens and time has certainly not stood still. The most important and most surprising development is the Arab uprising, which has the potential to move history forward in an important region of the world long locked in brutal stalemate by imperial machinations. But while the power of majoritarian protests refusing to accept corrupt and inept authoritarian rule in one Arab country after another serves as a catalyst for protests against ruling elites in Europe and even the United States, it is otherwise unrelated to the issues I addressed in Athens a year ago, so I will say no more on that subject.

Important developments during the last year in the United States include: (1) The Citizens United decision by the Supreme Court which undermines progressive electoral tactics by opening the floodgates to secret, corporate money in US elections; (2) the rise of the Tea Party and Republican electoral victories in the fall of 2010; (3) the defeat of all progressive legislation, on every subject, at the federal level; (4) Republican-led campaigns to cut vital services and destroy unions representing public employes in many states, as tax revenues continue to plummet; and (5) President Obama’s decision to vacillate, triangulate, and sell out all the progressive constituencies who backed him in 2008 in a desperate attempt to secure his own reelection no matter how meaningless this becomes. As a result progressive forces and the overwhelming majority of Americans have been left to fend for ourselves with no end to massive unemployment and home foreclosures in sight. The question, of course, is to what extent the kind of mass protests which began in Wisconsin over the winter will grow and spread.

In Europe nineteenth-century economic fallacies now reign supreme as all Keynesian wisdom is abandoned by European ruling elites, and one country after another is subjected to draconian fiscal austerity that is not only obscenely unjust and inhumane, but counterproductive even in regards to achieving the narrow goal of debt reduction. Greece has just demonstrated the futility of fiscal austerity in exchange for bailouts, which are too stingy for anyone who cares to see. As of last week the Greek government was being forced to pay 16.8 percent interest on ten-year bonds, and as a result it has had to return to the EC for help less than a year after its first bailout. Yet the European Central Bank, European Commission, and IMF persist in meting out even larger doses of the same austerity medicine to Ireland, Portugal, and Spain. Unlike phantom political terrorists, against whom the US government wages war, real economic terrorists—those Nobel Laureate Paul Krugman calls “the bond vigilantes”—are left free to roam the globe, wreaking havoc on one small country’s economy after another while nobody thinks to raise a finger. Global financial capital is even more powerful than a year ago, and politicians from all major political parties in Europe—whether center-right, as in Germany, France, and England, or center-left as in Greece and Spain—are even more subservient to its interests.

The political fallout has taken two forms. On the one hand we see the crumbling of electoral support for centrist political parties and the rise of opposition parties on both the left and right. In Canada the long-dominant Liberal Party has virtually collapsed, leaving the more solidly social democratic NDP as the official opposition party to Harper’s Conservative Party government. In Finland the right-wing True Finn Party recently made significant electoral gains. In Spain and Greece social democratic governments which agreed to administer austerity programs have lost considerable political support while groups to their left and right compete to win the allegiance of growing numbers of the disaffected. On the other hand we see the rise of a youth rebellion that is distrustful of all establishment political parties calling not only for sane economic policies but for much deeper social changes as well. In Greece, Spain, and France anti-authoritarian groups have as much influence as anyone among young Europeans who are increasingly taking to the streets. Meanwhile European ruling elites persist in aggravating economic conditions, and older European progressives seem unable to stop them.

May 27, 2011

Education’s Diminishing Returns and Revolutionary Potential in the United States and Beyond

William T. Armaline and William D. Armaline

Time Travel

The following chapter was completed in May 2011. Since then, the world has seen sparks burst into flames in the now infamous Arab Spring. Former regimes have begun to buckle and fall, and rulers in Syria continue to slaughter civilians in the streets with military snipers, vowing to crush democratic grassroots resistance by force. In Europe, the anti-austerity movement continues with student and union support in France, Spain, Italy, England, and (in particular) Greece—where at least partial default on national debt now seems unavoidable. Fears of an EU collapse and a “double dip recession” continue to shake financial markets on a weekly basis. As we pen this sentence the Occupy Wall Street (OWS) movement has officially globalized (Japan, England, Spain, Italy, and so forth) after having already spread to cities all over the United States OWS, in the words of the movement, represents “the 99%” responding to record wealth disparity on national and global levels, particularly as a result of the recent recession and policy norms of working-class austerity and owning-class bailouts (read: wealthfare on steroids, the largest upward distribution of wealth by the state in the entirety of human history).

Accurate and honest historical accounts will almost certainly record the primary engine of these movements as youth and young adults, who almost universally face relatively poor economic prospects—even if they have “worked hard and played by the rules.” People the world over are voicing their rage in the streets over, among other things, the diminishing returns on the schooling and wage slavery available to them (if any), and their lack of voice in decisions that most affect their lives. In their actions they demonstrate the revolutionary potential we describe below.

Introduction

The historical role of public education in the United States is a contested terrain, described both as a cultural institution with the potential to enable and liberate, and as a state institution that ordinarily operates to (re)produce power and resource inequalities along lines of class, race, gender, sexuality, ethnicity, and citizenship status. Whether public education as an institution and process of socialization and knowledge creation/dissemination (or later, “schooling”) is ultimately empowering or oppressive across history or in potential is arguably among questions at the center of critical educational scholarship over the last century.

Such reflections on public institutions and the state are especially relevant in times of social rupture, when one is forced to reflect on previous practices and seek sustainable paths forward. The recent global recession, placed in the context of free market capitalism’s fall from infallible grace and impending ecological crises, seems to be such a point of rupture. It is an opportunity for us to reflect on what has been done and how we might move toward political-economic sustainability and social justice in our local and global communities. How we come to understand the past and our collective futures—perhaps the essence of “education”—will determine our mutual paths in this regard.

In the United States, we presently observe the slashing of primary, secondary, and higher public education as states struggle with massive budget shortfalls and economic decline. Current and emergent university students face historically high debt loads and low prospects for sustainable employment in return for their educational credentials. Universities in the United States and other global communities have recently seen waves of student resistance to decreasing opportunities for work, the use of public moneys to bail out large corporations and banks, and public spending on war and state terror in Afghanistan, Iraq, and occupied Palestine.[215] In short, for many students (including the so-called “middle class”) a university diploma no longer ensures sustainable employment. What happens when new generations question the value of formal education in the capitalist context? What opportunities do such ruptures in collective consciousness and institutional function present for those interested in fundamental social change? In other words, what opportunities for social justice are created when public education is decimated, and the “false promise” of schooling is laid bare?[216]

The “Crises” Continue

Though we mean to speak here to global conditions and possibilities, there is a great deal to be learned from the US context concerning education and recent political economic developments. Though the United States does not reflect the global experience in its totality, it serves as an important example here due to its role as an international hub for university education, and its still hegemonic, though declining, role in the global capitalist system. We hesitate to agree with his statement literally, but Bookchin had a point when he suggested in the late 1960s that, “we need a cohesive, revolutionary approach to American social problems. Anyone who is a revolutionary in the US is necessarily an internationalist by virtue of America’s world position.”[217] As with many global social problems (nuclear and military proliferation, for example) the global economic recession (particularly concerning the mortgage and credit markets) was an American export by most accounts. Though the effects of the crises are shared globally, those companies most responsible for the crash(es) were American and western European financial, corporate, and insurance firms.[218] Where the state responded to the plight of large corporations and banks with an orgy of corporate welfare—“bail outs”—the plight of working people has been met with cuts to social services, employment, credit, and education, even in the face of domestic “stimulus” funding. Similar patterns of policy and discourse are reflected in much of the EU, China, and Japan (particularly including recent natural and human-made disasters), for example, where the global recession damaged trade markets and shrank state revenues. We might better understand the generational position of all new workers and students under the current global recession by looking at the raw financial losses suffered by American households, the rise in individual debt, and the condition of public institutions currently under siege in the United States.

The global economic recession has been utterly devastating for working, underemployed, and unemployed people. As reported by the Wall Street Journal, the wealth of American families fell by 18 percent in 2008. The net worth of US households fell by a total of $11 trillion, “a decline in a single year that equals the combined annual output of Germany, Japan, and the UK.”[219] Banks cut off credit to small businesses and large corporations (especially those without powerful contacts in the US Federal Reserve and Treasury), who then cut workers’ jobs, wages, benefits, and so forth[220]. The new generation of workers, young adults, and graduates face a difficult economic climate—all amid rising costs for education, credit, general costs of living, and record levels of national debt. As it seems, many will enter the employment market carrying significant debt in comparison to previous generations.

Where less than half of all graduates from four-year colleges in the US carried student debt before 1993, nearly two thirds (66.4 percent) carried student debt by 2004. In terms of amount, average student debt loads have doubled over the past decade to between $20K and $25K in the US and £13K ($25K) in the UK.[221] In addition, nearly half of college students in the US carry significant credit card ($1000 or more) and commercial debt to cover gaps between diminishing earnings and skyrocketing university and housing costs.[222] Two relevant works, Strapped[223] and Generation Debt,[224] detail the generationally unique characteristics of young adults in the United States: record lows in total savings, record highs in student and commercial debt, and record highs in education and living costs. Adolescents and young adults now face unprecedented levels of unemployment in the United States—rates over the past three years hovered at or above 10 percent, with an effective rate (including, for example, those who have stopped looking for work and/or dropped off unemployment rolls) at approximately 20 percent.[225] In sum, today’s young adults face very difficult circumstances in the job, housing, and credit markets.

Contrary to dominant ideology that would assume one’s socio-economic condition depends on one’s individual choices and ability to “compete” in various markets, young adults and their broader global generation are not to blame for their increasingly difficult situation(s). They’ve largely inherited truly unfortunate social and ecological circumstances, and on the whole show great promise in their tolerance and reflection of diversity, their political activism and civil engagement, and ability to avoid the police state (drops in arrests, imprisonment, drug overdose deaths, violent crime, and so on).[226] In fact, given the urgency of ecological challenges such as those caused by global warming, the fate of several species—including our own—depends on the luck or savvy of those very folks. For that reason, we might be concerned with the diminishing opportunities and returns for formal schooling and young adults’ reactions to current political economic conditions.

The shrinking opportunities offered by formal schooling are possibly best illustrated by the current condition of the world’s eighth-largest economy: California. California faced a state budget shortfall of $24.3 billion in 2009. The state administration and legislature decided to gut public education as part of an attempt to balance the books. California public schools (K–12) were forced to cut over $13.3 billion from their budgets, with another $4 billion planned for 2010.[227] The cuts manifested in average classroom sizes edging toward forty per classroom in public schools, the end of summer school and extra-curricular programs (including athletics) as we know them, and massive teacher layoffs—2,250 in Los Anegeles county alone.[228] In terms of higher education, the California State University (CSU) system, largely serving the state’s working class, was forced to cut $586 million (following already deep cuts made in 2008) with similar quality and labor effects for employes and stakeholders.[229] Two years later in 2011, CA public schools and universities face even larger cuts in public support and students of the CSU and UC systems face another 30 percent tuition increase, after similar increases in tuition and student fees over the two previous years.[230]

California, where the effects of foreclosure and unemployment are evident, serves to illustrate our contemporary economic condition: as capitalists and modern financiers are saved from themselves at public cost, public resources are completely and utterly decimated. As has long been argued by Marxists and anarchists, during times of capitalist “crisis,” we see owners and rulers employing their resources to protect their interests and prevent the full redistribution of wealth and power. Our point, however, is that such conditions provide an opportunity for class consciousness, especially for young people facing what has been called the “false promises” of education in bourgeois democracies.[231] New generations of workers and workers returning for further training are encouraged to conform to, compete in, and pay for schooling that will provide a credential—supposedly the key to gainful employment and class mobility. Under the conditions previously discussed, it’s increasingly difficult to convince people that conformity to the systems of schooling or work has the payoffs promised in dominant capitalist ideology and discourse—especially as young and/or working people are also forced to fight unpopular wars to gain similarly vague and questionable rewards. As seen in Paris in 1968, a realization of such false promises can lead to mass movements and the revolutionary moments required for fundamental social change.[232]

The False Promises of School and Work

Early political economic critiques present the history of public schooling in the United States as a litany of parallel efforts at educating for social control and “productive citizenry,” typically and narrowly defined in terms of the knowledge, skills, attitudes, and values that will promote a productive, efficient, and compliant workforce. This critical history, beginning with the revisionist work of Callahan and extended through Katz, Carnoy, Spring, and Bowles and Gintis, is well known and documented.[233] Many of these (and other) structural analyzes suggested the role of schooling in “reproducing” inequalities along lines of race, class, and gender. Today we find similar, though more theoretically and analytically sophisticated critiques of No Child Left Behind (NCLB) and the standardization movement,[234] dominant (read: largely capitalist, racist, patriarchal, and xenophobic) curricula,[235] pedagogical practices,[236] and so forth. Though an exhaustive discussion of critical educational scholarship is far beyond the scope of this piece, we mean only to point out a central theme in historical and contemporary research. That is, in the maintenance and perpetuation of global capitalism, public education is often a mechanism to produce new generations of workers socialized for their inclusion, typically as wage slaves, in the larger political economy. This process might be seen as one distinct from that of creative self-discovery, intellectual and cultural growth, or grounded historical or scientific exploration.

In much of his recent work, Stanley Aronowitz addresses the class reproductive features of public schools in the conceptual distinction between “schooling” and “education.”[237] Returning to the central question of how to define public education as an institution, Aronowitz makes a convincing argument that through the hidden curriculum, inequitable funding, the corporatization of schools,[238] and the standardization movement (NCLB and “Race to the Top”), a vast majority of activity in schools is the socialization process of “schooling.” Specifically, “schooling” refers to a system of training through a disciplinary (in the direct and Foucauldian senses) credentialing system that “contrary to [its] democratic pretensions, teach(es) conformity to the social, cultural, and occupational hierarchy” rather than critical independent thought necessary for personal autonomy and democratic societies.[239]

In comparison, “education” is conceptualized as something outside of and beyond this coercive credentialing system.[240] “Education may be defined as the collective and individual reflection[241] on the totality of life experiences: what we learn from peers, parents (and the socially situated cultures of which they are a part), media, and schools.”[242] Education is something that happens in all contexts: our homes, neighborhoods, cultural centers (public squares, churches, markets, and so forth), workplaces, and sites of leisure. Where in the system of schooling “legitimate” knowledge is determined by state standards (i.e., what’s on the test), the concept of education places all people in the position of creating knowledge and history, and the importance of any particular idea or body of research is determined through shared struggle and survival in real contexts. We might think of these concepts in relation to early Marxist notions of alienated labor: standardized schooling alienates people from the creation (process of labor) and use (products of labor) of knowledge and ideas, reducing learning and creative processes (to Marx, the heart of the human “species being”[243]) to a soul sucking process of regurgitating empty, detached information. When taken out of this oppressive context, learning (here “education”) can be a fulfilling process where we explore our shared social and natural world through tangible struggles and socio-cultural contexts.

The conceptual distinction between education and schooling allows for the consideration of fundamental change in how we go about creating and passing on knowledge and culture, rather than liberal reformism. It allows for a departure from typical liberal narratives on “equal access” to credentialing—asking instead, “access to what?” Aronowitz suggests that these typical liberal perspectives promote “the idea that class deficits can be overcome by equalizing access to school opportunities without questioning what those opportunities have to do with genuine education.”[244] Here we might return to the “false promises” made to new generations of students and workers—that their investments of time, money, and energy will ultimately be rewarded with gainful employment and a path for improving one’s quality of life and opportunity structure(s). People are promised education and upward mobility, but actually experience schooling, wage slavery, and the near certainty of class immobility. As research has shown over the past thirty years, wealth disparity and the centralization of capital in the US and global economies rise steadily, while the share of wealth and resources by working people continue to shrink. Class mobility for working and unemployed populations in the United States is a myth, where “the greatest source of individual wealth is inheritance. If you are not rich, it is probably because you lacked the initiative to pick the right parents at birth.”[245] Realizing the “false promises” of educational credentialing is to realize the difference between education and schooling, and to realize that the meritocracies of school and work don’t actually play out as Horatio Alger fables and more contemporary fictions might lead us to believe.

At the same time, educational credentialing is typically a necessary step for socio-economic survival and empowerment—especially for members of marginalized populations such as the poor, people of color, and migrant workers. Accepted hiring practices for jobs offering a living wage require some level of higher education in the “post-industrial” service economies. For some populations in the United States, the threats of not attaining basic educational credentials are quite severe. By 1999, approximately one in nine white high school dropouts would experience prison by their thirties.[246] However, the threat of incarceration is far greater for African Americans, who currently account for just under half of the 2.2 million people imprisoned in the United States, and suffer an incarceration rate nearly twenty-five times that of whites. Bruce Western’s research on punishment in the United States demonstrates that, “incredibly, a black male dropout, born in the late 1960s had nearly a 60% chance of serving time in prison by the end of the 1990s. At the close of the decade (2000), prison time had indeed become modal for young black men who failed to graduate from high school.”[247] Many poor students and students of color effectively choose between schoolhouses that bore, dispirit, and ultimately fail to deliver; prisons that brutalize and dehumanize their occupants; and increasingly dangerous military service.[248] But what happens when people actively question schooling, or refuse to play along? Working-class and minority students in particular have demonstrated various forms of resistance to formal schooling, as seen in ethnographic research on student resistance dating back to the 1970s in the United States and United Kingdom.

Early Studies of Resistance to Schooling

Drawing its origins from the “new sociology of education” in the UK,[249] “resistance theory” focused on micro-level analyzes of the social construction of knowledge,[250] the forms that knowledge takes, the various meanings made, and the resultant distribution of that knowledge and those meanings. The intersection of such phenomenological studies with critical reproduction accounts of schooling gave rise to a series of ethnographic studies of schooling in the United States and United Kingdom,[251] which helped to explain that working-class students are not passive, but play active roles in the producing of culture anew (albeit in line with older patterns of power and control) with each generation.[252]

These ethnographies document how working-class students see school as either completely irrelevant to “real life,”[253] or only relevant as a credentialing agent.[254] There is little if any inherent good in what schools have to offer in the eyes of students central to these studies. For example, in reveling in their masculinist and racist approach to life and work, Willis’ white, working-class “lads” rejected the mental/feminine labor of schools long enough to solidify their positions in the shop-floor culture of their fathers and brothers. The cruel irony at work is that in refusing to play along in school, the lads appear to have chosen their place in society—pigeonholed into manual wage labor. They took an active role in their own ultimate economic and social subjugation, appearing to have entered freely into an unfree situation. What is important here is that these studies show that students are not merely passive victims in the process of cultural and economic reproduction. Their awareness is apparent and their resistance, albeit self-defeating, is active.

While Willis represents the beginning of a series of powerful ethnographies in industrial settings,[255] Weis is the first to extend that ethnographic approach to analyzing the role of schooling in deindustrializing contexts and documents what happens when factory jobs are no longer available.[256] In brief, given deindustrialization, young working-class kids come to realize that they must become credentialed in order to be considered for non-factory work, and they strike an implicit agreement with school personnel to attend to the tasks or “form” of schooling but not the content or “substance” of the curriculum.[257] As a result, the actual preparation for higher education and, by extension, well-paying jobs is lacking, as these students never really master the curricular content that might enable them to attend and complete college. Again, student insight into the changing political economy of deindustrialization is accurate as far as it goes. But their “chosen” path of action, a focus on the credential alone, is ultimately self-defeating.

Both Willis and Weis find in their subjects’ experiences the potential for critical awareness and more radical political consciousness. In both cases, however, schools do not facilitate a deeper political awareness, but rather act to derail such understanding, both through the overt curriculum and through formal and informal institutional practices.[258] One example in Willis’s work is the school’s attempt to “reintegrate” potentially disenchanted students into the formal schooling process through more “relevant” (read: vocational, non-college prep) curricula and career education. The history of public education in the United States is replete with other examples of such efforts as well.[259]

It is interesting and distressing that current education proposals from the Obama administration parallel these reintegration efforts. Recognizing the huge social and economic impact of high dropout rates, especially in poor and nonwhite populations, coupled with the rising cost of a traditional four-year college education, the US government is trying to pump billions of dollars into two-year colleges that offer preparation in technological and service occupations as a way to encourage predominantly working-class kids to complete high school and seek post-secondary education for work. These same institutions are primary sites for retraining unemployed and displaced workers. Recent reports highlighted one such proposal to allocate $12 billion to “better prepare students for the changing job market.”[260] While an expansion of opportunities for post-secondary education is not necessarily a bad thing, the focus on two-year colleges attracting low-income students merely reinforces an already tiered and tracked schooling system in the United States that has served to perpetuate historical positions of social and economic privilege and subjugation. The most recent policy appears to be no different from its nineteenth- and twentieth-century predecessors’ focus on what Aronowitz and others characterized as “schooling” as opposed to “education.” Further, like wage slavery, it’s offered as a threat rather than a choice: dropping out as an alternative only increases the likelihood of incarceration faced by those who can’t or won’t play along with schools for a credential. Will contemporary students, and their unemployed and displaced brothers, sisters, and elders see through this ruse? If they do, will their “chosen” alternative move us all toward a more humane and sustainable future, or will it parallel past self-defeating forms of resistance?

As seen in previous research, the insights of working-class kids in industrial and deindustrialized contexts reflected a double-edged sword. While the students rightly perceived that schools and the economic structures those schools were designed to support work better for some than for others, their resistance only allowed for them being easily disciplined and coerced through the police state and wage work. Our contemporary challenge is to use this insight, dissatisfaction, and resistance to forge new coalitions and collective political action.

Resistance and Reform by Schools

Present national education policy may not bode well for efforts to revolutionize schooling from within. At the K–12 level, rather than taking seriously the inadequacy of public schooling to address the need for students to develop the knowledge, skills, and dispositions of critical citizenry, reforms are typically rehashed proposals for newly standardized curricula, high-stakes testing, and accountability measures for individual schools and teachers.[261] No serious effort is made to rethink what we actually do in/with schools in the first place. The effects of school reform in the aftermath of No Child Left Behind are to publicly identify inadequate schools (defined by test scores) and threaten them with a loss of funding should they continue to “underperform.” The schools then do what they can to improve test scores, often misusing and even falsifying data[262] to remove themselves from the scrutiny of the press.[263] In the best of circumstances, horrible schools may get less horrible, but the educational experience and resultant life chances of our most vulnerable students remain woefully inadequate. These same students are then afforded the “opportunity” to attend community colleges to prepare for jobs that may or may not actually materialize, due to the fact that increasing the schooling attainment of working-class kids as a group does not create jobs for them. It only ups the ante to secure whatever jobs happen to become available. The political economic structure, certainty of wage slavery, and the position of the owning class remain the same.

NCLB was the centerpiece of the G. W. Bush administration’s approach to reforming schools. The Obama administration, faced with the choice of either renewing or replacing NCLB as it considered the reauthorization of the Elementary and Secondary Education Act (ESEA), decided to create its own reform initiative, “Race to the Top” (RTTT). Where NCLB focused on restructuring or ultimately closing the most underperforming schools (read, “schools with the lowest standardized test scores”), the approach of RTTT was to reward schools and school districts that took the lead in developing rigorous curricula and transforming structural features of schooling, including the evaluation of teacher and administrator performance and connecting that evaluation to their pay (and ultimately to their ability to keep their jobs). On the surface, Obama and his education secretary Arne Duncan appeared to be challenging schools to be the best they could be, yet RTTT is really only the flip side of NCLB. The assessment and evaluation of student performance is still primarily tied to standardized test scores. The evaluation of teachers, schools, and districts is also determined by these same test scores, with a variety of metrics devised around both absolute test score achievement and “value added” approaches that consider where students start the year and where they finish, seeing the difference as the relative growth produced by the teachers and schools. This “value added” model was the basis of Duncan’s school reform project in Chicago (Renaissance 2010) when he was the CEO of the Chicago Public Schools. There is no evidence the model worked in Chicago, and much to suggest that it did not.[264] Yet it has been used as a central feature of the Obama reform agenda.

Under both NCLB and RTTT, when schools fail to meet their targeted performance measures, a variety of reform models can be applied to “restructure” the building. Those models tend to focus on removing a significant proportion of the teaching force as well as the principal and other top administrators. Ultimately, if the changes do not lead to sufficiently improved performance, the school can be closed. Even if the school is not closed, students can transfer out to other local schools or to charter schools, taking their state subsidy money with them.

In both NCLB and RTTT, charter schools are seen as appropriate “choices” to replace the “failing” schools. Often, these charter schools, ostensibly public in nature, receive public funds but are run by for-profit management groups and are also exempt from many of the performance requirements set for regular public schools. Just as with the “value added” teacher assessment model, the evidence on charter school performance indicates that they do no better and often do worse than the public schools they replace.[265] Yet the RTTT reformers, along with many newly elected governors such as John Kasich in Ohio and Scott Walker in Wisconsin, continue to call for increasing the number of charter schools in their respective states.

One important lesson we derive from this NCLB/RTTT continuum is that the G. W. Bush administration and the Obama Administration really do not view schooling much differently. They both buy into the dominant, corporate ideology of schooling efficacy. They both see the problem of lower school performance as the fault of the students, their parents, and teachers and not the extension of larger social, political, economic, and cultural forces. Further, they see the poor school performance as contributing to the economic downturn and the difficulty of turning the economy around, rather than the opposite.

Fortunately, some schools, scholars, and activists have designed productive alternatives to dominant schooling models. Dominant trends aside, there are public schools across the US that have transformed and organized themselves to unpack the complexities of post-industrial society such that students can come away with a more critical and radically informed understanding of their positions and roles in the political economy.[266] Further, as indicated in the conceptual differences between “education” and “schooling,” schools are not the only option for developing critical intellectual, political, and cultural understandings. Home, work, and community contexts offer rich opportunities that may not presently be afforded by schools. We will return to this point shortly.

What appears to “work” in progressive and transformative educational reform, both in the United States and abroad, is the process of developing schools and other educational settings that grow organically from a local context. This should be no surprise to those informed by forms of (broadly) libertarian socialist theory, where emergent anarchist pedagogy is based on such horizontal, community-based, democratic models.[267] Interested and committed educators connect with parents, local activists, and grassroots community organizations to develop schools that reflect and build on the strengths of the local community.[268] Typically those efforts begin with a view of education that seeks a more just, productive, and humane existence coupled with a structural critique of dominant schooling and the “opportunities” afforded by wage work. In other words, these efforts operate to critique the process of formal schooling and, in doing so, help students to question and understand, among other things, the false promises of school and work. From this dialogue, we might establish the fertile grounds for class consciousness and revolutionary educational moments.

The danger lies in larger entities (city schooling systems, the Gates Foundation, and so on) entering the picture to “systemize” or “replicate” features of particular schools they find attractive. The power of the small, organically generated schools comes from the connection with the community, the people who created them. Once that is lost, which is what typically happens when small local efforts are corporatized and systemized, the efficacy of the school to grow out of and reflect community life is often lost. What is exportable, however, is the process of creating the small schools in the first place. If and when larger public entities like school systems come to rely on the process (of education) more than particular products (e.g., an obedient workforce); or when our institutions come to rely on the vibrancy and intellect of local communities and organizations connected with dedicated and committed educators broadly conceived, there might be some hope for them to transform in more fundamental ways. Regardless of whether that can or will occur, we can draw from the experience of creating small, community-based and culturally responsive schools to develop our own approaches to education (as opposed to schooling) in and out of schools, linked to a more sustainable and humane social, economic, and political order.

Contemporary Student Resistance and Possibilities for Broad Social Change

Where earlier we discussed the resistance strategies of high school students to public schooling, we now see a pattern of resistance, civil disobedience, and direct action among young adults and students facing dire educational and socio-economic forecasts. As White reports, there were more than thirty student-led occupations on university campuses in the US and UK in response to decreasing educational and employment opportunities, increasing costs of education and housing, and the use of university resources to promote various military agendas in the first three months of 2009 alone.[269] As one specific example,

New York University students barricaded themselves inside a campus cafeteria and demanded greater budget transparency [2/18/09], tuition stabilization and divestment from Israel. Although the occupation ended in failure, defeat turned to victory when the retaliatory suspension of 18 students galvanized campus support. The subsequent protests forced the administration to reverse their punitive measures.[270]

Such occupations and student protests in the United Kingdom were relatively sustained through 2010,[271] and student resistance in the United States has since expanded to address the educational rights of immigrants. In response to draconian legislation subjecting Latino/a and indigenous populations to racial profiling and unequal treatment under the law (SB 1070), and to the cutting of “ethnic studies” programs across Arizona, students continue an aggressive campaign of civil disobedience—including the occupation of school board meetings in Tucson[272]—to demand equal access to culturally relevant public education. In the already discussed state of California, students continue to join faculty and staff unions to protest skyrocketing tuitions, shrinking enrollment, department faculty/instructor/staff layoffs, increasing classroom size, ballooning administrative pay and growth, and a refusal by state officials across the board to seek revenues from (for example) oil extraction, as done in many other states to fund public higher education.[273] These and other observations suggest that the emerging generation of workers and students are less than fond of their current predicaments, and are willing to resist their own school and state administrations to affect policy. Rather than a collection of random events, we might consider this primarily student-led resistance as part of the larger global movement against imposed austerity programs, where, as in fiscally unstable countries of the EU, young people join those near retirement in protesting massive cuts to public education, retirement pensions, public health care, and public sector employment. The false promises of education (sustainable employment with the imagined quality of life to boot) meet the false promises of wage slavery (retirement) in the post-Fordist West to create interesting and potentially powerful lines of solidarity.

Spain and Greece offer perfect illustrations of this solidarity in action. Political analysts in Greece have reported that people’s future aspirations across socio-economic status have dropped to all-time lows, along with studies from the Foundation for Economic and Industrial Research suggesting that economic indices have never been so low since they began reporting in 1981.[274] Kaimaki describes the conditions of what is now being called the “700 Euro Generation,” who recently participated in the country’s anarchist and labor inspired uprisings, resulting in the municipal takeover of several cities, and what is a sustained movement against capitalism and the Greek police state:

This united front is led by a generation of the very young. There is a reason for this: daily life for most young Greeks is dominated by intensive schooling aimed at securing a university place. Selection is tough and children focus hard on it from the age of 12. But once the lucky ones get there, they soon discover the reality of life after university: at best, a job at 700 Euros ($1000) a month.[275]

Youth in Greece, along with other sections of Greek labor, came to realize the false promises of school and work in their particular context. This, along with an explosive movement against the Greek police state (a point of controversy, especially for immigrant populations for some time) sparked by the murder of a young anarchist by Greek police forces, might be seen as a revolutionary moment led by the resistance of students and young adults.

As we write the final revision of this chapter (May 2011) tens of thousands of students, unemployed, and underemployed have taken to the streets in major Spanish cities (in the Puerta del Sol in Madrid in particular), partly under the leadership of the self-described “Youth Without a Future,” to protest the settling of state budgets on the backs of workers rather than on the backs of the banks, politicians, and financiers behind the financial “crisis.”[276] With the EU’s highest unemployment rate (approximately 21 percent), Spain also joins Greece and Portugal as the EU’s most financially unstable members. As a result, Spanish politicians are increasingly pressured by other EU members to balance national budgets on the backs of the people to avoid “instability” in the EU, and to frame discourse around the global recession as the fault of greedy taxpayers and public employes rather than fraudulent and tyrannical bankers, investors, and politicians. Facing the obvious false promises of school and work in Spain and Greece, perhaps the complete dissolution of anything resembling a social contract, it should be no surprise that the young join the under/unemployed to protest their conditions and the people and policies that created them. They realize, simultaneously, that they did not create these crises, and that they have some agency in reframing the public conversation and conflicts over finite resources that affect their lives so acutely.

The lessons? As they realize the false promises of school and work, emerging generations of students and workers (along with older workers in potential solidarity) are clearly able and willing to resist the constructed authority of school and state administrations to affect policy and practice in their communities. However, as we have learned from previous research on student resistance, there is some question as to how we take advantage of this opportunity for mass consciousness and action in such a way that results in social change rather than the eventual co-optation and appropriation of those who resist.

Though a full discussion of social movement strategies is beyond the scope of this piece, we would like to conclude with relevant suggestions to take advantage of current opportunities to organize and resist in a time of social and political-economic rupture. Unfortunately, we would like to break the hearts of educational entrepreneurs the world over in recognizing that our collective approach to education (particularly if differentiated from schooling) is not subject to quick fixes, particularly from “free trade” models that wish to privatize education and employ systems of private and “charter” schools to replace public educational spaces and resources. That said, we might consider the following in our steps forward:

1. First and foremost, radical public educators should seek to “accompany” current labor (perhaps through public employee unions for those employed by public universities/schools) and student protests seeking to stop forced austerity programs that immediately threaten the survival and opportunity structure of both the new and retiring generations of workers. This should be seen as a relevant social movement strategy that opens the door to affective practices of shared struggle—particularly direct action. It should also be seen as a mechanism to establish solidarity and tangible networks between otherwise rarely connected populations of the working class. It is a way for public intellectuals to help create and promote “communities of struggle”[277] across age, area of employment, race, ethnicity, and gender.[278]

2. Rather than returning funding to public institutions that continue to school but fail to educate, we need to reconceptualize and fundamentally change our schools, universities, and libraries into institutions of equal access that respond directly to the needs of the communities served. This typically involves a certain level of decentralization and democratization of schools, school districts, school boards, and universities. Such a process typically requires both forms of resistance and forms of more liberal-style “building from within.” In terms of resistance from within educational institutions, we might look to strategies of sabotage, direct action, and mutual aid that might be employed by school or university staff, community members, students, teachers/professors, and even administrators within their employing institutions.[279] We see resistance from outside of educational institutions in the point above and the illustrations previously discussed in this section. Wonderful examples of building from within educational institutions can be found in the organic (as opposed to corporate- and Gates-inspired) small schools movement discussed by Klonsky and Klonsky, and others.[280]

Further, we might look to alternative measures to create and disseminate knowledge horizontally, outside of formal schooling. Scholars such as Murray Bookchin have for some time argued that, “Education … is the top ‘priority’ for a radicalization of our time … the study group, not only the ‘affinity group,’ is the indispensable form for this time—especially in view of the appalling intellectual and cultural degradation that marks our era.”[281] The development of radical reading and study groups across age, race, ethnicity, gender, trade, and student/worker divides simultaneously provides an opportunity for class-consciousness building and education beyond the walls of formal schooling (not to mention without state censorship). Many organizations, such as the Radical Autonomous Communities (RAC) of southern California, have employed study groups and (online) list-servs successfully for these very purposes. In terms of building educational institutions outside of conventional schooling, one might look to the emerging Transformative Studies Institute (TSI).[282] The TSI seeks to become one of the country’s only graduate “free schools,” and currently offers its own independent academic press, radio show, interviews, scholarly journal, resources for social justice scholars and activists, and a growing body of faculty/scholars. Likewise, counter-institutions that have become staples on the libertarian left like the Institute for Anarchist Studies or the Z Institute should be supported by forward-looking anti-authoritarians, as should projects like the Anarchist Studies Network (http://anarchist-studies-network.org.uk) in Europe and the North American Anarchist Studies Network (www.naasn.org).

1. As noted previously, we need to rethink our notions of educational reform that stop at issues of access. We need to ask “access to what?” and change the curriculum or substance of public education accordingly. One of the greatest contemporary threats to working-class students is their being robbed of their history, and the general capability to critically interpret current events within a reasonable historical framework that reaches beyond last weekend. New workers are easy slaves to the extent that they depend on their rulers and owners to understand their own history and the realities and choices that face them in the present and future.

We need to recapture our own collective understanding of history that would include political philosoph(ies), local and global histories of non-elites that go beyond the history of wars and nation-states, and methods of civic engagement. This is an agenda that must be fought on several fronts. In terms of school curriculum, such changes require the entrance of radical scholars and workers into schools and universities (and vice versa), where strategies of resistance might be employed in classrooms, offices, and shop floors. Such resistance might first take aim at programs like NCLB and RTTT that steer curricula away from critical history and social science, toward “value free” skills in mathematics, vocabulary, syntax, and analytical reasoning.

As a second front, we can enter and engage with the larger public domain and news media. Radical and/or critical scholars must gather the courage and stomach to engage with news media that rank-and-file students and workers actually read/watch/listen to (i.e., not academic journals and specialty zines or blogs speaking only to their “choir”). In this sense we suggest public intellectuals actually engage their public in order to compete with the paid stooges and entertainers of the corporate owning class that tend to dominate mainstream news sources. To be effective, such engagement must happen consistently and from a large network of intellectuals—not simply the handful of “divas” on the left who currently rotate as predictable talking heads for large speaking fees and book sales (you know who you are, and so do the rest of us).

As we attempt to infiltrate mainstream news media, we might also turn to projects such as the “Media Carta” and “culture jamming” campaigns organized by writers/readers/supporters of the Canadian magazine Adbusters to release public discourse from the death grip of corporations.[283] Such campaigns employ legal (lawsuits and legislative reform) and extralegal (civil disobedience and sabotage) means to “reclaiming the mental environment”: in short, take the major means of communication (television, radio, billboards, newspapers, and so forth) away from private companies and advertizers, providing space for public and community discourse, dialogue, expression, and journalism.

Final Reflection

Here we’ve attempted to outline global capitalism’s effects on one of the world’s largest institutional programs—public schooling. Studies of political economy, in order to be holistic and effective, must include analyzes that go beyond quantitative market models, both to point out the disturbing relationships between capitalism and public institutions, and to suggest paths moving forward that create more sustainable and less hierarchical societies. Ultimately it will require a mass movement to democratize and redefine public education and to end the rule of elites in all political economic and social life—but these efforts are likely one and the same to a great extent. In order to build such a movement, we can and must begin in institutions such as schools, where much of our individual and collective “knowledge” is created, communicated, and deemed (il)legitimate. We wish to join radical students, workers, teachers, scholars, and activists in the battles ahead to rip the processes of knowledge and meaning making from the hands of rulers. We urge those interested in radical social change to take advantage of periods of social rupture to reconceptualize “education” and its place in forming sustainable non-hierarchical communities in the United States and beyond.