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The Case for Socialism (Updated Edition)
Alan Maass
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The Case for Socialism (Updated Edition)
Alan Maass
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About This Book
Is socialism an impossible, discredited dream or the only realistic path for human survival? If you're not sure of the answer, or are just curious about what the Left really believes in, you need to read Maass. He's the Tom Paine of the contemporary American left."
--Mike Davis, author of Planet of Slums
"This is a vivid, fluent and rare book about socialism for those uninterested in tracts and excited by new prospects."
--John Pilger, author of Freedom Next Time
Growing numbers of people are disgusted by the disaster of poverty, war, oppression, and environmental destruction caused by global capitalism. But is there an alternative? Author Alan Maass argues that socialismâa democratically planned economy based on workers' controlâis rational, necessary, and possible. With an afterword by Howard Zinn. Alan Maass is the editor of the website SocialistWorker.org.
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CHAPTER ONE
Why Capitalism Doesnât Work
All men are created equal, according to the Declaration of Independence. But when it comes to life, liberty, and the pursuit of happiness, it turns out thatâto paraphrase George Orwellâs Animal Farmâsome Americans are more equal than others.
At the end of 2008, with the Wall Street system on the brink of collapse following the bursting of the real estate bubble and the failure of some of the biggest banks in the United States and abroad, Congress and the Bush administration agreed on a $700 billion bailout program to save the financial system. It was an immense sumâabout $2,300 for every man, woman, and child in the United States. And that turned out to be only a small fraction of the mind-boggling sums the federal government ultimately put on the line in the rescue.
The Wall Street banks were âtoo big to failââunlike ordinary Americans who run into financial trouble. Millions of people have âbad debtsâ on their books, and they could be kicked out of their homes as a result. But the federal government is doing next to nothing for them. Under the Obama administrationâs celebrated Making Home Affordable program, around 30,000 homeowners got their mortgage loans permanently modified as of the end of 2009âabout 4 percent of the more than 750,000 people who applied in the hopes that they could avoid foreclosure. In other words, little better than no help at all.
Conservatives say these homeowners brought their problems on themselves. â[F]or every âpredatory lenderâ out there,â lectured right-wing commentator Michelle Malkin, âyou can find a predatory borrower ⊠who secured financing and bought a home he knew he couldnât afford with little money down, and bogus or no income verification.â Even liberal commentators tend to divide the blame between the financial system for hyping the housing bubble and American consumers for âliving beyond their means.â
But when you read about the nightmare that took over the final years of Addie Polkâs life, itâs hard to see her as anything other than a victimâpreyed upon by powerful corporate interests that robbed her of one of the only things of value left in her life, and then tossed her aside.
Addie and her husband bought a home in Akron, Ohio, in 1970 and managed to pay it off by 1982, just before they reached retirement age. But during the 2000s, Addie, by then a widow and suffering from a variety of health problems, ran into financial difficulties. So she decided to re-mortgage her home.
The good folks at Countrywide Home Loans were ready to help. At age eighty-six, Addie Polk signed a thirty-year mortgage for $45,620 and took out an $11,380 line of credit. Soon, she began missing payments. In 2007, the government-backed mortgage company Fannie Mae took over the loan and began proceedings to take the house. On October 1, 2008, sheriff âs deputies arrived to leave another eviction notice when they heard the gunshots. A neighbor used his ladder to get in a second-floor window, where he found Addie lying unconscious on the bed, shot twice in the chest. She was taken to the hospital, barely alive. Polk died six months later, at the end of March 2009.
Apparently, a ninety-year-old womanâs suicide attempt was enough for Fannie Maeâexecutives found it in their hearts to forgive the loan. But Addie Polk was one among so many. âThereâs a lot of people like Miss Polk right now,â Akron City Council president Marco Sommerville told CNN.
Countrywide Financial, whose home loan division made the new mortgage loan to Addie Polk in 2004, was one among many, too. There were hundreds of mortgage brokers, scores of lenders like Countrywide, banks that bought the mortgages, investment banks that rebought them and sold them again in the form of get-rich-quick investments. They all benefited from encouraging the mortgage boom. There was just so much money to be made off fees, commissions, interest payments, bond sales, portfolio management, and on and on.
Still, Countrywide founder and former CEO Angelo Mozilo stands out as a particularly vile piece of work.
Like any other top executive at a big financial corporation, there were the thousand-dollar suits, palatial homes, and a fleet of Rolls Royces and other luxury cars. Mozilo made a fortune selling his personal stake in Countrywide stock, as the company was headed toward bankruptcy. And when Countrywide got sold off in 2008 to Bank of America, Mozilo had a 24-karat golden parachute waitingâa severance package worth $110 million. Under the glare of publicity, Mozilo gave up some of the deal, but he still got tens of millions of dollars just to walk out the door.
But Mozilo really stood apart because of his unapologetic ruthlessness in victimizing people like Addie Polk. He was the driving force behind Countrywideâs meteoric rise to become the countryâs largest mortgage lender by the 2000s. He pushed the company to steer borrowers toward whatever loans would make the most profit. Countrywideâs payment structure made it much more lucrative for brokers to sign up customers for a sub-prime loan than a conventional one. To Mozilo, there was no question that homebuyers should be lured by the promise of low initial payments toward sub-prime mortgages with hidden traps.
Donât expect any humility from the man, now. Mozilo insists that he and his failed company were victims of âeconomic forces beyond our control.â And not faceless economic forces, either. At a conference sponsored by the Milken Instituteânamed, appropriately enough, after the 1980s junk bond king Michael Milken, who went to jail for financial fraudâMozilo explained that Countrywide was forced to push risky and highly lucrative sub-prime loans on borrowers because ⊠the loan industry was facing pressure from civil rights advocates to lend more to racial minorities.
Mozilo was at least forced out of the corporate boardroom. But for many of Countrywideâs partners in crime, it was nearly business as usual at end-of-year bonus time in 2008, in spite of the near-meltdown on Wall Street and the worst economic crisis since the Great Depression.
The super-bank Citigroup and Merrill Lynch, which was also, like Countrywide, absorbed by Bank of America, lost a combined $55 billion in 2008. But they were among nine major banks that paid out more than $32 billion in bonusesâas they took in a total of $175 billion in government aid, according to an analysis by the office of New York state attorney general An-drew Cuomo. Citigroup and Merrill, despite their catastrophic losses, accounted for more than a quarter of the bonus pool.
Facts like these beg a question: Why did Addie Polk feel like she had no place to turn for help when the U.S. government had billions of dollars to help Citigroup and Bank of America?
There is no other answer but this: Because the free-market system that caused the financial crisis is organized to make sure some people stay rich and get richer while the rest of us pay. Because capitalism is built around the principle that a few people, like Angelo Mozilo, deserve to be rich beyond anyone elseâs wildest dreams, while others, like Addie Polkâwell, their lives and dreams donât count.
The Systemâs Twisted Priorities
Imagine yourself at a casino where you start gambling on games of chance you donât understand, where the rules are being made up on the spot. You bet hundreds of times more money than you have, and then you bet again on the bets. You lose. Youâre not only broke yourself, but youâre taking down other players who let you play with their moneyâand the casino itself, which didnât ask to see your chips when you started gambling.
Youâd consider yourself lucky to stay out of jail, right? Ah, but you arenât a Wall Street executive! In the world of high finance, when you lose, the federal government steps in to guarantee your losses. You get to keep your big salary and bonus. And youâre invited to work with the government to cook up the ârescueâ program.
This is basically what took place in the financial world during the 1990s and 2000s, when Wall Street witnessed an explosion of high-stakes gambling on immensely complicated financial markets, far removed from the goods-and-services-producing âreal economy.â
No one asked too many questions because the money was so goodâwhether you were generating the fodder for the investments by pushing sub-prime mortgages or you were buying the impossibly complex securities, and especially if you were a Wall Street middleman collecting fees from both the buying and selling. When the bubble burst, the whole financial casino went bust. But the main perpetrators on Wall StreetâCitigroup, Goldman Sachs, and the restâwere too big to fail, so they got a bailout, courtesy of U.S. taxpayers.
Itâs easy to get lost in the mind-numbing details of the transactions and the unbelievable greed of the gamblers. But itâs worth asking a question that doesnât get raised much: Why did any of this happen in the first place?
No one could possibly claim that the Wall Street financial boom contributed anything to the greater good of society. Even the old standby explanation from Economics 101âthat financial markets like the stock exchange help channel money into worthwhile investment opportunitiesâdoesnât wash. The entire world of mortgage-backed securities, collateralized debt obligations, credit default swaps, and everything else concocted by Wall Street in this latest boom was directed toward one thingâmaking a tiny group of people incredibly rich.
Rolling Stone journalist Matt Taibbi put his finger on Wall Streetâs general uselessness to society when he compared the banking giant Goldman Sachs to âa great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.â Itâs impossible to regard the financial worldâs binge as anything other than theftâof incomprehensible sums of money that could have been devoted to meeting societyâs needs the world over.
Whatâs true about Wall Street is true about the capitalist system generally. The free-market system is organized in completely the wrong way for the goal of meeting the needs of the largest number of people in society.
This is obvious if you look at the political issue that came to dominate the first year of Barack Obamaâs presidency: health care reform. When the Obama administration embarked on discussions about health care legislation, it vowed to work with industry to ensure that a final proposal for âuniversal health careâ represented âall sides.â But the problem from the start is the bare fact that the interests of the industry lie in restricting health care, not making it universal. So, for insurance companies, the equation is simpleâthey have to take in more in premiums (and investments on that income) than they pay out in claims. That means their first job isnât to ensure their customers get anything they need, but to limit access to care beyond a level thatâs profitable.
Likewise, for pharmaceutical companies, the top priority isnât distributing their products to whoever needs them, but to whoever can pay for them, one way or another. For example, when Big Pharmaâusing research developed with government backingâstarted producing medicines that more effectively combated HIV/AIDS, the drugs didnât get to the poverty-stricken parts of the world where they were needed most because the victims of the disease couldnât afford the companiesâ extortionate prices. Eventually, the drug giants won an international agreement that protected their patents and profits, in return for wider distribution. Even so, according to a June 2008 United Nations report, 70 percent of AIDS victims around the world have no access to the medicines that could save their lives.
The profit motive of the privatized health care system lies at the root of all the health care horror stories you hear. Like Stacy Grondin, a grocery store manager in Nashville, Tennessee. In 2006, she suffered an episode in which her heart rate spiked. Fearing a heart attack, she went to a hospital emergency room in an ambulance. Problem: Stacy didnât have pre-approval from her insurance company for either the ambulance or an ER visit. She ended up with a $1,000 bill when her claim was denied.
Grondin was still struggling to pay off a medical debt for the care of her nine-year-old daughter Emily, who was severely injured in a 2003 car accident. Emilyâs father was serving a prison sentence because of that accident, but Stacy was responsible for more than $2,000 in medical costs not covered by her insurance. âWhen I first saw the bills,â Stacy told the Tennessean newspaper, âI was kind of mad because I was paying for this insurance which I barely use. Then, when itâs needed, itâs hardly there.â
In terms of technology and resources, the United States has the most advanced health care system in the world. Yet health care is a chronic source of uncertainty for those lucky enough to remain healthyâand a nightmare for those who get sick. Drugs and treatments that could help people live longer, healthier, and more fulfilling lives are often beyond reach because of a bewildering array of restrictions, imposed in the interests of the bottom line.
The health care system illustrates something thatâs true generally about capitalism: The drive for profit warps every aspect of the system that providesâor doesnât provideâwhat people need to survive. The failures of the free market arenât an accident but an inevitable result of the thirst for profit.
Think of it this way: In theory, the capitalist free market is supposed to work according to the law of supply and demand, right? The basic idea is that capitalists control what gets produced and how, but they make their decisions according to what people buy. So consumers use their dollars as a sort of âvote,â and capitalists compete with each other to provide the products consumers âvoteâ for.
But thereâs a problem with the theory: What if you donât have any money? Then you donât get a voteâand capitalists wonât produce what you want. In order for the free market to produce whatâs needed for everyone in society, there would have to be a roughly equal distribution of money to âvoteâ with. But in the real world, the rich have far more âvotesâ than anyone else. So the system is bound to put a priority on making products to meet their needs.
One result of this is whole industries devoted to products and services that are a total waste. Consider all the money spent on lyingâotherwise known as advertising. Few people care all that much about the difference between Sprite and Sierra Mist. But the owners and executives at the companies that produce the two soft drinks doâtheir profits depend on it. So they spend huge sums trying to convince people to buy one over the other. Companies spent more than $3 million for a 30-second-long commercial during the 2010 Super Bowl. Each ad cost more just to broadcast than a decently paid Teamster driver earns in a lifetime of work delivering products like Sprite.
And advertising is one of the more harmless forms of waste. Governments around the world spend well over $1 trillion every year on their abilities to wage war. The U.S. governmentâs military budget for 2010, including its wars and occupations in the name of âfighting terrorism,â was $663.8 billionâalmost as much as what the rest of the world combined spends on its armies.
The amounts of money spent on the Pentagon are stunning, but even more obscene is what this spending says about the priorities of the U.S. government. The U.S. nuclear weapons program cost more than $52 billion in 2008, seven-and-a-half times more than the government devoted to the Head Start education program for low-income children and their families. This is two decades after the collapse of the former USSR and the end of the Cold War between the two nuclear-armed superpowers. And still, the threat of nuclear annihilationâa war fought with weapons that could destroy the basis of all lifeâhangs over us.
And the doomsday scenario isnât even limited to war. The everyday workings of the capitalist system are wreaking havoc on the environmentâand the first frightening symptoms of a dire future are already present today. Aside from a few âexpertsâ paid off by the energy industry to say otherwise, scientists are virtually unanimous in confirming that pollution from the burning of fossil fuels like coal and oil is leading to global warming. Unless the amount of carbon in the atmosphere is reduced sharply and quickly, the consequences will be drasticâwidespread flooding, the spread of tropical diseases, worsening droughts, more severe weather conditions.
Many people believed the new Obama administrationâsince it actually acknowledges that climate change is taking place, unlike its predecessorsâwould take strong action on this issue. But the Democratsâ first pass at climate legislation was a watered-down half-measure, built around giving polluters the ability to trade their ârightâ to pollute. Even if the âcap and tradeâ system works as advertisedâand many environmentalists doubt that it willâthe resulting reductions in carbon emissions would leave the United States far from whatâs needed to slow global warming.
The Obama administrationâs performance at the international climate summit in Copenhagen in December 2009 was even more disappointing. Scientists estimate that carbon emissions by the worst-polluting countries like the United States need to be cut by 40 percent by 2020 to avoid a climate disaster. The Obama team arrived in Copenhagen offering a 4 percent reduction by 2020. The United States worked with Britain to undermine measures to help poorer countries reduce pollution. And when the Copenhagen talks seemed about to fall apart, Obama personally pushed through an âagreementâ that scrapped actual targets for cutting emissions.
The U.S. governmentâs behavior in Copenhagen was ap...