Commentary

The (IL)Logic of Bailouts

The ideological offensive accompanying the current financial and economic crisis is so intense that even many who consider themselves socialists and communists are reduced to criticizing the details of the trillions of dollars in corporate bailouts that have been announced over the past few months, rather than opposing them on a principled basis. The argument is presented to the effect that, even though the bailouts are detrimental in the long term and accompanied by various anti-worker provisos, in the short term they save millions of jobs and are, therefore, unavoidable. This is the same sort of argument that comes up during every federal or provincial election according to which working people must hold their noses and vote for the “lesser of two evils” because the alternative will be even worse.

However, this argument simply does not hold water. The multi-trillion dollar bailouts of the big banks and other financial institutions, supposedly for the purpose of restoring credit and confidence, have accomplished nothing for working people except to further impoverish them. Tens of millions of workers around the world have been thrown out of work over the past four months. Millions have already lost their homes and millions more will do so in the coming months. The bailouts of General Motors and Chrysler, which could end up well over $40 billion, were accompanied by the layoff of at least 50,000 workers, and that is just the first round of layoffs. The second round will involve Ford and the various auto parts manufacturers. The third round will be those workers whose jobs depend on the wages earned by those auto workers. Ultimately, if General Motors and Chrysler survive, and that is a very big “if”, it can only be on the basis of further mechanization and further transfer of production facilities to low-wage countries, such as China. So, claiming that the bailouts will “save jobs” is merely a sop to fool gullible workers. It is not a valid argument for the necessity for bailouts.

There is, of course, a logic of sorts to the bailouts. Despite the globalization of finance capital over the past few decades, national states are controlled by definite groups of monopoly capitalists who use them to maximize their profits at the expense of other sections. The bailout of the American financial sector is a good example. The U.S. economy is suffering from enormous budgetary deficits and enormous balance of trade deficits. It has amassed staggering debt levels, both governmental and personal. The financial crisis that came to a head in September of last year is international in scope and has resulted in tight credit everywhere. In order to bail out the financial institutions on Wall Street, the U.S. government had to come up with at least $1.5 trillion dollars, and probably far more. It will also be running a federal deficit of almost $2 trillion in 2009. This money has to come from somewhere and there are only two sources.

The first source is U.S. government borrowing, which over the past several years has come primarily from China and the oil-rich Arab states. Because the U.S. government is seen as the most stable in the world and it has essentially pledged to underwrite loans made by U.S. financial institutions, there will be a tendency for increasing amounts of liquidity in those countries to flow to the U.S. But China, in particular, is also facing an economic melt-down due to the loss of its American markets. So whatever capital flows from China to the U.S. will hamper any potential economic recovery there and condemn the Chinese people to even more job losses and suffering. Various other countries will face similar pressures. In other words, U.S. borrowing is a form of shifting the burden of the crisis onto the backs of the people in other countries.

The other source of money for the U.S. bailouts is for the U.S. government to simply print more dollars. This will have the effect of decreasing the value of the U.S. dollar, which will have several implications. First, a decrease in value of the U.S. dollar creates inflation which reduces the real value of wages. So, it will shift the burden onto the American working people. Second, it will drive up the price of imports and thereby further constrict the U.S. market to other countries. This shifts the burden onto America’s trading partners. Third, it reduces the value of foreign holdings of both U.S. dollars and U.S. debt, once again shifting the burden onto others. Therefore, the U.S. bailouts will have the effect of further internationalizing the crisis and blocking any potential recovery in other countries. They are a virtual guarantee of a long period of perpetual stagnation and crisis of the entire capitalist system.

This is all in addition to the fact, which Modern Communism has repeatedly pointed out, that taking money out of the pockets of working people and handing it over to the rich is counterproductive and will only serve to deepen and broaden the crisis by further reducing demand for surplus commodities. This is why no rational argument can be given to justify the bailouts. Instead, an appeal to emotions is substituted. We are told that “millions good-paying jobs” are at stake and that if we oppose the bailouts we are condemning those workers to unemployment. But it is not we, but the capitalist system, that has condemned those workers to unemployment. Furthermore, that die was cast, not last September, but years or decades ago by those who control the economy. With or without government handouts to the capitalists, those jobs will be gone. Whole industries will be gone. That is the reality facing the working class and people. This is the logic of capitalism.

The logic that the banks, the auto industry or some other sector of the economy is “too big to let fall”, is the logic of gangsters and of the labour aristocracy. It is the logic of those who are only interested in saving their own hides and to hell with the rest of the working class. They are prepared to accept the loss of millions of “low-paying jobs” if it will save a few thousand “good-paying jobs”. And when all is said and done, not even those few thousand “good-paying jobs” will be saved. It is all an elaborate shell game to transfer trillions of dollars in wealth from the working class to the rich and from smaller, weaker capitalists to bigger, more powerful ones. Even more dangerously, this logic is a major component of the ideological assault against the working class which demands that workers identify their interests with those of “their own” capitalists, while seeing other sections of the working class as their enemies.

Those who argue that the bailouts are a necessary evil should explain exactly what concrete benefits will result for the working class, not for one small section of the class, but the entire working class. They should explain why propping up various monopolies and delaying their inevitable collapse is preferable to letting them fall, along with the entire rotten capitalist system. And they should do so from the perspective of the working class and not from the perspective of the labour aristocracy.

There is no doubt that without the massive bailouts, particularly in the U.S., the entire international capitalist system would have collapsed last fall. This is not to say that capitalism would have come to an end, however, it would have placed the question of capitalism or socialism squarely on the agenda. It would have shattered all of the illusions about capitalism being the highest form of economic and social organization and encouraged working people to seek alternatives. The capitalists and their government and media spokespersons were quite clear on this issue, which is why they pushed through the bailouts. However, the working class has not yet figured out that it is capable of reorganizing society in ways that serve the interests of the producers rather than the exploiters. It has not yet come to the realization that if the capitalists and their system collapse the mines, mills and factories, as well as the hospitals, schools and so on, will still remain, as will the workers who run those facilities and who produce everything of value in the society.

Whatever the progressive and revolutionary forces say or do, the governments of various countries will continue to bail out some capitalists, while others will be allowed to fall. This is the way that monopoly capitalism operates and it will do so until it is finally overthrown. However, the worst possible disservice that the progressive and revolutionary forces can do to the working class and people is to cover up for the monopoly capitalists, to attempt to justify in the eyes of the workers the crass money grab that is being perpetrated in the name of “saving jobs”.

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