Pulling the Economy Down into Our Communities
[Contribution to the Reimagining Society Project hosted by ZCommunications]
This is an account that begins with the current condition - a brutal capitalism increasingly dominated by a financial logic that goes well beyond conventional understandings of capital accumulation. The effect is a massive gap between that which produces profits, on the one hand, and the massive unrealized demand for housing, food, health care, green spaces, and much more, that cannot be made into an effective market demand in this economy. This is a kind of capitlaism that has even become incapable of making markets for selling all that is needed, which would add hundreds of millions of jobs and hence further expand consumption. Today's captialism is dominated by a logic that moves away from actual economic activitity and re-orients more and more resources to the financial system.
Here I confine myself to a few aspects of the economy, specifically, on how we begin to make the economy ours. I focus on the US for practical reasons and because the US is an extreme case and hence makes it all more visible and easier to understand. It is also a country whose historic project has been to run as much as possible through the market and through privately owned means of production. But in fact today it is a capitalism that no longer knows how to create markets out of needs. The result is massive numbers of people who never become part of the economy or are expelled from the economy. This extreme character becomes an opening for launching an alternative economy, built in bits and pieces and reaching into what are now the abandoned and expelled people and spaces.
Critical is that our economy move toward a multi-sited, distributed condition that can become a platform for the next step in a trajectory that begins with today's brutal capitalism and moves toward a new socialism. What I discuss here is but the first step in this trajectory. It should develop into a mechanism for mobilizing people around all kinds of issues, from environmental struggles to the re-making of the political. Secondly, besides being one step in a long trajectory, what I discuss here ispartial: it needs all sorts of other interventions and political mobilizations. In brief it is one component in a broader collective effort.
My sense about making change in the US today, is that at the level of public discussion and opinion, it is easier to persuade around practical concerns that can push towards a more socialized economy than to say we need to fight for socialism. This is clearly an important assumption I am making here, but I think this is not so far off. In other words, it is easier to get a positive response if you say that we have the capacity to eliminate diseases that affect millions and to produce enough food to feed all, than if you say "Down with agribusiness and the pharmas." And it is even more feasible to persuade if we add, and if we do not eliminate some of those diseases and famines, it will all hit us back like a boomerang.
I am, then, trying to identify a practical basis for change. This is perhaps because I come from the Netherlands, a country where the task of ensuring the ocean does not invade it and there is some green space left requires a state technocracy doing its work no matter what political party is in power: a practical basis for the good work of preserving green space and for doing whatever it takes to keep the ocean abay. This has included the removal of vast numbers of people and buildings and infrastructure in certain areas that needed to be returned to the original condition of wetlands, the best sponge to negotiate changing water levels. New Orleans wetlands have been extensively damaged tue to the extensive running of oil pipes, and this has contributed to the severity of the floods. This has long been known, but the oil companies found this the cheapest and quickest way to transfer oil -it was good for them, but not for the city.
Here I confine myself to three vectors that have specific charactristics: done well they distribute postive effects rather than concentration of advantages.: using infrastrucre development to green the economy and to create jobs. Well done this is achannel for creating vast numbers of jobs and, very improtnat, mobilizing people into collective efforts, which can in turn produce a platform for further mobilizinb.
So what follows here is partial - it is meant to go along with other types of mobilizations. And it uses material practices as one platform for the work of making a socialism for the 21st century.
First some contradictory trends that mark today's situation across the world and create openings for new ways of handling economic basics.
The aggressive search for profits at all costs is becoming a boomerang. We have hints of this across our economies. Thus the search for profit in raising cattle and in raising pigs, have led to extremely abusive practices of animals that have created serious health threats to people. In the UK, feeding cattle the non-sellable parts of cattle (such as spine), is one factor linked to the dreaded so-called mad-cow disease (Kreuzfeld syndrome), and the Asian flu (SAR) is linked to inadequate housing for poor people who raise birds for human consumption, and now we being to understand that the latest "new" disease, so -called swine flu (H1N1), is linked to the extreme conditions in which pigs are raised to maximize profits. If we add to this the enormous levels of work place injuries across the world -from the meat-packing industry in the USA to the dismantling of huge iron clad ships by unprotected workers in India) , we begin to see the vast costs to society and to economies that narrow criteria for understanding and defining profitability.
The greater our capacity to produce wealth has become over the last twenty years (and finance has played a critical role here), the more radical the condition of poverty has become. It used to be that being poor meant a plot of land that did not produce much. Today being poor for the 2 billion or so is having nothing, only one's body -no plot of land, often not even a stable shack that might be called home. It is a fact that we have the capacity to feed everybody on the globe, but feeding is not the priority of our economic actors, so we have more hungry than ever before. And we have all heard about the abusive conditions under which diamonds are extracted, and how those profits get rerouted for armed warfare rather than development purposes. Fewer may have heard about citerade, a key mineral for electronic components (notably cell phones), which is mined by unprotected workers who use their naked hands to extract it and live basically in a condition of slavery, and die too young from poisoning to have been able to pass on the news of their abuse to the wider world. Finally there is the by now well established fact that discovering oil in a poor country becomes the formula for even more poverty and a small elite of super rich.
Finally, the current financial crisis has destabilized the system of power and the comforts of diverse middle classes. One important difference between the current crisis and the other post-1980 crises is the order of magnitude that speculative instruments have made possible. A second important difference is the larger economic landscape: the stronger recognition that we have an environmental crisis at our hands and that we need to act now, because international treaties are not enough. A third difference is the greater recognition that the extremes of wealth and poverty have become problematic: we now know there is no trickle down, and, more concretely, epidemics due to poverty and inadequate healthcare will affect also the rich.
This combination of differences compared to prior crises creates an opening for novel economic criteria. It is an opportunity to re-orient our economy to a broad range of needs. Givent he ongoing admiration among global elites of China's tapid growth, it needs to be recognized that the much-admired fact of half a million people in Asia lifted out of poverty was the result largely of jobs and small-scale entrepreneurship in manufacturing, transport, and other material economic sectors. It was not through getting credit cards from financial firms. I am not idealizing those jobs -we know they are problematic, most especially mining jobs.
THE BILLIONS OF THE ECONOMY VERSUS THE TRILLIONS OF FINANCE.
Let's focus on the work that needs to be done in our country. It is vast - we need to produce housing, healthcare, build urban parks and develop urban agriculture, clean our waters, weatherize all housing, from now on build only zero emission buildings, and so on. Doing that work would absorb all available workers, and then some. It would require that those who are skilled in whatever the task at hand, train the unskilled. In short we would all be occupied, most for pay; it would also draw on those who do not need income but need purpose in their lives.
This would vastly expand the economic footprint and, critically, it would mean a lot of economic activity geared towards the disadvantaged. This is economic activity that would iterally enter the abandanoned, neglected, actively segregated, at best policed and rarely governend, spaces of our country, from the forgotten dying towns scattered all over our country to the brutalized hyper-ghettoes of our cities and the abandoned spaces where the homeless now live. It would also enter the spaces that are now guarded by private guards - malls, corporate towers, coal mines, highly polluting factories.
The distributed character of this expanded footprint would/could begin to produce the experience that it is "our" economy, one we all work in and we work for all. Here comes my pragmatic approach to the matter of moving towards a new socialism -not quite re-imagining a full-blown socialism, but rather a step in the direction of making a new socialism. This kind of experience would/could enable a sense of the collective, of being part of an economy, rather than being used by an economy. From there would/could come a greater sense of existential security, and a buffer agaisnt the persuasive but predatory consumer advertising - a possibility fo not feeling here I am alone and dependent on the market, the corporations. There would/could be a grater sense of lateral articulations, even for those who cannot wrap their minds around notionsof class solidarity -this is the USA after all.
The reason that beginning such a long term project is more of an option now than in the last fifty years is that the government has shown it is willing to pump money into the economy. Pity it has been pouring most of it into rescuing zombie banks.
Over the last few months we have gottten used to hearing talk of the trillions it will take to rescue our financial system. But it would take billions, not trillions, to begin to work on the work that needs to be done. If we think in terms of the billions of the economy, rather than the trillions of high-finance, it all looks better. And there are hundreds of small traditional deposit-based banks in the US that also function in billions and are doing fine and can be channels for offering credit to small firms etc.
The effect I have in mind is a widely distributed range of growth sites, that incorporate more and more people. Clearly, this is nto a revolution. This is within capitalism, but it begins to lay the ground for a widespread and distributeed economic metwork, that can function as one platform for gaining entry into out economic "system" and begin to relate to it as ours. It is a sort of parallell to the notion of an organizational infrastructure that the left has long though would be a step to take us past this type of brutal capitalism.
MOVING RESOURCES TO WHERE THEY ARE NEEDED.
A first major issue is how to move money into work that now falls outside the dominant profit logics. But in a capitalist economy the government needs channels to use taxpayers' money to work on needs which cannot easily be met through market mechanisms given today's dominant profit logics in the US. The financial crisis and the environmental crisis have unwittingly joined to create an opening for the government to intervene in the economy. Infrastructure repair/development and the greening of our economy have become two key mechanisms for governments to channel money to thousands of localities, small and medium sized firms, and indirectly households. Eventually it would take a far greater, and somewhat different, allocation than the financing of Obama's stimulus plan and its distribution. But it would not take the up to 8 trillion dollars the Fed has basically extended to the financial system just to pay for its troubles with few feedback loops into the average economic sector. Building infrastructure and greening are labor-intensive and requie the participation of a broad range of economic sectors, thereby creating potentially significant multiplier effects for sectors not directly engaged by those activities.
Here are just a few numbers to illustrate what we could do with billions, let alone the 8 trillion extended to the banks. For example, the ASCE (American Society of Civil Engineers) estimated that the U.S. needs to invest an average of 300 US billion a year over the next 5 years. It documents that most components of America's infrastructure are poor or mediocre, and all sectors except aviation have declined since 2001. For instance, by 2007, 26% of the nation's 599,893 bridges were rated structurally deficient or functionally obsolete. According to EPA estimates, the US needs to invest $390 billion over the next 20 years to replace existing waste treatment systems and build new ones to meet increasing demand. The EPA's 2004 Clean Watersheds Needs Survey calls for an estimated investment of $134.4 billion for wastewater treatment and collection systems, $54.8 billion for combined sewer outflows, and $9 billion for storm water management. If this is not done then we risk losing the gains that have been made in cleaning up the nation's rivers, lakes, and streams since the enactment of the Clean Water Act in 1972.
And on and on... The reader can find a list of all kinds of infrastructure projects that would together cost less than 1 trillion and would make an enormous difference along the lines I describe above: www.huffingtonpost.com/saskia-sassen/the-billions-of-our-econo_b_170009.html
It would be critical to do all this needed infrastructure building in an environmentally sustainable manner. Amd environmental sustainability has become an accepted mechanism for the government transferring money to the economy. Greening is also likely to lead to more labor-intensive building processes and to more distributed sites for the work. Let me illustrate what I mean through a familiar issue: if we maximize the use of solar energy we have to make millions of proudction points (solar panels on roofs and on walls), rather than centralized distributors of energy. And we would use very diverse types of work. For instance, doing flood control in a sustainable way would involve returning cement covered land to their original status as wetlands, and it would require repairing dying wetlands -such as the oil pipe traversed wetlands by New orleans, which have killed much of the wetlands that regulated changing water levels in the Missisippi. Re-making and repairing wetlands is labor intensive and requires a very different workforce from building a concrete fllod-wall. In some instances, sustainable construction would not necessarily add jobs, but it would add more people-intensive modes of transport: thus building roads anywhere would always include safe parallel cycling lanes.
Weatherizing housing is a good example of an initiative that mobilizes households and many local firms, and thereby has the additional effect of mobilizing people into joint action - who then are also potentially mobilized for other projects. Austin's (Texas) program to weatherize low-income housing gives grants to these households and expects them to contract the work out to local firms. It is not very expensive, creates jobs, supports local enterprises, and begins to green the city. And importantly, it creates a collective effort.
THE US HAS OVER 6,000 SMALL BANKS: The government should use them!
One final item I want to discuss here is how e can being to make ours what is now the banking function in a capitalist economy. I make a difference between finance and banking. Simplifying, banking is about selling money you have while finance is about sellling money you do not have. (For more detail on this point, see http://www.huffingtonpost.com/saskia-sassen/a-bad-idea-using-a-financ_b_145283.html ).
We need a distributed, locally based banking system. Most needs of households, enterprises, workers pension funds, and local governments can be met through small banks. To build a dam (not such a good idea anyhow!) or a brand new steel mill takes a vast amount of capital that in a capitalist economy will require either a government or a group of large banks to finance. But mostly it is small enterprises, households and local governments that need to borrow to do what they need to do.
We know that small banks tend to be geared to the local economy and to have as their clients small and medium sized enterprises and lower and middle-income housholds, partly because they know the local conditions and can gauge the soundness of borrowers in a local context. Their situation provides them with far more information about the borrower than is the case with national and global banks. Most households and most enterprises do not need the big banks for their basic banking services, including residential and commercial mortgages. But since the deregulations of the 1980s, the big banks have grabbed most of the market share even in these sectors.
If 1 trillion dollars of the bank bailout taxpayers money would have been channeled through the 6,000 plus small banks we have in the US, we would have strengthened these banks and they would have used that money to make loans, unlike the big banks which used it the bailout dollars to build up their capital reserves (at best) and did not extend loans to modest income households and enterprises. Further, workers' pension funds are more likely to have better oversight of how a banks is handling their funds and to secure better investments for their workers than is the case with bigger banks where there now is considerable evidence that investments favored the profit logic of the banks and demanded excessive fees.
It is also one way of beginning to build a distributed, locally based banking system. The US has over 7,000 small banks, with below one billion in capitalization. And half of these have less than half a million in capitalization. This is truly small in the current context. These banks need small enterprises and medium to low income households. It is a very different relationship structurally than tht of the big banks to these modest actors. This further strengthens the structural articulation of these banks to their locality. Even bank owners who are greedy and not interested in the well being of their communities are structurally dependent on those communities. That is the key.
Again, my pragmatic rather than utopian view of moving towards a new socialism, sees in this distributed small banking footprint a potential platform for a more distributed capitalism. Yes, this is still capitalism. But it begins to move in antoher direction. If we join this to a mobilizing around the issues I described above, we begin to get a bigger citizen and community involvement with at least some part of the banking system. And we begin to build up that local banking function rather than give our banking accounts and credit card business to the big banks.
Below is a breakdown of the small banks as of early 2009 according to the FDIC. Since then a few may have closed but we also know that a) new small banks have been opened, and b) many are actually doing very well as people move their savings accounts from large to small banks. More than two-thirds of all insured banking institutions are doing fine, but their aggregate earnings were outweighed by large losses at several big banks. Total deposits increased by $307.9 billion (3.5%) among small banks.
Note that there were 2784 banks with assets under $100mm and 3,790 with assets from $100mm to $1B. Those are very reasonable concentrations of capital in that they are small and do not produce a massive power and control over the economy and the political system , as has been the case with the large banks. Clearly, these banks cannot take care of huge projects, but they can take care of the needs of 80% of the US population and many of the small and medium sized firms. They should be strengthened.
BROKEN DOWN BY SIZE (2009), All Commercial Banks in the US
- Assets less than $100mm (national): 2784
- Assets $100mm to $1B: 3790
- Assets move than $1Bn: 511
AND HERE SOME MORE DETAIL FOR SAVINGS INSTITUTIONS (2009)
- All Savings institutions (national): 1220
- Savings institutions with assets less than $100mm: 347
- Savings institutions with assets b/w $100 to $1Bn: 709
- Savings institutions with assets more than $1B: 164
(All data from the FDIC).
OUR HOLLOWED OUT LEGISLATURES.
On a different front, there is the need to strengthen what is still the most public and representative branch of government, the legislature. I have developed this elsewhere. For a short piece on this see http://www.dissentmagazine.org/issue/?issue=84.
For a broader perspective see www.opendemocracy.net/article/globalisation/world_third_spaces