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ECONOMIC ANALYSIS:

Responding to the Financial Crisis: Butter, Not Guns

by Gary Olson
After a huge infusion of taxpayer money to bail out Wall Street speculators where is the public's control over bank operations?
What should be done about the financial meltdown? For many Americans, this crisis has clarified the irrational and predatory nature of our economic system. Hopefully, unfettered capitalism with its invisible hand and trickle-down economic nonsense have been so thoroughly discredited that alternatives to market fundamentalism can now enter the national conversation.

There is a robust role for government, but we’re already on the wrong track. It’s troubling that Washington's initial foray involved acquiring shares in private banks, but these were non-voting shares.

It’s hardly a panacea and remains a minority status, but after a huge infusion of taxpayer money to bail out Wall Street speculators where is the public's control over bank operations? Absent a meaningful public veto, this is a democratic sham and a terrible precedent.

More critically, we need massive deficit spending, what the Institute for Policy Studies terms a "Main Street Stimulus Package," and $300 billion would be a good start.

We should launch job-creating WPA-type projects in health care, reconstruction of the Gulf Coast, public education, mass transit, bridges, green building, renewable energy, and aid to strapped cities and states facing with layoffs. The jobs created by these projects must pay a living wage because we need a bail out for working people.

If, in January 2009, Sen. Obama is the president-elect and his advisers are drawn from the ranks of those who got us into this crisis (Robert Rubin, Lawrence Summers and clones) they'll demand reduced spending and draconian cuts in government services. This will mean levels of unemployment not witnessed since 1937, accompanied by paralyzing economic stagnation.

Therefore the ultimate question is whether a President Obama will entertain the notion of giving up the U.S. empire with its $613 billion dollar Pentagon budget, hundreds of bases in 140 countries, offensive weapons in outer space, and the bottomless money pits of war in Iraq and Afghanistan. We can't have guns and butter.

Will we make the right choice? I want to believe there is more than meets the ear in what Sen. Obama publicly espouses, that much of his rhetoric is for political expediency, and that in his heart he's willing to consider truly progressive structural changes. However, a president-elect Obama will be under tremendous corporate pressure to resist following his best instincts.

Only an aroused and mobilized public will be able to exert enough leverage to prevail over Wall Street and its allies.


Gary Olson, Ph.D., is chair of the Political Science Department at Moravian College in Bethlehem, PA. Contact: olson@moravian.edu.



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This story was published on October 22, 2008.