(Berlin) Wall to Wall (Street)

by Tom Walker

Twenty years ago next month, the Berlin Wall fell. One year ago last month, Lehman Brothers collapsed -- the "second shoe" dropped. Just as the dismantling of the wall was the symbolic climax of a long process of disintegration that had begun in the 1970s and was not completed until several years after November 1989, the financial crisis that erupted in 2008 had deep historical roots and it will not be resolved with a recovery to business as usual. At this point it would be prudent to banish the word "recovery" from the analytical vocabulary. This is not a recession. Nor is it a depression. It is the systemic collapse of a system that has rotted from the inside out.

America's Stalin and the new New Deal

In popular mythology, the Soviet system and Western capitalism were polar opposites: communism on the one-hand and free enterprise on the other. In reality, they were very distinctive variations of what Burnham called "managerial society" or, in Galbraith's terminology, "the new industrial state". The Western version may have been more durable than the Soviet one but, on the other hand, it may have lasted longer just because it had a head start in the accumulation of material wealth, which enabled it to "coast" longer on its momentum.

The now largely forgotten corporate accounting scandals of 2001-2002 -- Enron, Arthur Anderson, WorldCom, Adelphia, Dynergy, Duke Energy, Tyco International, etc., etc. -- clearly demonstrated that the accounting system in place in the U.S. was no less prone to manipulation and gaming than had been the account for Soviet state-owned enterprises. The financial crisis of 2008-2009 has shown that the corruption is endemic and not accidental.

None of this, of course, would be of any interest to top rank economists, who operate on phantasmagorical models that bear no resemblance to the actual world where money changes hands. For thirty years, an ideological fig leaf of markets and competition, free trade and tax cuts has covered up for a system of brokered privilege that has little to do with any of those things. Many people believed these fantasies, though, simply because they wanted to believe. Certainly not because the veneer was all that convincing. The alternative was too bleak to acknowledge. But the jig is up. The genie is out of the bottle. The shit has hit the fan.

Since it is clear to too many people that a return to business as usual is not going to happen, what's the alternative? Some folks are putting their faith in the idea of a new New Deal. This involves, first, projecting an old New Deal significantly different from the real deal and, second, dreaming that we can somehow use the fictional successes of that fairy tail New Deal as a guide to future policies.

Similarly, when the Soviet Union was collapsing, there was a fair-sized constituency who looked back on the Stalin period as a time of stability and patriotic victory. Imagine how well a return to Stalinist five-year plans would have worked for Russia in the 1990s. That's the prognosis for a new New Deal in the 2010s. With FDR as the American Stalin. A kinder, gentler Stalin no doubt. But a Stalin in the pure, unadulterated sense of anachronism. In the sense, that is, that a time traveling 1930s American would feel more alien in 2010 America than he or she would in 1930s Russia.

Ladies and Gentlemen, we've already just lived through a pretend nostalgic return to an earlier, "more authentic" era. Hayek, Thatcher and Reagan choreographed a promenade through a Disneyfied 19th century gilded age where laissez faire, rugged individualism, robber barons and that old time religion prevailed. A phonier crock of horse piss you couldn't imagine -- unless it's the wished-for new New Deal.

The oligarchy would prefer to go back to the heyday of neo-liberalism, but they'll settle for a new New Deal because, for one thing, it won't be a real New Deal but only New Deal lite. More importantly, the new New Deal will start from a baseline of the compromises and concessions ironed out during the old one. There will be no Black-Connery Bill or GM Flint factory occupations to threaten a more radical outcome on the horizon. How's that for a negotiating strategy, then? Make your opening offer the absolute worst settlement that you can imagine living with. Then hope for the other side to offer you more than you've asked for.