Gar Alperovitz: When it comes to banking and other critical sectors, public ownership is the only solution
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.
There was an interesting moment during the 2008 presidential elections. The last couple of weeks, President Obama was ahead, and summoning up all the demons of the Cold War, John McCain fired what he thought might be a decisive shot. He called President Obama socialist. Obama’s reaction was rather interesting. He kind of stared it down. He said, I read my Bible; it says I should be my brother’s keeper. Well, I don’t think we’ve seen much of that President Obama since that moment. At the same time, he did go on to win the election, in spite of all of that rhetoric.
But the issue of public ownership keeps reasserting itself. During the crisis there was a lot of discussion about the importance or need for nationalizing banks and such. But now, two years after the crisisâ€”supposedly after the crisisâ€”the issue of public ownership seems to be back off into the margins of the discussion. Well, we think it should be back up front and center.
And now joining us is someone who’s done some work on this issue of public ownership, Gar Alperovitz. He’s a professor of political economy at the University of Maryland, College Park. He’s the founder of the Democracy Collaborative at the University of Maryland and a member of the board of directors for the New Economics Institute. And he served as a legislative director in the U.S. House of Representatives and the U.S. Senate. He’s the author of the book America Beyond Capitalism. Thanks for joining us, Gar.
GAR ALPEROVITZ, COFOUNDER, DEMOCRACY COLLABORATIVE: Glad to be with you. Thanks, Paul.
JAY: So what prompted you to write this piece? This was an article recently about public ownership you wrote in The Nation.
ALPEROVITZ: Well, several things. One, the new poll data on all this is kind of very interesting. You know, the Cold War is over, and younger people, the people in the age 18 to 29, a recent pew study said, say they are 49 percent more favorable to the word socialism and 43 percent for capitalism. Isn’t that interesting? There is a change going on. In fact, there’s been a trend: a couple of polls earlier had been even, and now it’s moving in this direction. The numbers for capitalism in general have been falling down. And this is a generation that’s going to make the new politics. Also saw a poll just recently, just the other day: 36 percent of all Americans, not just young people, believe that capitalism is incompatible with Christianityâ€””my brother’s keeper” line. So what that really means we don’t know.
And, finally, the other reason wasâ€”and I, frankly, get tired of this, the word is thrown around so muchâ€”anything at all that is progressive is now being labeled with the word socialism. And it’s just ridiculous, because the right-wing language and rhetoric has gotten out of hand. It has no meaning whatsover [inaud.]
JAY: Yeah, I guess it’s a littleâ€”. I guess “greed is good” is not to be found in the New Testament. Now, in your piece you talk about theâ€”.
ALPEROVITZ: In fact, I think the line is that a rich man has more chance of going to heaven then a camel getting through the eye of a needle.
JAY: Right. That’s actually more Jesus’s message, which today certainly would be branded socialism. More than that, I think it would probably be branded class warfare to talk like that.
ALPEROVITZ: And if you go a little further, Acts 2 has everyone laying down their private ownership to join collectively in the common Christian effort. So there’s a lot of love thy brother that is much more prevalent, and the preference for the poor is much more prevalent in the Old and New Testament than the notion about socialism that we’re talking about.
JAY: So the basic thesis of your article is that public ownership, at least in certain critical sectors of the economy, is actually the only way to solve some of these problems facing the country. What’s your point?
ALPEROVITZ: [incompr.] the only way, and it’s much more efficient. Now, that’sâ€”that goes right directly contrary to the argument of many conservatives. And so take number one, you cannot anymore regulate the large banks. Theoretically you could regulate them, but they are far more powerful than any regulator. And the swarms of lobbyists on Capitol Hillâ€”this is now conventional wisdom. Right wing, left wing, academics, everyone really knows this. They just don’t say up the implications out loud. The lobbyists are writing the regulations and rewriting them. And the possibility and the likelihood we’ll have another financial crisis, every expert that I read, left, right, and center, expects a crisis to happen again because the regulations just can’t be done, there’s too much power on the other side.
So I suspect what’s going to happen in the real worldâ€”we may have another crisis. And maybe the first reaction will be, okay, if people get angry enough, they’ll break up the big banks. And then, obviously, the big fish will eat the little fish and we’ll be back with the big banks trying to run the game again. And at some point I think it is all but inevitable that, someplace, we’re going to turn some of these big banks into public utilities. And I think that’s the only way to actually manage it. It’s the only practical way to deal with the problem. I think it’ll take us a decade, two, and a lot of pain to get there, but I suspect it’s going toâ€”it’s obvious, because there aren’t any other real-world alternatives that are workable. The head economist of Citicorp, no less, Citicorp, biggest bank, said before he became head economist that if the public’s paying the bills, we really ought to be public utilities. And I agree with him.
JAY: One of the points you make in your article: if you do make the main emphasis on breaking up the big banks, that even if you’re successful, like the phone companies, once you break them up, over a matter of so many years, depending, they wind up reemerging as the big Goliaths again.
ALPEROVITZ: Yeah, that’s just the process, because the advantage is to them controlling more and more markets, more and more capital, more and more deposits, and as soon as they get rolling, they get more momentum, and, as I said, the big fish eat little fish, and we’re back where we started.
You know, another point about this, and I mentioned it earlier: efficiency. You know, right-wing economists or kind of what I call old-school conventional economists say that these big public enterprises are not efficient. Well, compared with what is always the question. These banks have cost us trillions of dollars in lost output, massive economic collapse, people thrown out of work, thrown out of their homes, the economy slipping to 10, 12, and in the real world, if you count everybody, 20 to 25 percent unemployment as a result of their so-called efficiency. It is ridiculous to look at whether or not, internal to some bank, the way in which they do accounting is more or less efficient than whether or not a public utility does accounting, more or less efficiency within the bank, and the outcome of the big efficiencyâ€”massive unemployment, loss of economic output, loss ofâ€”is neglected. We don’t look over there. They are massively inefficient because they cause so much cost and so much waste by any standard at all.
JAY: Right. The generalized cost of, for example, the fossil fuel industry is not taken into account when you look at the efficiency internally of the fossil fuel industry.
ALPEROVITZ: Exactly. If you look narrowly, thenâ€”and this is the argument that’s always put up on the other sideâ€”look inside. These guys are much more efficient than some government bureaucrat. Maybe so. But if you can maintain stability in the economy rather than crash the whole airplane, which has massive costs, that’s the place to look. And we’ve got to balance those two. And the balance always comes out: obviously we’ve got to get some way to control these guys. And if you can’t regulate them, and if you can’t break them up so they stay broken up, there’s only one logicalâ€”.
You know, the people who made this argument are not liberals and they’re not socialists. It was the founders of the Chicago school, the most conservative school of economics, that pointed out, if you can’t regulate them, in the end the only way you get a free market is to socialize or nationalize some of the big ones in order to have the market to function. That was H. C. Simons, the founder of the Chicago school of economics, Milton Friedman’s teacher and a very conservative economist who understood that these guys capture the regulatory organizations if they’re that big, so you’ve got to deal with it.
JAY: Well, President Obama has said many times, you know, in his last State of the Union and out on the campaign trail, that there is effective regulation now. He talks about Doddâ€“Frank, he talks about the Volcker rule. I mean, isn’tâ€”doesn’t that show some evidence that regulation is possible?
ALPEROVITZ: In theory, regulation certainly is possible. And, indeed, when we had a stronger progressive liberal movement, maybe in fact it was possible for a while. But the movement that supported that really at its heart had organized labor as the muscle, the economic muscle behind the movement. And labor has dropped from 35 percent of the labor force to 11 percent, and only less percent less than 7 percent in the private sector. And the muscle in the movement that really could make effective regulation, unfortunately, it’s gone, which means that, you know, we either have to deal with the fact that regulation doesn’t work or we’re going to have another recession, which I think we will have. We’ll have more crises. And at some point we’ll wake up to say, look, the only answer is to make them into utilities, some of the really big ones, and that’s the only way to make the system work efficiently at all, or just work.
JAY: Well, now, there were some moments in the last couple of years, last four years, that presented themselves that one would’ve thought was the time when you could have had some assertion of public ownership. I mean, let’s start in the financial institutions with AIG. And, I mean, we’ve essentially nationalized. But what happened?
ALPEROVITZ: Well, AIG, which is the largest insurance company in the world, is in fact owned substantiallyâ€”a majority of the stock is owned by the U.S. government today. But instead of using it as a way to really control it, we set up proxy votes and set up trustees who are kind of beholden to Wall Street, who are the people who, arm’s length away from the public, are managing this operation, even though the public still owns it. Same thing could have happened with some of the big banks. We bailed them out. We could have bailed them and taken stock, and voting stock, and made them into public utilities instead of, you know, massively subsidizing them from the federal treasury and the Federal Reserve board, and then giving them back to the people who made all the trouble. So this is a possibility once you have to bail them out. That’s the time to actually assert control and do what, as I say, the chief economist of Citicorp said: if the public pays the bills, you know, it’s time to just turn them into utilities and make them runâ€”kind of hold the line and be a stable system.
JAY: Well, unfortunately, most of the leadership of Wall Street is saying the public should bail us out and we should keep our bonuses and great payments and keep things as they areâ€”and, in fact, as we can see from JPMorgan, go right back into the risky derivatives trading again, never mind any kind of change at all.
ALPEROVITZ: Yeah, it’s much larger now than it was before the crisis, and I think we’re going to see the results of that.
But I’m anâ€”in one sense, I think we’re going to have the pain lessened. At some point, I think, this is not an issue just of liberals and left and right. As I say, the real ideas that I’m talking about came out of the Chicago school of economics, the most conservative economists, who were at least sophisticated enough to face the problem directly that you couldn’t regulate them. And I think, as people are angryâ€”even the Tea Party people get really angry at these big banksâ€”at some point, the only obvious logical answer that’s going to be left is, you know, make them into utilities. That’s the only, you know, practical way to do it.
JAY: Okay. Well, we’re going to carry on our discussion in the next segment of this interview. So please join us for part two of our interviews with Gar Alperovitz on The Real News Network.
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