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Leo Panitch: Big Business opposed to government jobs programs, as their objective is to drive wages down through fear and global competition

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. The economic debate in capitals around the world, particularly what’s called the advanced world, as Europe and North America like to call themselves, is the issue of the crisis and what to do about it. And we’re told we have two alternatives: austerity measures, cut the debt, cut the deficit; or stimulus measures, Keynesianism, increase the amount of money in supply, government funding of programs. We’ve yet to reach a conversation about direct jobs programs, but at least government stimulus is the answer. Now joining us to talk about these two alternative strategies and are they really the only two strategies is Professor Leo Panitch. He’s a distinguished research professor at York University, teaches political science there, and he’s the author of the book In and Out of Crisis: Global Economic Meltdown and Left Alternatives. Thanks for joining us, Leo.


JAY: So, in one of our earlier interviews, we talked about–we sort of ended with you saying neither the austerity measures or Keynesianism–stimulus–will really solve the problem. So explain what you mean. And if they won’t, what will?

PANITCH: Well, you know, the very, very large stimulus that the Obama administration undertook, and it was a very big one, obviously has not had the effects, at least in terms of reducing unemployment, that was hoped for. It may have economic growth about 1 percent above what would have been, but it hasn’t had the effect that was hoped for. And part of the reason for that was that at best it was offsetting the cutting that states in the union were doing, as they faced enormous fiscal problems and enormous problems in terms of rolling over their debt at the state and municipal level. So to a significant extent the cutbacks that were being undertaken by states was being offset by the money being passed to states by the federal government. I have to tell you that was also very commonly the case in the Depression, and there were many, many years under Roosevelt’s New Deal when the positive fiscal stimulus was actually zero once you took together both state and federal fiscal policy.

JAY: Because what it did is just got states maybe back to a sort of a status quo. It didn’t actually add anything past [inaudible]

PANITCH: That’s right. I mean, this stimulus did pass a lot of money to the states, but it did so in the sense of offsetting the cuts that they were otherwise doing.

JAY: Now, the advocates of the stimulus, you know, from the more left side have said the problem is it was way too small, that even the Obama administration had originally said it needed to be, I think, almost as much as twice what it was. And then they wound up at the level they did. Is it a question of the size or the way the stimulus is spent?

PANITCH: It’s partly a question of size, obviously. But the main problem is that it involves either reducing taxes or giving people money to spend; it’s much less about direct state employment. And in that sense, when people are concerned about spending, when they’re trying to save to pay off their debts, when their wealth has been decimated through what–the main asset they hold is their home ownership, but also their pensions, people aren’t likely to spend. So the only way you can really address the enormous unemployment in the United States, which is officially 10 percent, in reality half that again, at least 15 percent, the only way you can do that is by employing people directly. And that was the aspect of the New Deal, and of course the war, that really got the United States out of the Depression at the end of the 1930s. That was the aspect of the New Deal that really counted through the Works Projects Administration, which wasn’t introduced until after there was an enormous upspring of protests by the unemployed after Roosevelt was elected. It was direct spending on the state directly employing people, through what was known especially as the Works Projects Administration. That involved the building of the Hoover Dam. It involved employing journalists and artists. It was an enormous direct employment by the state, which also created enormous creativity and productivity in the United States. Now, the balance of forces in the United States is such that that’s not going to happen, and you can see it by the virtue of the fact that even the most apparently left-wing liberal of commentators aren’t calling for this. It’s quite remarkable they’re not calling for it, especially when so much infrastructure is so desperately needed, especially when the society’s most creative artists and playwrights and intellectuals and writers are increasingly finding it difficult to get their work out in the context of this crisis.

JAY: The argument against it is that the government debt is already so enormous, and that if you have this kind of direct jobs program, not just ideologically–is abhorrent to a lot of sectors of the American society, given that everything’s supposed to be done through the private sector. But even if you set that aside, they say they just can’t have a bigger American debt without eventually–or sooner than eventually–causing a crisis of confidence in the US dollar and so on.

PANITCH: But as you said, the people were calling for twice the size of the stimulus, and that would have presumably the same effect in terms of scaring those who are lenders to the United States. The question is what that spending is going to go toward. And if it doesn’t go towards direct employment, it probably isn’t going to have the effect that it should have. Now, you’re right, I think you’re absolutely right that this would scare capital enormously, but rationally it shouldn’t, because so much of this expenditure would be in the creation of assets. It would be in the creation and the building of infrastructure. What could be better than borrowing–and you could have, indeed, targeted borrowing, that is, you could be issuing bonds directly for this purpose–to rebuild America’s infrastructure? This is desperately needed. It’s a long-term asset. It could be oriented to green technology, to dealing, in that sense, with the climate crisis, the ecological crisis, as well as the economic crisis.

JAY: But if you’re sitting on a lot of capital, particularly if you have that capital invested in businesses that hire people, there’s maybe two good reasons why you wouldn’t want to do this. I mean, when it comes to the issue of worrying about global confidence in the dollar and the concern of the debt, they don’t seem to be that concerned when it comes to the issue of extending the Bush tax cuts, which we know will add billions of dollars to the debt. But there’s another side to this, which is if you have a big government works program, it takes the heat off workers who are fighting for contracts and in negotiations with their employers. Right now it’s interesting to note that American factory wages are, I think, at historically low levels. And they recently–this two-tier agreement that took place in Detroit, where new workers are going to make half what older workers make, and when the older workers retire, essentially, the starting wage at General Motors, for example, will be $14 an hour. And then there’s been contract concessions won by employers at Harley-Davidson and a few other companies that have the same two-tier effect, because they threaten to move these companies out of Wisconsin and move them to lower-wage areas of the United States, not overseas. So is part of this whole issue is this is just a great time to beat up labor?

PANITCH: I mean, ultimately this is all about class relations and class power. Of course. That’s absolutely true. And if you did employ people directly in the state, you’d be employing them given the labor standards involved in state employment at high standards, which would set an example for the private sector. Even if you reduce unemployment, you begin to reduce the enormous fear that American workers have and make them willing to accept the kinds of horrible concessions that unions have agreed to in order to save what jobs they can, without, I must say, calling for the kind of thing I’m calling for, astonishingly enough.

JAY: Yeah, we talked to someone who works at a grinder plant in Massachusetts that has 3,000 employees. It’s actually a French-owned company with manufacturing places around the world, but one of the bigger ones is in Massachusetts with about 3,000 people. They’re trying to fill 100 jobs there, and so far they’ve only filled 50, and they’re having trouble because people are on unemployment insurance. I asked the guy, well, what are they paying? And it’s only about $3 above what people are collecting on unemployment insurance. And they say, why should they bother? Well, I said, there’s an easy solution: why don’t you pay more? So you can see even unemployment insurance is a somewhat upward pressure on wages, which is why there’s such an assault on extending unemployment insurance.

PANITCH: That’s absolutely correct. And that’s why pressures have always existed on social programs not to interrupt the capitalist labor market, not to get in the way of people’s fears that they may not be able to get employment. That’s a very interesting example, I must say, a very interesting example–the limitations of the Keynesian welfare state in a capitalist economy. We saw that back in the 1960s, when the crisis in the 1970s was produced by full employment, when workers were so confident that they were prepared to tell their bosses, when they told them to work harder, to screw off, or indeed when they made very high wage demands. We see it at the other end today in the kind of example that you’re giving. But, you know, to a certain extent this is going to get much worse, unless we make very, very radical changes, unless labor movements and intellectuals start making far more radical and forward-looking demands than the defensive ones they’re making at the moment, because there’s an inherent logic of capitalist globalization. Capitalist globalization has essentially been about capital moving around the globe to land on the backs of newly created working classes around the world–in China, in India, in Brazil, in Ireland. And they’ve been able to get those workers at lower rates of pay. It’s inevitable that the effect of this will be to bring down the rates of pay in the advanced capitalist countries, where through a century of struggles and trade unionization and all the advantages of just being where the strongest capital was located originally, workers were able to raise their standard of living using democratic rights of trade unionism and the right to vote and working-class parties etc. to win higher wages. The effect of what’s going on through globalization now is to drive down, equalize wages everywhere. Now, it’s going to take a very long time (it won’t be easy to do–these are very different cultures) before the wages of a worker in Massachusetts is going to be equal to the wages of workers in Bangladesh. That ain’t about to happen tomorrow. But the trends and the pressures in that direction are there. And what–when you hear that the solution ought to be that China increasingly sells its products, or that GM sells its products to Chinese workers, involves an assumption that Chinese wage workers will be able to lift their wages up and engage in the same kind of race for a standard of living as we’ve had in North America, as if that was ecologically possible, while Canadian and American wages correspondingly fall. That’s the logic of the situation we’re in. And unless we get out of this, we’re in a competitive race to a much, much lower standard of living.

JAY: Thanks for joining us, Leo. Thank you for joining us on The Real News Network.

End of Transcript

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