Review of ‘Central Bankers at the End of Their Ropes?’, Clarity Press, August 2017, by David Baker

Jack Rasmus has written a series of important books about the global economy; the critical question is, important or not, why would the general reader make the effort required to read any of them? The best answer comes from Noam Chomsky who tells us that we face two existential threats, nuclear holocaust and the environmental collapse called climate change. Those threats to tens of millions of people worldwide can only be mitigated by bringing back real democracy from the shadow of the empty political theater which we currently endure; but to bring back real democracy, we need to understand what destroyed it and what destroyed it is the collection of economic engines called neoliberalism. The most reliable guide to understanding neoliberalism is Jack Rasmus; his book, Central Bankers on the Ropes, examines the fundamental role of central banks in our new, savage global economy.

The word savage would puzzle Volker, Greenspan, Bernake, Yellen et al but it

accurately describes neoliberalism’s impact on the world; the lower 90% are collateral damage in the service of the 1%. But the central banks have always served rulings elites; kings and princes historically have financed their endless wars with the help of the institutional ancestors of central banks; in more modern times, central banks provide trillions of dollars in cash, in various forms, to the financial industry which in turn have been used to prop up the stock and bond markets world wide; offshore jobs, gamble in financial instruments, and pour out dividends. The central banks are in effect a conduit straight to the one percent; as fast as legal tender is electronically printed, it ends up hoarded in their accounts, where it stays.

Jack Rasmus is excellent at peeling away the layers of economic deceit to demonstrate that the rivers of cash pouring out of the central banks does not bring prosperity to the lower 90%; the idea that prosperity is even trickling down is empty ideology. The way in which he peels away the layers of deceit is by examining each of the central banks, in turn, The Fed, The Bank of Japan, the EU Central Bank, and the Central Bank of China, and determines which if any is actually achieving their publicly announced goals. These goals include inflation at 2%; interest rate stabilization; money supply stabilization; bailing out major financial institutions during economic downturns, and increasing GDP.

With the exception of China, each central bank has failed in all of their stated goals. Since their publicly stated goals are not being achieved, we have to examine their actual outcomes to determine what their real goals are and ultimately after peeling away all the layers of deception, their real goal to help the one per cent, by propping up stocks and bonds, providing capital to offshore jobs as well as gamble in financial assets.

The case of China is of particular importance because prior to the 2008 collapse, China pulled out of economic downturns relatively quickly and easily and did achieve its announced goal of significant increases in GDP. What happened after 2008, is that China changed its mix of monetary and fiscal policy, conventional banking, and strict restrictions on capital flows. But because China wanted its currency used as a major trading currency, it was pushed by the rest of the world banking community to open up its economy to capital flows and allow non conventional banking, i.e. shadow banking to operate within in its borders. This was a huge mistake; once China made this shift in policy, it could no longer pull itself out of downturns easily and it is finding it harder and harder to maintain its GDP goals. It has fallen into the chronic subsidization trap of financial institutions.

It is this paradigm shift, the chronic subsidization of financial institutions by central banks world wide that is the key finding; it is why central bankers are “on the ropes.” Historically, one of the major roles of central banks has been to bail out large financial institutions when they fail. Which is exactly what the Fed and others did during the 2008-2009 collapse. But by 2010, the financial institutions were stabilized but the trillions of liquidity injections, quantitative easing and low or no interest loans, continued. Why? Because the banking industry and the one per cent were making so much money from what became chronic subsidization, a subsidization that continues to this day. And here is the problem. The central banks know that a serious downturn is coming; if they continue to generate trillions of dollars in world wide debt through the extension of credit then the inevitable collapse becomes greater; but if they stop, they also risk a huge collapse since the rise in financial assets worldwide has nothing to do with the real economy but is propped up by the central banks.

Rasmus also documents another element of the central banks dilemma; they can’t raise interest rates. The central banks want to raise interest rates, for many reasons but one important reason is because it allows them to lower rates when the inevitable financial bust comes. If they can’t raise rates now, they can’t lower them when the bust comes; likewise, if they can’t stop the cash distributions now, they have nothing left in their monetary weapons to use when the crash comes. Over and over again, throughout history, it was the raising of interest rates by central banks that plunged the world into either recession or depression. So we are truly looking at the abyss since the coming collapse will be more violent, due to the rising oceans of debt [over $20 trillion] and the central banks have no monetary weapons left, either cash or lowering interest rates.

Which brings me to the heart of the debate, what in the austere language of economics is called Fiscal Policy versus Monetary Policy. Progressive fiscal policy is what finally dragged the US out of the Great Depression; it is what Ronald Regan sneered at as “Tax and Spend”. For a progressive, you tax based upon ability and spend based upon need; and, during the 1950’s and 1960’s, the progressive tax and spend policies produced prosperity for all. If you think about it, taxes are the only way to generate capital without falling into the credit/debt trap. Not so with monetary policy.

Monetary policy is economic policy driven by the central banks who in turn serve the one percent. There are many tools that can be used in Monetary Policy, the most well known of which are electronically printing low or interest free loans as well as direct buys of stocks and bonds and raising and lowering interest rates. What Jack Rasmus provides is the insight that the one percent are not willing to wait for prosperity to “trickle up” from the lower 90%; they want instant cash now, as fast as the Fed can electronically print it. Even if it brings down the entire world economy. The lower 90% can wait, apparently forever.

Once again, China did provide an interesting contrast prior to 2008; it had a true fiscal policy, not the fiscal austerity that monetary policy demands. China made and continues to make enormous expenditures on infrastructure, on a scale close to the fiscal policies of the US during WWII. In sharp contrast, none of the other central banks or economies examined engage in this kind of fiscal policy; the case of the EU is quite extreme; they are prohibited by their enabling legislation from engaging in any fiscal policy other than fiscal austerity.

Extraordinary dangers require extraordinary measures. Jack Rasmus concludes with a proposed US constitutional amendment that would place The Fed under strict democratic controls such as nationalizing all banking, prohibiting shadow banking and casino capitalism, placing strict controls on capital flows, and making the explicit goal of The Fed the raising of household disposable incomes. There is a body of scholarly work that demonstrates that the US Constitution was designed to protect investor rights [see e.g. An Economic Interpretation of the US Constitution] so why not amend it and finally give the people control over their economy? One criticism of this proposal is that it really doesn’t go far enough; doesn’t global capitalism require global controls? Thomas Piketty in his groundbreaking work, Capital, proposes just that.

David Baker

Review of ‘Looting Greece: A New Financial Imperialism Emerges’, New Politics, Winter 2017

“Reflections on Opportunity Lost
Greece and the Syriza Experience

A Review of ‘Looting Greece: A New Financial Imperialism Emerges
By: Jack Rasmus
Clarity Press, 2016, 315 pp., $24.95.

Stylistically, Looting Greece departs sharply from the memoir-like quality of Helena Sheehan’s book. Yet in writing such an analytically clear, historical account of the European and Greek debt crises, Jack Rasmus also has made a valuable contribution.

The book is divided into ten chapters, the first five of which deal with the evolution of the debt crisis prior to the coming to power of the Syriza government in January 2015. Chapters six through nine offer a blow-by-blow account of the failed strategy of Syriza in its dance with the creditors. The last chapter provides a broader overview and comparative analysis of how and why the Troika prevailed. Finally, in an extended conclusion, Rasmus puts forward an argument for financial imperialism as a new and growing form of imperialism.

For Europe, the creation of the European Monetary Union (EMU) and European Central Bank (ECB) in 1999, and the Lisbon Strategy, mark the origin of the current debt crisis. The ECB embarked on a devaluation of the EMU that led to external devaluation, which boosted trade. Simultaneously, internal devaluation occurred through labor market flexibility, that is, reducing labor security, wages, and benefit costs. Germany was the first to engage in neoliberal policies, with internal labor market changes known as Hartz reforms undertaken by a Social Democratic government; these kept German wages stagnant for nearly a decade and created a base for the production of cheap exports. With the German Bundesbank essentially dictating policy to the ECB, and cheap money and cheap goods flowing into the European periphery, the structures of the European economies were transformed. And so long as the money flowed back to the European central economies, primarily Germany, it was a virtuous circle for European capital. However, with onset of the 2008 economic crisis, this dynamic changed:

In addition to bank-provided money capital, German private foreign direct investment into Greece also rose from 1.4 billion euros in 2005 to more than 10 billion by 2008. As the money and capital to Greece was recycled back to Germany and the northern core economies in the form of exports, Germany got business profits, economic growth, and its money capital returned to it. In addition, as financial intermediaries in the recycling of money capital, both core and Greek banks got interest payments from the Greek loans and Greek bonds, Greeks got German and core export goods for a few years, but loaded up on credit and debt in the process for what appears will remain an interminable period of debt repayments well into the future (63-64).

When the banking and financial systems froze up in the aftermath of 2008, the cycle and flow of credit and money stopped between the European core and periphery. And when the peripheral (Spanish, Portuguese, Greek, and other) economies started to slow down, German exports and investment began to shift overseas. This further slowed the flow of credit. As Greece had been running an internal trade deficit with Germany, the initial impact of the credit crunch in Greece was that private banks became loaded with debt, monies that had been borrowed to facilitate imports from Germany.

Rasmus does a good job of showing that this trade deficit was caused neither by higher wages to the Greek working class nor by escalation in Greek consumer spending. Rather the debt was driven up by European Union and ECB policy, in the interest of European capital.

Looting Greece then takes the reader, in exacting if painful detail, through the distinct though compounding circumstances that led to each of the three austerity memoranda.

The first memorandum provided that a total of 110 billion euros was “lent” to the Greek government, 91 percent of which went to bailing out the banks that had been left with bad loans following the 2008 crash. The initial austerity measures demanded by the Troika were premised on unrealistic economic projections of growth but caused very real cuts in wages, pensions, and social security. And the result was a shifting of the massive debt load, mainly from the private banks onto the Greek government.

Then the second memorandum, argues Rasmus, “was primarily to refinance, pay off, and reduce Greek debt held by … private investors” (99), many of whom had already taken advantage of the bond markets to ramp up interest rates paid on Greek debt. Looting Greece does a great job in explaining the ways in which both the rules adopted by the ECB and the neoliberal ideology of “the German Hypothesis” (91), which drove their adoption, played a role in the cycle of debt and austerity that led to a humanitarian catastrophe in Greece.

Chapters five through nine offer an account of the rise of Syriza and a blow-by-blow telling of their approach to the problem of debt and austerity and the process of negotiations once the party came to power in January 2015. Rasmus’ account of the “institutional taming” of the Syriza government is painful to relive, but offers strong support for his argument that in the run up to the third Greek debt restructuring deal of 2015, Syriza and Tsipras would discover there was no option to return to social democracy and social democratic policies without austerity. The choice was either to leave the euro and the neoliberal regime, or remain caretakers for that regime on the system’s periphery, condemned to some degree of perpetual indebtedness, austerity, and long-run negative economic growth (118).

The last chapter provides an explicit assessment of the relative strategies of Syriza and the Troika and the structural/institutional straitjacket within which Syriza was attempting to negotiate. It also unequivocally answers yes to the likelihood of a fourth memorandum, given the logic of indebtedness and austerity and the current strategic course of the Greek government:

To have succeeded in negotiations with the Troika, Syriza would have had to achieve one or more of the following: expand the space for fiscal spending on its domestic economy, end the dominance and control of the ECB by the German coalition, restore Greece’s central bank independence from the ECB, or end the control of its own Greek private banking system from northern Europe core banks. None of these objectives could have been achieved by Syriza alone. Syriza’s grand error, however, was to think that it could rally the remnants of European social democracy to its side and support and together achieve these goals (228-29).

An extended conclusion to Looting Greece is entitled “A New Financial Imperialism Emerges.” In part, Rasmus argues that the views found in Lenin, Bukharin, and Hilferding, that finance capital is subordinate to industrial capital, need to be revised. The space devoted to this argument, however, is limited. While he argues that Greece has become a state dominated by the supra-national imperialist state of the Troika, given the degree to which sections of the Greek left have historically argued for Greece as a neo-colony, or one for which national oppression is primary, the full implications are not untangled by Rasmus.

Review of ‘Systemic Fragility in the Global Economy’, by Bob Jessop

Jack Rasmus studied economics at Berkeley, took his doctorate in the University of
Toronto (1977), and worked for many years as a union organizer and labour contract
negotiator. Then, after working as an international economist for global companies
(such as Siemens) and an international strategic analyst for some Silicon Valley start-ups,
he became a full-time independent economic researcher, author, journalist, radio host,
playwright, poet, lyricist, and activist. He also established Kyklos Productions and Jack
Rasmus Productions, which use different media, including stage plays and musicals, to
explain the long run changes in the USA and its future trajectory. He is currently Federal
Reserve Bank chair of the Green Party Shadow Cabinet and economic advisor to Jill
Stein, the party’s presidential candidate. This background is important for understand-
ing the theoretical novelty, persuasive power, political passion, and programmatic signifi-
cance of this book.

Systemic Fragility in the Global Economy (2015) is the fourth in a series that Rasmus
has produced within this broad intellectual and activist project. Each work not only
provides a theoretically-informed, empirically-grounded diagnosis but also offers a
wide-ranging set of policy recommendations aimed at progressive movements. The
first work was a detailed critique of the diverse upward wealth transfer mechanisms
employed in the corporate-government class struggle against subaltern classes and
groups in the Reagan-Bush-Clinton-Bush era (Rasmus 2006). The second, based in
part on major journal articles, was Epic Recession: Prelude to Global Depression (2008).

This also provides the theoretical foundations for his analysis of systemic fragility. Its
two main claims are that, first, the North Atlantic Financial Crisis (my term) is more
comparable to the recessions followed by stagnation that occurred in the USA in 1907-
1914 and 1929-31 than it is to normal cyclical recessions (marked by a brief contrac-
tion followed by a swift return to growth) or a classic depression; and, second, that the
explanation for epic recessions can be found in the interaction of debt-default-defla-
tion dynamics across the corporate, household, and government sectors. This work
was followed by detailed critique of the current and future policy failures of the Obama
Presidency and the presentation of an alternative policy programme and reform agenda
(2012). The fifth is concerned with the Greek crisis and the rise of financial imperial-
ism (2016).

The book reviewed here extends the analysis of epic recession dynamics, with declin-
ing growth, increasing fragility, and worsening instability, to the global economy. In
particular, Rasmus argues that the epic recession has been mutating as the financial crisis
becomes more general and directly weakens the ‘real economy’, generates secular stagna-
tion, and produces ricocheting contagion effects around the world economy exacerbat-
ing weaknesses in each economy and giving rise to distinct crisis symptoms in different
regions. Starting in the neoliberal, finance-dominated US-UK economies in 2007-2008,
in 2010-14 it affected the weak regional links in the advanced economies the Eurozone
and Japan before shaking China and emerging markets. Despite their different forms of
appearance (real estate, stocks, currency markets, government bonds), the underlying
causes remain excessive liquidity that fuel different kinds of speculative financial bubbles
and growing debt. The resulting crises cannot be tamed by fiscal or monetary means.
Indeed central bank liquidity injection and government fiscal policies exacerbate the
crises. Central bank responses have boosted liquidity, which has flowed into further asset
speculation rather than productive investment and is creating the basis for an even bigger
economic crisis. The detailed empirical analysis is backed by a sustained critique of inter-
national financial institutions, Wall Street shills and regulators, economic statistics and
statisticians, and, more importantly, mainstream economics, especially neoclassical econ-
omists and hybrid Keynesians (who seek to integrate Keynesian insights into neoclassical
economics), mechanical Marxists (who invoke the falling rate of profit to explain crises),
and the significant but now outdated contributions of Hyman Minsky to the analysis of
financial instability.

The theoretical novelty in this text compared with the author’s Epic Recession is a more
systematic presentation of systemic fragility. The possibility of recession, crisis, and
depression is given in the price system in general and the dynamics of financial asset
prices in particular, which differ in several ways from those of real asset prices and can
become fundamentally destabilizing under conditions of systemic fragility. For Rasmus,
this phenomenon is rooted in nine key empirical trends: slowing real investment; defla-
tion; an explosive growth in money, credit and liquidity; rising levels of global debt; a
shift to speculative financial investing; the restructuring of financial markets to reward
capital incomes; downward pressure on wages; the failure of Central Bank monetary
policies; and ineffective fiscal policies.

The case studies of the USA, Europe, Japan and China are excellent, typically contrar-
ian, and highly teachable. Many important and provocative arguments and points are
made in passing in these studies and they are strengthened by the more sustained theo-
retical analyses that follow. A major contribution is the analysis of the complexity of
shadow banking, an ill-defined term of art in most of the literature. I have found the
analysis of debt-default-deflation dynamics very helpful in my own research on crises and
the elaboration here is more detailed than in Epic Recession.

Nonetheless there are also three unresolved issues that will interest readers of
Capital & Class and are unlikely to be solved through Rasmus’s promised next iteration
of the analysis. First, perhaps reflecting his economic training and labour activism
in the USA and Canada, the critique of official dogma, orthodox economics and
Keynesianism is well-developed but the presentation and critique of Marxist theories
leads much to be desired, especially the critique of “mechanical Marxism”, and, com-
pared with his biting criticisms of other theorists, his grasp of Marx’s method and
arguments is disappointing. Second, relatedly, while the analysis of financial asset
price formation and debt-default-deflation dynamics is innovative, the articulation of
this analysis with the contradictions and crisis-tendencies in the circuits of productive
capital is weak. This matters insofar as the crisis of Atlantic Fordism in the 1970s and
1980s has a strong bearing on the rise of financialization and finance-dominated
accumulation in the USA and UK. And, third, the institutional mediation of crisis
dynamics in the political system, the influence of neoliberalism broadly considered,
and the specificities of political and ideological struggles that have shaped the rise of
finance-dominated accumulation, all deserve far more attention than they receive in
this text. The analysis seems at times to move uneasily between detailed empirical
description of crisis symptoms and dynamics, a general middle range theory of debt,
liquidity, and financial asset price formation, and a potentially class-reductionist
account of the social forces behind the rise of financialized capitalism. Paradoxically
this makes this book an excellent and cathartic text for teaching and activism but
leaves much unfinished business for those who want to relate this analysis to broader
questions of international political economy and political strategies that look beyond
the labour and green movements.

Bob Jessop, Distinguished Professor of Sociology, Lancaster University, UK
from ‘Capital & Class’, June 2016

References
Rasmus J (1977) The Political Economy of Wage-Price Controls in the U.S., 1971–74. Ph.D. thesis,
University of Toronto.
Rasmus J (2006) The War At Home: The Corporate Offensive from Ronald Reagan to George W.
Bush. San Ramon, CA: Kyklos Productions.
Rasmus J (2010) Epic Recession: Prelude to Global Depression. London: Pluto.
Rasmus J (2012) Obama’s Economy: A Recovery for the Few’. London: Pluto.
Rasmus J (2012) An Alternative Program for Economic Recovery. San Ramon, CA: Kyklos Productions.
Rasmus J (2016) Systemic Fragility in the Global Economy. Atlanta, GA: Clarity Press.
Rasmus J (2016) Looting Greece: a New Financial Imperialism Emerges. Atlanta, GA: Clarity Press.

Review of ‘Systemic Fragility in the Global Economy’ by Jan Pieterse

Advanced economies are in a rut of slow growth, the new normal (El-Erian), or is it the end of
normal (Galbraith 2014)? Growth was slim before the 2008 crisis and recovery after crisis has
been sluggish as well, with growth around 2% in the US (2.2% in 2017, according to IMF
estimates), 0.6% in the EU (2016), 0.7% in Japan (2016). An ordinary period headline is, ‘U.S. in
weakest recovery since ‘49’ (Morath 2016).

Emerging economies and developing countries (EMDC) face a ‘middle-income trap’ and
‘premature deindustrialization’; energy exporters see oil prices collapse from above $100 per
barrel to below $50 (2014) and advanced economies are in a ‘stagnation trap’.

Explanations of the conundrum are perplexingly meager. Many accounts are merely
descriptive, such as secular stagnation (Summers 2013)—noted, but why? Or, uncertainty—
which is odd because policies haven’t changed for years. Or, corporate hoarding—corporations,
particularly in the US, are sitting on mounds of cash, buy back their own stock, buy other
companies and reshuffle, but are not investing—noted, but why? Or, a general account is that
advanced economies are on a technological plateau, broadly since the 1970s (Cowen 2011,
Gordon 2016). With the rise of the knowledge economy and the digital economy (along with the
gig economy as in Uber, Airbnb and freelance telework), contributions of Silicon Valley (Apple,
Google, etc.), innovations in pharma and military industries, also in emerging economies,
innovations abound. However, as Martin Wolf (2016) notes, ‘today’s innovations are narrower
in effect than those of the past’. Besides, the shift to services in postindustrial societies means a
shift toward sectors (such as healthcare, education, personal care) where it is hard to raise
productivity.

If we consider policies, the picture gets worse because a) implemented year after year,
they clearly don’t work, b) indications are they make things worse.

Fiscal policy is generally ruled out because of fear of deficits. The policy instrument that
remains is monetary—low interest rates and quantitative easing (QE), implemented in the US,
UK, EU and Japan. Other standard policies are, in the EU, austerity—which may cut deficits but
obviously doesn’t generate growth (and by depressing tax revenues over time worsens
deficits)—and structural reform. Besides privatization, the major component of reform is labor
market flexibilization, in other words depressing wages and incomes. This has been
implemented in the US since the 1970s and 80s, in the UK in the 90s, in Germany in the 00s, and
is now on the scaffolds in Japan and France (and possibly Spain and Italy). The objective is to
boost international competitiveness by depressing wages and benefits, which a) ceases to have
effect when every country is doing the same, b) assumes the key problem is cheap supply,
whereas supply is actually abundant and what is lacking is demand, c) by depressing wage
incomes it further reduces domestic demand. No wonder these policies make matters worse.

Thus, explanations of slow growth fall short and policies have been counterproductive.
This is where Jack Rasmus’s book comes in. It offers the most pertinent analysis of the
stagnation trap I have seen. There are many steps to the analysis but it boils down to his Theory
of Systemic Fragility. I review the main points of his approach, for brevity’s sake in bullet form.

o Taking finance seriously, not just as an intermediary between stations of the ‘real
economy’ (as in most mainstream economics) but with feedback loops and transmission
mechanisms that affect the real economy of goods directly and indirectly.

o A three-price analysis—beyond the single price of neoclassical economics (the price of
goods), the two-price theory of Keynes and Minsky (goods prices and capital assets
prices), Rasmus adds financial assets and securities prices (408).

o The long-term, secular slowdown of investment in the real economy (chapter 7) and the
shift to investment in financial assets (chapter 11). This has been occurring because
financial asset prices rise faster than the prices of goods; their production cost is lower;
their supply can be increased at will; the markets are highly liquid so entry and exit are
rapid; new institutional and agent structures are available; financial securities are taxed
lower than goods; in sum, they yield easier and higher profits. Financial asset
investment has been on the increase for decades, has expanded rapidly since 2000 and
‘from less than $100 trillion in 2007 to more than $200 in just the past 8 years’ (212).

o In government policy there has been a shift from fiscal policy to monetary policy.
‘Central banks in the advanced economies have kept interest rates at near zero for more
than five years, providing tens of trillions of dollars to traditional banks almost cost free’
(220). Low interest rates and zero interest rate policies (ZIRP) benefit governments (it
lowers their debt and interest payments) and banks (affords easy money) while they
lower household income (lower return on savings and lower value of pensions), so in
effect households subsidize banks (471).

o Quantitative easing (QE) policies, massive injections of money capital by the US ($4tr),
UK ($1tr), EU ($1.4tr) and Japan ($1.7tr) since 2008, or ‘about $9 trillion in just five
years’ (185, 262). Add China ($1-4tr) and add government bank bailouts over time and,
according to Rasmus, the total global liquidity injected by states and central banks is in
the order of $25 trillion (263). The injections of liquidity into the system allegedly aim to
stimulate investment in the real economy (by raising stock and bond prices), which
raises several problems:

a Investment in the real economy isn’t determined by liquidity but by
expectations of profit.
b Funds that are invested in the goods economy leak overseas via MNCs investing
in EMDC, where returns are higher (and more volatile).
c Most additional liquidity goes into financial assets, boosting commodities,
stocks and real estate, and leading to price bubbles (177). ‘The sea of liquid
capital awash in the global economy sloshes around from one highly liquid
financial market to another, driving up asset prices as a tsunami of investor
demand rushes in, taking profit as the price surge is about to ebb, leaving a field
of economic destruction of the real economy in its wake’ (473).

The post-crisis attempts at bank regulation overlook the shadow banks, even though the
2007-2008 crisis originated in the shadow banks rather than the banks. (Shadow banks
include hedge funds, private equity firms, investment banks, broker-dealers, pension
funds, insurance companies, mortgage companies, venture capitalists, mutual funds,
sovereign wealth funds, peer-to-peer lending groups, the financial departments of
corporations, etc.; a typology is on 224.) The integration of commercial and shadow
banks is another variable. Shadow banks control in the order of $100 trillion in liquid or
near liquid investible assets (2016, p. 446).

Add up these trends and policies and they contribute to several forms of fragility, which
is the culmination of Rasmus’s argument. Rasmus distinguishes fundamental, enabling
and precipitating trends that contribute to fragility (457).

The explosion of excess liquidity goes back to the 1970s and has taken many forms since
then. QE policies amplify this liquidity and have led to financial sector fragility, which has
been passed on to government balance sheet fragility (via bank bailouts, low interest
rates, and QE), which have been passed on household debt and fragility (via austerity
policies). ‘Austerity tax policy amounts to a transfer of debt/income and fragility from
banks and nonbanks to households and consumers, through the medium of
government’ (472). This in turn leads to growing overall system fragility.

While Rasmus aims to provide a theory of system fragility, in the process his analysis
gives an incisive account of the stagnation trap. Many elements aren’t new. Note work on
austerity (Blyth 2013) and finance (Goetzmann 2016) and note, for instance: ‘The world has
turned into Japan,’ according to the head of a Hong Kong-based hedge fund. ‘When rates are
this low, returns are low. There is too much money and too few opportunities’ (Sender 2016).
However, by providing an organized and systemic focus on finance and liquidity, Rasmus makes
clear that the policies that aim to remedy stagnation (low interest rates, QE, competitive
devaluation, bank bailouts) and provide stability are destabilizing, act as a break on growth and
aggravate the problem. According to Karl Kraus, psychoanalysis is a symptom of the disease that
it claims to be the remedy of, and the same principle holds for the central bank policies of
financial crisis management.

This doesn’t mean the usual arguments for stimulating growth (spend on infrastructure,
green innovation, etc.) are wrong, but they look in the wrong direction. For one thing, the
money isn’t there. Courtesy of central banks, the money has gone by billions and trillions to
banks, shadow banks and thus to financial elites and the 1%. Surprise at corporations not
investing is also beside the point when government policies at the same time are undercutting
household income and consumer demand, reproducing an environment of low expectations.

Criticism of QE has been mounting, even in bank circles (‘it’s the real economy, stupid’).
Yet the role of finance remains generally underestimated. Rasmus’s analysis of central bank
policies overlaps with that of El-Erian (2016), but his critique of economics is more fundamental
and his theory of fragility and its policy implications are more radical. A turnaround would
require fundamentally different policies and, in turn, different economic analytics.

Let me note some reservations about Rasmus’s approach. One concerns the unit of
analysis—the global economy. His analysis overlooks or underestimates the extent to which East
Asian countries stand apart from general financial fragility. They have been less dependent on
western finance than Latin America and Africa and having learned from the Asian crisis of 1997,
they have built buffer funds against financial turbulence and tend to ring-fence their economies
from Wall Street operations. But, of course, this remains work in progress. Second, Rasmus adds
China’s stimulus spending to the liquidity injections of western central banks. However, the bulk
of China’s stimulus funding has been invested in the real economy of infrastructure, productive
assets and urbanization, which has led to over-investment, but which has next led to major
initiatives of externalizing investment-led growth in new Silk Road projects in Asia and beyond
(One Belt One Road, Maritime Silk Road, Asian Infrastructure Investment Bank, Silk Road Fund,
etc.). Meanwhile, Rasmus has made a signal contribution to contemporary economics and
provided a vitally important X-ray of the political economy of stagnation.

Jan Nederveen Pieterse, University of California Santa Barbara
in ‘Perspectives Libres’, Paris, 2016

References

Blyth, Mark 2013 Austerity: the history of a dangerous idea. New York, Oxford University Press
Cowen, Tyler 2011 The Great Stagnation. New York, Dutton
El-Erian, Mohamed A. 2016 The only game in town: central banks, instability, and avoiding the
next collapse. New York, Random House
Galbraith, James K. 2012 The end of normal. New York, Simon and Schuster
Goetzmann, William N. 2016 Money changes everything. Princeton University Press
Gordon, Robert J. 2016 The rise and fall of American growth. Princeton University Press
Morath, E., U.S. in weakest recovery since ’49, Wall Street Journal 7/30-31/2016: A1-2
Rodrik, Dani 2015 Premature Deindustrialization, NBER Working Paper No. 20935,
http://www.nber.org/papers/w20935.pdf
Sender, H., Short-term relief for hedge funds belies tough search for yield, Financial Times
7/12/16: 22
Summers, Lawrence, Why stagnation might prove to be the new normal, Financial Times
12/15/2
Wolf, Martin, An end to facile optimism about the future, Financial Times 7/13/2016: 9.

Review of ‘EPIC RECESSION: PRELUDE TO GLOBAL DEPRESSION’ by Yiqing Tang

From ‘Heterodox Economic Newsletter’, July 2013

In Epic Recession, Jack Rasmus introduces the term “Epic Recession” to analyze various economic crises, including the Great Recession that started in 2007. The author’s analysis is based on a presentation of a debt-deflation-default relationship in Epic Recessions in the context of financial and consumption fragility. Rasmus concludes the book by pointing out the flaws in the stimulus policy that the Obama administration employed, and provides alternative methods to promote economic recovery.

The book is organized in three main parts. Part I introduces the analytical framework that Rasmus uses to identify the quantitative and qualitative characteristics of Epic Recessions and their dynamic impact on the economy. Part II is a historical analysis of Epic Recessions in which Rasmus takes a closer look into U.S. Depressions of the 19rh century and identifies two types of Epic Recessions: “Type I” (1907-14) and “Type IT (1929-31). In Part III, Rasmus critically assesses the Bush-Obama policies in the wake of the 2007-2010 Epic Recession and provides an alternative route towards economic recovery. Incidentally, the book’s analysis stops in 2010, but its main argument is still valid in 2013.

According to Rasmus, unlike normal recessions, which are usually caused by temporary supply and demand shocks (p. 9), Epic Recessions are “precipitated by financial instability and crisis” (p. 24). Quantitatively, Epic Recessions usually fall in certain ranges of several economic indicators that the book specifically identifies, such as GDP and unemployment. Qualitatively, the formation of Epic Recessions is accompanied by close interaction among three factors: debt, deflation, and default, which create fragilities both in the financial and consumer markets. The author particularly argues that global liquidity explosion and speculative investing are great contributors to financial fragility, and to a certain extent, to consumption fragility as well.

Rasmus then analyzes several major economic crises in U.S. history. He divides Epic Recessions into two types. “Type I” Epic Recessions are financial crises followed by contraction of the real economy and long-term economic stagnation (p. 145). Here, monetary policy plays a huge role in stabilizing the economy and preventing future deterioration. The 1907-1914 recession is an example of “Type I” Epic Recession. “Type II” Epic Recessions are more severe. In these recessions, monetary policy can only temporarily stabilize the economy. Debt-deflation and default, together with financial and consumption fragilities, act upon each other, causing the real economy to constantly decline. The Great Depression is an example of “Type II” Epic Recessions. In both types, monetary policy can at most serve to stabilize rather than tackle the fundamental problems of the economy.

The Great Recession that started in 2007 is, according to Rasmus, an Epic Recession in which real assets did not absorb the explosion in global liquidity, which drove excessive speculation. Debt and leverage rose significantly, eventually leading to the financial crisis (p. 219). It is still not clear which type this crisis will become; the result depends on the policies the federal government implements. Furthermore, in Rasmus’ opinion, the Obama administration’s policy of injecting liquidity into the market only serves to offset the crisis temporarily, yet does not cure the fundamental problems of the current financial system. As a result, Rasmus offers an alternative program for economic recovery. He proposes governmental programs that promote long-term structural economic change in order to achieve the recovery. These programs address issues such as job creation, income inequality, and regulations of financial institutions.

The book thoroughly explains the causes of the current economic crisis through the theory of the debt-deflation-default relationship. This theory draws heavily on the works of John Maynard Keynes, Irving Fischer, and Hyman Minsky (p. 16). Rasmus argues that his work “fills the gaps” left in the works of these authors, including: (1) a focus on total debt (consumer and public) rather than just business debt; (2) an analysis of deflation based on a three price system: asset, product, and wage; and (3) a focus on debt and deflation affect defaults.

The last chapter of the book is a 28-point economic recovery program addressing a wide variety of economic issues including the foreclosure crisis, job creation and retention, taxing offshore profits, and regulating banking and other speculative activities. Taking a Keynesian approach to economic recovery, Rasmus puts a lot of faith in the federal government’s capacity to carry out such programs. The author does not give too much thought to the influence of special interest groups on public policy. Given the close relationship between big financial institutions such as Goldman Sachs and the government, aggressive regulations on financial institutions are more likely to be implemented.

Overall, the book provides an excellent assessment of the causes of the 2007 economic crisis and provides a solid historical and analytical framework for understanding Epic Recessions. The book is a great resource for undergraduate students and readers with basic economic knowledge. Heterodox economists working in the economic traditions of Keynes, Fisher, and Minsky will find this book engaging and thought-provoking.

Review of ‘OBAMA’s ECONOMY: RECOVERY FOR THE FEW’, by John Hall

From ‘Review of Keynesian Economics’, v.2, n. 3, Autumn 2014

Author Jack Rasmus tends to orient his research towards challenges facing the US economy. And in this recent title he carefully and skillfully delves into exploring what he regards as failures of the Obama administration’s policies, which can be justly summarized as ‘too little and too late.’ However, he stresses that the tepid recovery that began in 2009 did indeed generate one notable outcome, namely that the highest income earners in the United States increased their shares in national income, while the population at large suffered declines.

Rasmus describes the 2008 downturn as an ‘epic’ recession. He notes a Type I Epic Recession and a Type II Epic Recession, with the latter transitioning toward a depression. While he limits his book’s focus primarily to the US economy, Rasmus does call attention to the problems facing the European Union and the eurozone, which he attributes to the policy failures of uninspired leadership. In addition, with the once-impressive performances of the BRICS (especially China and Brazil) now cooling down, there is a real risk that failed leadership in the largest economies of the world could help to trigger a global depression. From this perspective, Rasmus suggests that the 2008 downturn could be classified as a Type II Epic Recession.

In his ‘Introduction,’ Rasmus traces the spending of $11 trillion dollars in federal funds, then seeks to measure the outcomes. He notes three economic stimulus programs advanced by the Obama administration that cost about $3 trillion dollars. Then, more than $9 trillion were relied upon to support banks. After all of this spending, Rasmus fails to find any positive outcomes. Although he does clarify that indicators of financial asset prices tended to recover from their 2008 levels, he stresses that non-financial indicators suggest only partial recovery of prior losses.

While the groups that gained and lost are considered in more detail as the main topic of chapter 1, chapters 2 and 3 develop the idea that the Obama administration sought to deal with the downturn by shifting the emphasis away from an effective spending program and toward adjusting the system of taxation, and with the consequences of substantial job losses and rising unemployment that was not effectively addressed. Rasmus notes that direct and substantial aid to homeowners facing mortgage foreclosures were considered, but in the end, as Congress took control of TARP funds, direct assistance for Americans diminished. And then as much as $50 billion earmarked as foreclosure aid was channeled into the Home Affordability Modification Program (HAMP), which tended to provide funds for mortgage lenders dominated by large banks.

The lag between formulation of policy and implementation is considered in chapter 4, and is noted to have contributed toward the failure in offering a substantial stimulus to the US economy when it was needed.

Chapter 5 considers the 2010 Economic Recovery Program and notes that the administration sought to emphasize increasing exports instead of directly concentrating on restoring the 25 million jobs that were lost early on in the crisis.

Chapter 6 juxtaposes the midterm elections of 2010 with what Franklin Roosevelt and Jimmy Carter had to deal with at the time of their midterm elections. In particular, Rasmus offers details of Roosevelt’s National Industrial Recovery Act, or NIRA, as a way to offer contrasts between the two approaches. Rasmus emphasizes that the NIRA led toward a more com¬prehensive set of policies and programs and developed into what we appreciate as Roosevelt’s ‘New Deal,’ with programs that certainly helped citizens mitigate some of the difficulties associated with the Depression decade. With this as background, Rasmus critiques the tendencies of the Obama Administration to shift from an emphasis on a stimulus-driven recovery, to focusing upon deficit reduction.

This leads into the topic of chapter 7 and the relationships between deficit management and the likelihood of a second major contraction in 2013 taking place as a ‘double dip’ recession. Chapter 8 offers details that suggest the US and world economy is indeed tending toward an economic depression. Rasmus considers several variables such as declines in consumption and investment spending, as well as government spending at the federal and state levels affecting, in particular, levels of public sector employment and the offering of public services such as education.

With its title,’ From Failed Recovery to Austerity Recession,’ chapter 9 details the opportunities missed through focusing upon budgetary austerity that have contributed toward an extended economic downturn.

Not giving over to a protracted lament on the hopelessness associated with the Obama administration’s politics and policies in this era of neoliberalism, Rasmus believes the US can avoid becoming mired in a depression. This is his expressed hope. And with his chapter 10 he outlines a set of common-sense policies and creative institutional changes designed to promote short-term, medium-term, and long-term recovery. Rasmus’s proposed recovery program focuses on jobs, housing, and state and local government reforms. He includes detailed proposals for a fundamental restructuring of the tax, retirement, and banking systems. He offers proposals that, in my judgment, would help the US economy to achieve the kind of economic growth that would generate benefits for broad sectors of the population, including young people, those in their working years including the unemployed, and the elderly.

A lack of talent has never been a serious problem for America over its comparatively short history as an independent nation. In 2008 and 2012, President Obama demonstrated his ability to assemble a brilliant team to help get him elected. Why can he not do the same by bringing in a team of economic advisers with talents equal to the members of his core election team.

Reflecting back, it seems that over his two terms, President Bill Clinton certainly engaged some of the best talent in our economics profession. He not only brought in talent with well-honed analytical abilities and that communicated effectively with the public, he also brought in talent that remained loyal to his administration, and some to the very end of his 8-year term. Some decades earlier, President John Kennedy invited to Washington exemplary talent, and there were selected economists who rendered his Council of Economic Advisers as the hallmark of what we as talented American economists could offer our nation. Lamentably, our ‘Council of Economic Advisers’ got sidelined during the Bush era. Now we have a ‘National Economic Council’ that has been headed by leadership better credentialed in jurisprudence than in economics. Sadly, it seems to me that we shall likely remain locked-in with a status quo: not led, but rather managed by the cautious and uninspired.

Finding little reason for optimism related to improvements on the policy front during the remainder of the Obama administration, still I think this is a fine book that is both timely and crucial to digest, for the themes are fully pertinent to the current US political economy. The arguments are well founded and based upon empirical evidence that is carefully researched, selected, and presented. This book could serve advanced undergraduates and graduate students focused on the US macro economy, its challenges, and the failures - at least to date - of our political class to effectively address challenges related to the recent financial crisis and the failed policies that have not, so far, set the US economy on the road to a sustained recovery.

Review of Book, ‘Obama’s Economy’, by Zoltan Zigedy

Jack Rasmus’ new book, Obama’s Economy (PlutoPress, 2012), is a marked departure from his earlier volume, Epic Recession: Prelude to Global Recession (PlutoPress, 2010). Where the earlier effort sought to provide a theoretical framework to understand the worldwide economic crisis that began over four years ago, the new book offers a detailed, critical history of President Barack Obama’s policy responses to that crisis. In fact, much of Obama’s Economy reads like a vivid, insightful diary of economic life during that period. Rasmus links these events into a powerful narrative that was easy to miss as we lived it.

This blow-by-blow account of economic decline and feeble policy response is all cast in the shadow of Obama’s campaign promises, promises that were neither bold nor progressive. As Rasmus demonstrates, Obama – the candidate – drew his financial support from Wall Street, surrounded himself with corporate-friendly, free-market-oriented advisers, and preferred caution and compromise to any bold, new vision:

Another clear conclusion from the campaign period is that once Obama had all but sewn up the nomination, he began a shift even further to the right. This was not unnoticed, even by the ultra-conservative editorials in the Wall Street Journal, not to mention columns by liberal economists like Krugman. To the extent that candidate Obama’s election-period programs were “populist? in any sense, they were positions largely borrowed from his Democratic opponents in the primaries. Most of these populist elements were de-emphasized in the fall election period, or soon after the election. Few would appear in his eventual 2009 first economic recovery program. (p. 33-34)
Beyond Rasmus’ account and well before the Presidential candidacy, Obama’s career was marked by sycophancy to power and wealth and by opportunism. What is truly pathetic is that so many who willfully overlooked the stark evidence and chose to embrace a Pollyanna picture of hope and change are now outraged at an imagined but non-existent “betrayal.? As Rasmus demonstrates, Obama’s economic course was largely predictable from his campaign promises. But then liberals and most progressives have been dining on the thin gruel of imagined Democratic Party “leftism? for decades. And they are at it again in this election cycle.

Rasmus sifts through the seeming chaos and improvisations of the last four years to find three distinct Obama recovery programs implemented in 2009, 2010, and 2011. In addition, Obama’s Economy identifies “two and a half? Federal Reserve actions (Quantitative Easings) meant to revive the slumping economy. It is Rasmus’s considered opinion that all these efforts failed to restore the US economy to anything like a sustainable vitality. The current abysmal state of the global economy and the sluggishness of the US economy would certainly suggest that Rasmus is right.

Further, he chronicles the bi-partisan, near-consensual debt-reduction mania that emerged in 2011, a development that found politicians competing with one another to suggest severe budget cutting and program elimination. Rasmus takes this anti-stimulative austerity to augur a “double dip? recession: a forthcoming decline in gross domestic product no later than 2013. In this, he is in agreement with the May 22, 2012 statement by the staid Congressional Budget Office which predicts a GDP contraction in the first two quarters of 2013 unless federally legislated measures are rescinded (the equally draconian state and municipal austerity programs are not a factor in the CBO calculations).

After reading Rasmus’ new book, one will find little to justify praise for the Obama administration. While the three trillion dollars of recovery programs (as tabulated by Rasmus) from March of 2008 until September of 2011 may have staved off an even deeper downturn, they have done little to revive the economy. And more than two thirds of these federal dollars were allocated on Obama’s watch.

Certainly from the perspective of capital and a wealthy and powerful tiny minority of our citizens, the recovery has been satisfactory, if not a rousing success: profits have been rapidly restored and, for those individuals, incomes and wealth are expanding. But for the vast majority in the US, wages are stagnant or dropping, benefits shaved or eliminated, living costs rising, home ownership in jeopardy, and employment tenuous; most of us are still looking for the recovery. And the economic data promise little improvement.

So if the Obama recovery program failed, why did it fail? And what might succeed? What should we advocate to save the majority from the devastation of this global economic catastrophe?

For the loyal opposition, most clearly represented by the high-profile, Nobel Prize awardee, Paul Krugman, the answer lies in the size of the stimulus programs. Obama and his administration failed to devote enough resources to bring the economy back. For these left liberals, size does matter. And the tragedy of Obama’s recovery program lies simply in pouring too little water on a raging fire, leaving hot embers that are about to re-ignite.

Of course this approach is merely a twenty-first-century revisiting of the ideas of John Maynard Keynes, ideas distilled from lessons he drew from the Great Depression of the 1930s. In its twenty-first- century incarnation, Keynesian solutions are advocated for their alleged ability to multiply or amplify economic growth as generated by government action. Neo-Keynesians, like Krugman, Stiglitz, Roubini, etc, see little difference in how or where governments act provided only that they generate more effective demand or investment push for economic activity. If recovery doesn’t come or if it stalls, more resources need to be committed.

Rasmus correctly challenges the simple, but flawed, remedy of the neo-Keynesians. Drawing on his understanding of the actual history of previous severe downturns—as described in greater detail in his earlier work—Rasmus stresses that the “where? and “how? of economic stimulus are of critical importance in generating recovery—it is not merely a matter of size, but also of composition, timing, and focus. Thus, tax cuts are proven ineffective stimuli, while jobs programs, infrastructure programs, government services, etc., often generate worthwhile outcomes. Likewise, the focus on restoring corporate health should not have overshadowed restoring home ownership, jobs, income and the stability of state and local government.

Unlike the formulaic neo-Keynesians, Rasmus respects the intent of the New Deal which was not conceived as a stimulus program, was not designed in its specifics as a recovery program, but, first and foremost, was implemented as measures to create jobs, provide humane living standards, and restore a popular sense of confidence. That is, the Roosevelt administration set out not to execute a general, comprehensive stimulus program for the flagging economy as did the technocrats in the Bush and Obama administrations, but to fix the many problems—unemployment, price deflation, impoverishment, financial distress, etc.—wrought by the Great Depression. All historians concede that the myriad New Deal programs—including the CCC and WPA jobs programs– were largely improvisational and trial-and-error. There was no overarching stimulus goal binding the programs together. Recovery would come when the broken elements were all fixed.

The idea of a stimulus program grounded in fiscal and monetary action is really a product of neo-classical economics, a conventional mode of thinking that captivates both the Obama administration and its neo-Keynesian critics. It is a toolbox approach linked to a mechanical model of the capitalist economy, an approach that smugly presumes that recovery is simply a matter of troubleshooting and tinkering with a fundamentally sound economic engine.

There is, however, a larger question that neither the liberal neo-Keynesians nor Rasmus addresses credibly, though Paul Krugman readily concedes its significance. After over four years of agonizing, painful economic distress, the global economy is mired in a crisis that, like the Great Depression, appears intractable. Certainly the measures taken by the New Deal administrators went a long way toward alleviating the harshest pains of the Great Depression; surely the many popular programs pressed by the Roosevelt team kept the economy from sinking even deeper; but on all historical accounts, these commendable efforts failed to generate the desired recovery. It was only the war build-up and subsequent world-wide conflagration costing tens of millions of lives, untold wounded and injured, and the production and unparalleled destruction of inestimable billions of dollars of wealth. Yes, World War II generated the recovery from the crisis of the ’30s, but at a cost in lives and resources far beyond what anyone could find acceptable.

Is a similar orgy of destruction – erasing debt, commanding production, and mobilizing the idle—necessary to escape the economic calamity of our time? Should we think that anything short of a planned, disciplined, state-directed war effort will rescue the US and world economy? Is war the only effective “stimulus? to a global economic catastrophe of this dimension?

Certainly, Rasmus is aware of this conundrum. In an aside in his earlier book, he states the following:

Wars have a double-edged impact on Epic Recessions and depressions… The financial panic of 1857 was cut short by the onset of the Civil War, which clearly dampened the potential impacts of the panic of 1857 on the real economy. The timing of the Mexican-American War in 1845 has yet to be analyzed as to its role in ensuring an end of the depression of 1837-43. Similarly, the Spanish-American War in 1898 perhaps not accidentally coincides with the ending of the depression of 1893-98… [T]he role of World War I in putting a definitive end to the Epic Recession of 1907-1914 is less debatable. The war put a definitive end to the extended stagnation period of 1908-14. (Epic Recession, p. 163)

Yet, if devastating wars are the only decisive solutions to the most severe crises of capitalism as history strongly suggests, then surely this raises the urgent question: Is capitalism worth saving? Is it time for a radical overhaul or replacement of the capitalist economic engine?

While I find much to admire in the writings of Krugman and other liberal public intellectuals, as much as I’ve learned from and appreciate the insights of Jack Rasmus, I am disappointed that they offer no answer to this, the most pressing question of our time. Indeed, they do not even acknowledge the question.

Since World War II, the US capitalist economy has become a perpetual war-time economy—first with the Cold War and now a contrived world-wide “war on terror.? When President Eisenhower warned of the “Military-Industrial Complex,? he was describing this new structural feature of capitalism in his own cautious words.

Nonetheless, even with the preferred “pump priming? of war and its associated economic “stimulus,? the global capitalist economy is now seriously broken. No way is it obvious or even likely that “repairs? are apt to be effective or that a recovery will ensue.

Thus a discussion – at the very least, a discussion – of socialism as an alternative economic system would seem to be in order. It is not surprising that a New York Times Nobel laureate would evade this question; otherwise, Krugman would be neither a Nobel laureate nor a New York Times columnist. It is disappointing that a writer of Rasmus’ integrity and acumen would not discuss its relevance.

The question of socialism is intimately linked with the politics of “recovery.? Rasmus, like the New Deal liberals (a brand of liberalism far to the left of what passes as “liberal? today), offers a people-oriented program that promises to restructure capitalism in a way that would dampen many of the inequalities and injustices generated by the capitalism of our time ( though I don’t share his confidence that it would revitalize the capitalist economy nor do I want to “save? capitalism).

His program in Obama’s Economy is one that, popularized and adopted by a broad political movement, could serve us all well for the immediate future. It is bold and daring, engaging the government in employment in a way unseen since the New Deal. It reverses the housing crisis and protects and strengthens the social safety net (While it mirrors the programs advocated in Rasmus’ earlier book, Epic Recession, it curiously and unfortunately gives too little attention to a single-payer healthcare solution in this version).

But in sharp contrast with the New Deal liberals, there is no political vehicle for this program. Certainly the Democratic Party has not and will not adopt it. The Democratic Party of the twenty-first century is Obama’s Party and not even a vague shadow of Roosevelt’s Democratic Party. And today’s weak labor movement has shown neither the desire nor gumption to re-shape or divorce the Democratic Party and opt for such a course. That leaves the fine Rasmus economic plan outside of US politics looking in.

Conversely, the socialist option will become increasingly attractive to millions of people as the global economy continues to sink and the wholly capitalist-owned political system continues to block any popular challenges to take-no-prisoners capitalism. Thus, the most urgent task is to ideologically and organizationally prepare a vehicle to advance that option.

Whether others agree with me, the wasteland of US mainstream politics leaves plenty of room to advocate independent, broad-based movements that will adopt a progressive program embracing the recommendations so persuasively argued by Rasmus. I regret that Rasmus does not engage in this advocacy in Obama’s Economy; perhaps he will in a later book. Nonetheless, I can wholeheartedly recommend the book for its unparalleled recounting of the economic failures of the Obama administration and its detailed, well-argued plan for the opening stages of the founding of a people’s economy.

Zoltan Zigedy

Review of Book: ‘Obama’s Economy: Recovery for the Few’ by Carl Finamore

Forthcoming ‘Z’ Magazine, June 1, 2012
By Carl Finamore

Apparently, economics is one of the most popular electives in Ivy League schools. Admittedly, it can be a difficult and confusing subject. Particularly, it appears, for undergraduates from these very elite colleges.

According to a survey in the Wall Street Journal published a couple of years ago, most of them walk away from their brief classroom introduction with blind faith in an unfettered and unregulated market economy.

Perhaps this explains Harvard graduate Barack Obama’s June 2008 comment to cable business channel CNBC that “I’m a pro-growth, free market guy. I love the market.?

Maybe they’re all reading the same books. I have another recommendation.

It comes fresh off reading economic professor Dr. Jack Rasmus’ latest book published by Pluto Press – Obama’s Economy – Recovery for the Few. In refreshingly clear descriptive language, Rasmus presents a devastating indictment of the last four years of utterly failed government policies and their underlying false precepts.

No cheerleading for the private sector cabal of banks and corporations here. Why should there be? Outside of Ivy League classrooms, what exactly has blind faith in the market accomplished?

Look no further than the very apropos book title - recovery for the few.

Rasmus cites 2011 business journal reports that “corporations have a higher share of cash on their balance sheets than at any time in half a century…rather than invest[ing] in new plants or hiring.?

Banks are no different. The author explains that banks are sitting on “$1.7 trillion in excess cash? which they refuse to extend for mortgage relief or as credit for small businesses.?

The author breaks down how banks received low interest and, in some cases, zero interest bailout funds of nine trillion dollars, without any obligation or intention to help out millions of working people facing foreclosures.

It may also shock readers to learn that insurance policies reimburse bank mortgage losses at higher, pre-crash market rates. And, Rasmus reveals how quasi government mortgage agencies like Freddie Mac and Fannie Mae extend exactly the same favor to their banker friends.

This is a far better deal than renegotiating lower principle and interest payments with desperately “underwater? homeowners.

Free Market is Free Money for the Rich

And, just when you think it can’t get worse, other chapters disclose one of the most unscrupulous policy scandals of any recovery program. Banks were actually urged to park their zero interest or ridiculously low 0.25 per cent interest bailout funds with the Federal Reserve Bank (Fed) where they were paid more millions in interest for doing nothing.

Corporations are no better. Rasmus describes how they are sitting on a huge stash of $2 trillion, much of it resulting from government tax cuts.

This money is being invested in more profitable overseas markets or is being used to buy up their company stock, a move that inflates the stock value and, thus, increases dividend payments to fortunate shareholders.

Neither of these extremely profitable ventures produced jobs in this country.

Therefore, Rasmus concludes, rather than just simply arguing for more government spending as some liberal economists do, it’s far more important to challenge how the money is being spent, something economists call the composition of expenditures.

In other words, who receives bailout funds and what do they do with it.

I asked the author to further explain how he differs from other progressive economists. “My other difference with liberal economists,? Rasmus replied, “is that if corporations are hoarding their tax cuts and squeezing profits from labor the past four years, then government should and must tax them and create jobs directly itself.

“The market created the crisis and you cannot rely on the market to resolve it. Government must directly create jobs, and to do so without raising deficits there must be a radical restructuring of the U.S. tax system.?

To illustrate his point that Obama’s exclusive reliance on the private sector has been a complete disaster, Rasmus produces ample evidence that this is the most “lop-sided? recovery of the post WW II era.

For example, while the majority is suffering significant loss of spending power from the deep recession, he explains in the book how stock and bond investors have achieved extremely high returns and how corporate profits have snapped back “to record highs not seen in decades.?

Rasmus targets Obama’s policy for these cockeyed results and for producing other ruinous consequences - not increasing employment, not halting foreclosures and not ensuring sustained state and local government revenue. As only one example mentioned by Rasmus, upward revisions of the current low tax rates for the wealthy and for corporations could alone offset most government deficits.

Three Strikes and We are Out!

Other chapters thoroughly delve into Obama’s three-pronged recovery program of tax cuts, temporary subsidies to states and local governments and cash handouts to the private sector.

In fact, the author believes these government policies have generated another downturn in job losses and foreclosures.

As Rasmus points out, “there has never been a recovery of the economy from recession since 1947 without a sustained recovery of jobs, without the housing sector leading the recovery, and without state-local government increased spending on jobs and services.?

The government has completely failed to provide direct funding to solve these chronic problems – no funding to the 25 million unemployed for a massive, government-sponsored jobs program as was done during the Great Depression and no direct funding to some sixteen million “underwater? homeowners facing foreclosures now at around levels of 200,000 month.

Rasmus examines in depth how Obama and congress provided billions of dollars to banks without any obligation to renegotiate home loans and provided billions to corporations without any obligation to create new jobs.

This quick read of 177 pages is really a nice companion piece to Rasmus’ earlier 2010 work, Epic Recession, Prelude to Global Depression. But here Rasmus focuses his critical review less on theory and more on policy, examining decisions that have deepened the crisis and burdened further the overwhelming majority of people by favoring banks, corporations and the very wealthy.

As the author concisely summarizes: “So long as current economic recovery policies focus on more tax cuts for business and investors, on more subsidies for corporations, more free trade, more deregulation, and more deficit cutting for the rest of us—there will be no sustained recovery.?

What do we do Now?

Before becoming a trained economist, Rasmus served several stints as a union representative and organizer. He brings that knowledge and experience to his current profession. The last chapter in the book contains a full social and economic program that, in his view, will result in a dramatic reversal of the serious downward trends he predicts will only worsen, perhaps to the point of a global depression just a few years ahead of us.

His proposals are quite thoughtful. They include immediate relief to homeowners and the unemployed along with long-term structural reforms.

For example, it is quite interesting to review his detailed proposals fundamentally restructuring the tax system and a similar overhauling of the banking and retirement systems that in the longer run, Rasmus explained to me “ will shift income back to the middle and working classes and expunge their debt burden. Without these changes more ‘2008-like’ crashes are in our future, just as they are unfolding today in Europe.?

In every case, his initiatives contain revenue sources that, predictably, do indeed place the burden on banks, corporations and the wealthy. But, for example, he suggests increasing corporate tax rates that return to 1980 levels. These are still far lower than business tax rates of the 1950s.

In this sense, Rasmus frames his program as realistic appeals to the majority of people. That is, while they do indeed require struggle against the entrenched interests of the one percent, the suggested reforms are also capable of being considered both reasonable and necessary by millions who today believe the rich should be taxed more.

I strongly recommend this very readable primer for those interested in understanding more thoroughly how economic policy affects us, how it has been shaped by the upper crust and how new radical reforms can earnestly get the attention of the majority whose support and action are so desperately needed to shape a new reality.

Carl Finamore first met then-CWA Business Agent Jack Rasmus some thirty years ago when Rasmus was leading a militant strike in Oakland, California. Finamore is a delegate to the San Francisco Labor Council, AFL-CIO. He can be reached at local1781@yahoo.com and his writings viewed on http://carlfinamore.wordpress.com/

Review of ‘Epic Recession: Prelude to Global Depression’ by Doug Dowd

by Doug Dowd,
October 2010

It’s Wakeup Time

There are thousands of economists in the USA and thousands more in the rest of the world but, as readers of this journal well know, not more than a handful of those thousands can be trusted to blow a warning horn when serious economic trouble is around the corner; or even when it has arrived. With his several books and many articles of recent years, Jack Rasmus has been a member of that tiny club; his Epic Recession makes him one of its leaders./1/ The term “epic recession? is seldom used, so it is appropriate to begin with the clarification given by Rasmus in his book’s “Glossary?:

Its characteristics are similar to both a normal recession and a depression; like a depression it is precipitated by financial instability. Quantitatively it is more severe than a normal recession but less severe than a depression in terms of depth, duration, deflation, and other indicators. But unlike a normal recession, forces of consumption and financial fragility are present…and processes of debt-deflation-default begin to emerge…. When the latter and dual forms of fragility intensify and are allowed by policymakers to deteriorate, the containment of an epic recession by traditional fiscal and monetary measures becomes increasingly difficult, may result in a second financial banking crisis, and its causal interdependencies may push the economy into a classic depression. If the debt-deflation-default processes and fragility are stabilized and prevented from deteriorating further, but not necessarily corrected and reversed, then epic recession may result in an extended period of economic stagnation in lieu of depression or sustained recovery.

This book has arrived none too soon, and it brings back disturbing memories of the 1930s. Then, month by month and year by year, as the financial crackup of 1929 was becoming the worst depression in history, the economics profession was humming “Prosperity is just around the corner? Even Keynes, the economist who finally understood how and why it was disaster– not prosperity, coming around the 1929 corner– did not see that until 1936(in his General Theory of Employment, Interest, and Money). By then horrendous damage had been done, with the official (then and still) understated unemployment rate of 25%. U.S. unemployment never went below 10% until World War II sent 16 million US workers into uniforms. The price was high: tens of millions dead and unknown millions wounded in Europe and countless ruined lives plus millions more in the Asian war. This time we can’t wait that long, if only (but not only) because in the next and all too possible world war (as a popular song of the 1960s put it) “We’ll all go together when we go.?

Economists are –or should be – infamous for making their arguments in the language of mathematics, as though determined that none but their fellow servants of the status quo will understand them. Rasmus is at home with the numbers game, but he also knows that ongoing socio-economic trends carry disaster with them unless the general public is enabled to understand today’s whys and wherefores and set ourselves on a healthy path. His book provides that understanding for all concerned. Not only does he write in readable language, he also provides a substantial set of lessons for understanding the relevant aspects of today’s political economy and proposes steps for achieving a safer and decent society. /2/

What follows attempts to convince its readers of the importance, the validity, and the clarity of this work, with the belief that having done so they will be prompted to increase their political efforts. Rasmus shows that, more than ever we must push politicians’ attention to the needs of the public and away from the wants of the powerful. Our Congress is thoroughly corrupted for a the top one percent; it is taking us always deeper toward a many-faced disaster.

The structure and content of this review is meant to have it read, its importance grasped by all; that we all become more involved politically. Unless we get to work to bring about a world “by and for the people,? the powerful minority now ruling us it will continue to take us – and the world –not only to global depression but into the worst war ever.

The book is divided into three parts: 1) the nature of an “epic recession?; 2) a survey of depressions and epic recessions of the past, and 3) a sustained analysis of today’s “epic recession.? The latter is followed by an “alternative program? for economic recovery; and the need for our substantial political activity if it s to be attained.

It is relevant to compare this book with The General Theory of Keynes (noted above): 1) This book is readable by all; Keynes wrote for economists, but Rasmus writes to the public and economists 2) he is a strong critic of capitalism; Keynes took capitalism for granted. 3) Although the reforms proposed by Keynes were much better than nothing, they were too little and too late; the alternative program for recovery of Rasmus is broad, deep, and comprehensive. 4) The strengths and virtues of his book not only give the reader a firm grasp of the many dangers of our time – economically, politically, militarily, and environmentally -– they also show that it is up to us if the dangers are to be dealt with safely and decently. When Keynes wrote, all hell had already broken loose with worse on its way in its political economy and its wars; in our day, it is all too possible that the future will be worse in both respects if those now in power stay in power. The intent of following discussions is to prompt you to read the book and act upon it. I begin with the book’s first three chapters.

“Part One: Theory.? The theory is complicated; but Rasmus has sensibly taken great pains to make these and his other analyses readable for non-economists, beginning with an explanation of “epic recessions?:

‘Epic recession’s dominating characteristics are: a) quantitative, b) qualitative, and c) in its dynamics. Quantitative characteristics differentiate “epic? from “normal? recessions by the depth and duration of their economic decline, and their debt, deflation, and default. b) The distinguishing qualitative characteristics include financial instability and fragility, a large “shadow banking system,? consumption fragility, a shift to speculative investing compared with traditional forms of investing, and global synchronization of the crisis. c) The dynamics include several sets of particular relationships and inter-dependencies between speculative and non-speculative investing and debt; between debt, deflation, and default; between defaults and financial and consumption fragility; and, between governmental fiscal and monetary policies and the key processes of debt-deflation-default and fragility. The dynamic characteristics focus on the processes by which quantitative and qualitative characteristics are mutually determined.’

“Part Two: History.? This part’s three chapters distinguish between “epic recession? and “depression.? Chapter 4 discusses the several depressions of the 19th century; Chapters 5 and 6 the “epic repressions? of 1907-14 and of 1929-31. The latter, of course, evolved into what came to be called “the Great Depression.? We will confine our attention to how the “epic recession? of 1929 evolved into the Great Depression; how and why will be specified as we proceed. I begin with quotations from Chapter 6, which – in showing the confusion and errors concerning that depression – can be of great value for today’s “epic recession? I quote:

‘The depression was not single monolithic event… but had several phases and phases within phases….. Started in 1929 and declined into 1933, punctuated by a series of four banking crises, each worse than earlier…. culminating in the near collapse of the entire financial system in March, 1933. From 1933 to 1935 the economy was partially stabilized with some recovery in 1934. By early 1935 a third phase of the depression began and continued into 1937 lightened by the New Deal. A fourth phase in 1937, as the New Deal began to be dismantled under pressure from business/ and the economy collapsed…, and substantial unemployment returned and consumption of durable goods declined….. Full recovery did not take place until 1941-42, as the USA went to war.’

As I now turn to the present and its fluttering recession, it is well to have that history in mind, lest we allow ourselves to go from one level of recession after another and then into depression, as Wall Street and its friends in D.C. continue to tell us that “prosperity is just around the corner.? There are, of course, many differences between that past and this present, but one similarity that should be alarming (and will be noted later) is that our ongoing economy remains weak despite trillions of military expenditures; although war billions got the USA out of 1930s depression, today’s war trillions don’t even get us out of a recession. The needed policies were not put in place by Wall Street’s Congress in the 1930s, World War II did that. Before the 2010 elections, Congress failed us; the new GOP Congress will be worse, so it’s up to us to organize and force what’s needed down their throats. Now to a quick look at the sluggish US economy, with the hope that readers will study the analysis in the book: /3/

“Part Three: Epic Recession, 2007-2010.? The analyses of Parts One and Two are concerned principally with the financial sector and the critical roles played by its excesses in ongoing recessions and (in Chapter 6), the 1930s depression. However, a comparison of that financial behavior with what became common from the 1980s to the present is to compare a reckless child with a maniac; a maniac, it needs adding, who bribed the police to look the other way. Because of the 1930s depression, Congress passed laws designed to prevent Wall St. from ever playing its interwar fun and games again. But from the 1980s on, at an always rising pace, not only were preventive laws such as the Glass-Steagall Act revoked, but, as Rasmus notes, “the Gramm-Bliley Act provided incentives to banks to enter speculative markets…..while, at the same time, what remained of controls to capital flows were also eliminated.? The foregoing is but a quick taste of how Wall St., much more powerful since the 1980s than ever before (which is saying a lot) has effectively transformed a political economy always favoring industry and Wall St’s rich and the powerful into one dominated even more narrowly by the always more powerful financial sector. That sector, once dominated by banks and their conservatism, became, as the 20th century ended, a gambling casino open to all comers: dominated and enriched (as Rasmous details) by its financial fragility whose “shadow banking enables wealthy investors – individual, corporate, and institutional – to move into always more speculative and profitable forms of investment…? Wall Street’s slogan has become “Let the Devil take the hindmost?; and he did.

The foregoing discussion, of the “three parts? is a greatly compressed survey of over 200 pages of a detailed historical analysis. All who read the book will be rewarded with an education in political economy which today is as rare as it is essential; essential, that is, if we are ever to lift ourselves up and out of a society dominated by King Greed and his buddies. Now I turn attention to the final chapters: Chapter 8(a critique of the “Bush-Obama? recovery programs) and Chapter 9 (the sustained “Alternative Program for Economic Recovery? of Rasmus). I use the word “sustained? because the “Program? itself fills up more than 30 pages. I begin with his summary statement:

‘Unlike normal recessions Epic Recessions of the current type (2007-2010) are driven in the short run by processes of debt-deflation-default and the interactions of financial and consumption (fragility). But the longer run causes are rooted in the origins of financial and consumption (fragility)—i.e., the rising debt, debt repayment, and declining income. In the long run the major causes of rising debt and declining income derive from the growing relative shift toward speculative forms of investing, their negative consequences for investing in real assets, and the global money parade’s access to ever increasing availability of liquidity and credit…. Successful policies must address the processes of debt-deflation-default in the short run,
financial and consumption fragility in the intermediate term, and the global money parade and speculative investing in the longer run.’

He goes on to show that Obama’s administration has failed to meet those needs, explains how and why, and then shows what must be done to meet and overcome the causes of the ongoing crisis. We now turn to a selective summary of his program in Parts I to V. I and II both have five proposals, III has ten, IV has 5, and V has 4. Only a few of the 30 pages of those substantial proposals will be discussed; enough to give the reader an indication of why many substantial reforms are needed and their nature. You may rightly infer from that our economy is in very deep trouble.

Part I: “Homeowners’ Stabilization and Consumption.? No’s 1 and 2: Reset mortgage rates and principals for loans originated in 2002-07. Part II: “Job Creation and Retention.? No’s 6 and 7: $300 billion each for both infrastructure and public sector jobs. Part III: “Financing the Alternative Program.? No. 11: Offshore tax haven asset repatriation. No. 12: Foreign profits tax recovery. No. 18: Payroll tax on incomes of wealthiest 1 percent of households. Part IV: ?Long-term Income Restructuring.? No. 20: 20-80 percent coverage single-payer health care.
No, 23: Re-unionization of the private sector workforce. No. 24: Low and contingent wage indexation. Part V: “Banking and Financial Restructuring.? No. 25: Nationalizing consumer credit markets. No. 26: Democratizing the Federal Reserve. No. 28: Taming the global money parade.

That should indicate how much needs doing and, as well, the mountain of political organization and work there is to be done: by us, or not at all.

This writer is an old geezer of 91 years who has witnessed and sweated through the worst war and the worst depression ever. As an economic historian I have studied many economic crises. What we face today is more likely than not to match or be worse than both that military and economic past. If that disaster is not to descend upon us, “we the people? must lift and push what is now “their? society to become our society; to make it into a truly democratic society instead of what it is: dangerously phony. We moved a few inches toward that for a decade or two after World War II, but from the 1970s on we allowed ourselves to become creatures of a nation dominated by militarism and war, consumerism and debt. Now, once more, the rich and greedy, the exploiters, the racists, and the war lovers are licking their lips.

Notes

/1/ Rasmus is an econ prof at both Santa Clara University and St. Marys College and a lecturer at U.C. Berkeley, all in Northern California He is the author of several books, including War At Home: The Bush-corporate Offensive Against American Workers and (forthcoming) Obama’s Economy: Why Recovery Failed: What’s Next? He has written many articles for, among others,
Z Magazine, In These Times, and the Dispatcher, and is also a political playright. He can be reached at rasmus@Kyklos.com

/2/ He is not alone in that effort, but he makes understandable his many important economic arguments in ways both substantial and readable for all (and which might awaken the minds of socio-economic professors). He is not entirely alone in his efforts, of course: there is Paul Krugman, for example, whose critical arguments in the NY Times are timely and “on our side.? But he does not fill the need for the strong understanding which creates the determination to become political and fight back: Rasmus does.

/3/ This book was published as that recession has continued, deepened, and spread, Rasmus has been busy writing articles bringing his position up to date; in doing so he shows that the ongoing recession is all too likely to be allowed to flop into depression. See: “An Economic Crisis Balance Sheet,? and “Obama’s Failing Recovery,? in Z Magazine, July and November 2010, in that order.

Review of ‘Epic Recession: Prelude to Global Depression’, by Suzi Weissman

by Suzi Weissman
‘Z’ Magazine, September 2010

I do a weekly drive time radio show in Los Angeles and began concentrating on the economy right after the effective nationalization of Long Term Capital Management in 1998 – the year that the so called ‘Asian flu’ took down economies from Asia to Russia and beyond. Economically we seemed to be in new territory – profound and unresolved problems in the real economy were papered over by debt, speculation drove profit, and it soon became apparent that the US economy was addicted to bubbles as a growth strategy. I began to interview Keynesian, Minskyan and Marxist economists for answers, and my featured guests commented with growing alarm as bubbles inflated, deflated and then burst. As with LTCM in 1998 but on a much larger scale, the 2008 financial meltdown couldn’t be contained to the US and leapt national boundaries with electronic speed.

Not surprisingly, I turned to Jack Rasmus time and again to go ‘beneath the surface’ and help the listeners understand the unfolding economic drama. Armed with facts, Jack Rasmus could expose the rosy recovery myths the mainstream business press celebrated, talk about the real numbers of unemployed, and otherwise analyze, make predictions and theorize the nature of the financial implosion we are living through. Jack’s articles chronicling the crash and critiquing the measures proposed to deal with it appeared in Z Magazine regularly. It’s been an amazing ride, to say the least – and now Jack Rasmus has published his thinking on the biggest economic crisis in the last 80 years.

When the financial institutions began to go bust creating a domino like run on the banks, economists, journalists and pundits debated whether this was a recession, depression, or something else. The mainstream press has settled on the name “Great Recession.? Many on the left classify this as another great depression, the second in 75 years and an indictment of the capitalist system. Jack Rasmus calls it an ‘Epic Recession’ and that is the title of his new book. Epic Recession: Prelude to Global Depression, Pluto Press, London 2010.

Does it make a difference what this global meltdown is called? Yes—and there is substantial disagreement among analysts. But what is crucial is that we get more than either a recitation of events, or a grand theoretical overview that pays scant attention to the story as it unraveled, bringing the global economy to the brink of collapse. We live in an age that has little sense of history: the causes and consequences of the crash of 1929 and the decade which followed were easily forgotten in the hubris and euphoria of what some called bubble-economics.

Jack Rasmus’ book takes us through an historical comparison with epic recessions from the past and shows how government policy can either avert the worst or lead the economy into a great Depression, step by step. Politics matter in how this economic crisis is handled, as the economy is more and more dependent on the government and conscious decision making. Epic Recession: Prelude to Global Depression is not a simple blow by blow catalog of events from the dot.com boom and bust to the stock market and real estate bubbles and busts, followed by weaker attempts to create a commodities and then an oil bubble. Rasmus does examine what set off the cascade but then asks questions and analyzes the structural changes in motion.

Rather than just blame the smart set in the banks who devised complex financial instruments that few could understand, Jack goes back three decades to look at deliberate actions taken during the Reagan administration that deepened the dependence on debt to maintain consumption. Examining the subsequent structural changes in the economy, fiscal and governmental policy, Rasmus attempts to theorize what has happened, to explain why the Bush and Obama bailouts are insufficient to prevent the continued downward slide and hemorrhaging of jobs, and to propose an alternative recovery program that can be used as an organizing tool.

Three articles by Jack Rasmus have been published in Z Magazine that outline the major arguments of his book. Most of what has come to pass was predicted accurately by Jack in these articles. He wasn’t alone. Notwithstanding the Wall Street boosters on much of the cable television business channels, noted economists and financial journalists of the right and left saw this coming – some had a ringside seat – and warned and wrote about what was happening. They weren’t in a position to do anything about it.

Analysts on the left tend to see this crisis as another indictment of a failed capitalist system, no longer able to hide its decline with debt driven bubbles. Some see the crisis in criminal terms: fraud, theft, opacity and corrupt regulators combined to make this meltdown an inevitability, especially once protective walls like Glass-Steagall were removed. Danny Schechter, in Plunder, sees the crisis as a crime scene, asking for “jail-outs not bail-outs.? Max Wolff undercuts conventional wisdom on “Too Big to Fail,? saying the real problem is “Too Big to Bail.? The steps that States take are crucial to fostering a recovery or, alternatively, leading us into depression. Nomi Prins calls this a banking-led depression. Michael Hudson, watching current European proposals to inflict painful, draconian cuts to the public sector to tame deficits (which he says are coming here next) thinks the world is heading back to a system of debt peonage. Others argue that government and business are taking advantage of the crisis to return to a pre-WWI, or even pre-Civil War economy, before the gains of the Progressive, labor, and Civil Rights movements. Most observers agree that the period ahead looks bleak.

Rasmus recognizes the theoretical debt he owes to three economic thinkers: John Maynard Keynes, whose work is more about how to recover than what produced the crisis; Irving Fischer, who identified debt and deflation as the main mechanisms that drive a downturn into a depression, and Hyman Minsky, the theorist who wrote about the role of speculative investment, showing how the accumulation of debt can destabilize the entire financial system and provoke the kind of financial meltdown we have just experienced. Although Minsky died in 1996, his thinking is so pertinent to the crises of 2007-2010 that financial journalists and academics have called it a “Minsky moment.?

Theoretically, Rasmus tries to take the work of these theorists further in order to understand the nature of the current crisis, and Rasmus pledges to do this more fully in subsequent volumes as this crisis unfolds. His analysis is also aided by a thorough grounding in Marxist economic theory. Missing in Keynes, Fischer and Minsky, he writes is “the consideration of the price for labor and its relationship to product and asset pieces: how wage deflation is related to product and asset deflation.?

Chronicle of the implosion

There were warnings all along about the dangers in the highly leveraged subprime mortgages that rapidly spread to credit markets worldwide, creating financial havoc that led to recession in 2007. In March 2008 Bear Stearns collapsed, beginning the global meltdown. The Fed sought to contain the damage through infusions of capital and forced restructuring of failing institutions. Bear Stearns – an investment bank that was one of the shadow institutions heavily involved in the subprime mortgage market – was essentially given to JP Morgan Chase at a fire sale price backed with money from the Fed. The Fed then backed Fannie Mae and Freddie Mac. When Lehman Brothers started to go belly-up the Fed reversed its policy and allowed it to go under (Fed Chief Paulson spoke of ‘moral hazard’). AIG was partially nationalized and the whole house of cards came down in late summer 2008. More than just the puncture of a bubble, this was a catastrophic breakdown and a fully fledged banking panic ensued. The amount owed on leveraged ‘instruments’ was now many times the world’s GDP, though this isn’t a particularly useful measurement. More importantly, was this a crisis of liquidity that infusions of cash could remedy, or was it a crisis of insolvency? There followed an unprecedented financial freeze – credit simply crashed, taking down businesses, contracting the economy and leading to massive layoffs. It started to look a lot like the early years of the great depression of the 1930s.

This much can be ascertained from the many fine financial articles, blogs and books that have appeared chronicling the ‘age of greed’ and the melt-down, often from front row seats. Reviewing these events Jack Rasmus concluded that this was not a typical recession, but something entirely new. Finance capital imploded. The connections between Wall Street and Main Street became all too apparent – with banks unwilling to lend, businesses laid off workers and/or went under. But what were the fundamental forces at work that drove and underlay this economic storm?

Going beneath the surface Rasmus sees the debt, deflation and default cycles as enabling but not fundamental causes, leading to “consumption fragility? and the collapse of finance that produced what he calls the Epic Recession. It is epic, according to Rasmus, because the contraction of the economy is a hybrid with characteristics of both a recession and a depression. What are the forces driving this contraction? Rasmus’ interrogation involves a thorough historical and theoretical investigation to arrive at an understanding. He is not interested in what he calls ‘labeling in lieu of analysis’ or the kind of conceptual models or even superficial historical parallels that may dazzle but fail to explain and fall short of proposing solutions. Rasmus reviews the analyses of economists (academic and non-academic) as well as those of financial journalists, raising essential questions they fail to address. He notes that sophisticated terminology is no substitute for theoretical analysis, but theoretical models abstracted from the facts are equally unhelpful.

The Epic Recession did not begin with the housing bubble. To get at the underlying cause of the present crisis Jack Rasmus goes back to the Reagan era deregulation and tax cuts. The shift to finance capital that began in the 1970s came on the heels of the radicalizing social movements of the 1960s and the rising expectations of the working population for a higher standard of living. The response was an employer offensive to roll back the historic rise in American workers’ real wages through attacking unions and shipping production to low wage economies. It marked the ‘switch’ to finance from industry, the transfer of wealth upwards and the expansion of debt-driven finance for household and state budgets alike.

More than deregulation and tax cuts, Reagan began the frontal assault on unions. When the air traffic controllers went on strike in 1981, Reagan ordered them back to work; they continued the strike and he fired them, destroying their union (PATCO). This was by implication an attack on the organized working class, and Reagan’s success signaled the beginning of the assault on living standards (stagnant wage growth) and the redistribution of wealth upwards from workers to investors and corporations. Not surprisingly, it was also in 1980 that working and middle class households began to resort to debt to maintain living standards. It is this income redistribution that allowed the creation of what Jack Rasmus calls the ‘money parade,’ a global glut of capital sloshing around looking for profitable investment.

The shift from manufacturing to speculative investment brought with it new forms of banking to get around regulators (the shadow banking industry) as well as new financial instruments that serve as conduits for the “money parade,? creating debt-financed consumption in place of the old fashioned generation of income and jobs through physical production of assets. In common parlance the shift was from making goods (manufacture went to countries with cheap labor) to making bets on capital: the term casino capitalism is a fair description.

Epic recessions

Defining the 2007-2010 crisis as an epic recession and not a depression leads Rasmus to trace its origins and discern its dynamic, suggest policy approaches to deal with it and warn about the consequences of policy failure that could well transform this epic recession into a bona fide depression. He looks at two previous epic recessions which because of their similarities to the present become crucially important to understand. 1907-1914 was an epic recession that stagnated, while the 1929-1931 crisis evolved from an epic recession into a bona fide Depression.

The banks were bailed out in the epic recession of 1907-1914, but not the real economy. Sound familiar? The financial sector was stabilized but credit contracted, production declined, businesses shuttered, unemployment soared, asset prices fell (deflation) and an extended period of stagnation ensued. There were brief and shallow recoveries along the way, but the end only came with the onset of World War I in 1914. Again, sound familiar?

The ‘epic recession’ following the financial crash of 1929 until 1931 was worse, and there was no bailout of the banks or of the real economy. The result was an economic collapse that descended into global depression. The effects of government fiscal and monetary policy determined in each case the economic result. The chapters on the 1929-31 epic recession and that of 2007-2010 are gripping, as we see step by step that the cyclical downturns can be made much worse by bad fiscal public policy, something we are about to see globally now. When Rasmus catalogs the 1980s Savings & Loan crisis and Reagan’s push for deregulation, it is a stomach wrenching read, but that crisis did not go global nor beyond the S&L industry.

Policy muddle?

The world economy is ever more dependent on governments and conscious decision making, so policy is all important. Jack Rasmus correctly concentrates on the insufficiencies of both the Bush and Obama injections of capital to deal with the crisis. While Bush is a firm believer in market, not government solutions, his economic team pressed him to bail out the financial institutions with an initial $700 billion injection of funds and to set up the TARP (Troubled Assets Relief Program). More than four trillion has been thrown at the problem with another eight trillion dollars (or so) committed for future bailouts. As Rasmus notes, this was the monetarist solution – “a liquidity solution to an insolvency crisis.? The Obama/Geithner team steadfastly refused to nationalize the banks, while it could be said that the Bush/Paulson bailouts amount to a nationalization of banking bankruptcy.

Obama’s program, as Rasmus notes, is a short term holding operation for normal recessions, not epic ones. It relies on market solutions, doesn’t address the collapse of consumption, and favors global markets over domestic ones. The amount of stimulus injected was inadequate to fight deflationary pressures and hemorrhaging jobs, but at the same time talk emerged about rising deficits and fighting inflation down the road. The discourse changed when China balked at buying more US securities to finance US deficits. The irony of relying on semi-Stalinist China (led by the Chinese Communist Party) to save capitalism is a rather rich one to contemplate.

Now that the financial sector has been bailed out, it is back to business as usual. Companies are sitting on mountains of cash, yet they continue to slash payrolls and cut expenditures. Main Street just gets worse and worse with chronic high unemployment and underemployment, dire cuts to education and health (in California one in four is without health insurance) and more foreclosures and bankruptcies to come. State and local governments are in desperate need of bailouts, and their balanced budget requirements undercut or cancel out Obama’s economic stimulus. Everywhere individuals, states and nations are drowning in unsustainable debt. The crisis is global and the picture is grim from Iceland to Ireland, the Baltics to the Balkans, Chile to California.
Wall Street has poured hundreds of millions on Congress to try to prevent any real regulation that would curb their profitable practices. Regulation is being restored, but with plenty of loopholes. Congress can’t legislate what needs to be done – it is constrained by party polarization, ideological intransigence and buckets of money from financial lobbyists. The somewhat veiled relationship between capital and power has lost its cover. Congress is openly seen as a wholly owned subsidiary of the titans of finance, industry, real estate (FIRE) and pharma. Capitalism may be losing its luster (confirmed by a recent Rasmussen poll) but the deficit hawks are gaining ground, blaming workers and crying for pain.

Western Europe has taken the decision to cut living standards drastically (Britain’s Cameron has warned of pain for decades to come) and the UK and Germany are in the lead in attacking living standards. Indeed, European policymakers make President Obama’s stimulus policy look reasonable by comparison. Since the deficit hawks in the US are not in control the US stands out as the only developed country with any sense, even if the Obama program is insufficient for recovery. Nonetheless, the calls for deficit reduction are gaining in the US, and the states are already forced into draconian measures.

Keynesian economists like Paul Krugman warn that economic policy is now set on a disaster course of crippling cuts that will kill any possibility of recovery. But why are governments choosing policies that will, as Rasmus warns, take this ‘epic recession’ into a full blown global depression? Why don’t governments simply reflate to spur growth rather than cutting back? Put another way – what would it take to force governments to adopt the policies that would benefit the majority of the population?

Simply put, there would have to be a vibrant labor movement that could effectively challenge the cuts to come. It would require the kind of popular mobilization and sustained fight-back that Greek workers began to mount to resist austerity. Unfortunately that doesn’t exist today. Greek workers called for a default and no cuts to their living standards. They have been temporarily bailed out, but draconian cuts are part of the package.
Economic policy has veered from supports that are too little and not given a chance to work, to deficit reduction guaranteed to undermine recovery. There appears to be no satisfactory ‘exit solution’ from this crisis that preserves present power relationships. To reflate the economy and raise living standards depends on the confidence that the population represents no threat. Technically it doesn’t but capital is still smarting from the revolts after 1968. The switch to finance after the 1970s appeared to be the solution to the impasse, shifting manufacture to low wage economies, including those in former Stalinist states where workers would be reliably docile. Now there seem to be no strategy, and Greece notwithstanding, no real left either. Increasingly the policy appears to be one of rollback, to strip away the gains workers have won over the last 60-70 years that cut into profits. The logic that governments are following is to go back to some form of an imagined pristine capitalism before there was any challenge to the system. Even so, the current offensive proposed in Europe seems suicidal.
Alternative solution for recovery

Epic Recession is written in the language of political economy and economic history; it is technical, analytical, political and practical. The material is well organized with clear explanations and Rasmus provides a very useful glossary at the end that succinctly describes his key concepts. After a review and critique of the Bush and Obama recovery efforts through the policies enacted by Greenspan and Bernanke, Paulson and Geithner, Jack draws up his own practical solutions to the crisis in a twenty-eight point recovery program that is being taken up by labor councils around the country.

The alternative recovery program is one that involves a radical restructuring of the economy in the interests of the vast majority: massive job creation programs, nationalization of the mortgage and consumer credit markets, new banking and tax structures tax and a long-term redistribution of general income with quality and equitable healthcare delivery and retirement systems.

The beauty of the alternative program for recovery that Rasmus proposes is that it provides a concrete basis to fight the offensive on living standards underway. He insists it represents the only way to prevent the onset of a classical depression. The program addresses both the root causes of the crisis but also contains solutions that are reasonable and realizable. His solutions threaten the position of capital and would be fought tooth and nail.

This radical restructuring of the economy challenges capitalism without overthrowing it, yet cannot be undertaken without a militant labor movement that demands and wins jobs, healthcare, homes, education, and decent retirement pensions. Had his program been in place right away, the foreclosures would have been staunched, and the credit market stabilized.

Among the proposals in the alternative recovery program are: Mortgage rates would be reset (all loans, not just those in trouble) to the Fed’s 30 year bond rate plus .5%, so an effective rate of 3.5%. Mortgage principle would also be reset to the levels before the artificially inflated prices of 2003-2006. There would be a moratorium on all foreclosures both residential and commercial.

The second set of proposals would provide for real job retention and creation, pumping adequate and targeted stimulus (infrastructure jobs, manufacturing and public sector job retention and creation, plus adequate safety net funding.) The program also includes measures to insure it is adequately financed through restructuring the tax system. Proposed measures would assure the finance sector as well as begin to redistribute income; restructure retirement tax so that a surplus is restored to the social security system after 2017; provide funding for a single payer healthcare delivery system. His tax measures would reverse regressive taxes and recover capital from offshore havens, create a financial transactions tax and many other progressive measures. These measures would gradually reverse the income inequalities of the last three decades.

To implement the Rasmus alternate recovery program would require confidence, mobilization and organization from the very sectors that have been adversely affected for decades. It is precisely that kind of mobilization that government policy seeks to avoid and seems prepared to risk a depression to effectively discipline labor (even super-exploited low wage immigrant workers). That is class warfare on steroids, coming from the wrong class!

Nowhere does Jack Rasmus call for an end to capitalism or sound the call to mount the barricades. His alternative recovery program does address the real problems in the economy and does so through concrete proposals. It has the added value of being an organizing tool that lifts the population – and as such challenges the status quo with its property and wealth arrangements. Chuck Mack, the International Vice-President of the Teamsters writes (on the back cover) that Epic Recession provides a rallying point for trade unionists and concerned citizens who want to ensure that any recovery is felt further than Wall Street. Rasmus calls for bailouts for workers not bankers.

Review of ‘Epic Recession: Prelude to Global Depression’, by Zoltan Zigedy

by Zoltan Zigedy, August 2010

Epic events require epic explanations. If Dr. Jack Rasmus is to be believed, we are in the midst of an Epic Recession that began in 2007. Rasmus’ new book, Epic Recession: Prelude to Global Depression (Pluto Press, 2010) argues convincingly that the global economy is now traveling a precarious course through rough shoals, far different from the many business cycle recessions that have occurred since World War II. Even more ominously, Rasmus shows that without fresh, bold initiatives, the Epic Recession of 2007-2010 could quickly descend into a global depression unlike anything seen since the 1930’s Great Depression.

Despite a host of Nobel laureates in the economics field, epic explanations for the persisting economic crisis have not been forthcoming. Steeped in economic convention and dogmatic theory, nearly all academic and private economists were caught with their pants down, neither expecting a major upheaval nor equipped with the economic tools to explain it. Certainly there were Schillers and Roubinis who sensed that matters had gone awry based upon the decidedly impressionistic and loose economic concept of “bubbles?. But “bubble? metaphors do not make for deep theory. Rasmus makes short work in his book of the feeble, often silly, efforts at understanding a profoundly important historic event – an epic event.

Sad to say, my Marxist colleagues do not fare much better. Those who see the collapse of capitalism in every burp or hiccup of the system can certainly claim no special insight into the current economic crisis. Far too many have bought in on the comforting idea of Marx as Keynes’ precursor, focusing solely on imbalances between effective demand and production. For them, Keynes seems to have overshadowed even Lenin, who wrote over ninety years ago in Imperialism that “under the general conditions of commodity production and private property, the ‘domination’ of capitalist monopolies inevitably becomes the domination of a financial oligarchy.” He elaborated that “The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy.” It is this supremacy of finance capital and the financial oligarchy that holds the key to understanding how the current catastrophe came to be.

Rasmus fully grasps this point, placing the financial system, its evolution, and its relationship with other sectors of the economy, at the center of his analysis. But others have also pronounced this downturn a financial crisis, locating the source of the global downturn in financial shenanigans. The difference is that Rasmus uncovers structural features of the financial sector – specifically the speculative financial sector - that invariably generate and amplify economic malfunction. At the heart of these structures and institutions – the blood that circulates and gives life to the speculative financial system – is an enormous accumulation of capital in the hands of a few. Rasmus puts it this way:

… there exists today a massive global pool and near-liquid money capital that must find an investment… it is thus so excessively large that it cannot find real, fixed investment opportunities to absorb all of it… Meanwhile, that liquidity pool cannot and will not remain idle. It is therefore prone to seek out new price-driven speculative opportunities, which are more easily and quickly exploited, with faster turnover and often with greater returns, than physical asset investment in structures, equipment, inventories and such (p. 93)

In Marxist terms, one might say that an unprecedented (since the Great Depression) concentration of wealth has collided with a tendency for profit to decline in the real, productive economy. With finance capital playing a larger, more dominant role in capitalism’s evolution, capital poured into this sector, generating greater returns and encouraging more exotic and riskier investment institutions and vehicles to counter this tendency.

Rasmus also shares with the Marxist tradition the notion that capitalism generates its contradictions from its internal logic and not from extraordinary, external disruptions. He states it thusly: “Epic Recessions and depressions are not simply normal recessions writ large. They are fundamentally different economic animals, driven principally by internal, not external, forces.?

The combination of a vast accumulation of capital and its absorption by a financial sector extending further and further from real asset investment generate a deepening maelstrom of credit-debt, deflation, and default that draws in all other sectors of the economy nationally and globally. It is this replicable process that produces epic recessions, not as a unique, historically accidental event, but as the logical development of financial ascendancy.

Epic Recession is far more than theoretical speculation or ideological polemic. Standing behind Rasmus’ account is a fount of empirical data, both current and historical. In fact, the book would stand as an essential source book for pertinent factual information even without its deep analysis and policy projections. His explanation of “The Speculative Investment Shift? and the exotica of speculative capitalism are lucid and thorough – the best that I have seen with one reservation: the elaboration of “naked short selling? is a bit confusing.

Of particular relevance, Epic Recession guides us through a history of prior economic disruptions from the nineteenth century through The Great Depression. Rasmus’ account of the oft-neglected 1907-1914 “epic recession? is most illuminating, adding great weight to his claim of common features, especially speculative surges, in the precipitation of severe crises. Popular lore views The Great Depression as a severe downward spiral halted and reversed only by New Deal programs (Current conservative revisionists argue that the New Deal programs were irrelevant or harmful to recovery; the Depression merely ran its course). By contrast – and correctly –Rasmus reveals the Great Depression as a series of slumps and faux-recoveries through the 1930’s that, at best, attained a measure of stability until recovery came with the sprouting of military spending at the end of the decade and its full blooming accompanying the massive spending associated with US entry into World War II. Rasmus’ detailed, coolly detached, historical examination of instability thus separates him from the pack of conventional economists who have made a career of studying “routine? economic behavior and bear an unjustified faith in the rationality of markets. I am reminded of the quote from John Strachey’s 1934 book, The Nature of Capitalist Crisis: “Capitalist crises are in truth to the… modern Europeans and Americans, what the tempest and earthquake are to the savage… The savage… has his experts, his medicine men who by chant or howl, by sacrifice or incantation attempt to cajole the destroying force. The capitalist world also has its experts, its economists. The phenomena of crisis lie, however, outside the scope of their science.?

In turn, the detailed historical analysis allows Rasmus to develop a taxonomy of extraordinary economic events defined by both qualitative and quantitative features. Further, the interrelationships of these features are revealed by historical comparison and form the basis for his theory of Epic Recession which he duly applies to the current economic calamity.
One will find in Epic Recession an insightful and detailed account of the 2007-2010 downturn which correctly locates its roots far earlier than the housing boom and earlier “bubbles?. The story of our economic “troubles? reads jarringly like that of earlier severe epic recessions, especially The Great Depression. Rasmus is unsparing in his disappointment with both Bush and Obama policies. If nothing else is learned from this account, it is that far more intensive and radical intervention is necessary to pull us out of this deepening vortex. He puts it especially well with this well-chosen metaphor:

… with each outbreak the disease was only temporarily forced into remission with ever more massive injections of monetary antibiotics; but each time the disease returned more serious than before. The same antibiotics were therefore injected once again, in increasingly larger doses. Larger injections of liquidity, bailouts, and fiscal stimulus were fed into the successive crises in order to contain them. But in so doing, only the symptoms were treated, not the more basic physiological illness. What is required is basic economic surgery – i.e., a more fundamental restructuring of the body economic itself. (p. 286)

Rasmus’ prescriptions for this surgery are contained in 28 proposals – theses nailed on the door of the policy-makers’ church. He gathers his proposals around four main policy goals - first, tame and reverse the destructive economic decline with a powerful program to restore employment and empower working people; second, strengthen the role of the public sector in providing the basics of social life – infrastructure, education, health care, etc. – through redistributive tax policies; third, quarantine the speculative financial circus by nationalizing all banking that serves a socially useful, real economic purpose; and lastly, channel society’s wealth so that it flows more justly into the pockets of the people and socially useful investments. Epic Recession addresses all four of these goals in ways that are generally realistic, innovative and persuasive.

Rasmus’ remedies for mending the consumer sector focus on resetting mortgages, offering small business and homeowners tax credits, and, most importantly and boldly, excising the homeowner mortgage business from the private sector – in fact, nationalizing financing for consumer mortgages. As bold as it may seem, this would only fulfill the early promise of the 1938 FNMA (Fannie Mae) before its semi-privatization in 1968. Yet Rasmus goes further and shelters all consumer-oriented banking functions into what is, in effect, a public utility.

The job-creating program in Epic Recession is epic in scope – earmarking $1 trillion – but less than epic in reach. Much of the funds would be channeled through private contractors or subsidize private sector jobs. Public revenues should flow primarily to public sector initiatives. The experience of the Obama stimulus demonstrates that the leakage to profits, consultants, crony sub-contractors, etc. leaves far too little for actual new employment; this approach motivates profit-taking and not job creation. Conversely, the experience of the WPA proves that direct public employment is a far quicker and more efficient way to create jobs. The construction and operation of a fast, efficient, low cost public transportation system retracing the routes of the era of train travel alone would grow employment immensely and leave our country a far better place. In fairness, Rasmus proposes a generous investment in the public sector, with expansion mainly in the needy arena of public health.

In addition, readers should welcome Rasmus’ innovative proposals for single-payer health insurance, a national retirement plan on top of Social Security, a union-friendly environment, and sturdy floors for low-wage and contingent employees.

Cognizant of the difficulty of the task, Rasmus leaves “taming the global money parade? as an open ended goal with no easy answer. But these proposals would take us much closer to that goal.

In my view, a program worthy of this epic moment must not only stem and reverse the course of economic devastation, but must also shift the balance of power decidedly in favor of the majority of people who have been most victimized by speculative excesses and the “financial oligarchy?. The proposals in Epic Recession pass this test. For all its merits, the New Deal never advanced beyond humane, but patronizing, policies crafted by elites operating less from conviction than practicality. Moreover, New Deal policies were adopted in response to massive, militant, progressive - often radical - movements that emerged in the thirties in response to the devastation of The Great Depression. These empowering movements were subsequently demonized and suppressed in the Cold War McCarthy period. Today, we are living with the consequences of that loss.

Nonetheless, honest liberals, progressives, socialists, and communists can embrace the Alternate Program outlined in Epic Recession with some hope that we can again rebuild these movements and move beyond a society more and more divided by the privileges of class and race.

Today, we are faced with a wide-spread, nearly hysterical call for fiscal austerity in response to growing government debt: precisely the course that will lead to disaster, according to Epic Recession. The argument in this fine book demonstrates that the ubiquitous debt scolds are much like the bankrupt, compulsive gambler who blames his problem on his kids’ college tuition.

Review of ‘Epic Recession: Prelude to Global Recession’ by Jon Amsden

Review by Jon Amsden
Against the Current magazine, September-October 2010

The present economic crisis which began in the United States late in 2007 and picked up speed early in 2008 may have caused production in the American economy to fall precipitously, but it has had the opposite effect on the production of books seeking to analyze the world economic crisis that has followed. This will be clear if you look for the book to be reviewed here, namely, Jack Rasmus’ Epic Recession: Prelude to Global Depression, by typing the words “economic crisis” in the “Books” category on the Amazon search bar. You will find the Rasmus book among no less than thirty-six other titles on the same topic, all appearing before the collection of Thorsten Veblen’s essays entitled Economics for an Age of Crisis.

The list of living authors preceeding Veblen’s name is impressive. It begins with the titanic nay-sayer Nouriel Roubini who sounds his warnings in Crisis Economics: A Crash Course in the Future of Finance. Roubini’s prelude to future disaster is followed by the irrepressible yea-sayer Paul Krugman’s The Return of Depression Economics and the Crisis of 2008. Next is the first Marxist contribution to the list entitled The Great Financial Crisis: Causes and Consequences and written by John Bellamy Foster and Freddy Magdoff.

Amazon Books’ distinguished list of authors confronting economic crisis then continues to include, Joseph Stiglitz, Lord Keynes biographer Robert Skidelsky, and Robert Brenner on the liberal left, while Robert Solow, Ludwig von Mises, and Martin Feldstein defend from the other side of the barricades. The Left side of the discussion blames the fundamental instability of capitalist free market production (in one way or another). “Lefties? dream wistfully of Keynesian solutions that might actually work. Meanwhile the stern mandarinate on the Right sagely point out that a resolute moment or two of austerity may now be required to keep the whole system up and running again. Somewhere in the middle is Justin Fox, the economics editor of Business Week, who in his The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, tells us, most atypically, that “the myth of rational markets” is just that, a myth.

Given the list of notables who have already pronounced on the theoretical and practical problems presented by the current crisis, the author of Epic Recession, Jack Rasmus, sails into a powerful headwind here. Nevertheless, what Rasmus has to say is well worth the read. The book contains, moreover, an extensive review of recent economic data along with detailed histories of two of the most serious economic crises in the 20th Century American economy. Rasmus’ text is no literary quickie. On the contrary, it contains 311 densely packed pages of text, with, additionally, a useful “Glossary of Key Terms” for those unfamiliar with financial jargon, a generous collection of “Endnotes” guiding readers to a useful list of sources, and a nicely detailed “Index". It should also be noted that Pluto Press have done a very respectable job of producing a paperback combining an attractive appearance, high quality stock, with a good binding in both paperback ($25.20), and hardback ($125).

The argument on crisis presented by Rasmus may be broken down into three major parts. These three parts are theoretical, historical, and prescriptive in nature. In the first of three sections of the work, Rasmus is concerned to define what he refers to as an “epic recession", distinguishing it from what he styles: “…normal recessions or a depression” (22). Most readers on the Left, and especially those with some interest in Marxist economics, will probably be looking for a theoretical statement as to why economic slowdowns have occurred regularly throughout the history of industrial capitalism. For anyone who hasn’t been counting, US economic history records serious economic crises beginning in: 1837; 1857; 1873; 1893; 1907; 1929; 1952; 1958; 1963; 1975; 1981; 1987; 1991; 1998; 2000; and, most recently, 2007-8. In addition to these major meltdowns, there were a number of minor economic slumps as well, so, where the historical section of his work is concerned, Rasmus has his work cut out for him.

Generalizing over this large number of crises and covering such a great span of history is a risky proposition. Over the years, and especially since the views of J.M. Keynes began to dominate the discussion, liberals have tended to explain economic shut downs by pointing to the “decline of aggregate demand” as the guilty party. Conservatives, on the other hand, have tended to treat economic crises as little more than a necessary period of economic adjustment during which the working class is to grin and bear it. On the other side of the argument, some Marxists have followed Karl Marx’s analysis of economic crisis faithfully while some have deviated from the master.

Marx says in Volume 2 of Capital that lack of balance between the sectors producing consumption and production goods gives rise to economic crises. In Volume. 3 of Capital Marx adds that there will be a tendency for the rate of capitalist profit to fall as “dead labor” (i.e., machines) replaces “living labor” (human labor power) in the production process. This decline in capitalist profits, according to Marx, leads crisis and possibly to a moment when capitalists choose to “hoard gold", basically sitting back and waiting for better times. When this happens, what Marx calls “the circulation of commodities” is temporarily interrupted and this is what, in our own day, we call “economic crisis.”

There is still little agreement on Marx’s views of economic crisis, especially among Marxists. Rasmus may have been wise, therefore, to avoid the inevitable controversies that arise in such discussions by abstaining from pronouncing his judgment on why economic crises take place. Instead, in the first part of his work, Rasmus concentrates on the problem of defining what he calls an “epic recession” and of distinguishing it from what he calls “normal recessions.” To simplify somewhat, the “epic recession", for Rasmus, is one that strongly resembles long term economic breakdowns such as those that occurred in the United States between 1907 and 1914 and again between 1929 and 1942. Rasmus analyzes the “epic recession’ in terms of the following variables: “…depth of the economic decline, its’ duration, and levels or degrees of debt, deflation, and default” (23). The alert reader will notice here that in both cases of “epic recession” cited by Rasmus, the slowdowns in economic activity that took place were each brought to an end by international wars of unprecedented violence and destructive power. Rasmus observes the same but does not dwell on the point.

The essence of the argument presented by Rasmus in the first section of his book is that the current financial crisis was caused by an deadly triad of debt, deflation, and default. It was this unholy trinity of economic phenomena, Rasmus argues, that led to excessive speculation in the (unregulated) banking sector as well as in the stock market, and the (new ) “shadow banking” sector all of which contributed to economic disaster. Under conditions of runaway debt creation and excessive speculation, Rasmus argues, the liquidity bubble that was created as the Greenspan Fed repeatedly poured money on economic problems eventually lead to the bursting of the bubble, a crash, and an economic crisis that we continue to endure.

Before following the author on a well researched and highly detailed journey through the history of economic crisis in the United States, however, the reader may wish to evaluate the basic economic analysis that Rasmus intends to support in the second major part of his work. Rasmus argues that it was the recent financial crisis that led to the present slowdown in the productive sector of the economy. It is more likely, however, that the causality moved in the other direction.

The question presents itself, is whether it was the so-called “sub-prime crisis” that almost destroyed the financial sector of American capitalism that led to the massive slowdown in the productive economy, or was it, perhaps, the other way around? While it certainly appears to most of the massed punditry and to the tribe known as “market economists” that the former is the case, the contrary possibility must also be considered. Clearly, if the US economy went into a slump after the bursting of the “dot.com bubble” of 2000 and the brief recovery that followed, then the many hundreds of thousands of Americans who bought houses in the period of mass financial hysteria that occurred between 2002 and 2007 would have eventually become unemployed and would, therefore, have been unable to make their mortgage payments. They would then, after a brief period of happy home ownership, have been the primary victims of what is now known as the “sub-prime mortgage crisis.” Note at this point that the very term “sub-prime crisis” tends to place the blame for the crisis on greedy mortgage salesmen and the working poor who dreamed of home ownership rather, than upon the irreproachable capitalist free market system itself.

If one chooses to follow the basic Marxist analysis of economic crisis, therefore, a different view of what took place in the housing bubble and the following crash of the real estate market will emerge. The Marxist view, after all, holds that the cycle of capital accumulation includes necessary periods of crisis. During these necessary moments of discomfort what happens are the following things: over-inflated values are destroyed; the smaller and more inefficient producers are eliminated; and the working class receives a useful drubbing that encourages their willing subordination to the next upswing of the cycle of capital accumulation that follows. In the Marxist view, the necessary downturns in the cycle ( i.e. “panics", “depressions", “recessions", etc.) are caused by a tendency of the rate of capitalist profit to fall towards the end of a period of vigorous economic activity. This leads the owners of capital to withdraw the same from the “circulation of commodities", causing a temporary economic collapse, featuring unemployment, bank failures, loss of property, and so on. If this schema describes history better than the alternative schemas offered by orthodox “economists” and others, then it will appear that the current crisis began as American workers (and would be home owners) first lost their jobs and only then defaulted on their mortgages either formally or by simply walking away.

In the second part of his work, Rasmus supports this analysis by taking a careful look at the history of economic crisis in the United States. It is in this part of the book that the interested reader will find careful and interesting analyses of the two past periods of major economic crisis in this century. One of these (1907-14) has been, until now, more or less ignored and forgotten, except of course, for the fact that it was the final stimulus for the creation of the Federal Reserve after more than a century of sharp political battles in the US Congress over the question of central banking.

What is very interesting about the historical analysis that Rasmus presents here is that the author provides support for both hypotheses outlined above. While it is clear that Rasmus holds that the financial crisis caused a crisis in the basic economy, it is also possible to find support in his treatment of US economic crises from 1837 to the present for the alternative view. In his analysis of the several economic crises of the 19th Century, and of the two “epic recessions” of the twentieth century, Jack Rasmus points out that, in those cases where sufficient data exist to decide, (for e.g., in the financial crisis of 1907 ) the financial episode in the crisis usually came some time after slowdown in the basic productive economy had already begun, and that the economic crisis in the productive economy also continued until well after the financial crisis had been resolved. Two of the historical crises examined by Rasmus (1893 and 1907) were resolved by spectacular coups de theatre provided by J.P. Morgan, after which, in each case, the crisis in the productive economy dragged on. After J. P. Morgan was no longer available to save American capitalism from itself, and after the creation of the Federal Reserve in 1913, versions of the same drama of saving capitalism from the excess of speculators were staged by the Fed Governors and the US Treasury. Rasmus also points out towards the end of the historical section of his book that the “epic crises” of 1907-14 and 1929-42 both came to an end as the United States geared up for war. Rasmus does not, however, believe that war is the inevitable outcome of the “epic crises” that he has described.

This is why the third section of his Epic Recession Prelude to Global Depression is devoted to describing the current (2007-2010) crisis and to offering a list of policies that could be undertaken to bring the present economic crisis to an end. Rasmus precedes his prescription for economic change and renewal with an astute and very readable critique of the failed Bush/Obama recovery policies. The Fed gets rather poor marks in this section of the book. Rasmus introduces a note of reality into the contemporary fantasies about how the Fed shall once again ride to the rescue as follows: “True to his philosophical ‘monetarist’ roots, Bernanke’s solution to a deep financial crisis was simply to throw money at it- i.e., a liquidity solution to an insolvency crisis” (264). What follows this remark is a detailed quantitative analysis which shows that throwing money at problems fixes nothing, and merely shifts the burden of maintaining the present system from those who benefit richly from it to those who can least afford to pay. Its a clear and insightful analysis, rich in interesting details. Those who look for sterner stuff, however, should move quickly on to Rasmus’ many prescriptions for preventing a “descent into depression.” This prescriptive list of policies makes extremely interesting reading, not in the least because some of the structural changes that Rasmus calls for would probably require social revolution in the United States today.

Rasmus presents twenty-eight proposals for restructuring the American economy many of which are specifically aimed at the housing problem. These include: resetting both mortgage rates and principal for all loans originated in the 2002-2008 period, introducing a 15% homeowners investment tax credit; and declaring a moratorium on foreclosures. To restart employment in the United States (Proposals 6-10) Rasmus recommends expenditures totaling $1Trillion for specific job creation projects as well as the creation of a viable “social safety net.” To finance the suggested outlay of cash Rasmus recommends a series of taxes and controls on the super wealthy (Proposals 11-19) any one of which could inspire apoplexy in the talking heads on Fox News or MSNBC. The list of punishments for the rich includes: the repatriation of assets held in offshore tax havens, a serious program foreign profits tax recovery, a roll back of the Bush tax cuts on capital income, an excess speculative profits surtax; and, a “payroll tax” on incomes of the wealthiest 1% inter alia.

Not all of Rasmus’ proposals are this Draconian. Many are specific and quite feasible. One that will get the attention of anyone with children in college is the deprivatization of the student loan market. This is a specific demand, entirely doable, and, almost all would agree, a reform measure highly to be recommended. Other structural changes listed by Rasmus are more general and also more problematic. An example of this would be a structural change that would provide “80% coverage single payer health care” (Proposal 20).

Many people, including some on the Left, will regard Rasmus’ list of proposed policies as “utopian", “unrealistic", and even “impossible” given the economic and political system that oppresses most Americans today. This, however, is the point that Rasmus is really making on the final pages of his book. To implement even a few of Rasmus’ proposals for ending the current crisis would require not much less than a thorough-going social revolution in the United States. Since most of the people reading this review are socialists, it seems not inappropriate to point this out. What Jack Rasmus has reminded us in this exhaustively researched and highly provocative book on the current crisis is that it is once again time to start talking seriously about radical economic, social, and political change in the United States.

Review of ‘Epic Recession: Prelude to Global Depression,’ by Carl Finamore

How Did it Happen, How Bad will it Get?
By Carl Finamore, Trade Winds magazine, July 2010

In the not too distant past, bankers, financiers and investors could do no wrong. They were the wizards of Wall Street, ushering a new era of economic expansion. But around 2006, it became very clear their magic was just an illusion. The only thing real was millions of homeowners defaulting, millions of pensioners watching their 401Ks evaporate and millions of workers losing their jobs.

Investors and bankers didn’t end up nearly as bad. They seemed to just shut down their old game, move on down the road and reopenfor business as usual as if nothing had happened.
Billionaire Warren Buffet’s two rules to investors were in full force and effect and backed up by the U.S. Treasury: “Number one rule is to never lose money and number two rule is to never forget rule number one.?

In fact, big business pretty much has made up its own rules during the last three decades. Taxes for corporations and the wealthiest were continually lowered` and regulatory obstacles to domestic and offshore investments were eliminated. At the same time, conversely, wages for the majority remained stagnant since 1973.

Not surprisingly, a dramatic shift in wealth occurred during this time. The top one percent today controls 40% of our wealth in the United States if housing alone is excluded. On the other hand, the majority is being squeezed more and more and purse strings tightened.

Simply put, the average consumer has been losing ground in the last thirty years. Extensions of credit to family households concealed this decline and kept the economy going until debt burdens finally led to the current wave of defaults, especially in the housing market where speculators drove housing prices to unprecedented levels.

Too much money in the hands of too few fundamentally led to the crisis according to Jack Rasmus, a former elected union official turned college professor and writer, whose latest book, Epic Recession, Prelude to Global Depression, has just been released by Pluto Press.
“A massive amount of liquidity in the hands? of “wealthy individuals, their various investing institutions like hedge funds, private equity firms, private banks? and corporations have created over the last three decades a “global money parade…that sloshes around the global economy in pursuit of the greatest short-term returns, which in recent years have become increasingly speculative in nature.?

Rasmus cites 2006 statistics that reveal both the relative value of global financial assets and their infinite variety such as cash, stocks, bonds, options, certificates of deposit, commercial paper, money funds, foreign currency, precious metals, commodity futures, derivatives, redeemable insurance contracts, accounting receivables and more.

The endless brew of financial cocktails outstripped the world’s total production of commodities by a factor of three. In the US, it was worse, the enormously lucrative financial sector accounted for four times the Gross Domestic Product (GDP), a measure of all the goods and services produced in this country.

Numerous investment schemes were concocted to attract this excess glut of global capital that saw more profit in paper transactions than in production of real goods and services. As demand for speculative ventures multiplied, so did the stock market.

The Dow Jones jumped an incredible 8000 points from 1994-2000, the largest leap in its history. All seemed to be going good, too good as it turned out. Little of real, hard physical value was being produced as the global economy was awash with trillions of dollars in the pockets of the wealthiest among us, all swimming toward the next big speculative venture.

Cracks began to appear during the Asian currency crisis and the Dot.com bust of the last decade, creating what billionaire financier George Soros described as a “longer-term super bubble.? But, deciding not to fold, the Federal Reserve Bank threw more chips into the pot by dramatically lowering interest rates.

The Fed often worked this way by making sure the money faucet flowed anytime Wall Street got a little thirsty.

With more money on the table, banks in the first years of this decade actually aggressively pursued home buyers just to keep the casino doors open. More home buyers meant higher home prices meaning even more eager purchasers of mortgage-bundled investments. With new blood in the water, the feeding frenzy by speculators continued.

Thus, warning tremors were ignored as profits continued to flow. Few recognized or wanted to admit that the economy was built on shallow landfill unprepared for the next “Big One? to hit.
However, when consumers could no longer afford the skyrocketing price of a home, the hot item topping the menu of speculators the last few years, the housing market finally collapsed. The resulting sag in home purchases in 2006 was compounded by the growing number of defaults, thus triggering an enormous free fall of the fragile financial structures that depended so heavily on the fantasy that home prices would steadily and endlessly increase.

How did this Happen?

New financial packages were developed in the US housing sector that profited enormously as each mortgage of the original physical asset, a home in this example, was bundled together with assorted other stock portfolios, hedge funds and securities that was passed along a chain of sellers and buyers. Each investor profited from every subsequent exchange even as the paper trail extended far, far beyond the initial real, material asset of the home.

Speculators of home mortgages both produced and greatly benefited from the surge in housing prices. In fact, higher home prices were essential to maintaining the profitable sale and resale of these bundled mortgage investments.

As is the nature of Wall Street thrill seekers, no one believed the ride would end.
In fact, to keep the wheel of fortune turning, lenders began desperately and aggressively offering no interest home loans to credit-deficient working people who subsequently defaulted when the Federal Reserve Bank began raising their credit line from a floor of one percent to over six percent after 2003. Hundreds of thousands of defaulting families, often portrayed by Wall Street apologists as causing the deep recession, are really the victims and pawns of these shady pyramid schemes.

Eventually, the numerous and extended links in the investment chain began to ultimately unravel as the original home borrower defaulted because of growing debt obligations. The whole scheme depended on housing prices rising and this worked for awhile as speculative demand for housing derivatives increased. But, at some point, the material asset of a home, for example, must actually correspond to a more real set of values.

Rasmus makes the point that supply and demand restraints do not equally apply to speculative ventures. In fact, it is demand that is the driving force there and as demand grew for the sale and resale multiple times of home mortgages to investment firms, for example, so did the price of each subsequent transaction escalate. Profits and fees were added along each step, thus, also driving higher the price of homes.

As bets continued to be placed on the same original home investment, it was essential home prices continue to rise, thus ensuring profits for new players climbing on board vying for mortgage-based derivatives.

The price of the real, physical entity of a home, unlike its various speculative paper derivative counterparts, however, is affected by market supply and demand as Rasmus explains. So, when home prices outdistanced the ability of cash-strapped and debt-ridden consumers, a cascade of defaults resulted, adding to the housing glut and leading to dramatic declines in home prices.
The boom finally went bust. But Buffet and the other billionaires are still smiling. They either profited enormously in those years or were bailed out by the Bush and Obama administrations that subsidized several trillion dollars of losses of the 19 largest banks and investment firms in the United States.

But not one dollar was extended by the government to homeowners directly. In effect, nothing has been done to solve the underlying problem which is that working families have become chronic under consumers. The problem is acerbated since being deprived of credit which was the one life line to compensate for lower wages and higher health care costs.

The author does not, therefore, exclude the economy descending even further. The current situation is nothing more than a holding pattern, a stalemate that only temporarily avoided descent into depression. The fragile banking system was beefed up but little has been done to rebuild the deteriorating condition of worker consumers in this country and no recovery is possible without this being addressed.

Turning the economy around means turning around the increasingly wide gap in wealth between the top and the bottom and it calls for real investment in products and services.
Not surprisingly, the former labor organizer offers a political theme in his final chapter recommending solutions. In it, he expresses more confidence in a rejuvenated union movement that champions working class economic and social reforms than he does in the politicians in Washington who have amply demonstrated their class bias favoring banks and investors.
His solutions include nationalization of key banking transactions to provide no-interest home loans, the same benefit provided to bailed-out banks and investment firms.

Depression or Recovery?

The fraudulent nature of the economic boom of the last decade has been exposed.
The book explains how it happened, how previous recessions and depressions arose and abated, how dramatic structural changes of the economy are required that go well beyond reinstituting needed banking regulations, how direct government control must be instituted and how trillions must be spent directly on a social programs and jobs to upright a thoroughly imbalanced economy tilted toward the super rich.

The reader is conveniently provided three distinct book sections which can each be read independently: a discussion of broad economic theory, a description of US economic history and an analysis of the causes and solutions to the current epic recession. The introduction gives an excellent overview of all three of these chapters.

Thus, the author is the exception to George Bernard Shaw’s observation that “if all economists were laid end to end, they would not reach a conclusion.? On the contrary, Professor Rasmus has plenty of opinions, all fact-based, and plenty of conclusions, all well-documented.

But the author does face the obstacle wittily noted by another famous authority, the late liberal American economist John Kenneth Galbraith who noted that “economics is a subject…resonant with boredom. On few topics is an American audience so practiced in turning off its ears and minds. And none can say the response is ill advised.?

Students, workers, social activists, and those who simply want to examine more closely the collapsing world economy dramatically affecting us all, would be well advised to plunge ahead. To be sure, this is not a happy face book that can be read leisurely with your IPOD blasting away. This is a scholarly work on a serious subject that deserves to be studied thoughtfully. This does not mean it is too difficult to understand.

On the contrary, the book shatters the mystique of economics. Human decisions, not Adam Smith’s legendary “invisible hand,? have brought us to the brink of disaster. If you want to understand better the world around us, better understand the current turmoil engulfing us and better understand and even anticipate future events that lie ahead for us, Epic Recession belongs on your bookshelf.

Review of ‘Epic Recession: Prelude to Global Depression,’ by Alan Benjamin

by ALAN BENJAMIN, Unity & Independence Labor Newsletter, July 2010

Jack Rasmus is an economist, university professor, author, and activist who has worked closely with the San Francisco Labor Council and the Workers Emergency Recovery Campaign (WERC) to organize a workers’ fightback against the assault on workers’ rights, jobs and gains that is taking place in the name of the so-called “economic recovery.” In May 2010, his new book “Epic Recession: Prelude to Global Depression” hit the bookstores across the United States and Great Britain.

“Epic Recession” is a powerful book that is sure to provoke a widespread discussion in the U.S. labor movement about the need for independent political action by labor to defend jobs and prevent the onset of a Global Depression.

The jacket cover includes a statement praising the book by Chuck Mack, a longtime International Vice President of the Teamsters’ Union. Mack writes: “Extensive research, thoughtful analysis and articulate writing have created a great book. Jack Rasmus doesn’t just talk about the economic catastrophe of the last two years, he identifies the problems, the root causes of the problems and offers sound and insightful solutions.”

In an article published in Z Magazine (April 2010), Rasmus summarizes some of the main points covered in his new book. He writes:

“A year ago the Obama administration assured the nation that its $787 billion economic stimulus bill and three-part bank bailout plan would generate an economic recovery from the current economic crisis. A year later it is now abundantly clear that the Obama administration’s programs never intended to generate an economic recovery.

“These programs all were designed to simply put a floor under the escalating economic collapse at the time. The Obama strategy was designed simply to buy time to allow a market-driven recovery to take hold, led by the banks renewing lending once again. But the banks didn’t lend, market forces have been unable to generate a sustained recovery, and except for the big banks, big multinational companies, and the stock markets, the U.S. economy has been simply ‘moving sideways’ – neither collapsing further nor able to enter a sustained recovery. … Why is this?

“The current crisis is an Epic Recession, and thus quite unlike other ‘normal’ recessions in the post-1945 period in the United States. Epic Recessions are the consequence of major financial system implosions resulting from prior speculative investing excesses, which drive debt and asset-price inflation to dangerous levels. When the bust occurs, it produces greater than normal debt unwinding that leads to deflation and defaults.

“These forces are the consequence of escalating global income inequality, exploding global liquidity and the expanding ‘global money parade’ of speculators, their new shadow financial institutions, and new markets and financial instruments created for those markets (most notably derivatives). The global money parade, with more than $20 trillion on hand, drives the speculative boom, in the process creating a mountain of debt in the system.

“So what is to be done?

“Short of another financial-banking system implosion, which may originate anywhere globally given the now global nature of the capitalist financial system, the current economic crisis can go on for years, with short, unsustained recoveries and brief, equally unsustained economic relapses. This can go on for years until massive fiscal spending in the form of major government public investment and jobs creation occurs and appropriate structural reforms take place. These structural reforms will almost certainly have to address the banking-financial system, the tax system, and the serious income mal-distribution problem today in the U.S. economy.”

Rasmus goes on to explain that his new book contains 28 proposals for an alternative program needed to turn things around in the interests of the working-class majority. Among his proposals one can find the following:

” - Job Creation and Housing Stabilization: There can be no sustained recovery so long as jobless numbers remain in excess of 20 million (today roughly at 22-23 million when properly calculated) and so long as housing foreclosures, defaults and delinquencies continue to rise and prices and equity net worth continue to fall.

“A new federal housing agency, a ‘Home Owners-Small Business Loan Corp.’, or HSBLC, is needed to provide direct lending to homeowners and small businesses. … The initial task of the HSBLC is to purchase existing mortgages in foreclosure and resetting rates and principal. Thereafter, it would extend mortgage financing to all potential home financing in the future. The HSBLC is the primary agency administering a nationalized residential mortgage and small business property markets. …

“A one-year moratorium on residential and small business property foreclosures is needed to prevent further consumption collapse estimated from 4-5 million new foreclosures projected to occur. The moratorium will allow necessary time for the organization of the HSBLC. …

“- $800 Billion for Job Creation and Retention: An effective alternative jobs program must carefully consider the composition of employment generation. The quickest way to retain and grow jobs is within existing industries and businesses, not primarily by creating new industries from scratch. A quick path to jobs creation is direct hiring by government, in particular state and local government and school districts. A third fast path is promoting hiring in those industries having shown in the past high job growth rates, and thus potential for high job growth, such as health care. With these caveats in mind, job creation and retention program must target $300 billion for infrastructure jobs, $300 billion for public sector jobs, $100 billion for growth sector jobs like health care, and $100 billion for relocating manufacturing jobs back to the United States.

“- Tax Restructuring and Programs Financing: Capital Incomes Tax Cuts Rollbacks: There are approximately 114 million taxpaying households in the U.S., and the wealthiest 1%, or 1.1 million, have increased their share of IRS reported income from 8% in 1978 to more than 24% in 2007. This 24% share is equivalent to that which existed for the wealthiest 1% in 1928. No long-term recovery is therefore possible without a basic re-restructuring of the tax system in the U.S., starting with capital incomes taxation. It is necessary to roll back tax cuts on capital incomes – i.e. capital gains, dividends, interest and rental incomes for business – to 1981 levels, not 1993 levels, that is, back to that point at which the major tax restructuring began in the United States on behalf of earners of capital incomes at the expense of earners of wage incomes.

“80% Coverage Single Payer Health Care: There can be no long-term solution to the health care crisis in America (measured as deteriorating coverage, rising costs, and declining quality of care for the majority) so long as the Insurance companies remain a primary player in the system. Therefore, as an interim step toward a Universal Single Payer system, it is necessary to set up an Interim Single Payer system initially for the 91 million households earning less than $160,000 per year. Households earning above $160,000 (households within the top 20% income distribution) would be exempt, but could participate for a fee that would scale up with their income level.

“Re-Unionization of the Private Sector Workforce: A long-term program for restoring income to the bottom 80% households includes policies and measures to restore the unionization rate to at least the 22% level of 1980. The first step toward re-unionization must include reforms to level the playing field between workers, their unions, and management at the level of legal rights. This begins with implementation of the Employee Free Choice Act, or EFCA, which permits a more fair process for union organizing.”

Rasmus summarizes his solutions as follows: “The only way to prevent the onset of Depression is to radically restructure the economy through a massive jobs-creation program, nationalizations, a fundamentally new kind of banking structure and a long-term redistribution of income through better healthcare and benefit systems.”

Rasmus provides ample facts and figures to back up his 28 proposals. But he does not explain what it will take to ensure that these policies can become the law of the land – no doubt, he might say, because such an undertaking is beyond the purview of this book.

Possibly. But the question is posed from the beginning pages of his book. Millions of people voted for Barack Obama because they wanted “change they can believe in.” They wanted jobs, peace and justice – all of which are impossible to obtain so long as the Obama administration continues to bail out Wall Street at the expense of Main Street.

Promoting an independent Workers Emergency Recovery Campaign – including a massive jobs-creation program – will require that the U.S. labor movement act independently of the Democratic Party and fight in the streets and in the halls of Congress for its own agenda, through its own Labor Party.

Rasmus has made this task a bit easier by publishing a book that provides us with an analysis that is sound and a set of proposals that are reasonable and winnable – provided, of course, there is the political will in the house of labor to act independently of the twin parties of capitalism.

(For bulk order information, contact or

Review of ‘Epic Recession: Prelude to Global Depression,’ by Suzi Weissman

“When Are We in a Real Depression?”
by Suzi Weissman, ‘Z’ Magazine, September 2010

I do a weekly drive time radio show in Los Angeles and began concentrating on the economy right after the effective nationalization of Long Term Capital Management in 1998 – the year that the so called ‘Asian flu’ took down economies from Asia to Russia and beyond. Economically we seemed to be in new territory – profound and unresolved problems in the real economy were papered over by debt, speculation drove profit, and it soon became apparent that the US economy was addicted to bubbles as a growth strategy. I began to interview Keynesian, Minskyan and Marxist economists for answers, and my featured guests commented with growing alarm as bubbles inflated, deflated and then burst. As with LTCM in 1998 but on a much larger scale, the 2008 financial meltdown couldn’t be contained to the US and leapt national boundaries with electronic speed.

Not surprisingly, I turned to Jack Rasmus time and again to go ‘beneath the surface’ and help the listeners understand the unfolding economic drama. Armed with facts, Jack Rasmus could expose the rosy recovery myths the mainstream business press celebrated, talk about the real numbers of unemployed, and otherwise analyze, make predictions and theorize the nature of the financial implosion we are living through. Jack’s articles chronicling the crash and critiquing the measures proposed to deal with it appeared in Z Magazine regularly. It’s been an amazing ride, to say the least – and now Jack Rasmus has published his thinking on the biggest economic crisis in the last 80 years.

When the financial institutions began to go bust creating a domino like run on the banks, economists, journalists and pundits debated whether this was a recession, depression, or something else. The mainstream press has settled on the name “Great Recession.? Many on the left classify this as another great depression, the second in 75 years and an indictment of the capitalist system. Jack Rasmus calls it an ‘Epic Recession’ and that is the title of his new book. Epic Recession: Prelude to Global Depression, Pluto Press, London 2010.

Does it make a difference what this global meltdown is called? Yes—and there is substantial disagreement among analysts. But what is crucial is that we get more than either a recitation of events, or a grand theoretical overview that pays scant attention to the story as it unraveled, bringing the global economy to the brink of collapse. We live in an age that has little sense of history: the causes and consequences of the crash of 1929 and the decade which followed were easily forgotten in the hubris and euphoria of what some called bubble-economics.

Jack Rasmus’ book takes us through an historical comparison with epic recessions from the past and shows how government policy can either avert the worst or lead the economy into a great Depression, step by step. Politics matter in how this economic crisis is handled, as the economy is more and more dependent on the government and conscious decision making. Epic Recession: Prelude to Global Depression is not a simple blow by blow catalog of events from the dot.com boom and bust to the stock market and real estate bubbles and busts, followed by weaker attempts to create a commodities and then an oil bubble. Rasmus does examine what set off the cascade but then asks questions and analyzes the structural changes in motion.

Rather than just blame the smart set in the banks who devised complex financial instruments that few could understand, Jack goes back three decades to look at deliberate actions taken during the Reagan administration that deepened the dependence on debt to maintain consumption. Examining the subsequent structural changes in the economy, fiscal and governmental policy, Rasmus attempts to theorize what has happened, to explain why the Bush and Obama bailouts are insufficient to prevent the continued downward slide and hemorrhaging of jobs, and to propose an alternative recovery program that can be used as an organizing tool.

Three articles by Jack Rasmus have been published in Z Magazine that outline the major arguments of his book. Most of what has come to pass was predicted accurately by Jack in these articles. He wasn’t alone. Notwithstanding the Wall Street boosters on much of the cable television business channels, noted economists and financial journalists of the right and left saw this coming – some had a ringside seat – and warned and wrote about what was happening. They weren’t in a position to do anything about it.

Analysts on the left tend to see this crisis as another indictment of a failed capitalist system, no longer able to hide its decline with debt driven bubbles. Some see the crisis in criminal terms: fraud, theft, opacity and corrupt regulators combined to make this meltdown an inevitability, especially once protective walls like Glass-Steagall were removed. Danny Schechter, in Plunder, sees the crisis as a crime scene, asking for “jail-outs not bail-outs.? Max Wolff undercuts conventional wisdom on “Too Big to Fail,? saying the real problem is “Too Big to Bail.? The steps that States take are crucial to fostering a recovery or, alternatively, leading us into depression. Nomi Prins calls this a banking-led depression. Michael Hudson, watching current European proposals to inflict painful, draconian cuts to the public sector to tame deficits (which he says are coming here next) thinks the world is heading back to a system of debt peonage. Others argue that government and business are taking advantage of the crisis to return to a pre-WWI, or even pre-Civil War economy, before the gains of the Progressive, labor, and Civil Rights movements. Most observers agree that the period ahead looks bleak.

Rasmus recognizes the theoretical debt he owes to three economic thinkers: John Maynard Keynes, whose work is more about how to recover than what produced the crisis; Irving Fischer, who identified debt and deflation as the main mechanisms that drive a downturn into a depression, and Hyman Minsky, the theorist who wrote about the role of speculative investment, showing how the accumulation of debt can destabilize the entire financial system and provoke the kind of financial meltdown we have just experienced. Although Minsky died in 1996, his thinking is so pertinent to the crises of 2007-2010 that financial journalists and academics have called it a “Minsky moment.?

Theoretically, Rasmus tries to take the work of these theorists further in order to understand the nature of the current crisis, and Rasmus pledges to do this more fully in subsequent volumes as this crisis unfolds. His analysis is also aided by a thorough grounding in Marxist economic theory. Missing in Keynes, Fischer and Minsky, he writes is “the consideration of the price for labor and its relationship to product and asset pieces: how wage deflation is related to product and asset deflation.?

Chronicle of the implosion

There were warnings all along about the dangers in the highly leveraged subprime mortgages that rapidly spread to credit markets worldwide, creating financial havoc that led to recession in 2007. In March 2008 Bear Stearns collapsed, beginning the global meltdown. The Fed sought to contain the damage through infusions of capital and forced restructuring of failing institutions. Bear Stearns – an investment bank that was one of the shadow institutions heavily involved in the subprime mortgage market – was essentially given to JP Morgan Chase at a fire sale price backed with money from the Fed. The Fed then backed Fannie Mae and Freddie Mac. When Lehman Brothers started to go belly-up the Fed reversed its policy and allowed it to go under (Fed Chief Paulson spoke of ‘moral hazard’). AIG was partially nationalized and the whole house of cards came down in late summer 2008. More than just the puncture of a bubble, this was a catastrophic breakdown and a fully fledged banking panic ensued. The amount owed on leveraged ‘instruments’ was now many times the world’s GDP, though this isn’t a particularly useful measurement. More importantly, was this a crisis of liquidity that infusions of cash could remedy, or was it a crisis of insolvency? There followed an unprecedented financial freeze – credit simply crashed, taking down businesses, contracting the economy and leading to massive layoffs. It started to look a lot like the early years of the great depression of the 1930s.

This much can be ascertained from the many fine financial articles, blogs and books that have appeared chronicling the ‘age of greed’ and the melt-down, often from front row seats. Reviewing these events Jack Rasmus concluded that this was not a typical recession, but something entirely new. Finance capital imploded. The connections between Wall Street and Main Street became all too apparent – with banks unwilling to lend, businesses laid off workers and/or went under. But what were the fundamental forces at work that drove and underlay this economic storm?

Going beneath the surface Rasmus sees the debt, deflation and default cycles as enabling but not fundamental causes, leading to “consumption fragility? and the collapse of finance that produced what he calls the Epic Recession. It is epic, according to Rasmus, because the contraction of the economy is a hybrid with characteristics of both a recession and a depression. What are the forces driving this contraction? Rasmus’ interrogation involves a thorough historical and theoretical investigation to arrive at an understanding. He is not interested in what he calls ‘labeling in lieu of analysis’ or the kind of conceptual models or even superficial historical parallels that may dazzle but fail to explain and fall short of proposing solutions. Rasmus reviews the analyses of economists (academic and non-academic) as well as those of financial journalists, raising essential questions they fail to address. He notes that sophisticated terminology is no substitute for theoretical analysis, but theoretical models abstracted from the facts are equally unhelpful.

The Epic Recession did not begin with the housing bubble. To get at the underlying cause of the present crisis Jack Rasmus goes back to the Reagan era deregulation and tax cuts. The shift to finance capital that began in the 1970s came on the heels of the radicalizing social movements of the 1960s and the rising expectations of the working population for a higher standard of living. The response was an employer offensive to roll back the historic rise in American workers’ real wages through attacking unions and shipping production to low wage economies. It marked the ‘switch’ to finance from industry, the transfer of wealth upwards and the expansion of debt-driven finance for household and state budgets alike.

More than deregulation and tax cuts, Reagan began the frontal assault on unions. When the air traffic controllers went on strike in 1981, Reagan ordered them back to work; they continued the strike and he fired them, destroying their union (PATCO). This was by implication an attack on the organized working class, and Reagan’s success signaled the beginning of the assault on living standards (stagnant wage growth) and the redistribution of wealth upwards from workers to investors and corporations. Not surprisingly, it was also in 1980 that working and middle class households began to resort to debt to maintain living standards. It is this income redistribution that allowed the creation of what Jack Rasmus calls the ‘money parade,’ a global glut of capital sloshing around looking for profitable investment.

The shift from manufacturing to speculative investment brought with it new forms of banking to get around regulators (the shadow banking industry) as well as new financial instruments that serve as conduits for the “money parade,? creating debt-financed consumption in place of the old fashioned generation of income and jobs through physical production of assets. In common parlance the shift was from making goods (manufacture went to countries with cheap labor) to making bets on capital: the term casino capitalism is a fair description.

Epic recessions

Defining the 2007-2010 crisis as an epic recession and not a depression leads Rasmus to trace its origins and discern its dynamic, suggest policy approaches to deal with it and warn about the consequences of policy failure that could well transform this epic recession into a bona fide depression. He looks at two previous epic recessions which because of their similarities to the present become crucially important to understand. 1907-1914 was an epic recession that stagnated, while the 1929-1931 crisis evolved from an epic recession into a bona fide Depression.

The banks were bailed out in the epic recession of 1907-1914, but not the real economy. Sound familiar? The financial sector was stabilized but credit contracted, production declined, businesses shuttered, unemployment soared, asset prices fell (deflation) and an extended period of stagnation ensued. There were brief and shallow recoveries along the way, but the end only came with the onset of World War I in 1914. Again, sound familiar?

The ‘epic recession’ following the financial crash of 1929 until 1931 was worse, and there was no bailout of the banks or of the real economy. The result was an economic collapse that descended into global depression. The effects of government fiscal and monetary policy determined in each case the economic result. The chapters on the 1929-31 epic recession and that of 2007-2010 are gripping, as we see step by step that the cyclical downturns can be made much worse by bad fiscal public policy, something we are about to see globally now. When Rasmus catalogs the 1980s Savings & Loan crisis and Reagan’s push for deregulation, it is a stomach wrenching read, but that crisis did not go global nor beyond the S&L industry.

Policy muddle?

The world economy is ever more dependent on governments and conscious decision making, so policy is all important. Jack Rasmus correctly concentrates on the insufficiencies of both the Bush and Obama injections of capital to deal with the crisis. While Bush is a firm believer in market, not government solutions, his economic team pressed him to bail out the financial institutions with an initial $700 billion injection of funds and to set up the TARP (Troubled Assets Relief Program). More than four trillion has been thrown at the problem with another eight trillion dollars (or so) committed for future bailouts. As Rasmus notes, this was the monetarist solution – “a liquidity solution to an insolvency crisis.? The Obama/Geithner team steadfastly refused to nationalize the banks, while it could be said that the Bush/Paulson bailouts amount to a nationalization of banking bankruptcy.

Obama’s program, as Rasmus notes, is a short term holding operation for normal recessions, not epic ones. It relies on market solutions, doesn’t address the collapse of consumption, and favors global markets over domestic ones. The amount of stimulus injected was inadequate to fight deflationary pressures and hemorrhaging jobs, but at the same time talk emerged about rising deficits and fighting inflation down the road. The discourse changed when China balked at buying more US securities to finance US deficits. The irony of relying on semi-Stalinist China (led by the Chinese Communist Party) to save capitalism is a rather rich one to contemplate.

Now that the financial sector has been bailed out, it is back to business as usual. Companies are sitting on mountains of cash, yet they continue to slash payrolls and cut expenditures. Main Street just gets worse and worse with chronic high unemployment and underemployment, dire cuts to education and health (in California one in four is without health insurance) and more foreclosures and bankruptcies to come. State and local governments are in desperate need of bailouts, and their balanced budget requirements undercut or cancel out Obama’s economic stimulus. Everywhere individuals, states and nations are drowning in unsustainable debt. The crisis is global and the picture is grim from Iceland to Ireland, the Baltics to the Balkans, Chile to California.
Wall Street has poured hundreds of millions on Congress to try to prevent any real regulation that would curb their profitable practices. Regulation is being restored, but with plenty of loopholes. Congress can’t legislate what needs to be done – it is constrained by party polarization, ideological intransigence and buckets of money from financial lobbyists. The somewhat veiled relationship between capital and power has lost its cover. Congress is openly seen as a wholly owned subsidiary of the titans of finance, industry, real estate (FIRE) and pharma. Capitalism may be losing its luster (confirmed by a recent Rasmussen poll) but the deficit hawks are gaining ground, blaming workers and crying for pain.

Western Europe has taken the decision to cut living standards drastically (Britain’s Cameron has warned of pain for decades to come) and the UK and Germany are in the lead in attacking living standards. Indeed, European policymakers make President Obama’s stimulus policy look reasonable by comparison. Since the deficit hawks in the US are not in control the US stands out as the only developed country with any sense, even if the Obama program is insufficient for recovery. Nonetheless, the calls for deficit reduction are gaining in the US, and the states are already forced into draconian measures.

Keynesian economists like Paul Krugman warn that economic policy is now set on a disaster course of crippling cuts that will kill any possibility of recovery. But why are governments choosing policies that will, as Rasmus warns, take this ‘epic recession’ into a full blown global depression? Why don’t governments simply reflate to spur growth rather than cutting back? Put another way – what would it take to force governments to adopt the policies that would benefit the majority of the population?

Simply put, there would have to be a vibrant labor movement that could effectively challenge the cuts to come. It would require the kind of popular mobilization and sustained fight-back that Greek workers began to mount to resist austerity. Unfortunately that doesn’t exist today. Greek workers called for a default and no cuts to their living standards. They have been temporarily bailed out, but draconian cuts are part of the package.
Economic policy has veered from supports that are too little and not given a chance to work, to deficit reduction guaranteed to undermine recovery. There appears to be no satisfactory ‘exit solution’ from this crisis that preserves present power relationships. To reflate the economy and raise living standards depends on the confidence that the population represents no threat. Technically it doesn’t but capital is still smarting from the revolts after 1968. The switch to finance after the 1970s appeared to be the solution to the impasse, shifting manufacture to low wage economies, including those in former Stalinist states where workers would be reliably docile. Now there seem to be no strategy, and Greece notwithstanding, no real left either. Increasingly the policy appears to be one of rollback, to strip away the gains workers have won over the last 60-70 years that cut into profits. The logic that governments are following is to go back to some form of an imagined pristine capitalism before there was any challenge to the system. Even so, the current offensive proposed in Europe seems suicidal.
Alternative solution for recovery

Epic Recession is written in the language of political economy and economic history; it is technical, analytical, political and practical. The material is well organized with clear explanations and Rasmus provides a very useful glossary at the end that succinctly describes his key concepts. After a review and critique of the Bush and Obama recovery efforts through the policies enacted by Greenspan and Bernanke, Paulson and Geithner, Jack draws up his own practical solutions to the crisis in a twenty-eight point recovery program that is being taken up by labor councils around the country.

The alternative recovery program is one that involves a radical restructuring of the economy in the interests of the vast majority: massive job creation programs, nationalization of the mortgage and consumer credit markets, new banking and tax structures tax and a long-term redistribution of general income with quality and equitable healthcare delivery and retirement systems.

The beauty of the alternative program for recovery that Rasmus proposes is that it provides a concrete basis to fight the offensive on living standards underway. He insists it represents the only way to prevent the onset of a classical depression. The program addresses both the root causes of the crisis but also contains solutions that are reasonable and realizable. His solutions threaten the position of capital and would be fought tooth and nail.

This radical restructuring of the economy challenges capitalism without overthrowing it, yet cannot be undertaken without a militant labor movement that demands and wins jobs, healthcare, homes, education, and decent retirement pensions. Had his program been in place right away, the foreclosures would have been staunched, and the credit market stabilized.

Among the proposals in the alternative recovery program are: Mortgage rates would be reset (all loans, not just those in trouble) to the Fed’s 30 year bond rate plus .5%, so an effective rate of 3.5%. Mortgage principle would also be reset to the levels before the artificially inflated prices of 2003-2006. There would be a moratorium on all foreclosures both residential and commercial.

The second set of proposals would provide for real job retention and creation, pumping adequate and targeted stimulus (infrastructure jobs, manufacturing and public sector job retention and creation, plus adequate safety net funding.) The program also includes measures to insure it is adequately financed through restructuring the tax system. Proposed measures would assure the finance sector as well as begin to redistribute income; restructure retirement tax so that a surplus is restored to the social security system after 2017; provide funding for a single payer healthcare delivery system. His tax measures would reverse regressive taxes and recover capital from offshore havens, create a financial transactions tax and many other progressive measures. These measures would gradually reverse the income inequalities of the last three decades.

To implement the Rasmus alternate recovery program would require confidence, mobilization and organization from the very sectors that have been adversely affected for decades. It is precisely that kind of mobilization that government policy seeks to avoid and seems prepared to risk a depression to effectively discipline labor (even super-exploited low wage immigrant workers). That is class warfare on steroids, coming from the wrong class!

Nowhere does Jack Rasmus call for an end to capitalism or sound the call to mount the barricades. His alternative recovery program does address the real problems in the economy and does so through concrete proposals. It has the added value of being an organizing tool that lifts the population – and as such challenges the status quo with its property and wealth arrangements. Chuck Mack, the International Vice-President of the Teamsters writes (on the back cover) that Epic Recession provides a rallying point for trade unionists and concerned citizens who want to ensure that any recovery is felt further than Wall Street. Rasmus calls for bailouts for workers not bankers.

Review of THE WAR AT HOME by Harvey Schwartz

The War At Home: The Corporate Offensive From Ronald Reagan to George W. Bush
by Jack Rasmus
Kyklos Productions, San Ramon, California, 2005, 534 pp.

REVIEWED by Harvey Schwartz
Curator, ILWU Oral History Collection and Sam Kagel Historian
Labor Archives and Research Center, San Francisco State University

Did you like Howard Zinns, A PEOPLE’S HISTORY OF THE UNITED STATES? If so, you are going to love the new book by Jack Rasmus, THE WAR AT HOME: THE CORPORATE OFFENSIVE FROM RONALD REAGAN TO GEORGE W. BUSH. Rasmus is a former local union president and a seasoned organizer who once directed a community college labor studies program. He also holds a Ph.D. in political economy. Here he employs the tools of that exacting science with rigor and insight to analyze the victorious thrust in recent decades of corporate power into every phase of American social, political, and economic life.

Like Zinn, Rasmus sees American history as a continuous struggle between the “haves? and the “have nots.? Zinn traces the rise of elite power and the organized response of various groups of exploited people from Columbus to, in the most recent edition of his best seller, Bush II. Rasmus would not dispute that approach to the past. On the contrary, by going into serious depth in several key areas of American life since Reagan, Rasmus effectively picks up the story where Zinn leaves off.

Rasmus differs from Zinn in looking at the political and economic policies of corporate America and the resulting deleterious impact on workers and unions rather than at any specific people’s opposition movements. Consequently, his book is an excellent complement and companion to Zinn’s popular work. Rasmus seeks to pull together the various phrases of what he calls “the corporate offensive? in a readable and comprehensive account that workers, progressive activists, and other non-specialists will find useful and informative. In this I think he succeeds admirably.

THE WAR AT HOME is not driven by any conspiracy theory of history. Instead, after briefly carrying the story back to 1929, Rasmus traces ebbs and flows in a quite public corporate push that more or less parallels the ascendancy of Republican presidents since Richard Nixon.

Early on, Rasmus also points out that acknowledging any such thing as “class war? is anathema to mainstream American politicians and media opinion-makers. He then convincingly demonstrates exactly how the elites have profited since 1980 at the expense of working class families in income and wage distribution, job loss, debasement and outsourcing, federal tax, trade, labor policies, and health care and pension benefits.

The final chapter of THE WAR AT HOME focuses on the evaporation of the once vast Social Security surplus over the last twenty-five years. This inquiry is especially riveting given President George W. Bush’s crusade to privatize and essentially hamstring the Social Security program, that best known remaining legacy of Franklin D. Roosevelt’s New Deal.

Rasmus has a lot to complain about, but he does not let matters drop there. He has suggestions for dealing with the corporate offensive at the end of several of his chapters, and a real battle plan for organized labor in his lengthy conclusion. There he challenges the AFL-CIO to improve the coordination of its member unions in several key areas.

Intending to stimulate fruitful discussion within the ranks of labor itself, Rasmus holds that American unions must henceforth work together and perhaps restructure their movement at the grass roots level. Only then, he argues, can they hope to expand significantly and to recapture the kinds of industry-wide or regional-wide collective bargaining agreements that re-enforced union power in much of the United States before 1980.

All this should give you a sense of the inclusive sweep of THE WAR AT HOME. The final verdict, it seems to me, is that if you want to get beyond the “big G? hot button issues successfully exploited by various reactionary politicians in recent campaigns—God, gays, guns and the like—and find out what has really been going on, give THE WAR AT HOME a look. It has some great labor cartoons by Jim Swanson and a few simple graphs even I was able to follow. Most important, it is a sobering and path-breaking effort to “put it all in one place.? As such, it is clearly a valuable service to “the people? in what is most assuredly their time of need.

THE DISPATCHER, June 2005

Review of THE WAR AT HOME by Laurence H. Shoup

The War At Home: The Corporate Offensive From Ronald Reagan to George W. Bush
by Jack Rasmus
Kyklos Productions, San Ramon, California, 2005, 534 pp.

REVIEWED BY Laurence H. Shoup, “Z” Magazine, October 2005

The dominant institution in American society is the corporation, an instrument of aggrandizement for the few that enriches its already wealthy owners through a never ending process of commodification and privatization. The corporation’s goal is to make everything, even life itself, into a salable commodity, and it tries to turn every type of public property into private property, owned by and for the few. As a result, the earth and all of its life giving resources, from land and water to ores and oil, is being privatized into fewer and fewer hands, with dire consequences for numerous life forms worldwide, including billions of poverty stricken human beings. Current statistics illustrate how successful the corporation has been in helping the several hundred thousand families that make up the core of the corporate rich to reach a level of wealth and power beyond what any ruling class has ever known. The U.S. corporate rich, the top 1% of the population, holds nearly 40% of the country’s wealth, the top 10% over 70%, while the bottom 80%, making up the core of the working population, controls only 16%.

Not only is inequality in America grotesque, it is increasing due to an ongoing economic class war on poor and working people launched about twenty-five years ago by our nation’s dominant corporations. This class war has been very successful for the rich. As billionaire Warren Buffet recent exclaimed: “my class is clearly winning?. Working people, on the other hand, are clear losing. The corporate class war has been a disaster for the vast majority of our people.

In an important new book, THE WAR AT HOME: THE CORPORATE OFFENSIVE FROM RONALD REAGAN TO GEORGE W. BUSH, Jack Rasmus explores these key themes. Filled with facts and analysis, including 45 tables and 540 endnotes, and coming at a key historical moment, THE WAR AT HOME comprehensively illustrates the all-sided corporate attack on working people and their leading organizations conducted both historically and since 1980. In so doing, he makes a major contribution to our understanding of what has been going on, illustrating in depth how every societal institution which supposedly promotes the general welfare, from government at all levels, down through the Democratic Party and its trade union allies, has failed to protect the American working class from the disastrous consequences of unbridled corporate rule.

Rasmus uses the theme of periodic corporate offensives to good effect in reviewing the history of the last century to illustrate how we got to our present predicament. He sees four different corporate offensives since the 1890s, the latest and ongoing one dating from about 1980. In chapters which form the core of the book, Rasmus focuses on how the corporate power structure, using both top down legislation and bottom up actions at the point of production, has, over the past thirty years, been able to transfer about $9 trillion from over 100 million working class Americans to the wealthiest 5% of households. This has been done through tax cuts for the corporations and the rich (for example, the corporate tax rate was 23% in 1969 but is now only 7%), along with tax increases for workers; through ‘free trade’ and runaway shops, which has cost our country ten million jobs, seriously undermining our unions; through further reducing wages by contingent employment, reducing overtime pay and not raising the pathetically low minimum wage; through forcing workers to pay for health care or do without; and through reducing or eliminating pension benefits and stealing the Social Security surplus. Now they are even boldly attempting to privatize this program. Rasmus also suggests how to turn around the ongoing rout and disorganization of the U.S. working class, offering ‘suggested solutions’ at the end of most chapters, along with useful theoretical discussions of some key issues such as the ideology of ‘free trade’.

Rasmus also points out how American democracy itself is now threatened by the so-called ‘Patriot Act’ and the ‘War on Terror’ resulting, together with the impacts of the corporate offensive, in our nation’s most serious economic cultural and political crisis since the 1850s. Rasmus argues that part of this crisis involves the Democratic Party, which is increasingly influenced by corporate donations and lobbyists, is adrift with no clear ideology, or mobilizing approach to politics, and represents a weak ‘Republican lite’ approach overall. Largely taken over by the pro-corporate Democratic Leadership Conference (DLC) in the late 1980s, Rasmus correctly calls the Democrats an ‘organizational ally’, a ‘junior partner’, and frequent supporter of important aspects of the current Corporate Offensive. The War At Home documents key examples of this support, such as NAFTA, the 2000 trade deal with China, the sellout of health care for all in 1992-94, the theft of the Social Security surplus, corporate tax cuts, and two trillion dollars in tax cuts for the rich during George W. Bush’s first term alone. By 2004 the Democratic retreat from pro-working class economic positions had created such a vacuum that its former base had become confused and vulnerable to right wing appeals on cultural/social/religious issues. This is illustrated by 2004 poll numbers showing that core working class voters, those with a high school or less education, supported Bush over Kerry 57% to 38%.

Rasmus concludes THE WAR AT HOME by focusing on a reorganization of the AFL-CIO as the hope for a renewal of progressive class politics in America, proposing his own plan for restructuring the labor movement and its main federation. He points out that for at least thirty years the AFL-CIO’s political strategy has been characterized by “…an almost blind reliance on the electoral fortunes of the Democratic Party, to the exclusion of other forms of political and community organizing or inter-union coalition building? (p. 459).

During this same period probably several billion dollars in resources have been given by the union movement to Democratic candidates instead of organizing and educating working people for an independent fight back based on the needs of the majority. As a result, there has been no coordinated response to the Corporate Offensive, with the dire results that Rasmus documents so thoroughly. To remedy this, Rasmus proposes that to rebuild union and worker power requires a rank and file grass roots democratic movement with an effective membership base working on solidarity activities at the community and point of production level, and implementing a new, “radical transformation of the organizing process? itself (p. 470).

To successfully achieve this requires a fundamental restructuring of the AFL-CIO. At the core of the Rasmus proposal is the creation of an ‘American Workers Congress’, a new legislative body gathered from the state and local levels to set overall policy quarterly, plus two new union structures replacing the AFL-CIO. These are the ‘American Federation of Unions’ with the primary task of political action, including elections, as its main focus, and the ‘American Council of Unions’ with organizing and other activities at the point of production as its main focus.

To implement this at the grass roots level, what Rasmus calls ‘Local Mobilization Committees’, composed equally of union and community forces, would drive local solidarity activities like strike and boycott coordination, major cross-union organizing drives against companies like Wal-Mart, anti-corporate campaigns, demonstrations and actions in defense of community interests, and similar point of production focused activities. Union and community groups would have equal weight in both the membership and leadership of these committees. A new kind of cross-union and even union-community membership would evolve, producing a new layer of ’shock troops’ for labor. And whereas current Central Labor Councils would carry out the political organizing tasks of the American Federation of Unions, the Local Mobilization Committees would carry out the point of production solidarity actions and report to the American Council of Unions in the new reorganized structure. Both parallel structures would cooperate closely but essentially remain independent in carrying out their primary focus and missions, whether political or point of production.

Rasmus also weighs in on the ‘union density’ debate, suggesting that to increase density and potential power, sectoral unions would need to begin to develop. At first voluntary and in a loose federated structure, such unions would operate within the American Council of Unions to enforce coordinated bargaining, develop organizing strategy and direction, resolve union jurisdiction issues, etc.. He sees the eventual necessity, however, of one union in all of transport (trucking, longshore, railroad, airlines, etc.), one union in all of health care, in hospitality, manufacturing, and so on. Neither craft or even industrial unions are adequate to deal with global corporate forms of organization. But the process of developing sectoral unions must be evolutional and voluntary, in his view, not forced from the top down.

One limitation of THE WAR AT HOME is the failure to discuss and suggest possible solutions to one of the central dilemmas facing the left in America: how to escape the clutches of the DLC/Corporate-controlled Democratic Party. There are alternative parties (the Green Party and the Labor Party come to mind) with solid programs now struggling to be recognized as the party of, by and for the working class. An infusion of major labor support would instantly make one, or a merger of these two major players, a viable alternative. There are also those who argue that the political system, with its corrupt financing, winner take all structure, non-transparent voting machines, and partisan political supervision is fraudulent at its core and should be boycotted as not democratic enough even to participate in. A creative discussion of the entire political situation to stimulate a larger debate about what to do in this key area is lacking in the book.

Despite a few shortcomings, THE WAR AT HOME is a path breaking work which will stand as a milestone on the road to a fight back by and for working people, the vast majority of the American population. Jack Rasmus has performed a major service to the movement by starting what needs to be a great debate about our collective future. Those who do not want us to connect the dots about the profound transformation now occurring due to the economic warfare of the corporate rich hope that the majority now being marginalized into oblivion never find out about and read this book. Of course, this is the very reason that it is so important that we all should read it and spread the word about The War At Home.

Laurence H. Shoup is an Historian and author of the book, Imperial Brain Trust: The Council on Foreign Relations and U.S. Foreign Policy.

‘Fire on Pier 32′

reviewed by Larry Shoup in the ILWU DISPATCHER, March 2004

The many-faceted play "Fire on Pier 32" takes its title from a dramatic historical event. Worker demands for an organized voice on the waterfront during the crisis of the Great Depression led longshoremen to burn their company union contract books, the infamous "blue books," on San Francisco’s Pier 32 in 1933.

This collective act of defiance was pivotal in the history of both the International Longshore and Warehouse Union (ILWU) and the larger American labor movement. The blue books were concrete representations of the slave-like conditions imposed on working people. Their burning was a mass act of rebellion that posed larger questions of the union shop, of how jobs were to be allocated, (the workers’ demand for a union-controlled hiring hall),of pay and pensions, as well as bigger social and political questions.

Longshore Workers March Down Market St.

There was no turning back for the courageous workers who organized this waterfront bonfire. Their lives were now committed to the concept of democratic industrial unionism by and for the workers, and they now survived only through solidarity and struggle, through building their union. Their direct action and the actions of others around the country during the 1930s breathed life into a near moribund labor movement, showing that the way forward was militant democratic industrial unionism, organizing all workers irrespective of skill, race, gender or status.

The history of the ILWU represents one of the purest expressions of class consciousness and class militancy in the U.S., making its past, present and future of immense interest to us all. Perhaps no union in the U.S. has a more inspirational history for advocates as working people, real democracy and social justice. "Fire on Pier 32" reviews this dramatic history in three acts, with a cast of twelve, over two-and-a-half hours, covering the ILWU story from 1933 to 2003. It is about repeated employer offensives against labor and organized, militant solidarity as the only effective union response.

The play begins with the 1934 maritime and San Francisco general strike, then covers the epic "march inland" to organize warehouse workers, the successful organizing in Hawaii, and the great strikes of 1948 and 1971, using solidarity to turn back successive employer offensives. Final scenes of Act 3 include the lockout of 2002, when the union’s solidarity and strength was tested as the ILWU had to face down both the corporate bosses and the Bush faction of the national power structure.

In "Fire" National Writers Union playwright Jack Rasmus uses the Epic and American Musical theater traditions, as well as historic photo montage, to capture the conflict, spontaneity and passion of varied situations as the ILWU leadership and the rank and file collectively made history together. By establishing context using a narrator and ILWU archive photographs projected on an overhead screen, along with longshore workers and their key leaders as central characters, Rasmus is able to educate by provoking critical thinking and raising consciousness about social, economic and political relationships. His portrayals of boss and politician scheming at secret meetings expose the totalitarian impulses and venality of those who rule the corporate capitalist system. In another scene he shows how solidarity and the union’s collective democratic power enforce safety standards and make a real difference in people’s daily lives on the job.

At the same time, "Fire" entertains, with six new songs in contemporary musical styles, performed by a chorus of three singers-dancers and the cast of actors. The lyrics and music of the play’s two theme songs, "The Song of Solidarity and "Song of the New Unionism," are particularly memorable, representing in musical form the main premise of the play. Other key songs include "The Song of Desperation," "Government Man," "The Web," and "Moving the Money Around." These songs focus on secondary themes: government always siding with the bosses, the infamous Taft-Hartley law and how the corporations play games during negotiations.

The acting is also outstanding. "Fire’s" central protagonists, Frank and Joe, are two young workers who grow and develop as they build a union that resists corporate attacks through solidarity. Their passionate portrayals of the rank and file helps us feel in our guts what it must have been like to be a worker with only his fists, courageously facing police and National Guard machine guns and tanks during the decisive battles of July 1934.

This play is a powerfully important contribution to the entire American labor movement. In "Fire" historical events and the union movement live again through art, allowing our collective history to emerge clear and true. We see the personal and social transformations that take place as workers and their leaders debate the strategy and tactics of resistance while facing the manoeuvres of the bosses and the betrayals of some corrupted leaders.

The play succeeds in giving a human face and emotion to the meaning of solidarity—born of struggle, nurtured by sacrifice and cherished forever in the hearts of those who come to know it as more than just a concept. The universality of Rasmus’ art helps us see deeper truths about ourselves and our current predicament. The result is a useable past, helping us see that our ultimate goal must be democratizing the world, confronting the corporate capitalist usurpation of our inalienable rights and emancipating all working people everywhere.

It has been said that the theater houses a nation’s soul. If this is true, it can be said that "Fire on Pier 32" is one place where the soul of American labor resides. "Fire" is now on video and DVD, get a copy and see it with your union brothers and sisters. It is wonderfully entertaining and instructive at a time when we face the Bush-Leaguing and Wal-Marting of America.



About the Reviewer
Larry Shoup grew up in a union household, his father was a member of the Machinists Union. He has had a varied work career and has been a member of both the old Retail Clerks Union (today’s UFCW) and American Federation of Teachers. He now makes his living writing and is a member of the National Writers Union, serving on its steering committee and as its delegate to the Alameda County Central Labor Council. Shoup has written three books and numerous magazine articles. He is currently working on his fourth book: "Rulers and Resisters: A People’s History of California."

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WHAT REVIEWERS SAY ABOUT THE PLAY 'FIRE ON PIER 32'
"The universality of Rasmus's art helps us see deeper truths about ourselves and our current predicament. The result is a useable past."

Jack Rasmus Productions
211 Duxbury Court
San Ramon, CA 94583
drjackrasmus@gmail.com
925-999-9789