Friday, May 29, 2009


Harry Targ

“That Freshman Course Won’t Be Quite the Same,” is the headline of an article by N. Gregory Mankiw, professor of economics at Harvard, that appeared in the business section of the New York Times, May 24, 2009.

Professor Mankiw, as the headline indicates, is changing his introductory economics course in several ways due to the current economic crisis. His course will need to highlight more the role of financial institutions in affecting the economy, he says. Banks and insurance companies are like stage hands. They work behind the scenes and are only noticed when they fail to show up. “The process of financial intermediation is similarly most noteworthy when it fails.”

Introductory economics at Harvard needs also to discuss more “the effects of leverage,” “the use of borrowed money to amplify gains, and in this case, losses.” Economists, Mankiw suggests, will have to explore why banks “undertook so much leverage.” In addition, the gateway course will have to assess monetary policy and study the broad range of monetary policy tools that are being introduced today to reduce the crisis.

Finally, introductory courses in economics need to analyze the limits of economic forecasting, particularly to realize that economic outcomes are beyond what professional economists can predict. “…students should understand that a good course in economics will not equip them with a crystal ball. Instead, it will allow them to assess the risks and to be ready for surprises.”

The most revealing aspect of Mankiw’s view of his introductory course in economics, which he says is given to some 700 Harvard undergraduates each year, is that the current economic crisis does not suggest the need for any fundamental change in what he teaches. His words are important here:

“Despite the enormity of recent events, the principles of economics are largely unchanged. Students still need to learn about the gains from trade, supply and demand, the efficiency properties of market outcomes, and so on. These topics will remain the bread-and-butter of introductory courses.”

So for those 700 students of economics at Harvard, presumably many of whom will become influential policy makers in Washington or on Wall Street some day, economic crises require no deeper and different reflection on how the economy works, who benefits from it, who experiences it primarily as pain and suffering, and what can be done to make the economy work for people and the environment.

According to Mankiw’s description, Harvard’s Introduction to Economics course is an introduction to a way of thinking about the economic universe that emphasizes maintaining systems of wealth and power. It presents as “science” an ideology that serves and justifies the status quo. It represents that intellectual tradition, neo-classical economics, that extrapolates from the historical reality of the rise of banks and corporations, the connectedness of economic institutions and the state, the use and abuse of those who work for a wage, and the use of race and gender to make workers more malleable, to create a mathematics of individual rational actors engaging in a system of free choices and supply and demand.

Neo-classical economics dismisses the great classical political economists from Adam Smith, to Karl Marx, to Lenin, to Joseph Schumpeter, to Paul Baran and Paul Sweezy, who realized that economic processes change through history, connect economics to politics, benefit some and disadvantage others, and create new powerful economic and political institutions that need to be studied, evaluated, and changed if they fail to meet growing human needs.

In the end, the introductory economics taught at Harvard describes and defends the status quo. Those who seek to understand the current economic crisis in order to change it will have to look elsewhere.

Wednesday, May 27, 2009


Harry Targ

"Clearly, the most important blame is with the financial institutions that didn’t manage risk and the regulators who didn’t ensure that the banks did what they were supposed to. There were some other factors, such as easy money. But easy money could have been used for productive investment, so you can’t blame easy money. It was the way easy money was misused that led to the bubble.” (Joseph Stiglitz, “Thoughts on a Crisis: The Future of Capitalism,” Financial Times, May 12, 2009, 28)

Lenin’s Theory of Imperialism

Lenin wrote his famous essay on imperialism in 1916, drawing upon a variety of theorists who began to see significant changes in the way capitalism worked as an international economic and political system in the twentieth century. To him imperialism was an economic and political/military system that was driven by capital accumulation, the ability to generate more and more profit from all economic exchanges. A central source of profit was the exploitation of workers of all kinds. By the dawn of the century a multiplicity of economic actors had been consolidated such that ever-smaller numbers of economic giants dominated the economies of individual nations and the entire international economy. Multinational banks and corporations gained enormous wealth and power. The nation-states from which they came were driven to capture vital raw materials, markets, cheap sources of labor, and increasingly in the modern age, investment opportunities.

It was imperative for the capitalist system to be an international system, because it became vital for newly industrialized countries to enhance their access to raw materials that could not be acquired domestically. Similarly, with the increasing worldwide division of labor, non-Western countries became the source of valuable agricultural goods that supplied the increasingly industrializing nations with vital food stuffs. Further, labor power as a commodity was cheaper in countries victimized by foreign penetration, particularly after labor in the industrializing countries began to organize to demand a greater share of the value of what they produced. Another obvious need of burgeoning industrial capitalism was markets for products produced in the capitalist countries for which insufficient customers could be found at home because of the logic of capitalist exploitation.

The Rise of Finance Capital

Lenin stated that although capitalism continued to require raw materials and foodstuffs, cheap labor, and markets, a new need was generated by the further concentration of the capitalist economies. The concentration was manifest in the emergence of integrated banking and monopoly corporate control of the economy. Banks had assumed a particularly important place in twentieth-century capitalism, and the wealth accumulated by banks and monopoly corporations had to find investment opportunities or the system would stagnate. Therefore, as profitable investment opportunities reached their limits domestically, money capital had to find outlets abroad.

Consequently, Lenin observed, what later would be called “the Third World” was increasingly becoming absorbed into the international political economy by way of investments from joint stock companies, loans, and other investments to facilitate the overseas sale of goods and the building of production facilities to utilize cheap indigenous labor. (In our own day investment instruments would include private equity funds, hedge funds, and other speculative financial instruments). The political expression of the spread of capital worldwide was, in Lenin’s day, colonialism, or formal occupation and administration of subject territories. Later colonialism would be replaced by neo-colonialism, with the targeted land superficially ‘independent” but under the economic yoke of one or a few capitalist powers, or the entire international economy imposing its will on a dependent country’s political and economic life.

The world’s great capitalist powers were often able to establish accords dividing the world but during periods of intense economic competition conflict and war often resulted. Usually, Lenin claimed, wars were associated with the rise of new capitalist competitors to challenge the hegemony of the older ones. Given the concentration of wealth and power and the uneven character of capitalist development across countries, war was seen as a common feature of international relations in the era of monopoly capitalism.

In Lenin's Words

Lenin best captures his theory in the following graph:

Without forgetting the condition and relative value of all definitions in general, which can never embrace all the catenations for a phenomenon in its complete development, we must give a definition of imperialism that will include the following five of its basic features: 1)the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; 2)the merging of bank capital with industrial capital, and the creation, on the basis of this ‘finance capital,’ of a financial oligarchy; 3)the export of capital as distinguished from the export of commodities acquires exceptional importance; 4)the formation of international monopolist capitalist combines which share the world among themselves; and 5) the territorial division of the whole world among the biggest capitalist powers is completed.”

And he summarizes: “Imperialism is capitalism in that stage of development in which the dominance of monopolies and finance capital has established itself; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun; in which the division of all territories of the globe among the biggest capitalist powers has been completed.”

While the Financial Times may not wish its readers to return to the classic theories of imperialism, for most of us such theories, such as Lenin’s, may provide a clarity and resonance that can help us understand the current financial crisis.

Tuesday, May 12, 2009


Harry Targ

Six hundred and fifty Hart, Schaffner, and Marx clothing workers rallied at noon, on Monday, May 11, 2009, in the Chicago suburb of Des Plaines. They demanded that Wells Fargo, which received a $25 billion bank bailout from the federal government, provide loans to investors who would purchase their bankrupt company and keep it open. Workers at the Des Plaines, Illinois plant were speaking for 3,600 workers around the country who could lose their jobs if the company was sold to an investor committed to closing the company.

Stephen Greenhouse in a New York Times article quoted Illinois Congressman Phil Hare who asserted that Wells Fargo needed “to stand up for the American worker, like Congress stood up for the banks when times were tough.”

A spokesperson for the workers proclaimed that the union local was going to do whatever was necessary to keep Hart Schaffner and Marx plants open. The workers, Greenhouse wrote, were “coming from Chicago’s south side as well as China, Greece, Mexico, Poland and a dozen other countries, many earn around $12 an hour.”

Worker’s struggles for jobs and living wages at Hart Schaffner and Marx have a long history. Ninety nine years earlier, on a bright and sunny morning, 17-year-old Russian immigrant, Hannah Shapiro ran to work at the old Hart Schaffner and Marx factory in downtown Chicago. She rushed to her wooden chair and began sewing the pockets that would be attached to men’s pants. Shortly after the workers assembled at their work stations the foreman came on the floor and curtly announced that from now on they would earn 3 ¾ cents per pocket instead of 4 cents.

Hannah, called Annie by friends, was so outraged by this cruel cut in piece work pay that she got up from her chair and stormed off the shop floor. To her surprise 15 co-workers, also young women, followed her. Thus was launched the great Hart Shaffner and Marx strike that would lead to 40,000 workers in Chicago factories walking off their jobs in support. Annie Shapiro, the Russian girl who spoke English haltingly, mobilized support from Hull House activists, the Women’s Trade Union League, and she marched with famed lawyer Clarence Darrow and 20,000 workers in a solidarity parade on December 4, 1910.

While the workers did not earn union recognition immediately, Hart Schaffner and Marx offered an agreement to Hannah Shapiro and her co-workers to establish a joint worker/management committee to address grievances. Workers voted to accept the agreement. Within three months workers gained pay raises and improved working conditions. In addition, the walkout, led by a humble young Russian woman, not only brought modest gains to workers in the men’s clothing factory but planted the seeds for worker solidarity, militancy, and trade unionism in Chicago.

In retrospect, the seeds for worker justice today were planted long ago in hundreds of thousands of invisible local struggles, like that waged by Hannah Shapiro and her co-workers. Until jobs, living wages, healthy working conditions, and rights to a union are guaranteed, these struggles will continue.

A forthcoming children’s rendition of the story of Hannah Shapiro and the Hart, Schaffner and Marx strike by Marlene Targ Brill is in production. For further information see

Thursday, May 7, 2009


While this article reports on a discussion at a regional meeting of the Committees of Correspondence for Democracy and Socialism (CCDS), the issues raised are of general interest to progressives and warrant inclusion on this blog.

Harry Targ
May 3, 2009

Building a Progressive Coalition

Twenty members and friends of the Committees of Correspondence for Democracy and Socialism (CCDS) spent a beautiful Saturday, April 25, in West Lafayette, Indiana, discussing how to build an effective progressive majority for the Obama years at its semi-annual Midwest regional meeting.

Mildred Williamson, member of the CCDS National Executive Committee, opened with four questions that she said were critical for the Left as it seeks to help build a coalition of progressives.

First, and most basic, we need to figure out how we can analyze and overcome our differences. Instead of highlighting differences with Obama, with Democrats, among activists with different views of the environmental crisis, she argued, we need to prioritize thinking and acting on ways to bring our disparate voices together.

Second, Williamson said, we need to ask ourselves how we should act when we disagree with the new Obama administration.

Third, and inextricably connected with the second point, we need to discuss how we can most effectively address issues that are not being addressed.

Finally, she claimed that we have to develop more effective techniques to reach out to different sectors of the progressive movement.

Issues Central to a Progressive Coalition

Having raised general issues of strategy and tactics, Williamson then discussed issues that have not been adequately addressed through public discourse or our various movements and campaigns. She said that by framing the impacts of economic crisis around the so-called “middle class,” the particular nature of the economic crisis in poor and working class communities, particularly communities of color, has been ignored. For example, measurable African American unemployment is at least twice that of white unemployment, and underemployment among African American male youth in some communities approaches fifty percent. Percentages of unemployment among other marginal communities exceeds that of the so-called “middle class” as well.

Along with ignoring poverty and differential experiences of poverty by race and gender, the Obama administration and Congress still have not imposed a moratorium on mortgage foreclosures and have not addressed the fundamental issue of affordable housing for millions while more and more people are living on the streets, in tents, and in homeless shelters.

Finally, Williamson said, progressives must begin to address the consequences of long-term economic crisis; addictions, incarceration, and differential criminalization of addictions by class and race.

Janet Tucker, CCDS National Organizer and activist with Kentuckians for the Commonwealth, confirmed that in rural (as well as urban) Kentucky, unemployment, homelessness, racism, and criminalization were problems for poor and working class people before the current crisis and remain problems. She added that geographic differences should be taken into account as well. In the Kentucky case, mountain top removal has destroyed the environment and communities while it has brought new wealth to elite energy companies.

John Wilborn, a Louisville CCDS member, called for a progressive response that builds upon united efforts from a variety of groups (Progressive Democrats of America, Democrats for America, Progressives for Obama and others) to demand the firing of Tim Geithner and Lawrence Summers, Obama economic advisers; the establishment of a commission to investigate the causes of the financial crisis like the Perora Commission of the 1930s; and the restoration of the Glass-Steagall Act and revocation of the Commodity Futures Modernization Act of 2000, to reregulate the financial sector of the economy.

Labor economist, David Cormier, from West Virginia, underscored the need to reestablish financial regulation, arguing that the entire US economy has shifted from the production of goods and services to financial speculation. Now less than 15 percent of U.S. workers are in manufacturing, he pointed out.

Don Scheiber, local UNITE-HERE member and Clint Fink, West Lafayette CCDS, added military spending to the list of causes of economic crisis. In addition, George Fish, Indianapolis CCDS member, raised the specter of a futile "guns and butter" policy with Obama trying to pursue his domestic agenda while still keeping sizeable forces in Iraq and escalating U.S. involvement in Afghanistan and incursions into Pakistan. Such policies, in conjunction with an economic stimulus package at home, were economically impossible to sustain and were reminiscent of the disasters that ensued when Lyndon Johnson pursued the same strategy in the 1960s, trying to have both his domestic Great Society and the War on Poverty while simultaneously escalating a war in Vietnam.

Activating the Progressive Majority

European nations, all capitalist, have progressive policies concerning health, transportation, education, and the environment Ted Pearson, CCDS National Executive Committee member, pointed out. While President Obama’s job description is to oversee and advance the interests of capitalism, people in motion can work inside the system as well as outside it to achieve the modest but significant reforms that Europeans have gained. The possibilities may be enhanced now, he said, because of the economic crisis and the fractionalized character of the capitalist class.

Several attendees warned, however, of the emergence of rightwing populism fueled by the far right of the Republican Party and their spokespersons in the mainstream media. For them the economic crisis is the result of Obama and the “Left” as they see it.

As to organizing, Stephen David, Lafayette, urged activists to build off of the grassroots mobilizations of the Obama campaign and to use those that remain active to challenge “bureaucratic” top-down politics with “grassroots” bottom up mobilizations. April Burke, Purdue University graduate student and IWW member, reported that there are positive signs among young people attending colleges and universities, who are beginning to organize around workplace issues as well as in support of labor struggles generally. Beth Rosdatter, Lexington, pointed out that progressives need to include organizing temporary and unemployed workers.

Finally, Berenice Carroll, CCDS member in West Lafayette, added that all the issues discussed must also consider the particular effects of economic and political crisis on women. We should remember, she said, that building a progressive majority involves networking with women’s organizations as well as others that have been mentioned.

At the end of the discussion of the economic crisis and building a progressive majority, Ira Grupper, CCDS Labor Task Force coordinator, urged CCDS to expand its organizing work and to include discussions of causes in analyses of the economic crisis.

It was agreed that this report on building a progressive coalition, issues relevant to it, and activating the progressive majority should be passed along to the National Convention of CCDS for inclusion in discussion.

Friday, May 1, 2009


Harry Targ

Sketching Today’s Global Political Economy

During the latest phase of monopoly and finance capital (1945- to the present) enormous changes occurred in the global political economy. First, the United States emerged as a superpower and in an effort to crush the threat of socialism around the world committed itself to constructing a “permanent war economy.” This permanent war economy would create the military capacity to destroy alternatives to global capitalism, stimulate and maintain a high growth manufacturing economy, justify an anti-communist crusade to crush the left in the United States, and co-opt and/or repress working class demands for change. In addition, the permanent war economy would occasion the perpetuation of racism and patriarchy in public and private life.

As the years passed corporate rates of profit began to decline as a result of rising competition among capitalist states, over-production and under-consumption, an increasing fiscal crisis of the capitalist state, and rising prices of core natural resources (particularly oil). With a growing crisis, global corporate and finance capital shifted from investments in production of goods and services to financial speculation. Thus capitalist investment steadily shifted to financialization, or the investment in paper-stocks, bonds, private equity and hedge funds and other forms of speculative investment. Financial speculation was encouraged by state tax policies, “free trade” agreements, an expanded international system of indebtedness, and increased reliance on consumer debt.

Multinational corporations which continued to produce goods and services sought to overcome declining profit rates. This, they concluded, could only be achieved by reducing the costs of labor. To overcome the demand for higher real wages, health and other benefits, and worker rights, manufacturing facilities were moved from core capitalist states to poor countries where lower wages were paid. Thus, in wealthier countries millions of relatively high paying jobs were lost while production of goods increasingly moved to sweatshops in poor countries. Wealthy capitalist states experienced deindustrialization.

Finally, assisted by technological advances, from computers to new forms of shipping, financial speculation and deindustrialization fueled the full flowering of globalization, or the radically increased patterns of cross border interactions-economic, political, and cultural. Globalization began to transform the world into one integrated global political economy.

In short, we may speak of a four-fold set of parallel political and economic developments that have occurred since the end of World War II, in which the United States has played a leading role: creating a permanent war economy, financialization, deindustrialization, and globalization.

Should We Be Thinking About Socialism Today?

A rich and vital set of images of a socialist future comes down to us from the utopians, anarchists, and Marxists, the martyrs of the first May Day, and the variety of experiments with socialism attempted in Asia, Eastern Europe, Western Europe, Africa, and the Caribbean. Extracting from the multiple reasons why individuals and movements chose socialism one reason stands out; that is, that capitalism historically is and has been a cruel and inhumane system, a system borne and fueled by slavery, genocide, super exploitation of workers, tactics of division based on race and gender, and an almost total disregard for the natural environment that sustains life. Building a permanent war economy, financialization, deindustrialization, and globalization are merely extensions of the cruel and heartless pursuit of profit which has been the fundamental driving force of the capitalist mode of production.

Drawing on the history and the images of a better future coupled with the brutality of the capitalist era, we might conceive of a 21st century socialist future that has four main dimensions.

First, we need to create institutions that are created and staffed by the working classes and serve the interests of the working classes. While scholars and activists may disagree about what “class” means in today’s complicated world, it is clear that the vast majority of humankind do not own or control the means of production, nor do they usually have an instrumental place in political institutions. Therefore, socialism involves, in the Marxist sense, the creation of a workers’ state and since most of us are workers (more than 90 percent of the US population for example), a state must be established that represents and serves the interests of the many, not the few.

Second, our vision of socialism is a society in which the working classes fully participate in the institutions that shape their lives and in the creation of the policies that these institutions develop to serve the needs of all the people.

Third, socialism also implies the creation of public policies that sustain life. Socialism in this sense is about good jobs, incomes that provide for human needs, access to health care for all, adequate housing and transportation, a livable environment, and an end to discrimination and war.

Fourth, socialism is also about the creation of institutions and policies that maximize human potential. A socialist society provides the intellectual tools to stimulate creativity, celebrate diversity, and facilitate writing poetry, singing and dancing, basking in nature’s glow, and living, working, and loving with others in humanly sustainable communities.

Today we remain terribly far from any of these dimensions of socialism. But paradoxically, humankind at this point in time has the technological tools to build a mass movement to create a socialist future. We can communicate instantaneously with peoples all over the world. We can access information about the world that challenges the narrow ruling class media frames about the human condition. We have in the face of brutal war, environmental devastation, enduring racism, super exploitation of workers everywhere mass movements of workers, women, people of color, indigenous people, and youth who are demanding changes. Increasingly public discourse is based upon the realization that our future will bring either extinction or survival. Socialism, although it is not labeled as such, represents human survival.

Where do we who believe that socialism offers the best hope for survival stand at this critical juncture? We are weak. Many of us are older. Some of us have remained mired in old formulas about change. Nevertheless we can make a contribution to building a socialist future. In fact we have a critical role to play.

We must articulate systematic understandings of the global political economy and where it came from: permanent war, financialization, deindustrialization, and globalization. We need to articulate what impacts these processes have had on class, race, gender, and the environment. In other words, we need to convince activists that almost all things wrong with the world are connected and are intimately tied to the development of capitalism as the dominant mode of production.

We need to take our place in political struggles that demand an expanded role for workers in political institutions. We need to insist that the working classes participate in all political decisions.

We need to work on campaigns that could sustain life: jobs, living wages, single payer health care, climate change etc. Our contribution can include making connections between the variety of single issues, insisting that participants in mass movements take cognizance of and work on the other single issues that constitute the mosaic of problems that require transformation. We must remember that in the end the basic policies that sustain life require building socialism. Most struggles, such as those to achieve living wages or a single payer health care system for example, plant the seeds for building a broader socialist society. We can incorporate our socialist vision in our debates about single issues: if we demand a living wage, why not talk about equality for example?

We need to rearticulate our belief that human beings have a vast potential for good, for creativity, and given a just society, we all could move away from classism, racism, and sexism. We could pursue our talents and interests in the context of a sharing and cooperative society.

By working for institutional incorporation (empowerment) and life-sustaining and enhancing policies we will be planting the seeds for a socialist society.

“In our hands is placed a power greater than their hoarded gold,
Greater than the might of armies, magnified a thousand-fold.
We can bring to birth a new world from the ashes of the old.
For the union makes us strong”

From “Solidarity Forever,” Ralph Chaplin lyrics, 1915.