How Obama Saved Capitalism and Lost the Midterms

In the November 2, 2010 online New York Times commentary, "How Obama Saved Capitalism and Lost the Midterms," Timothy Egan explains that the partisan attacks on President Obama's handling of the U.S. economy are misguided and untrue.

Egan writes:

If I were one of the big corporate donors who bankrolled the Republican tide that carried into office more than 50 new Republicans in the House, I would be wary of what you just bought.

For no matter your view of President Obama, he effectively saved capitalism. And for that, he paid a terrible political price.

Suppose you had $100,000 to invest on the day Barack Obama was inaugurated. Why bet on a liberal Democrat? Here’s why: the presidency of George W. Bush produced the worst stock market decline of any president in history. The net worth of American households collapsed as Bush slipped away. And if you needed a loan to buy a house or stay in business, private sector borrowing was dead when he handed over power.

As of election day, Nov. 2, 2010, your $100,000 was worth about $177,000 if invested strictly in the NASDAQ average for the entirety of the Obama administration, and $148,000 if bet on the Standard & Poors 500 major companies. This works out to returns of 77 percent and 48 percent.

But markets, though forward-looking, are not considered accurate measurements of the economy, and the Great Recession skewed the Bush numbers. O.K. How about looking at the big financial institutions that keep the motors of capitalism running — banks and auto companies?

The banking system was resuscitated by $700 billion in bailouts started by Bush (a fact unknown by a majority of Americans), and finished by Obama, with help from the Federal Reserve. It worked. The government is expected to break even on a risky bet to stabilize the global free market system. Had Obama followed the populist instincts of many in his party, the underpinnings of big capitalism could have collapsed. He did this without nationalizing banks, as other Democrats had urged.

Saving the American auto industry, which has been a huge drag on Obama’s political capital, is a monumental achievement that few appreciate, unless you live in Michigan. After getting their taxpayer lifeline from Obama, both General Motors and Chrysler are now making money by making cars. New plants are even scheduled to open. More than 1 million jobs would have disappeared had the domestic auto sector been liquidated.

“An apology is due Barack Obama,” wrote The Economist, which had opposed the $86 billion auto bailout. As for Government Motors: after emerging from bankruptcy, it will go public with a new stock offering in just a few weeks, and the United States government, with its 60 percent share of common stock, stands to make a profit. Yes, an industry was saved, and the government will probably make money on the deal — one of Obama’s signature economic successes.

Interest rates are at record lows. Corporate profits are lighting up boardrooms; it is one of the best years for earnings in a decade.

All of the above is good for capitalism, and should end any serious-minded discussion about Obama the socialist. But more than anything, the fact that the president took on the structural flaws of a broken free enterprise system instead of focusing on things that the average voter could understand explains why his party was routed on Tuesday. Obama got on the wrong side of voter anxiety in a decade of diminished fortunes.

“We have done things that people don’t even know about,” Obama told Jon Stewart. Certainly. The three signature accomplishments of his first two years — a health care law that will make life easier for millions of people, financial reform that attempts to level the playing field with Wall Street, and the $814 billion stimulus package — have all been recast as big government blunders, rejected by the emerging majority.

But each of them, in its way, should strengthen the system. The health law will hold costs down, while giving millions the chance at getting care, according to the nonpartisan Congressional Budget Office. Financial reform seeks to prevent the kind of meltdown that caused the global economic collapse. And the stimulus, though it drastically raised the deficit, saved about 3 million jobs, again according to the CBO. It also gave a majority of taxpayers a one-time cut — even if 90 percent of Americans don’t know that, either.

Of course, nobody gets credit for preventing a plane crash. “It could have been much worse!” is not a rallying cry. And, more telling, despite a meager uptick in job growth this year, the unemployment rate rose from 7.6 percent in the month Obama took office to 9.6 today.

Billions of profits, windfalls in the stock market, a stable banking system — but no jobs.

Of course, the big money interests who benefited from Obama’s initiatives have shown no appreciation. Obama, as a senator, voted against the initial bailout of AIG, the reckless insurance giant. As president, he extended them treasury loans at a time when economists said he must — or risk further meltdown. Their response was to give themselves $165 million in executive bonuses, and funnel money to Republicans this year.

Money flows one way, to power, now held by the party that promises tax cuts and deregulation — which should please big business even more.

President Franklin Roosevelt also saved capitalism, in part by a bank “holiday” in 1933, at a time when the free enterprise system had failed. Unlike Obama, he was rewarded with midterm gains for his own party because a majority liked where he was taking the country. The bank holiday was incidental to a larger public works campaign.

Obama can recast himself as the consumer’s best friend, and welcome the animus of Wall Street. He should hector the companies sitting on piles of cash but not hiring new workers. For those who do hire, and create new jobs, he can offer tax incentives. He should finger the financial giants for refusing to clean up their own mess in the foreclosure crisis. He should point to the long overdue protections for credit card holders that came with reform.

And he should veto, veto, veto any bill that attempts to roll back some of the basic protections for people against the institutions that have so much control over their lives – insurance companies, Wall Street and big oil.

They will whine a fierce storm, the manipulators of great wealth. A war on business, they will claim. Not even close. Obama saved them, and the biggest cost was to him.

Capitalism Sucks?

The Pyramid of Capitalism

Michael Moore's New Target: 'Capitalism' Itself

According to Kenneth Turan's September 22, 2009 National Public Radio (NPR) movie review "Michael Moore's New Target: 'Capitalism' Itself":

Capitalism: A Love Story is more than Michael Moore's latest documentary — it's the summation of the movies he's been making for the past 20 years. He lays all the ills of American society at the feet of an out-of-control free-market system — a system he detests so much that he puts priests on camera to talk about capitalism's moral evils.

Clearly Moore has not lost his provocateur's gift. But not even the director's pot-stirring skills can quell the suspicion that Capitalism would have benefited from the narrower focus that helped give his earlier films such punch. This picture comes by its scattershot approach naturally — just ask Karl Marx, who spent 18 years researching and writing his multi-volume Das Kapital — but it's still distracting.

That said, Moore's scattershot is a lot more interesting than some filmmakers' focus, and many of his individual sequences are classic. The director hasn't lost his zest for confrontational antics: He surrounds all of Wall Street with yellow "crime scene" tape to emphasize his low opinion of the area's activities, and he drives an armored car up to AIG's corporate headquarters, demanding that the company return federal bailout funds.

The main point Moore wants to make — the thing that drives him craziest — is his notion that capitalism, far from being a system that rewards excellence, is a scheme set up to make a profit on absolutely anything, a system that has turned American society into a culture that says money is the only value.

In the end, perhaps the most startling thing about Capitalism is that Moore stands revealed not as some pointy-headed socialist, but as an unreconstructed New Deal Democrat. He admires Franklin D. Roosevelt, believes in increased democracy and opportunity, and feels that the decades-long weakening of unions has fatally weakened America. The fact that this will be a controversial stance says as much about today's political culture as it does about Moore's place in it.

Capitalism: A Love Story

In the September 6, 2009 TIME magazine article "Michael Moore's Capitalism Goes for Broke," Mary Corliss reviews Michael Moore's documentary film about unsavory aspects of capitalism and free markets:

"Banking establishments are more dangerous than standing armies." So wrote Thomas Jefferson to a friend in 1816. Now Michael Moore, whose Fahrenheit 9/11 took on the U.S. Army, and the entire military-executive-industrial establishment, brings his latest documentary, Capitalism: A Love Story, to the Venice Film Festival. The land of Macchiavelli and the Medici is the perfect setting for Moore's nonfiction tragicomedy of greed and chicanery on Wall Street, in Washington, D.C., and through the entire economic apparatus. The movie will have its world premiere here tonight, before playing the Toronto Film Festival next week, opening Sept. 23 in New York and Los Angeles and achieving wide release Oct. 2.

Writing on his web site, Moore proclaimed, "The director of the festival [Marco Mueller] said that our movie was 'incredibly symphonic' and that he was moved by its epic nature. Jeez, these Italians! Everything's an opera to them!" The movie is not opera so much as impassioned journalism — a broadside fired at the good ship Free Enterprise, with the hope of altering its course, and dislodging the pirates who have seized it.

Capitalism: A Love Story does not quite measure up to Moore's Sicko in its cumulative power, and it is unlikely to equal Fahrenheit 9/11 in political impact. In many ways, though, this is Moore's magnum opus: the grandest statement of his career-long belief that big business is screwing the hard-working little guy while government connives in the atrocity. As he loudly tried to confront General Motors CEO Roger Smith in Roger & Me in 1989, and pleaded through a bull horn to get officials at Guantanamo to give medical treatment to surviving victims of 9/11, so in Capitalism he attempts to make a citizen's arrest of AIG executives, and puts tape around the New York Stock Exchange building, declaring it a crime scene.

Moore's admirers and detractors alike will recognize his methods in the new film: brisk, pointed synopses of complicated issues (though even a Harvard professor has trouble describing what a derivative is); sad tales of working-class families evicted from their homes because their mortgage rates ballooned; a snowbank of statistics, such as that worker productivity has increased by 45% since 1980 while average real income is stagnant; and pert clips ranging from 1950s instructional films to that YouTube favorite, "Cat Flushing a Toilet Music Video." The material is, as always in Moore movies, efficiently and amusingly marshaled to serve the larger theme: that the establishment thrives by cheating ordinary Americans.

How so? Moore eagerly counts the ways. He lays out the "Dead Peasants" insurance loophole by which a corporation can take out policies on their rank-and-file workers and, when they die, reap millions in tax-free payouts. To support his position that airlines are risking catastrophe by underpaying their pilots, he excerpts the Congressional testimony of Hudson River hero Chesley Sullenberger, who notes that his pay had been cut 40% and he lost his pension. In an episode that might have come from a Dickens novel, Moore tells of two Pa. judges who shut down a state-run detention center and sentenced children, some for the most minor of infractions, to a facility run by a private company that kicked back millions to the judges.

The anecdotes are instructive and appalling; and if they meander off the immediate talking point of the trillions the banks took in bailout money last year and the billions they made in profits this year, they bolster Moore's belief that no one should have been surprised by the collapse of a corrupt system, and the ingenuity with which the big-money boys land on their feet while stepping on ours. He must also have thought that many in his audience would be familiar with the shuttle of heavy hitters between Goldman Sachs and recent Administrations, Republican and Democratic. Moore does summon University of Missouri professor Bill Black, author of the 2005 book The Best Way to Rob a Bank Is to Own One, to describe Robert Rubin, Henry Paulsen, Lawrence Summers, Timothy Geithner and others as "powerful lobbyists from the inside, and we paid their salaries."

Black and Ohio Congresswoman Marcy Kaptur are Moore's star witnesses; he gets Kaptur to agree, without too much prodding, that the events of the past 12 months amount to "a financial coup d'etat." The rhetorical pitch keeps rising until, toward the end, Moore suggests a solution: not from the government down but from the grass roots up, through community groups (like LIFFT in Miami), united workers (like those at Republic Windows and Doors in Chicago) and the common decency of elected officials (like the Wayne County, Mich., sheriff who decided to stop foreclosures on his neighbors' homes).

At the end Moore says, "I refuse to live in a country like this — and I'm not leaving." But this call to arms demands more than a ringleader; it requires a ring, an engaged citizenry who are mad enough not to take it any more. That's unlikely to happen. Moore's films are among the top-grossing documentaries in history because they are pertinent populist entertainments. The question remains: will Capitalism: A Love Story rouse the rabble to revolt? Or will audiences sit appreciatively through the movie, then go home and play the cat-in-the-toilet video?

Capitalism and Free Markets

Capitalism is an economic system in which the means of production and distribution are privately or corporately owned.
Socialism, by contrast, is an economic system in which the means of production and distribution are collectively owned.

A free market occurs when the purchases and sales of goods and services occur without interference, intervention, regulation, or subsidization by the government.

What many advocates of capitalism and free markets fail to acknowledge is that they do not exist - at least not in a pure form.

Every society in the world is a combination of capitalism, socialism, and tradition. Every economy allocates its resources and products through tradition, command, and markets.

Under pure capitalism, the government does not produce or distribute anything. It provides no national defense, police and fire protection, public health, education, roads, highways, bridges, or garbage collection.

And when markets are unregulated by government, they create many socially undesirable outcomes, such as excessive amounts of pollution, poverty, and market power.

Many advocates of capitalism and free markets seem to imply there are only two options: capitalism or socialism. The reality is that there is a whole spectrum of ways to produce and distributes goods and services. Societies vary in the degree to which they rely on the government to improve market outcomes. It is deceptive to imply any increase in government involvement in the economy is a leap from one extreme to another. Instead, it may be a slight move along a broad continuum.