Wall Street vs Main Street:
Finger Pointing vs System Change
by Rick Wolff
Amid the current capitalist crisis, fear spreads and scapegoating surges. Media and politicians charge the predictable suspects. Arrests may follow. Few recognize the system as the problem, rather than this or that group reacting to the system's demands and pressures. True, the word "capitalism" now arises in public discussion. But there it means big business, big banks, or Wall Street, rather than the system that ties together all streets, businesses, workers, households, and the government.
Cruder right-wingers scapegoat the home-buyers now unable to pay for their sub-prime mortgages. The slightly more sophisticated denounce government intervention -- to help minorities and the poor become home-owners -- for whatever ails the economy. The crudest of all blend Wall Street, bankers, and crooked Washington insiders into conspiracies to profit personally and/or sell out the US to world communism or terrorism or maybe Muslims.
On the left, favorite whipping boys include Wall Street, bankers, hedge funds, overpaid executives, crooked corporations, and compromised politicians who let bad things happen "to our economy." More sophisticated leftists accelerate condemnations of "neo-liberal deregulation." Ever since Reagan's election, they say, government failures to regulate markets and control private enterprises facilitated the wild financial misdeeds that have now brought us low.
Neither side treats the capitalist system as the basic problem. Rather, both mostly agree that the interacting network of corporations with their boards of directors, salaried managers, and wage-workers are the necessary and appropriate foundations "of our economy." As that network, capitalism strikes them as inevitable, and thus not the appropriate target for right or left. Instead, they debate how much blame should attach to this or that group for "causing" the crisis: poor people or too much government intervention or too little or the overpaid rich with hedge funds or the corrupt bad apples fouling the system. Fingers point to culprits spoiling a capitalism -- "our economy" -- that would otherwise work just fine.
Consider the Wall Street vs Main Street debate. Many leftists and not a few rightists accuse Wall Street of "causing" the sub-prime mortgage mess (as if countless Main Street banks and mortgage brokers had not pushed profitable mortgages onto locals unable to afford them). They scowl that Wall Street invented "derivatives," those dangerous new financial gimmicks (as if Main Street types did not invest in and profit from them). Leftists claim that Wall Street got politicians to de-regulate the economy (as if many Main Street businesses did not likewise support and profit from deregulation). Many rightists claim that insufficient government de-regulation, because of Wall Street influence, caused the crisis (as if Main Street did not benefit from that government intervention). Rightists and leftists both largely blame Wall Street and Washington for together producing the housing and real estate bubble (as if Main Street did not cheer the rising prices and building of houses, the booming demand for household products, the resulting jobs, incomes, and tax revenues, etc.).
As capitalism's latest boom goes bust, Wall Street and Main Street shift from mutually profitable cooperation to a struggle over survival. Main Street fears Wall Street will use its power, money, and influence to dump the pains of economic crisis onto workers and governments (by cutting wages and jobs, paying fewer taxes, and demanding more government aid and bailouts). This will hurt Main Street. Capitalism works to shift economic costs down the economic structure and economic gains upward. So Main Street fights back with public opinion campaigns to blame Wall Street for the crisis. In this falling out among thieves, left and right mostly take sides rather than reject the system that spawned those thieves. The alternative position would be to demand system change.
System change does not mean what Paulson and Bernanke now plan: to buy shares of private US banks. In this partial "nationalization" of the banks, the US government will buy and hold bank shares and possibly place state officials on the banks' boards of directors. Private enterprises thereby become, partly and probably temporarily, public enterprises. This change is big for Bush, Paulson, and Bernanke because they always denounced public enterprises as socialism or communism.
But replacing private members of bank boards of directors (elected by and responsible to private shareholders) with public members (named by and responsible to state officials) does not basically change the system. The workers still work 9 to 5; they still follow the board's orders; and the goods, services, and profits they produce belong to the boards of directors to serve their interests. Those boards, whether private or public, still give the orders, sell the products, receive the revenues, and decide how to use the profits. The profound inequalities between workers and board of directors remain. The profound absence of democracy in the capitalist workplace remains. Both public and private boards of directors have historically sought to evade, weaken, or eliminate state controls and regulations limiting their freedom of action and their profitability (in the USSR as well as the US).
Capitalism has everywhere oscillated between private and public phases. Private capitalism minimized government interventions and mostly kept state officials off boards of directors. In capitalism's public phases, governments intervened and sometimes replaced private with public members of boards of directors. Crises of one phase often provoked transition to the other. The 1929 crisis of private US capitalism ushered in Roosevelt's New Deal state intervention (establishing social security, unemployment insurance, and other costly -- to business -- programs and regulations). The 1970s crisis of state-regulated capitalism returned the US to another private capitalist phase, the Reagan-Bush era, which undid most of the New Deal. What will follow today's crisis of private capitalism? Will the pendulum swing back to state re-regulated capitalism? If so, the US business community will utilize decades of accumulated expertise in how to evade, then weaken, and finally eliminate state regulation. Re-regulation will thus likely be short-lived. Or might the alternative of system change become important?
System change would supplement re-regulation with a transformation inside enterprises. Suppose old boards of directors were replaced by new boards whose members understood and shared the goals of regulation rather than seeing regulation as limitations to be undermined. This might happen if the new boards comprised the collectivity of the workers themselves. Job descriptions of all workers would henceforth combine the particular labor of each with her or his full participation in the collective tasks of the board of directors.
In this way, workers-as-also-bosses could both shape economic regulations -- alongside other workers running other enterprises -- and then carry them out inside each enterprise. The conflict of interests between employers and employees would be transformed once these were no longer different and opposed groups. This would be real system change. Without this, boards of directors, private and/or public, will continue to function in the future as they have in the past. They will undermine regulations aimed to make the economy serve society, will continue to run their enterprises undemocratically, will maintain economic inequalities, and will continue to generate economic crises like the one imposed on us all today.
Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick) New Departures in Marxian Theory (Routledge, 2006).