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March 1999, Volume 50, Number 10

March 1999, Volume 50, Number 10
» Notes from the Editors

If the United States has ever had a “welfare state,” Social Security must surely be the heart of it. In the world’s most predatory capitalism, this is the closest thing to a humane and equitable institution. An International Monetary Fund (IMF) study has even suggested (but who trusts the IMF?) that the U.S. state pension system is more redistributive than the one in social democratic Sweden. What, then, should we make of Clinton’s proposal for “rescuing” the system?

Let’s get one thing straight first. The talk of rescue is phony, because the crisis is phony. It has nothing to do with a cash crunch or with the coming explosion of aging baby boomers, and everything to do with politics and ideology.

Over the years a bill of goods has been sold to the public that the Social Security system is in danger of going bankrupt, and that at some point in the not too distant future, there won’t be enough reserve funds to pay the pensions promised to retirees. But this means that Social Security is being treated in a way that applies to no other part of the state budget. Why should Social Security depend on the financial integrity of a special trust fund in the first place? Why should benefit payments be limited by the volume of payroll taxes and the size of the fund? Why should the system depend entirely on such a fund instead of drawing on general state revenues, like just about every other pension system in the world? No one, for instance, expects arms expentitures to be subsidized by a separate fund. No one expects the “defense” budget to stand or fall with the changing fortunes of a special trust fund. It’s taken for granted that arms expenditures come out of the general state budget, so why not Social Security?

When he introduced the system, President Roosevelt tried to put a positive spin on the payroll tax fund. “With those taxes in these pensions,” he said, “no damn politician can ever scrap my Social Security program.” But the simple truth is that the specifically American principle of depending only on accumulated payroll taxes was imposed to satisfy insurance company interests and conservative legislators, so the 1935 Social Security Act could be pushed through Congress.

Well, the politicians haven’t so far succeeded in scrapping Social Security, but they sure have chipped away at every aspect of means-test social benefits—welfare, food stamps, Medicaid and others. And they have generated a fear that the Social Security system, which Roosevelt called “a legal, moral, and political right,” will be destroyed by a potentially bankrupt trust fund sometime soon.

The concept of a government function going bankrupt is in itself a fraud, so long as the government has the power to levy taxes and the ability to collect them. Besides, the gloomy forecasts about the stability of the existing system are full of holes, because they are based on grossly unreliable detailed guesses about the economy decades ahead. Still, as fraudulent as it may be, the pall of fear does serve a purpose. It spreads gloom over social benefits and justifies shrinking them for the poorest and weakest members of society. It has now become almost universally accepted that social security is in need of “reform.”

Money marketeers would love to see the system privatized. The enormous amount of money in a constantly enlarging fallow trust fund excites their imagination. Just think of the profits made by the health insurance firms. Now we have President Clinton, urgently needing to show leadership and divert public attention from other matters, proposing a way allegedly to rescue Social Security, a change that plays to the moneyed crowd while skirting around outright privatization.

In what some people are treating as a brilliant compromise (though there’s nothing really new about it), Clinton proposes to divert a substantial proportion of the U.S. budgetary surplus to the social security system for investment in the stock market instead of safe but low-yield government bonds. Without privatizing the system, we’re told, Clinton’s plan would take advantage of the much more lucrative stock market. What this really means is that social security is not a basic human right. It’s a crapshoot.

The most fascinating response to this proposal has come from Federal Reserve chairman, Alan Greenspan, who has attacked Clinton’s scheme on the grounds that, with so much public money invested in the stock market, it would be hard to avoid government interference in private enterprise. Echoing his warning, other critics, who would obviously prefer outright privatization, have suggested that Clinton’s system would enable the government to divert investment from, say, the tobacco industry to other, more “ethical” investments.

Now we were very interested in this response. Some of us might, at first glance, have thought that any involvement of the stock market in the provision of pensions is a dangerous concession to capitalism, which not only involves huge risks but is yet another step in the subordination of all social goods to the imperatives of private profit. Some of us might have thought that it’s bad enough living in a capitalist world where the only way to secure our old age is to gamble our future on investment in mutual funds, or to have our pension funds invested for us by our employers. Now, even our state pensions seem to be going the same way. But Greenspan is setting us straight on that: investing social security funds in the stock market is really a threat to free enterpise.

Well, we should be used to that kind of thing, that knee-jerk response from spokesmen for capital who see red in any kind of state intervention, unless it’s intended to bail out capital or to suppress opposition. And, of course, the intrusion of such a major interloper into the movements of stock prices is an affront to brokers and speculators. The trouble is that some people on the left seem to have accepted the same view, and are welcoming Clinton’s proposal for that very reason —if not as a harbinger of socialism, at least as a way of civilizing capitalism.

This is an illusion. Capitalism is about the production of goods and services not for their use-value but for capitalist profit, so that all other considerations are subordinate to the requirements of profit-maximization and capital accumulation. This isn’t a simple matter of ownership. Even workers’ cooperatives, for instance, can be subject to the imperatives of capital accumulation if they operate within a system where the “market” regulates the economy. In such conditions, even in the absence of capitalist employers, workers (as Marx pointed out) will be subject to self-exploitation —not to mention other typical responses to market pressures, such as closing unprofitable enterprises and laying off their workers.

The same general principle applies to any pension fund invested in the stock market. Here, too, the principles of capitalist profit dominate everything else —except that now we’re dealing with capitalist profit in its most predatory, as well as its most risky, form, even further removed from the production of use-values: profit derived from speculation on the fluctuation of stock prices. Here, too, ownership is not the central issue. A union pension fund is no less likely, no less obliged, than any other to be managed according to basic capitalist rules.

There’s absolutely no reason to think that state-run pension funds that rely on the stock market will operate according to a different logic. In fact, it would be hard to argue that they should. Sure, there is some room for manoeuvre at the margins, and an “ethical” or “social” fund would in some ways be preferable. But the differences couldn’t be that great, because ultimately, the choice we’d be offered is between a profitable pension fund —i.e. one that operates successfully on capitalist principles— and a fund that operates on some other principles more acceptable to socialists but which, for that very reason, performs badly in the market.

We’ve talked before about the emptiness of the “Third Way,” and here is a very good example. Capitalism doesn’t, in the end, permit any third way. You either obey its basic rules or you go under.


Recently, we got a letter from Boris Kagarlitsky, who co-authored, with Roger Burbach and Orlando Nunez, a book reviewed in MR by Chris Rude: Globalization and Its Discontents. Boris complains that Chris didn’t give enough attention to the disagreements he has with his co-authors. As he points out, though both the review and Burbach’s introduction to the book refer to disagreements, they never specify what those might be. Boris says that any reader should have been able to guess from the substance of his chapter that he disagreed fundamentally with the conviction expressed by the others that the Marxist project is dead and that the nation-state is irrelevant. He goes on to explain that the “the trouble was that the sharpness and irreconcilability of the contradictions between Marxism and the postmodernist interpretations of socialism became obvious to me exactly while I was working with Burbach and Nunez.”

We welcome Boris’s clarification, and, while the contradictions between Marxism and postmodernist interpretations of socialism seem more immediately obvious to us, we heartily concur with his assessment that those contradictions in the text of the book “lend the book a still more postmodernist air.”

That alone, even without other considerations, makes it hard for many on the left to be indifferent to the outcome of this sorry impeachment business. At the same time, it really is a tragic testimony to the degradation of U.S. politics that minorities—and, on the whole, organized labor—feel compelled to turn to someone like Clinton for lack of something better. It’s no less tragic that some of the more progressive political leaders—including some who in other circumstances would oppose, and have opposed, imperialist adventures—apparently out of loyalty in the impeachment battle supported Clinton’s latest crime in Iraq.

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