Saturday, September 15th, marked the 10th anniversary of the collapse of Lehman Brothers, and the beginning of the Global Financial Crisis (GFC). In many ways, the legacy of the crisis remains with us today. Stagnant wages, chronic worker insecurity via the gig economy, and astronomical inequality are the hallmarks of what we are all assured is a thoroughly modern economy. But equally, it remains with us in our fetid political system. "The old world is dying away and the new one struggles to come forth”, wrote Antonio Gramsci in an age not so different from our own, “now is the time for monsters.”
During the crisis there was little serious reflection on its origin. Talk of declining unionization, stagnant pay, skyrocketing inequality, and the reliance on credit to cover the ballooning costs for necessities like education, healthcare, and above all housing was postponed to another time. Now was the time to do the critical thing: save the banks. In due time, the Federal Government found $700 billion on hand to save the banking system, while many wondered aloud why similarly titanic resources were not being deployed to aid the millions thrown out of their homes and their jobs. As the ‘recovery’ continued to leave many as desperate as before, anger at the political consensus produced two diametrically posed reactions.
On the one hand, there has been a thickening of the usual crowd of casual and unrepentant racists and ethno-nationalists trucking in the politics of fear and resentment. Validated in their resentments by decades of out and out dog-whistling and scapegoating on the part of the mainstream political parties, this crowd rests assured that they have a right to be angry, and cling to this all-to-familiar formula. They birthed the Tea Party, the Freedom Caucus, and the mainlining of White Nationalism as an acceptable political position in the Republican mainstream.
On the other hand, there have been the green new shoots of a vibrant socialist revival. The DSA, having recently surpassed 50,000 members, is perhaps the most prominent example. These new members number amongst the wider community of Americans who translated their disgust for the recklessness and greed of the financiers, and the enabling behavior of politicians both before and after the crisis, into a practical commitment to socialist politics.
Each of these groups vies for the soul of the American nation. As yet it is unclear who will prevail.
Complementing these two opposed parts of the political legacy of the GFC are two different economic perspectives. Indeed, if one numbers amongst the privileged few at the top— financiers, executives, high-skilled employees, and the like— the party leading up to 2008 never really stopped. Wage growth has not only remained consistent for these select few, but actually risen rapidly since the 2008 crisis. Indeed, even on Wall Street, only Kareem Serageldin, the only person indicted for actions during the financial crisis, is not around to enjoy the latest festivities.
But what is the story for the average American? Here the story is quite bizarre. The average American is regularly reassured that this economic recovery is a validation that 2008 has been overcome; that, as the Wall Street Journal has it, we are in the midst of the “second longest economic expansion” on record. But for whom is this expansion really a benefit? The answer is not hard to confirm. Shielded from the crisis by the nanny-state, the wealthy in this country continue to rack up the score against the middle and working class. We hear from august academics at the Brookings Institute, buried at the end of technical papers, the reality for most Americans. “Faster wage growth across the distribution has not automatically followed economic growth in the United States for the past few decades. Weakened unions combined with noncompete contracts, market power exercised by firms in labor markets, and a declining real minimum wage have left workers with a smaller share of gains.” What an abuse of language it is, then, to say that we, the vast majority, are in the midst of an expansion when all the last decade has brought has been the crawling, pitiful return of the past.
How then to explain the expansion? It is not so difficult to account for as it at first appears. For when we hear about rising growth figures, this often means little more than rising profits, rather than rising wages. The New York Times acknowledged this with uncharacteristic bluntness, writing “Corporate profits have rarely swept up a bigger share of the nation’s wealth, and workers have rarely shared a smaller one.” Labor, for the first time in modern history, now takes home less than 6 out of every 10 dollars made in this country. While the American economy stands nearly 20% above its 2008 counterpart in size, the average American only just seen their wages return to that of 2008 last week! The facts are enough to make one's blood boil.
So what are we to make of the legacy of 2008? For one, it clearly remains with us, despite the beliefs of some commentators. It continues to fuel the anger and resentment in our politics just as it gives a renewed purpose to those of us who fight each day for a more just and equitable society. But most importantly, it will also remain with us unless we break decisively with the policies of the last decade.
Such a break would include a number of things. The first would be a reversal of the long trend of falling top marginal incomes, which have fueled rising inequality and enabled the bipartisan agenda of cutting welfare and other social service programs in the name of combating the deficit. This agenda has always been defined more by political calculations than any serious economic imperative, as the latest Republican tax cut and history of aggressive deficit spending attests.
The second would involve the Federal Reserve taking a more proactive role in enabling economic growth. While instrumental in preventing the collapse of certain US banks, the US Federal Reserve has taken its pledge of preventing inflation to protect creditors much more seriously than ensuring full employment. Both, it should be recalled, number amongst the monetary policy objectives enshrined in the original Federal Reserve Act of 1913, and the full-employment goal reinforced in the 1978 Humphrey-Hawkins bill. And yet today, despite anemic wage growth and a shaky and uneven recovery, the central bank has already loudly announced it intends to raise interest rates three times in the name of combating a largely non-existent inflation problem, in the process eliminating tens of thousands of jobs for working Americans. A complimentary policy of monetary and fiscal expansion, enabled by a more activist Federal Reserve, a more progressive system of taxation, and expansionary government spending, could help realize full employment and help spur wage pressure, generating much needed wage growth the working Americans.
The last would be Dodd-Frank. Its most prominent features like the Consumer Financial Protection Board (CFPB) have already come under vicious attack by politicians in the service of payday lenders and other financial institutions, but largely because of its earlier successes in its aim of protecting average Americans from predatory lending practices. Another progressive reform would be the reintroduction of Section 716 of Dodd-Frank prohibiting the use of the very financial tools and practices which caused the 2008 financial crisis, but which was silently killed in subcommittee. Dodd-Frank as it stands was an important if cumbersome reform of the financial system, but few would contend that as it stands today it has the potential to protect us from another financial crisis.
Ultimately, what has occurred since 2008 has been an accelerated version of what has been going on since the 1970s, with the onslaught against organized labor in the shops and more recently in the case of Epic Systems and Janus, in the courtrooms, rewriting the wage-earner out of the proceeds of their labor. The pushing and shoving to secure anti-worker Brett Kavanaugh’s accession to the Supreme Court— joining Trump-nominee Neil Gorsuch, sitting as he is on his stolen Supreme Court seat— is simply the most recent page in this ongoing chronicle. Only a politics stridently opposed to the status quo can hope to reverse the losses it is incurring.
The lesson from 2008 is this: a decade on, and despite the shoulder-patting of policymakers, the average American remains in a deeply divided country. Ask them, and they will tell you as much. They have had their unions attacked, been locked out of the benefits of a growing economy, and been encouraged to scapegoat the vulnerable, all while the government selectively favors corporate donors and gives tax cuts for the wealthy. Setting aside the uniquely petulant and proto-fascistic rhetoric of this administration, this is nothing new. It has been the policy of the Freedom Caucus since 2010, the Gingrich Republicans and Clinton-style Democrats since the early 90s, and the Reaganite neoconservatives before that.
The legacy of 2008 best illustrates the burden of class warfare waged by those in command of the economy: Average working families and the struggling middle class are aware of the factors – the many manifestations of capitalist practice -- that keep them perpetually behind. But the anxieties of life under capitalism make it very hard to see how all these seemingly disparate factors – weak unions, low wages, skyrocketing inequality, reckless finance, capricious governance — are all of a piece, and must be opposed in the same way: through activism and solidarity. Facing the specter of 2008, that’s the true socialist clarion call.