Capital Goes On Strike

For the first time in history, the creditworthiness of the United States Treasury was downgraded yesterday. Standard & Poor's dropped its AAA rating of US debt down a notch, to AA+.

During the last few weeks' arguments over negotiating a deal to increase the debt limit, both the Obama administration and members of Congress warned that a bill needed to be passed before hitting the debt ceiling on August 2 in order to avoid a credit downgrade. Well, they got a deal, it was signed into law on August 2, but our credit has been downgraded anyway.

Far from being an unprecedented or unexplainable move by a jittery rating agency, this instead seems to be part of a pattern of actions by finance capital to sabotage the US economy.

Corporations have large amounts of cash reserves - nearly $2 trillion, according to some estimates - but rather than using that cash to hire more employees, they're either using it to buy back their own stock (to pump up the price) or just sitting on it. Similarly, banks have nearly $1 trillion in cash, but they're reluctant to actually lend it to potential home buyers or startup businesses.

Just as workers use the withholding of their labor (a labor strike) to change unfavorable conditions, the financial industry is withholding its capital to change what they perceive as unfavorable conditions. We appear to be in the grip of a capital strike.

U.S. corporations have engaged in this sort of behavior before, sometimes with the cooperation of the U.S. government, to undermine social democratic governments in other countries. During the 1970s, Chile under President Salvador Allende and Jamaica under Prime Minister Michael Manley were both victims of capital strikes by U.S. companies as well as local businesses. Allende was overthrown in 1973 by a U.S.-backed military coup, while Manley's party was merely voted out of office in 1980, but in both cases capital began to flow freely once again under new conservative governments.

Not that President Barack Obama should be mistaken for a social democrat; Obama's policies pale in comparison to the wide-ranging reforms of Allende and Manley. Moreover, Obama did nothing to stop the overthrow of elected President Manuel Zelaya in Honduras, where business interests welcomed the coup. Nevertheless, it appears that even the possibility of an occasional finger-wagging or public shaming from a Democratic President is more than our financial industry is willing to tolerate.

President Obama needs to stop worrying about being accused of "fomenting class warfare" if he targets wealthy individuals or corporations. The class war is already underway, instigated by the wealthy against the rest of us; yesterday's credit downgrade should be seen as a declaration of war. It's time for President Obama to be clear about what's happening, and stop trying to appease the markets, because that's clearly not working.

The United States can either return to the democratic rule of one person, one vote, or we can continue on the current path towards an oligarchy of one dollar, one vote.

Which side are you on?