Since the establishment of the U.S. government, manufacturers, bankers, landlords and slaveowners have all been unanimous in crying, "No government intervention in the affairs of the free market!"So pervasive has this cry been through the centuries of the rule of big business that nothing seems to shake it. In foul and fair weather, the cry is raised again and again: "The free market will regulate itself. It needs no outside interference. It needs no bureaucrats. The market knows best."
Thus it would seem, from a superficial reading of U.S. history, that every move by the government which in any way would seek to regulate, help or restrain the banking, commercial and manufacturing interests is met with the same old refrain: "No government intervention!"
Even some of the most liberal-minded politicians invoke the old Jeffersonian maxim that government is best which governs least.
The people will always be duped and hopelessly deceived if they accept these pronouncements of the ruling class as genuine articles of faith representing their real views.
But Marxism teaches the masses, on the basis of the materialist conception of history, that in order to understand the real motivation of social classes and political groupings, it is necessary to go beyond the hundreds of ingratiating and appealing slogans and examine the question from the point of view of their class needs and interests. The question is always what motivation, what social, economic and political interest lies behind this or that slogan. In no other way can we even approach the real truth.
Attitude toward a central bank
Beginning with the year 1791, when the first attempt was made to establish a U.S. central bank, the financial and commercial groupings as well as the planters didn't regard it from the point of view of any "revealed truth" in the slogans of the politicians of the time, but wanted to know what specific interest it would serve.
The slogans about being for the good of the country, for progress, never made any impact on the vested interests of the classes that ruled the U.S. They were strictly concerned with their financial and economic interests.
When the First Bank of the U.S. went under in 1811, no one seemed too concerned with its demise. It was more than 100 years before the Federal Reserve was established in 1913, and the historical record shows that the largest bankers and manufacturers were opposed to it. The slogan of the bourgeoisie at the time was of course the same old one--no interference by the government in the free market. They didn't need any bureaucrats to run the banking system.
Woodrow Wilson promoted the idea of the Federal Reserve Bank. It was one of his most demagogic promises as a presidential candidate that he would rein in the banks, put an end to "funny money," and see to it that the banks were controlled by the people. Wilson's strategy was to undercut the remains of the Populist movement of the time and coopt a resurgent working class, the most advanced sections of which were veering in the direction of the Socialist Party headed by Eugene V. Debs.
Debs nevertheless amassed a record vote of over one million at a time when both women and Black people were disenfranchised.
But when all is said and done, Wilson's Federal Reserve and its various regional banks ended up as a bankers' institution more than any other institution since. It is not at all accidental that none of the Federal Reserve officers are elected. They are all appointed. Today it is composed entirely of bankers and, moreover, of right-wing Republicans.
When they invoke the free market
The ruling class becomes extremely vocal with its free market sloganeering when the U.S. government is under extreme pressure from economic crisis and the anger of millions of workers, as evidenced in the 1930s with the historic upsurge of the working class.
It was indeed a time when no government in Europe or America, conservative or liberal, could withstand the pressure without embarking on major social programs such as unemployment insurance and social security. The bourgeoisie, almost unanimously, denounced it all as pump-priming, which would ruin the country if not all Western civilization!
In one form or another, the self-serving slogans about the free market and nonintervention prevail to this day. Now and then they are muted, but then they loudly reappear.
This went on until the early hours of Saturday morning, Oct. 14. The last echo came from Jay Golden, a young stock market prophet of the firm of Jefferis & Co., a large West Coast brokerage firm. He was asked on Cable News what the government should do to help in light of the stock market collapse. "The government should not interfere," he said. "You cannot legislate the market. The market should be left alone."
Suddenly, cheers for the Fed
The next 24 hours heard a deafening silence on this issue. No more talk of nonintervention. The silence prevailed for a full day. Then came an outburst of cheers that reverberated from Wall Street in the East to San Francisco in the West. The Federal Reserve Bank, the financial arm of the U.S. government, would unload billions to prop up the market! The mood quickly changed from gloom to euphoria.
Alan Greenspan and his colleagues in the Federal Reserve, together with the Treasury, had opened the spigot. Cash was flowing like water into the coffers of the big institutions. The money managers of the big funds, the banks and insurance companies were to share in it, lifting themselves out of a morass of hundreds of billions in losses.
Who got in on this monstrous giveaway? It's not yet known, but it certainly went to the selected elite groupings of the Wall Street mob. The little investors, about whom they and the capitalist press are always so solicitous, were wiped out.
"As trading opened yesterday morning on the big board, stocks of many of the nation's biggest companies couldn't open for trading because a wave of sell orders was overwhelming buyers. By 10:10, the Dow Industrials were off 63.52 points ... . But then, as quickly as the Dow had fallen, it began to turn around, and ended with a gain of 82.12 points." (Wall Street Journal, Oct. 17.)
What did it? A magic wand? No, not a wand but a flood of government funds. Early estimates were $2 billion, but it is sure to turn out to be much more.
No legal basis for it
The most important questions that leaders of the working class, progressive and civil rights movements must address themselves to is, Where did this money come from? Did this small group of Federal Reserve officers have the legal and constitutional authority to transfer this huge sum of money from the Treasury in order to save the hides of a handful of big financial and industrial magnates?
Article 1, Section 9, Subsection 7 of the U.S. Constitution specifically and categorically makes clear that "No money shall be withdrawn from the Treasury but in consequence of appropriations made by law." Article 1, Section 8 states that only Congress "shall have power to lay and collect taxes" and to "coin money [and] regulate the value thereof."
Just suppose that a left-wing or progressive government had been elected. Then suppose it siphoned off, in an illegal transfer of funds such as has just taken place, billions of dollars and pumped it into housing for the homeless, childcare, medical care, education and so on. The capitalist media and press would be saturated with violent attacks on the government.
There is no legal authority for what the Federal Reserve has just done. Bourgeois economists will try to explain this huge swindle on the basis of the discredited trickle-down theory--that if you give a billion dollars to a giant banking corporation, some of it will finally trickle down to the workers.
But can such a thing turn a crisis around with impunity? The stock market is merely a barometer, a surface manifestation of what is below. Can opening the gushers really change this? Can it stave off an economic crisis which is in the making?
Where it all leads
The basic aim is to keep capitalist production going, which inevitably leads to capitalist overproduction at a time when inventories are rising, consumer income is declining along with payrolls, and the general wage level is becoming more depressed with each technological restructuring of U.S. industry.
All who lived through the late thirties, or who have studied the historical evolution of the Nazi and fascist economic measures, must wonder about the similarity to today.
At the time there were many editorials in the New York Times, Washington Post and Los Angeles Times ridiculing the measures of the Hitler and Mussolini regimes, which were pumping billions of marks and lire into the economy. There were sorrowful articles about the poor economics minister, Hjalmar Schacht, who was a holdover from the Weimar Republic and knew better, but went along with Hitler's pump priming, printing more money and thus laying the basis for vast inflation.
But Hitler said that his pump priming was different from the measures recommended by the "international bankers" for Germany, because his was for the "common good" of the German people.
Let us look at the situation today. Is it fundamentally different from the pump-priming strategies of Hitler and Mussolini?
Why the dollar fell
No sooner had the New York stock market collapsed and the Federal Reserve announced its intention to intervene, than the dollar began to fall in all the currency markets of the world. Why? Because this pump priming by the Federal Reserve was nothing more than depreciation of the currency. It seems like a great space-age stratagem, but it comes straight from the old coin-clipping of the monarchs, when they controlled the gold holdings of the realm. This tactic invariably failed to enrich the royal treasury because the same clipped coins came back to the king in the form of taxes. This aspect of financial dealings has changed only in form with the transition from a feudal monarchy to a capitalist democracy.
Many chickens are coming home to roost for the U.S. capitalist economy. The tremendous cost of Pentagon militarism no longer can be offset by the global expansion of U.S. economic and financial interests, for this has only led to the utterly impossible indebtedness of the oppressed countries. The use of military means to compel payment is out of the question.
In addition, there is the specter of the rise of Japanese finance capital as the principal lender on the world financial arena. Its formidable challenge to U.S. competence in technology and managerial skills has raised inter-imperialist tensions to a fever pitch. It cannot forever be contained.
Thus, no matter how many billions the Federal Reserve may throw down the rathole, there is no way the capitalist government can continue to stave off the inevitable day of reckoning.