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This is Doug Henwood's response to attacks on his book Wall Street mounted by net personality Bob Malecki. Malecki claims to have been radicalized by a single leaflet during the Vietnam War; this led to his alleged participation in a plot to blow up a power plant in Cleveland, while he was working at the (nonexistent) "Chrylser division of General Motors." Facing trial, he (not unreasonably) escaped to Sweden, where he remains, issuing a large volume of electronic pronunciamenti. For more, download his fantastic memoir, Ha-Ha McNamara, Vietnam - My Bellybutton Is My Crystal Ball.

The full attack is on Malecki's web site. Most of it is a reprint of Workers Vanguard articles, since he never read the book himself (and confessed that he found even the WV articles over his head). Reading them you wonder whether the Sparts lie out of stupidity or as a conscious political strategy.

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Bob Malecki quoted from WV's lying, lazy comments on my book Wall Street:

>Hence the condition of financial markets is at the most fundamental level
>governed by the state of the class struggle between the working class and
>the capitalists.

[and]

>Wall Street and the Class Struggle
>Earlier this year, the left-wing London publishing house Verso brought out
>Wall Street, a study of U.S. financial markets by American writer Doug
>Henwood. Publisher of the New York-based newsletter Left Business
>Observer, Henwood considers himself a Marxist.

But WV, and Bob, who possess a mysterious device for testing Marxist
purity, obviously disagree.

>Paradoxically, while the bourgeois analyst Stephen Roach recognizes the
>central importance of the class struggle in determining the movement of
>financial markets, the leftist Henwood does not.

This so badly misrepresents everything I've written that it made me wonder
whether the Sparts lie out of ignorance or as a conscious political
strategy.

Instead, Henwood presents Wall Street as a world unto it-self, governed
exclusively by the actions and interactions of investment bankers, money
managers, corporate CEOs and other "players," to use his term.
>Henwood holds "Reaganomics" in large measure responsible for the sharply
>widening gap between rich and poor in the U.S. over the past few decades.
>Blaming the increased leverage of Wall Street financiers over industrial
>corporations for the deterioration of the economy and the falling living
>standards of working people,

Perhaps they missed the quote from Marx that serves as an epigraph:

"The credit system, which has its focal point in the allegedly national
banks and the big money-lenders and usurers that surround them, is one
enormous centralization and gives this class of parasites a fabulous power
not only to decimate the industrial capitalists periodically but also to
interfere in actual production in the most dangerous manner - and this crew
know nothing of production and have nothing at all to do with it."
- Marx, Capital, vol. 3, chap. 33

And perhaps they missed the first line of chapter 6, on Governance: "If
money is an instrument of control, then financial markets are a lot more
than the institutional matchmakers for savings and investment. You can see
that clearly by looking how an owning class's power is asserted over
corporations and governments through financial mechanisms." 55 subsequent
pages develop that theme.

>Henwood counterposes a series of economic reforms to deal with this situation:
"Seriously boosting the income tax rate on the richest 1-2% of the
population could fund all manner of public programs4 from free education
and childcare to public jobs programs. And taxation of wealth itself, along
with income, would be a wonderful way to raise funds for, say, the
upgrading of the public physical and social capital stock-financing urban
reconstruction, mass transit, alternative energy research, and
environmental repair"

I know this sounds hopelessly tepid next to calls for World Revolution Now!
But perhaps they missed this passage 14 pages earlier than they one they
quote:

So any call for financial transformations has to be considered only as a
part of a broader attack on the forms of capitalist social power. As this
is written, that seems almost unimaginable. What once seemed like mild
social reforms - even the bare minimal aspects of a social democratic
welfare state we've seen in the U.S. - are viewed by our rulers as an
intolerable trespass on their God-given rights. The intensification of the
attack on the welfare state in the U.S. and Western Europe since 1989 has
made it clear that the boss will grant such concessions only as long as
there's a credible threat of total expropriation, which is what the USSR,
for all its countless faults, always represented to them. As impossible as
expropriation may seem today, it pays to remember the old slogan from Paris
1968: be practical, demand the impossible.
In lieu of a 10-point recipe for social transformation, I offer a montage
of critique and suggestion. First a look at a very bad idea; then a review
of some mixed ideas; and finally a few more ambitious proposals.
But first, it's important to remember that not all attempts to rein in
globalizing finance in the name of the local are politically progressive.
Here, for example, is one writer's view:

Thus, the task of the state toward capital was comparatively simple and
clear; it only had to make certain that capital remain the handmaiden of
the state and not fancy itself the mistress of the nation. This point of
view could then be defined between two restrictive limits: preservation of
a solvent, national, and independent economy on the one hand, assistance of
the social rights of the workers on the other. The sharp separation of
stock exchange capital from the national economy offered the possibility of
opposing the internationalization of the German economy without at the same
time menacing the foundations of an independent national self-maintenance
by a struggle against all capital. The development of Germany was much too
clear in my eyes for me not to know that the hardest battle would have to
be fought, not against hostile nations, but against international capital.

That was Hitler (1943, pp. 209, 213), in Mein Kampf. One should always be
careful of critiques of finance that stop short of being critiques of
capital - especially ones that focus on internationalization as an evil in
itself."

>The working class enters Henwood's picture of the current American economy
>only as helpless victims of capitalist greed personified by Wall Street
>financiers. In a 16-page index, there is no reference to the AFL-CIO or to
>trade unions in general. In fact, albeit expressed in more leftist
>verbiage, Henwood's views mirror those of the AFL-CIO bureaucracy.

Gee, I'm doing a terrible job mouthing the AFL-CIO line if I don't quote them!

Reference to an index is a dead giveaway that a hack hasn't read a book.
Even so, there's an index entry on "class struggle," with subheads like
"central banking," "bond markets," and "leveraged buyouts." In fact there's
a sentence that says "An LBO [leveraged buyout] is a form of class
struggle."

And, of course, not a word about the section where I specifically address
Marx's view of credit, an analysis that all but the laziest, stupidest, or
most tendentious readers could see pervades the entire book, from the
epigraph to the last word. I'll leave it to Thaxians to decide whether it's
laziness, stupidity, or tendentiousness operating in the case of Bob & his
Spart friends.


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From: Doug Henwood <dhenwood@panix.com>
Subject: Re: M-TH: Henwood's "Wall Street" (Part 1)
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More crap from the Sparts via Malecki:

>The Reaganites deliberately manufactured massive budget deficits-the
>federal debt tripled between 1981 and 1990-in order to create the
>financial pressures and resulting political conditions to dismantle the
>"welfare state:' And the strategy worked. Witness the effective
>elimination of Aid to Families with Dependent Children under Democrat
>Clinton and the looming attacks on
>Social Security and Medicare. Henwood blames it all on the financiers:
>"With the vast increase in government debt since the Reagan experiment
>began has come the increasing political power of 'the markets,' which
>typically means cuts in social programs in the name of fiscal probity."
>Would Henwood have us believe that the boards of directors of General
>Motors, Du Pont and Exxon are less insistent on cutting social programs
>than their counterparts at Citicorp and Morgan Stanley?

Another passage or two perhaps overlooked under deadline pressures at WV:

from a history of the Federal Reserve:

This history helps explain the absence of a finance-industry split, minor
family quarrels excepted, over central bank policy in the U.S. and
elsewhere. There was remarkable regional and sectoral agreement on the need
to rationalize the banking system, both for reasons of stabilizing the
economy and to promote overseas commercial and imperial interests. This
history also helps explain populist thinking in the U.S. today, with a
similar analysis often shared by left and right, greens and libertarians.
Their opposition to central banks, centralizing corporations, and global
entanglements in favor of a decentered, small-scale system reflects the
historical processes by which these modern institutions formed each other.
They typically forget the volatile, panic-ridden history of the late 19th
century in their dreams of simpler times.

from a passage on why financiers hate inflation:

Liberals and populists often search for potential allies among
industrialists, reasoning that even if financial interests suffer in a
boom, firms that trade in real, rather than fictitious, products would
thrive when growth is strong. In general, industrialists are less than
sympathetic to these arguments. Employers in any industry like slack in the
labor market; it makes for a pliant workforce, one unlikely to make demands
or resist speedups. If a sizeable portion of industry objected
fundamentally to central bank policy - not only in the U.S., but in the
rest of the rich world - then central banks wouldn't operate the way they
do. While rentiers might like a slightly higher unemployment rate than
industrialists, the differences aren't big enough to inspire a big
political fight.

and from a section called "refusing money":

More radical than taxation is what Harry Cleaver (1995) has called "the
subversion of money-as-command." If, as Marx held (and Negri emphasized),
money and credit are forms of social power - and debt and fiscal crises are
used to intensify the force of capitalist rule - then the refusal of that
relation would strike sharply at the orthodox order. Cleaver argued that
Keynesian welfare state policies, through their excessive generosity,
reduced the capitalists' power and increased that of the working class;
rising wages and benefits during the Golden Age also contributed to this.
Among the virtues of this line of analysis are that it politicizes
apparently technical aspects of budget-making, and clarifies the importance
of the New York fiscal crisis in introducing the era of capitalist
counterattack - still in full swing as these words are written more than 20
years later.

Restoring the welfare state is one line of action - a bit boring,
perhaps, but essential to any more radical projects, since nothing boosts
the freedom of maneuver for nonelites like a hospitable safety net. A more
radical version of the subversion of money is the organized, political
refusal to pay debts, a technique that was used with great success in South
Africa during the final assault on apartheid. It's hard to imagine the
American masses, energized with revolt, collectively scrawling "Non
serviam" across their VISA bills, but stranger things have happened.

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Subject: Re: M-TH: Henwood's "Wall Street" (Part 1)
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Yet another installment of crap:

>Although Henwood's Wall Street focuses almost exclusively on the state of
>the U.S. economy, he draws from this material sweeping generalizations
>about the capitalist system as such7 Yet the financial structure of
>so-called "bank-based" economies like Germany and Japan is very different
>from the "market-based" economies in the U.S. and Britain. In the former
>cases, it is particularly meaningless to speak of a division, much less an
>antagonism, between industrial and financial capitalists. For example,
>Japanese capitalism has since the late 19th century been organized around
>tightly integrated groups of financial, industrial, distribution and
>commercial capital known today as keiritsu (whose origins stem from the
>pre-1947 zaibatsu).

No shit, comrades. There are several passages contrasting stock-based and
bank-based systems in Wall Street, and there's even an index entry for

>In the 1980s, however, financial operators of a new type appeared to
>become the strongmen of American capitalism. Bigume "corporate raiders"
>like Carl Icahn and T. Boone Pickens, wheeler-dealers like Donald Trump
>and junk-bond kings like Michael Milken became household names. Yet how
>many people could identify the chief executives of General Motors, Exxon
>or Citicorp? The deteriorating conditions of American working
>people-layoffs, plant closures, cuts in wages and benefits-were now blamed
>on the new financial operations, such as leveraged buyouts. Corporate
>raiders and their financial henchmen were denounced by union leaders and
>liberal intellectuals for killing the "American Dream."
>The liberal populist view of the changing American economy was well
>expressed in the 1991 film, Other People's Money. The plot centers around
>the efforts of a Wall Street raider, "Larry the Liquidator"-played by
>Danny De Vito as a wiseass sleazeball-to take over a small New England
>manufacturing company. The firm's profits are down because its main
>division is losing money due to the low level of capital construction in
>the U.S. The company's patriarchal head, played by Gregory Peck, waxes
>nostalgic about the late 1940s, when Harry Truman made a campaign speech
>outside the plant gate. Peck's character says: "That was the golden
>age-rebuilding America:' At a key stockholders' meeting, he proclaims:
>"Here we care about 'more than the price of our stocks; here we care about
>people." Another character comments, "Wall Street's in the liquidation
>business these days:' The implicit message is that Wall Street used to be
>in a different, more constructive "business" and that the recent wave of
>layoffs and plant closings was dictated by outside financial interests
>against the will of old-line owners and managers

It was at first. Were they awake in the early 1980s? Do they recall the
cries of distress from the Business Roundtable? Now that CEOs pockets are
stuffed with stock options - or, in the polite language, now that the
incentive structure of executive compensation has been aligned with that of
shareholders - they don't cry anymore. But the Fortune 500 hated Milken and
his stable of raiders.


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Bob Malecki quoted
:
>Wall Street and the War Against Labor
>Part 3: The 1930s New Deal and Labor Reformism

Oh, this is the best part yet. WV obviously picked up some refs on
corporate governance/separation of ownership & control issues from Wall
Street and forgot to mention that my position isn't all that much at odds
with theirs, the presumably correct "Marxist" one.

[...]

>The Notion of Progressive Managerialism
>
>The defining features of the New Deal variant of liberal populism
>centered on the fiction that large corporations could be made to serve
>the interests of society as a whole and that the sort of governmental
>policies advocated by British economist John Maynard Keynes could lead
>to full employment and prosperity for working people.

[...]

>These ideas were expounded in a highly influential book, The Modern
>Corporation and Private Property (1932), by two young liberal
>intellectuals, Adolph A. Berle and Gardner C. Means. The former would
>soon become a leading member of FDR's "brain trust" of economic
>advisers. Berle and Means maintained that in a large, modern
>corporation control or management had become divorced ftom ownership,
>and that this was, at least potentially, a progressive development.
>Noting that the large majority of shares in big corporations were
>dispersed among thousands of individual investors and that bondholders
>and other creditors exerted little influence over corporate policy
>unless the firm couldn't meet its debt service, Berle and Means
>contended that corporate managers were a distinct social group whose
>income and status were not directly tied to the drive for ever-higher
>profits:
>
>"Those who control the destiny of the typical modern corporation own
>so insignificant a fraction of the company's stock that the returns
>from running the corporation profitably accrue to them in only a very
>minor degree. The stockholders, on the other hand, to whom the profits
>of the dorporation 'go, cannot be motivated by those profits to a more
>efficient use of the property, since they have surrendered all
>disposition of it to those in control of the enterprise."

[...]

>These words today appear to express the utmost liberal naivete`. The
>1980s demonstrated for all to see, and in a most dramatic way, the
>power of stockholders to get rid of corporate managers seen to be
>disregarding their interests. In a critical introduction to a new 1991
>edition of The Modern Corporation and Private Property, mainstream
>bourgeois economists Murray Weidenbaum and Mark Jensen simply stated
>the obvious: "The wave of hostile takeovers in the late 1980s was a
>response to managers who paid insufficient attention to the concerns
>of shareholdersÖ. A business is an economic institution, designed to
>provide goods and services for consumers in order to benefit the
>stockholders

Enough WV. A few grafs from Wall Street, chap. 6:

Berle, Means, and managerialism

Typically, the concern with the governance of the modern large
corporation, which hinges in the classic formulation on the separation of
ownership and control, is traced to Adolph Berle and Gardiner Means's The
Modern Corporation and Private Property (1932/1967). To Berle and Means,
modern capitalism is characterized by the simultaneous concentration of
production in the large corporation and the dispersion of ownership among
hordes of shareholders. That dual movement marked a profound transformation
in the nature of property. The function of the 19th century
owner-entrepreneur had been divided in two. Formal ownership was delivered
into the hands of thousands, even millions, of dispersed stockholders,
rarely capable of organizing themselves to affect the operations of the
firms whose titles they held. Actual control, however, fell to managers,
who though formally responsible to the stockholders, were in fact largely
independent, self-sustaining, and answerable to no one in particular as
long as things didn't go badly wrong. In the eyes of jurisprudence, a firm
and its owners were entirely distinct, with the corporation itself
acquiring the rather mystical status of a person under law.

[...]

In his preface to the 1967 revised edition, Berle described the new
system as one of "collective capitalism," an affair that yokes together
thousands of corporations, and millions of employees, owners, and customers
- too many people to be considered private enterprise in the classic sense;
and since the state was now so deeply involved in economic affairs, no
redefinition of "private" could ever be broad enough to apply. Research was
no longer carried out by lone inventors, but in teams, and no longer within
a single enterprise, but in cooperation with university and government
researchers - often with subsidies from public and nonprofit sources.
(Despite the individualist ideology of the high-tech world, basic research
as well as product development still is highly social.) To the 1967 Berle,
these changes had moved us "toward a new phase fundamentally more alien to
the tradition of profit even than that forecast" in the first edition of
their book, published 35 years earlier.

Reading the updated Berle 27 years later, even more than the 1932
original, it's hard to imagine that anyone could have thought that modern
corporate society moves by anything significantly different from the
maximization of profit. But the belief that the advent of the large
corporation had changed capitalism into a more humane, progressive force
was a core belief of American liberalism from the New Deal through the end
of the 1960s. Profit maximization, the motor of 19th century
entrepreneurial capitalism, had been replaced by growth, and competition by
long-term corporate planning and administered prices.

>Keynes and Liberal Pseudo-Socialism
>
>Even more important in contributing to the ideology of the New Deal
>than the notion of progressive managerialism were the theories of John
>Maynard Keynes.

[...]

> In response to these conditions, in the mid-1930s Keynes
>came out with a more "radical" economic program. If capitalist
>entrepreneurs would not borrow and invest on an adequate scale, the
>government should do so in their stead. He called for a massive
>program of public works-railroads, highways, electric power plants,
>office buildings, housing-to be financed by borrowing rather than
>increased taxation. Keynes advocated a Board of National Investment
>which "would in one way or another control by far the greater part of
>investment. Private enterprise (meaning industry) requires such a tiny
>fragment of total savings that it could probably look after itself.
>Building, transport and public utilities are almost the only outlets
>for new capital on a large scale" (quoted in Doug Henwood, Wall
>Street [1997]).

WV negelects to quote the paragraph that followed this quote:

Yet even this program, for all its evasions and contradictions, is
revolutionary in the eyes of capital. Private investment is largely
self-financing, as Keynes argued, but to ignore it is to ignore what shapes
the evolution of much of our physical and social environment. Capital could
be made plentiful in the physical sense, but a system of production
organized for money profits - which Keynes acknowledged capitalism to be -
have none of it. Rentiers, while they may be socially functionless, are
nonetheless the owners of the productive capital stock, and the creditors
of its hired managers. They would never concede to their 'euthanasia,'
since they have never thought their condition terminal, at least since the
mid-1930s. Nor would employers ever consent to a regime of full employment;
it would be the death of work discipline.

Or these paragraphs, either:

But the real problems with Keynes lie ultimately in the naivete and
conservatism lurking behind his sophisticated and iconoclastic style.
Having (re)discovered that 'entrepreneurs' (a word he and post-Keynesians
like Davidson prefer to the more loaded 'capitalists') are in business to
make money, and nothing else, he somehow concluded that rentiers will
consent to their euthanasia. Compare this vain wish to a 150-year-old
observation: 'In England there takes place a steady accumulation of
additional wealth, which has a tendency ultimately to assume the form of
money' (quoted in Marx 1981, p. 543). A tendency indeed: money, whatever
its economic role, is most definitely not neutral in its social role; the
accumulation of money is the fondest desire of every good capitalist
citizen. Keynes realized this with one half of his mind, and then with the
other half thought you could tweak this fundamental tendency out of
existence almost unnoticed. Having laid bare some real contradictions, he
spuriously proposed to resolve them.

And further, having discovered in two ways, those of the Treatise and
the General Theory, that capitalism does not tend of its own accord to full
employment and stability, Keynes (1936, p. 379) then declared at the end of
the General Theory that his goal was not to overturn the 'Manchester
system,' but merely to liberate its full potential:

The complaint against the present system is not that these 9,000,000
men ought to be employed on different tasks, but that tasks should be
available for the remaining 1,000,000 men. It is in determining the volume,
not the direction, of actual investment that the existing system has broken
down. Thus I agree with Gesell that the result of filling the gaps in the
classical theory is not to dispose of the "Manchester System," but to
indicate the nature of the environment which the free play of economic
forces requires if it is to realize the full potentialities of production.

The problem of capitalism lies not in the exploitation of labor, the
creation of poverty amidst plenty, the abuse of nature, the atomization of
society, nor the trivialization of culture, but simply in its
incompleteness - that one in ten are denied its full delights. But given
full license, Keynes and his epigones could solve that problem. Too bad the
capitalists haven't let them do it yet.

But they did, in a sense - not the sense in which Keynes meant it, and
post-Keynesians still mean it, but in a sense illuminated by Antonio Negri
(1988). Here's how Keynes (CW XIV, pp. 112-122) defined uncertainty in a
1937 essay that was a response to critics of the General Theory:

By "uncertain" knowledge, let me explain, I do not mean merely to
distinguish what is known for certain from what is only probable. The game
of roulette is not subject, in this sense, to uncertainty; nor is the
prospect of a victory bond being drawn. Even the weather is only
moderately uncertain. The sense in which I am using the term is that in
which the prospect of a European war is uncertain, or the price of copper
and the rate of interest twenty years hence, or the obsolescence of a new
invention, or the position of private wealth-owners in the social system in
1970. About these matters there is no scientific basis on which o form any
calculable probability whatever. We simply do not know.

The examples given, notably the last - 'the position of private
wealth-owners in the social system in 1970' - are of a weighty sort, the
kinds of doubts that nag investors in the midst of crises like those of the
1930s. In the First World, we haven't seen its like in 60 years. Here's how
Negri read Keynesian uncertainty and the role of the state:

Investment risks must be eliminated, or reduced to the convention, and
the state must take on the function of guaranteeing the basic convention of
economics. The state has to defend the present from the future. And if the
only way to do this is to project the future from within the present, to
plan the future according to present expectations, then the state must
extend its intervention to take up the role of planner, and the economic
thus becomes incorporated in the juridical.... [The state] will not
guarantee the certainty of future events, but it will guarantee the
certainty of the convention.... In effect, the life of the system no longer
depends on the spirit of entrepreneurialism, but on liberation from the
fear of the future.

The role of the state, then, is to stabilize expectations - to guarantee
there won't be depressions, and to guarantee (insofar as anything can be
guaranteed) the position of private wealth-owners in the system. In these
senses, bastard Keynesianism did the trick - of, to paraphrase Claus Offe,
regulating the system politically without materially politicizing it. The
establishment took what it needed from Keynes and left the rest."

Does that make me a neo-Keynesian?


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Robert Malecki wrote:

>My reply to Doug Henwood!

>The last bit of your fourth answer so far is interesting.
>
>> The
>>establishment took what it needed from Keynes and left the rest."
>>
>
>In my opionion this expresses (partially) the methodology used by you in
>disguising your liberal left view in "leftist" rhetoric...
>
>Question...What if the "establishment" had not taken what it needed
>according to your theory? Ha Ha gottcha Doug! Or you put you foot in your
>mouth again..

What in god's name are you talking about, Malecki? This is utterly
incoherent. Since you have no idea what you're talking about, you certainly
have no idea what I'm talking about.

Let me see if I can do this even in English you can understand. Keynes
offered a semi-radical analysis of capitalism. He thought that, contrary to
classical fantasies of the system tending towards full employment, it was
quite possible that it could stabilize at high levels of unemployment. To
address this problem, he thought the state would have to plan and regulate
the level of investment, a process that had been the choice of private
capitalists. He also thought that financial interests hindered the move
towards full employment, and wanted to put them out of business. He called
this "the somewhat comprehensive socialization of investment." He thought
this modification of capitalism would save it from collapse and/or from the
Bolsheviks. The capitalists weren't interested in this kind of rescue at
all. They liked parts of his plan, though. MIlitary spending, for example.
You could buy arms, stimulate the economy, and use the weaponry to kill
Commies and strikers too. A perfect compromise. They ignored all that stuff
about "the somewhat comprehensive socialization of investment." They did
like the socialization of losses - like the S&L bailout, the Chrysler
bailout (you remember the Chrysler division of GM, right?), the
Scandinavian bank bailouts, etc. But profits, oh those are to remain
private.

>>Does that make me a neo-Keynesian?
>
>No, you still are a liberal influenced by Social Democratic utopian
>Keynesianites and American Stalinist politics..

This is the first time I've ever heard Keynesians called utopian. Wow.

>
>Remember your praise back on the lists of the CP in the fifties along with
>Proyect?

You know, Bob, you can praise part of something and criticize another part.
It's called ambiguity. I know that's a big concept for you to get your mind
around, but you've got lots of time on your hands, don't you?

>All three have a common denominator. Hate Trotskyists and all kinds of
>organizational manuvers (now to amongst themselves) to gag debate..

Nope, just stupid disruptive ones.

>After all the Swedes are running charter trips of "new" Social Democrats to
>down under in order to get the latest plan to screw workers...Maybe a New
>Zealand/Swedish Industrial relations act?

Social democracy is bad, but the undoing of social democracy in Sweden is
also bad? Please explain...

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