Is the Inflation Reduction Act non-reformist?
I hit a wall last year. After getting excited about the Inflation Reduction Act and teasing out the particulars of what it would mean for school districts to get federal money for decarbonizing their facilities, something whimpered in my head. It happened after I had a few organizing conversations with teachers on the ground trying to fix the school buildings problem in Philadelphia, specifically to see what they thought of this as a demand: pressure the district's office of capital programs and financial operations to put together a big spending plan over five years that uses the IRA's programs.
But neither of us could get jazzed about this demand. One organizer asked me very directly "do you think this finance policy is socialist?" I had to think about it for a minute (this Kate Aronoff piece is helpful in that regard).
At first, I did think it was socialist, at least in the sense of non-reformist reform. The IRA would be a policy change that, while not revolutionary, gets us on the way to transitioning from capitalist relations of production to socialist relations of production. As my friend and comrade Jason Wozniak told me (he was citing someone else, I have to ask him who): a non-reformist reform is a policy that, after the revolution, you wouldn't have to get rid of.
I thought the IRA's financing program was a non-reformist reform because, to put it simply, it puts labor in the driver's seat more than capital when it comes to the money behind decarbonizing public infrastructure. But having spent a bit of time thinking about from the perspective of school districts the wind isn't in my sails so much, but not entirely.
Hooligan vicissitudes
The system for school facilities financing we have now is a terrible patchwork of state and local policies where some states have great supports, programs, and financing and others have none (and everything in between). It leaves districts out in the cold, both literally and figuratively, since in places like Pennsylvania some districts can't afford to heat their classrooms.
Districts get left out in the cold because they're exposed to the hooligan vicissitudes of private credit markets. They have to sell bonds to get the financing they need for their buildings. This money is expensive, racist, and complicated. One of the running themes of this newsletter is that we have a toxic financial system for our school facilities.
This toxic finance even impacts states with great school construction programs like Connecticut, Massachusetts, or Wyoming. They have to sell bonds at the state level. Granted their state credit ratings are higher and they can modulate support based on district differences to make sure that poorer districts get more. But they still have to sell themselves as public entities on the private market.
The only thing the federal government does to help is keep profits from municipal and government investments tax free. This tax exemption incentivizes the bourgeoisie to buy the bonds that public public entities sell, which get the entities revenue to do what they need to do. (And this policy isn't some recent neoliberal policy. It's always been this way.)
In other words, capital is in the driver's seat when it comes to the money behind our public school buildings, and it's a drunk driver. Even when states have good policies, they rely on the municipal bond market for that financing, keeping a rapacious industry well-heeled as our school buildings keep getting D+ ratings from the American Association of Civil Engineers. In capitalist United States, public infrastructure must be a business before serving the public.
In the driver's seat?
That's the problem. And I thought that the IRA was a solution because, instead of going through the municipal bond market for money, the districts and states could, for example, go to the Greenhouse Gas Reduction Fund administration and get what they need (technically the districts could go to green banks, who would get capitalization from the GGRF). Or they could to the Department of Energy and get investment tax credits. They wouldn't need to sell bonds.
These programs are the result of legislation passed by elected officials and administered by people appointed by those elected officials. It's more democratic, and puts labor in the driver's seat more, since the money spigot isn't controlled by go-go gambling bankers on Wall Street.
The whole vision here is consistent with bigger picture proposals put forward by the heterodox economists and lawyers Robert Hockett and Saule Omarova (the latter of whom was supposed to be Biden's comptroller of the currency but was called a communist by Republican senators). As they lay out in a big paper and subsequent reports, we should be aiming to finance public infrastructure--which is a collective action program--using collective financial arrangements. Their proposal is a National Infrastructure Authority at the federal level with an appointed board, much like (and funded through) the Federal Reserve.
While the GGRF and the IRA do not a National Infrastructure Authority make, they accomplish something similar and get us closer to the policy that Hockett and Omarova want: elected and appointed officials controlling the money spigot for public infrastructure like school buildings. Public finance for public infrastructure.
In the end, this vision of public finance for public infrastructure puts labor back in the financial driver's seat. At first it appealed to me as a socialist because ultimately that's what socialists want: labor in the driver's seat of society. Hockett even came to an event I organized for socialists about how the Municipal Liquidity Facility could hold the keys to a socialist policy for school buildings finance. I remember him calling us comrades.
But this is where I hit my wall. Does this vision of public finance really put labor in the driver's seat? Is it something to be excited about?
The problem of state capitalism
I'm reading a book right now that rains on the parade a bit: James Olson's history of the Reconstruction Finance Corporation (RFC), a public financing engine behind the New Deal, which Hockett and Omarova cite as a central influence on their thinking. The title of the book is telling: Saving Capitalism.
Olson's thesis is that the RFC was a public alternative to private financing, yes. However, the institution itself was explicitly not socialist but rather state capitalist. In line with the left reading of the New Deal generally, he says the purpose of the RFC was to prevent socialism from happening.
Hockett and Omarova aren't explicitly anti-socialist in their writing, but you can see the state capitalism throughout. They're constantly appealing to private markets, bankers, and capitalists to go along with the proposal because it's ultimately good for them to have the government in charge of public infrastructure. It's more stable, it's more certain, it's not prone to violent crashes. They say their policy is business-friendly. But they also call it a paradigm shift, almost saying it'd be revolutionary in its democratic status.
State capitalism is more or less the political-economic framework for social democracy: get the state in the financial driver's seat rather than private markets so that the private markets can work better to serve the working class. Socialists know this is materially impossible. Private markets can't serve the working class because they're inherently exploitative. State capitalism isn't socialism, but rather when the state steps in for longer or shorter periods of time to make sure capitalism is covering its bases. Because if it leaves out portions of the population then that population could get unruly and blame capitalism, which we surely can't have (queue pearl-clutching).
If Hockett and Omarova's vision is state capitalist, and state capitalism is anti-socialist, and the IRA/GGRF strategy for school facilities financing is consistent with their vision, then that strategy is anti-socialist.
This argument certainly holds for the way the GGRF would work in Philadelphia's case. In a previous post, I broke it down and all the excitement appears to ultimately come down to a policy of school districts getting bridge loans from private building companies, who then get reimbursed by the federal government through the school district who applies to the federal programs.
But like, come on. How are we supposed to wage a campaign with working class teachers, parents, and students where the demand is "get the school district to go into debt to private firms and force the district to apply to the federal government to reimburse them!" Not an appealing slogan. The situation is clearly state capitalist: it gets the government involved in the private markets to shore up the hegemony of private firms as they serve public purposes.
In a recent episode of The Dig podcast, host Dan Denvir asks left historian and economist Tim Barker what he thinks about the IRA (check out 1:19:09). Barker distinguishes public investment from what the progressive economist Paul Samuelson characterized as "the bribe to capital formation." He says the IRA--and everything that's come out of the Biden administration on infrastructure--is a clear case of what Samuelson meant: bribing private firms to invest rather than the government building the decarbonized school, which would entail the government actually investing in schools itself.
Maybe it's a terrain
As a coda, I have to keep reading Olson's book, because I still have questions about this conclusion that the IRA is state capitalist and the comparison of the NIA to the RFC. I'm wondering if this conclusion is essentialist, creating immutable and immoveable thinking where there need not be. Does the GGRF/IRA have to be state capitalist? Did the RFC have to be anti-socialist? What if these policies always operate on a unique and uneven terrain where, depending how labor fights, we could get to a more socialist policy? What if they're the gateway to something non-reformist? The only thing we know for certain is that the future is uncertain. The categorization of a policy like the IRA as state capitalist, plain and simple, is way too reductive and deflating.
Another way to ask my lingering question: Is the way to socialism through socialism? Or can it be through state capitalism?
I don't think there's any ironclad a priori answers to this question because class struggle takes place in the din of history, a geological froth of forces where nothing is predetermined and the classes that get themselves together for themselves can make their own destinies. I just don't know whether the IRA is an opportunity for the working class to do that. I'm going to keep assuming that it is because it's all we've got, but I've lost my way in how exactly to keep pushing.