A Pre-Dystopian Tale.
You can’t live a post-revolutionary existence in a pre-revolutionary society.
This quote has stuck with me over the years, since I first heard it during the early 1970’s in the dining room of a longtime friend’s home in the Haight while interviewing spokespersons for a film I was shooting about a group of activists that had been instumental in creatiing the Free Clinic, the Food Bank, and had been active in several other Bay Area coalitions related to housing and healthcare for the indigent and homeless. The three-story house located on Ashbury near Haight Street also served as home to the group, then self-avowed Marxists, was about as close to being what we would call a commune as it gets, especially in an urban environment. Dinner there was served on a long table in this sizable space in the back of the house, usually accompanied by fervent discussions and debates over topics and strategies centering around local issues and events, often well-oiled by an abundant sampling of varietals from area wineries.
My friend, whom I met while serving in the Navy while we were both stationed in Puerto Rico, was at the time a member of this group of community organizers. He was a native San Franciscan and a lifelong Forty-Niner fan and season ticket holder dating back to when the team played its home games in fog-shrouded Kezar Stadium competing not only against NFL rivals but also on occasion with the ever-present seagulls who had a tendency to gyre overhead, often landing on the field right in the middle of a pass play.
He had moved to Portland, Oregon after military service, taking a job with the local American Express office – a job he was particularly well-suited for, having been a Public Affairs officer for several years while accompanying the Navy Steel Band on its frequent tours throughout the Caribbean as well as Stateside. Plus he was an affable, gregarious, and genuinely entertaining character; at the center of every gathering and a joy to be around. He passed away several years ago after spending the bulk of his adult life working both in and around City Hall and the Bay Area as a tireless advocate for medical facilities and affordable housing for street people whom had no real place to live. In 2013 a 120 unit apartment building designed to house the homeless was erected in SOMA and dedicated in his memory. His name was Rene Cazenave.
One Christmas, Rene invited me to drive down from Seattle and share in the festivities at the home of the parents of one of his paramours (don’t ask her name – I just can’t remember) located in a Portland subdivision. It was a lovely affair, replete with the usual holiday repast and ritual that earmarks the excesses of the season. Later in the evening the party migrated next door to the house of a neighbor whose daughter named Cathleen was a former classmate of Rene’s nameless paramour where we introduced ourselves, gathered around the tree and through the course of the evening regaled each other with tales of some of our exploits. At the time I was a student in Communications at the University of Washington (“U Dub” to its denizens), and was among other things actively involved with instructors and fellow classmates in lobbying for a film production curriculum to be created for the Radio and Television Department.
So my “tale” involved a project we were then currently shooting for several tribal elders of the Quinault Indian Reservation located on the Olympic Peninsula in Western Washington. Using an old 16MM Auricon camera together with a spring wound Bolex to record on 16MM color reversal mag-stripe stock, a group of fellow students and I were documenting the tribe’s struggles with the Bureau of Indian Affairs (BIA) over rampant and poorly supervised clearcutting of the virgin conifer forests on the reservation. Putting aside the issue of whether “clearcutting” itself is detrimental to the environment, the primary problem here was the “slash” left behind after the logging company was finished with harvesting the timber.
Slash is logging debris – consisting of tree stumps and coarse wooden shards left on the ground that clog local the local watershed, and if left untreated can become a major hazard, not just for fires but also for the local salmon fish hatcheries. The slash we witnessed had been so plentiful on the Quinault, that nothing except weeds would grow in the areas that had been clearcut. The secondary problem in eyes of many of the tribal elders was that outwardly the BIA , tasked by the Department of the Interior to manage reservation resources including the letting of logging contracts, had no re-forestation plan. Nada.
Once again, native Americans had their resources ripped away by colonialists with no goal except for short-term profits coupled with a lust for acquiring abused land at rock-bottom prices. Just across the road from the reservation, on land managed by Georgia-Pacific (now – perhaps ironically in the context of this story – a subsidiary of Koch Industries) stood thousands of acres of pristine new-growth conifer that a decade or two down the road would be ready for harvesting. Thus to the naked eye, the lesson seems to be that private enterprise with a Free Market neoliberal agenda enabled by an abundant revenue stream appeared to do a much better job at husbanding natural resources than a public bureaucracy whose cash flow was subject to the political whims of the current administration and its corporate-controlled Congress.
As I was relating this story I became aware that the elderly gentleman seated in a high backed easy chair across from me was avidly ingesting every word I uttered. He had been proffered earlier as Cathleen’s husband, introduced informally as “Bill”. One could not help but admit that there was a noticeable age difference between the two. When I finished speaking he chimed in that he’d recently completed a backpacking trip in the Cascades with Cathleen, relating how much he enjoyed such outings and how great a priority it was with him that the forests and the watershed that feeds the rivers that in turn supply our water be preserved for the future enjoyment of everyone. Then he said, “Even in D.C., we can see how polluted the Potomac has become, just in the years since I’ve lived there”. It was then that I first realized that he was no ordinary “Bill”. He was none other than William O. Douglas, then Associate Justice of the Supreme Court.
For those who either don’t remember or are too young to have known of him, Justice Douglas was a life-long environmentalist, who was recruited by FDR to first serve as on the SEC in 1934 and ultimately nominated five years later to succeed Louis D. Brandeis as Associate Justice at the tender age (for Supremes) of 40. On the bench Douglas became known as a strong advocate of First Amendment rights. He long insisted on a strict interpretation of the First Amendment’s command that no law shall restrict freedom of speech. One of his more famous quotes was: “The Constitution is not neutral. It was designed to take the government off the backs of the people….“. Later in his public life, Douglas was subjected to several impeachment proceedings led by then Congressman Gerald Ford over his opposition to the Vietnam war and the policies of the Nixon administration and also excoriated by conservative critics for his penchant for relationships with younger women. Maybe there’s still hope for us geezers yet.
Capitalism — the extractive neo-liberal kind that dominates the world economies currently — depends on conflict. As Naomi Klein relates in her seminal tome on the hegemony of global capitalism The Shock Doctrine, in order to bring about social and political change, there must first be a crisis — either a real, but more often a perceived calamity or disaster. A hurricane in the case of New Orleans and Katrina brought about the wholesale auctioning off of public assets in the Cresent City at bargain basement prices, while subjecting residents of New Orleans to a staggering debt load. And under neoliberal capitalism, politics has become a theatre for controlling economics via military force.
30 years before in the Southern Cone of South America, the crisis was manufactured — similar to what the world is now witnessing in Venezuela and in Brazil exacerbated by rampant corruption — where, after the CIA-engineered coup of the democratically elected socialist regime of Salvador Allende was ousted, free market guru Milton Friedman – he of the Chicago School of Economics – was brought in by the Pinochet government as an advisor to restart the economy – once it was destroyed that is, by the IMF and the World Bank through its proxies in the financial markets having attacked Chile’s currency and commodities markets, creating chaos, hyper-inflation, and rampant corruption, followed by shortages of staples, increased unemployment, poverty, and capital flight (from the clients of international banks in partnership with the IMF/World Bank all dancing to the tune of the Bank For International Settlements). It was the imposition of disaster capitalism on an economy by shock therapy — The Shock Doctrine.
“Not only were Chileans in a state of shock following Pinochet’s violent coup, but the country was also traumatized by severe hyperinflation. Friedman advised Pinochet to impose a rapid-fire transformation of the economy—tax cuts, free trade, privatized services, cuts to social spending and deregulation. Eventually, Chileans even saw their public schools replaced with voucher-funded private ones. It was the most extreme capitalist makeover ever attempted anywhere, and it became known as a “Chicago School” revolution, since so many of Pinochet’s economists had studied under Friedman at the University of Chicago.”
—— Excerpt From: Naomi Klein. “The Shock Doctrine.”
Then Friedman’s acolytes at the IMF stepped in to offer an olive branch in the form of a bridge loan at high interest, demanding as collateral the transfer of ownership of public assets to private hedge funds and transnational corporations, bought up at pennies on the dollar. What disaster capitalism leaves in its wake is a society of economic zombies; debt peons enslaved to an economic grist wheel riven by poverty, extreme wealth inequality, and increasingly subjected to a system of monopolized economic and political power concentrated in the hands of the plutocracy, benefitting the few at the expense of the many.
“Everywhere the Chicago School crusade has triumphed, it has created a permanent underclass of between 25 and 60 percent of the population. It is always a form of war. But when that warlike economic model of mass evictions and discarded cultures is imposed in a country that is already ravaged by disaster and scarred by ethnic conflict, the dangers are far greater. There are, as Keynes argued all those years ago, political consequences to this kind of punitive peace—including the outbreak of even bloodier wars.”
More than often the catalyst for change comes in the haggard and terrifying visage of war; a disaster scenario that devours all in its path via an insatiable appetite for accumulation through the utter destruction of any competing ideology. It is the single most effective way to transfer economic power from the many to the rentier class and is the driving force behind neoliberal capitalism. Without the immanent threats of force, violence, and fear, the imposition of economic stagnation created through the hoarding of Capital and the extraction of its income stream by the rentier class, austerity programs and polices directed against social programs and the public sector infrastructure would be ineffective against the political will of the many.
The World’s 62 Richest People Own The Same Wealth As The 3.6 Billion Poorest People.
The Carceral State
Let’s be crystal clear about the nature of these threats. Similar to the struggles fought by the underclass against feudalism throughout the entire span of the 19th Century, we are now actively engaged in not only a very real economic class war, but we also in the grips of a do-or-die battle for the viability of democracy itself – on the streets; in the courtroom; in the halls of Congress – waged continuously on a global scale by minions of the neoliberal plutocracy. Without the overt threat of war – The Forever War – now being waged against the poor and the marginalized men and women of color right here on the streets of our cities, capitalism would collapse and the rentier class knows this.
The “domestic front” of The Forever War has never been more overtly conspicuous than in the recent “legalized’ murders by police of poor people of color both in Saint Paul, Minnesota, Baton Rouge, Louisiana, and the frightful counterviolence in Dallas,Texas which resulted in the deaths of five policemen which in the end only serves to validate the interests of the corporate carceral state to keep the underclass under control. Chris Hedges, in a recent post on TruthDig entitled “Legalized Murder and the Politics of Terror” makes a valid case that certain of our citizens, mainly poor and black inhabitants of what he terms as inner city “sacrifice zones” created by neoliberal economic policies, now live in a constant state of terror.
Police officers carry out random acts of legalized murder against poor people of color not because they are racist, although [some] may be, or even because they are rogue cops, but because impoverished urban communities have evolved into miniature police states. Police can stop citizens at will, question and arrest them without probable cause, kick down doors in the middle of the night on the basis of warrants for nonviolent offenses, carry out wholesale surveillance, confiscate property and money and hold people — some of them innocent — in county jails for years before forcing them to accept plea agreements that send them to prison for decades. They can also, largely with impunity, murder them. This downward spiral of violence and counterviolence will not be halted until the ruling ideology of neoliberalism is jettisoned and the corporate state is dismantled. Violence and terror, as corporate capitalism punishes greater and greater segments of the population, are, and will remain, the essential tools for control.
There Is No Alternative
So what is “neoliberalism”? In a recent post for Common Dreams, author and Guardian journalist George Monbiot calls neoliberalism a failed ideology because contrary to its ethos, in practice it stifles competition resulting in economic stagnation through wealth extraction rather than creating economic growth through re-investment.
Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning. “The freedom neoliberalism offers, which sounds so beguiling when expressed in general terms, turns out to mean freedom for the pike, not for the minnows. Freedom from trade unions and collective bargaining means the freedom to suppress wages. Freedom from regulation means the freedom to poison rivers, endanger workers, charge iniquitous rates of interest and design exotic financial instruments. Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty. It may seem strange that a doctrine promising choice and freedom should have been promoted with the slogan “there is no alternative”.
Yet for all of its protestations for liberty and freedom, holding that all attempts to limit competition be treated as being antithetical to the exercise of the Free Market; that taxes and regulation be minimized; that public services be privatized; neoliberal capitalism functions most effectively under monopolistic conditions where there is a decided lack of competition ensuring the highest prices, lowest costs, and largest profits for its rentier owners. To Monbiot, neoliberalism is the Zombie Doctrine, extracting as its sustenance unearned income in the form of interest and rents from the living, thereby leaving in its wake an economy that is essentially a corpse.
How many of us still use a car to commute to work? I mean, there you sit all alone by yourself camped behind the wheel thinking about how you’re going to break it to your boss that you really need to take two weeks off instead of just one because you (or your significant other) are craving a life-changing experience like a trip to Cuba now that the neoliberals have convinced the Castros that Capitalism is cool for the jibaros. You could offer to smuggle in some cigars – only she doesn’t smoke.
Come on, admit it. This is how you waste an hour each way each day, dreaming and worrying about shit that will never happen while increasing exponentially your chances of getting into a fender-bender and making a new enemy of some other poor commuter who’s caught up in the same black hole, when you could be riding to work in style. I don’t mean hitching a ride on one of those Tech Bro mega buses from Oracle, Google or Genentech. I’m talking about Public Transportation. Why?
Because it’s way affordable, surprisingly convenient, environmentally friendly, and most importantly it will force you to interact with what is going on around you every day in the real world – in the real economy. The first thing you will notice once you board the 38 Geary or the 9 Sunnyvale bus is how many people rely on public transportation to get them where they need to be. The second thing you will notice is how many of them are handicapped; in wheelchairs, on crutches, or led by seeing-eye dogs. The third thing you will see is how many are school kids, shouldering backpacks and clutching books or skateboards and chattering excitedly with their mates. The fourth thing you will notice is that many are geezers headed home from the doctor’s office or from shopping. And when you look out the windows of the bus or train, you will see, on almost every other block, the homeless, the indigent , and the forgotten; those who can’t afford a house or a car or even to pay the bus fare. You will be confronted by fellow classmates of the Ninety-Nine Percent and victims of The Forever War.
On the bus coming home one morning I, along with several others, became engaged in an angry confrontation with a man who was vociferously defending the seating reserved for seniors and the handicapped in the front of the bus against those whom he perceived did not qualify as either. The spark for his initial outburst was a woman pushing an infant in a baby carriage who wanted to take a seat across from him. “These seats are for seniors and the handicapped only”, he blurted, pointing toward the back of the bus. “Go sit somewhere else.” When other passengers reminded him that the reserved seating also pertained to women accompanied by children he blanched but offered no response.
A few moments later he turned his attention to a young woman with a small dog in her lap seated across from him, berating her with a similar fervor, accusing her of usurping the rightful space dedicated to individuals like himself, claiming that he was not only handicapped and a senior citizen, but also a veteran Marine who had served in Vietnam; had fought for the freedom of people like her whom he felt didn’t respect who he was and were taking advantage of his sacrifices.
“You were never in the military. You never fought for freedom”, he accused her. “You don’t know anything about me”, she retorted. “There are plenty of available seats for seniors here. And besides, I don’t believe in either fighting or the military”. Face darkening, he shot back, “How can you not believe in the military. The military fights for peace.” Opening her mouth in disbelief, she countered, “Fighting for peace? That’s an oxymoron!” You could almost see his bald head explode as he unleashed the full force of his pent-up rage with a verbal torrent of accusations and abuse, aimed at forcing the now completely flabbergasted young women to move, demanding that she get out of her seat and get off the bus.
I had heard enough. “Maybe you should get off the bus”, I exclaimed. “Who’s you?”, he answered. “You”, I retorted. Then he saw me. “Why don’t you get off the bus?”, he shouted. “I will – in two stops,” I answered. “But before I do I think you should apologize to this woman for treating her so badly.” “I’m not going to apologize, you apologize to her,” he screamed. “Okay, I will. I’m a veteran too”, I countered. Then turning to the young women, whom by now was in tears and being consoled by the woman with the baby carriage, I proceeded to express my personal regrets that she had to endure such an unwarranted personal attack coming from a complete stranger and hoped that she would forgive us for our insensitivity and callousness.
Of course all that did was to set him off like a hand grenade and he began focusing his anger toward me and away from the young girl, accusing me of stupidity, telling me to shut up, and even challenging me to a fight. Fortunately a passenger from the rear of the bus sidled up, stood between us and demanded we both stop yelling and give the rest of the the riders some peace, a sentiment that was seconded by the operator who chimed in over the P.A. calling for all of us to shut up, calm down, and take a seat.
I knew arguing with the man was moronic on my part because by then he was practically incoherent in his rage against the machine and just needed some space to vent before he wound down and ran out of gas. His litany of pain and abuse ran something like this: nobody respected him; nobody listened to him; nobody loved him; everybody was against him. He’s was ripe for a conversion to Trumpism.
“It’s PTSD; I get it,” I muttered to myself, feeling ashamed that I’d only contributed to the fracas, and not abated it by any means. However, I did take only small amount of comfort in knowing I had at least managed to briefly deflect the focus of his indignation from the luckless young woman whom had borne the brunt of his assault.
Afterwards I got to thinking — always a dangerous thing — that this poor, lonely, angry man is not alone – even if he feels isolated and victimized by an Empire for which he sacrificed several years of his life ostensibly in defense of; in a world not of his making; for a world that ignores its victims and rewards only those it deems complicit in its designs as victors. There are a lot of us – especially us veterans, all having become Empire’s sacrificial lambs; recruited from the lower classes; trained to kill and maim in order to bring “democracy” to the unwashed and the unwilling; anointed as the saviors of freedom and forgiven any excesses in its pursuit; then promptly abandoned on the trash heap of neoliberal Captalism when either too used up, too unwilling to continue, or too old to die.
We are all Zombies on this bus.
I recently watched a production of Arthur C. Clarke’s 1950’s masterpiece “Childhood’s End” adapted as a miniseries on the Sci Fi Channel (CBS) in which the Earth is taken over by a master race of “Overlords” – servants to an all-powerful entity called the “Overmind” – who set out to pacifiy the human race at first by propaganda disseminated by intermediaries who, though long-dead, resemble trusted individuals from the past, seemingly resurrected to serve as trusted guides; and second by imposing a new world order where there is no poverty, no sickness (although people do die), and no wars; only shared peace and prosperity where everybody gets along in a Hobbesian utopia.
This goes on for a decade or two until the now-docile human population begin to have children, but these offspring turn out to have special powers known only to the mysterious and unseen Overlords. When the Overlords finally decide to reveal themselves to humankind, the event triggers a backlash among the populace but by now of course it is too late to back out. The Trick in the Tale is that a bargain has already been struck by the human race; decades of prosperity in exchange for their children – a deal with the Devil – reinforced by the physical appearance of the Overlords who turn out to resemble Beelzebub or Hob; replete with horns, cloven hooves and pointed tail.
The Human Race has turned itself into Zombies; bamboozled by greed into sacrificing the Future for a Life of plenty in the present, thereby disenfranchising their own children whom will no longer even be human in whatever future they might have under the Overmind. There’s that “propaganda” word again. Is it just me, or does this sound eerily familiar?
“Oh, and I say it again, you’ve been had. You’ve been took. You’ve been hoodwinked. Bamboozled. Led astray. Run amok!”
— Malcolm X.
And you always thought that propaganda meant brainwashing and torture sessions a la The Manchurian Candidate or being tied to a chair and exposed to a Leni Riefenstahl film or a Communist Party broadside and poster. No, not those. We get bombarded by propaganda every day — at least 400 discreet messages each 24 hours — telling us where to eat, how to get there, what to wear, when to get there, what is good on the menu, how to save money by spending more money, and who to vote for so that everything keeps going in the direction we are programmed to believe it is going in (which is really nowhere). Messages declaring that capitalism creates wealth and socialism is for freeloaders; what drugs to take to get thin; how to avoid paying taxes; and basically how to be a model consumer.
Propaganda is ubiquitous; on the TV, at the movies, on your smart phone (ever wonder why it’s called “smart”), in the subway, on billboards, on the sides of buses, at the ballpark, hanging from streetlight posts, all over the internet. Everywhere. A person by the age of Fifty has been exposed on average to 7.3 million such messages. I’ve been exposed to nearly 9.5 million in my lifetime.
Recently during my half-hour morning workouts, I witnessed a guy doing pushups – one-handed – while texting with the other, eyes completely glued to the four-inch screen on his phone as if his life depended upon the content of the message he was interacting with. There can be no questioning the fact that we are programmed from birth to death to be model citizens – commodities really; to consume, and to not upset the status quo. A lot of money is spent to convince us that this is our one goal in Life; that it is our reality and anything else is bad for business. So if you believe you cannot afford to do any of this, you are as worthless as a toad and twice as ugly.
You’re ugly and your mother dresses you funny.
— Old Schoolyard “put-down”.
Of course this universal messaging is not overtly called propaganda. It is commonly known under the euphemism advertising and the people who originate it are members of the “public relations” industry. The individual who is credited with creating public relations and who is widely regarded as one of the most influential personalities of the 20th Century is Edward Bernays, nephew of Sigmund Freud. Bernays was the first person to take his uncle Freud’s ideas about how to manipulate the masses to the mainstream. He showed American corporations (and the government) how to make people want things they didn’t need by systematically linking mass-produced goods (and political/economic policies) to their unconscious desires and thereby keep the masses happy — and docile. Why?
Because there is a fortune to be extracted from pliant and indebted consumers – what classical economists such as Adam Smith called unearned income – interest and rents that accrue to the rentier class – by convincing the public to empty their wallets, leverage their assets, browbeat them to become slaves to compound interest, and ultimately blame the government and/or themselves for their economic suicide when economic winds change.
Isle Of The Dead
Look at what is happening to Puerto Rico right before our eyes – the Zombie Doctrine in full regalia. Since the mid 1950’s, Puerto Rico had been promoted through Operation Bootstrap as a Free Market island paradise for transnational corporations. The enticements of cheap labor, low rents, abatement of customs duties, and a 10 year tax moratorium created a boom cycle that lasted for several decades as many companies opened branches there. Traditional agri-businesses tied to sugar cane, tobacco and fishing that had been the basis for the local economy in the past were de-emphasized in favor of rapid industrialization.
But mechanization of much of the agribusiness economy coupled with globalization starting in the late 1960’s and NAFTA in the 1990’s flooded the market with competitive alternatives and Puerto Rico soon experienced increasing levels of unemployment, peaking in 2006 when the tax moratorium was ended and businesses started to close causing a severe economic crisis.
Since the year 2000, Puerto Rico has seen a net loss in population of nearly 400,000 people, many of whom migrated stateside leaving paradise in search of a better life. More recently, the three major ratings agencies downgraded Puerto Rico’s debt to junk status, citing its long history of economic weakness (New York Times, 2014). The island’s debt burden began to grow after government expenses began outstripping revenues in the late 1990s, ballooning currently to an estimated $70 billion.
Much of this debt has been purchased by hedge funds whom are demanding that the debt be restructured, pledging what is left of the island’s public assets as collateral. In a statement published by CNBC, the island’s governor Alejandro García-Padilla issued a last ditch appeal for calm in the face of this TINA (There Is No Alternative) crisis.
Puerto Rico adopted the most stringent austerity measures. The payroll has been reduced dramatically. We have deferred other obligations. We have withheld tax refunds. The inability to pay our suppliers has resulted in the loss of commercial credit and many services must now be paid on delivery. Without supplier credit, medicines and supplies for public hospitals and air-ambulance service to trauma centers are now in jeopardy. The emergency measures we have taken are unsustainable, harm our economy, reduce revenues and diminish our capacity to repay our debts. Puerto Rico cannot endure any more austerity. On July 1, 2016, Puerto Rico will default on more than $1 billion in general obligation bonds, the island’s senior credits protected by a constitutional lien on revenues. Creditors and bond insurers have initiated multiple lawsuits and last week, hedge funds filed an injunction before the Southern District of New York claiming the “absolute highest priority” over government resources, including those needed for essential public services. That complaint minces no words and states that, in “times of scarcity,” bondholders should be paid before essential services.
In other words, Puerto Rico’s economy and its people are effectively zombies on suicide watch.
Economist Michael Hudson explores the concept of earned vs unearned income and the rise of financialization as the driving force behind what he calls junk economics in his recent book, Killing The Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
“There are many ways to commit economic suicide on a national level. The major way throughout history has been through indebting the economy. Debt always expands to a point where it cannot be repaid by large swaths of the economy. That is the point at which austerity is imposed and ownership of wealth polarizes between the One Percent and the 99 Percent. Today is not the first time this has happened in history. But it is the first time that running into debt has occurred deliberately, applauded as if most debtors can get rich by borrowing, and not reduced to a condition of debt peonage.”
Professor Hudson argues that the rentier class, made up of members of the One Percent who own large portfolios of Real Estate, stocks, bonds and derivatives plus the investment banks and Wall Street brokerages that manage these portfolios, provide no substantive value to the real economy because they do not add to economic output. These unearned rents, dividends, fees, bonuses, mortgage and loan interest payments, insurance premiums, and Capital gains actually suck up earned revenue from the real economy generated through the business cycle; via profits gleaned from the buying and selling of goods and services, from wages, and from sales and income taxes that support the public sector; all of which can no longer be re-invested into growing the real economy and thereby be deployed to expand business production, create jobs, and maintain the public infrastructure.
On the contrary, a large percentage of this unearned income vacuumed up from the real economy into this neoliberal financialized economy is used by transnational companies and Wall Street for speculation; to accumulate more assets like Real Estate, thereby bidding up the price of these assets on the “free market” pushing the price of homes beyond the range of many buyers; and to buy back outstanding shares of stock, inflating stock market prices which for Wall Street results in increased bonuses and commissions for that company’s senior management as well as increased dividends and Capital Gains for its stockholders.
“A recent Harvard Business Review article calculated that for the decade 2003-2012, the 449 companies publicly listed in the S&P 500 index “used 54% of their earnings – a total of $ 2.4 trillion – to buy back their own stock” – even more than the 37% paid as dividends. This left only 9% of earnings available for new capital investment. This management strategy created financial wealth by elevating the stock price, not by producing more goods. Earnings per share rose not because companies actually earned more, but because there were fewer shares outstanding among which to spread the earnings. Many of the companies [even] downsized and outsourced their employment and production.”
— Hudson, Michael (2015-08-26). Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
One can make the case that an increase in property values will result in an increase in revenues from property taxes which are used by municipalities for funding schools, maintaining roads, providing police and fire protection, and collecting garbage thereby providing a contribution to the real economy. While true, taxation based upon market valuation does nothing to address income and capital inequality; the endemic failures inherent with neoliberal capitalism’s propensity for self-annihilation plus it begs the question of alternative ways to fund the public infrastructure and elevate the indigent such as through Community Land Trusts, Commonomics projects, and an UBI – sometimes called Quantitative Easing for the masses – which will be treated in later chapters of this series on The Neoliberal Book of The Dead.
There is another equally distressing problem with what Professor Hudson terms as “asset-price inflation bubbles”. Since rents and interest add to the cost of living, they also serve to deflate real economy spending while simultaneously inflating the break-even cost of living and thereby making the cost of U.S. labor less competitive on a global scale.
“What makes American labor so high-cost is the monthly “nut” that wage earners must spend to carry their debts and pay for housing, taxes and health insurance. There is no way for an economy with such high debt service, real estate and tax charges to compete with less financialized economies where housing is not so debt-leveraged, where family budgets do not have such high debt carrying charges, and where taxes have not been shifted so regressively off the FIRE sector onto labor and industry.”
— Hudson, Michael (2015-08-26). Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
Then there are the Zombie banks. Remember the 2008 Wall Street bailouts? The TARP bailouts ostensibly amounted to $700 billion. But because of a paucity of reserves, some banks were deemed to be undercapitalized, so the FDIC and the Federal Reserve over time have actually spent more than $19 trillion to retire “troubled assets” through the Fed’s Quantitative Easing programs – AKA helicopter money or welfare for Wall Street. Plus those undercapitalized banks could now get loans under Dodd-Frank at a discount. As Bloomberg.com reported in 2013, this amounted to a discount of .8% on the capitalized value of all of their liabilities.
Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected. “The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. — account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits. In other words, the banks occupying the commanding heights of the U.S. financial industry — with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.
Read that last sentence out loud and let it sink in. The top five largest banks in the US are profitable only because of subsidies from the taxpayers! And…they are “too big to fail” which means they’ll be back like Terminators begging the taxpayer for another bail out. Perhaps a better solution in the future might be for these financial behemoths to instead turn to their shareholders and depositors for “bail-ins” in order to regain some semblance of solvency should the need arise. Yeah, bail-outs and bail-ins – corporate welfare unchained.
This was no accident. It is the central strategy of the Zombie Doctrine; use economic distress caused by excessive debt overhead that reduces spending in the real economy, to foreclose on assets distressed because of such inflated debt service fees and transfer them from debtors to creditors while keeping the underlying debt intact, and then force the public to not only make good on that debt now owned by the Rentier Class, but to prop up the market valuation of these assets through interest-free loans, subsidies, tax breaks, and Quantitative Easing tranches, then force the public to pay again via austerity programs that attack the public safety net and its assets. As Michael Hudson points out “The 2008 crisis afforded an opportunity to grab vast sums and subsidies by threatening that the alternative was chaos.” Who made all of these threats? The Federal Reserve in cahoots with the Treasury.
Until 2008, financial crashes had a silver lining: to wipe away the debt overhead so that economies can recover. Debt relief through bankruptcy traditionally forced housing prices to fall back to more affordable levels. But the Fed’s aim was (and remains) to preserve the economic power of the One Percent and revive bank balance sheets by preventing housing, stock market or bond prices from falling. In conjunction with cutting back public spending programs, this shrinks the domestic market, and wages fall instead of the housing and other asset prices. The banks were bailed out, not the economy.
— Hudson, Michael (2015-08-26). Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.
Stagnation and Austerity
This financialization of the economy has not led to real economic growth. It has in fact resulted in stagnation — a zombification of the economy — because stock buyback programs, debt service on loans and dividends paid to the rentier class use profits that could have been deployed to generate more economic output have instead been cannibalized for self-preservation. Plus the rentier class, awash in hyper-inflated assets have no place to put their money except in these same markets at exponentially expanding prices.
In other words, Zombie Economics is one “yuge” Ponzi scheme with participants tautologically claiming economic growth is true because they say it is when in reality it is a chimera; a massive transfer of public funds into private hands exacerbated by politically-imposed austerity programs that are designed purposely to shrink economic output and accelerate the accumulation of Capital for the elites.
According to economists Robert W. McChesney and John Bellamy Foster in their book The Endless Crisis, stagnation is endemic to this phase of neoliberal capitalism – a phenomenon the authors call The Great Stagnation, having produced in the last few decades a seemingly endless series of economic crises.
From a Marxist point of view, the authors describe a global economy increasingly monopolized — a few very large transnational firms that control one or several industries — resulting in an increasingly concentrated accumulation of Capital with too few avenues for strategic investment for growth. Hence, this corporate largesse is hoarded offshore in tax havens or exploited by Wall Street for speculation in commodities hedges and derivatives.
Stagnation is the word that economists use for this phenomenon. In human terms it means declining real wages, massive unemployment, a public sector facing extreme budget crises, growing inequality and a general and sometimes sharp decline in the quality of life. “This neoliberal campaign for the internationalization of monopoly capital is not merely an attack on the working class. Rather it must be understood, more broadly, as an attack on the potential for political democracy, that is, on the capacity of the people to organize as an independent force to counteract the power of corporations.
— McChesney , Robert W.; Bellamy Foster, John (2012-09-01). The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China (p. 9). Monthly Review Press.
The Friedman Doctrine.
As a matter of course, this discussion inexorably dovetails back to Milton Friedman and his slavishly loyal followers from the Chicago School whom dominate neo-classical economics today and whose neoliberal policies to a large extent have created an economic pandemic of income disparity and stagnation imposed by austerity.
In his book , “Where Did All The Money Go?” economist George Blackford eviscerates Friedman’s core assumptions regarding a scientific basis for his economic models. In one instance, Blackford targets specifically Friedman’s essay entitled “The Methodology of Positive Economics” in which Friedman presented a thought experiment positing that “excellent predictions” could come from confidence in a system based upon an hypothesis that an expert billard player would perform as if he (or she) intuitively understood all of the complicated mathematical formulas and geometrical angles associated with participating in the game and would then make all of the instantaneous calculations by eye to cause the balls to move in directions commensurate with these formulas, not as a result of any empirical evidence demonstrating that a billiard player actually could complete such a process, but is derived from a belief that unless these subjects were capable of such a result, they could not in fact be called “expert” billiard players. In other words, class matters and only “experts” should control the game.
“In spite of the simple fact that scientific understandings and explanations arise through logic and reason from the implications of the assumptions (i.e., premises) on which scientific arguments are based, and that a logical argument only has substantive meaning to the extent the premises on which it is based are true, Friedman argues that the relevance of a theory cannot be judged by the realism of its assumptions so long as it is also argued that it is as if its assumptions were true. Aside from the fact that this argument makes absolutely no sense at all as a foundation for scientific inquiry, it begs the question: Why should mainstream [neo-classical] economists be taken seriously if their theories and, hence, their arguments are based on false assumptions?”
According to Blackford it is precisely the blind adherence to the neo-classical anti-Keynesian policies of financial de-regulation implemented over the previous four decades by acolytes of this “free market” Friedman Doctrine — one that assumes speculative asset bubbles do not exist in spite of historical proof to the contrary and completley ignores the other side of the Balance Sheet; the explosion in debt and its concommitant appendage – compound interest, to be paid by declining earned incomes wrenched from the Real Economy and transferred as unearned income to the Rentier Class.
“Is it any wonder that the economic models created by mainstream [neo-classical] economists in the wake of Friedman’s billiard-player analogy have ignored the long-run relationship between consumption and effective demand, output, and employment…to the effect that the logical implications of mainstream economic models have been used to justify deregulating the domestic and international financial systems, cutting taxes on the wealthy and increasing taxes on the not so wealthy, eliminating usury laws, promoting the adoption of private retirement accounts, destroying labor unions, converting Social Security from a pay-as-you-go into a partial-prepayment system, opposing increases in the minimum wage and many other policies that only make sense within a paradigm that not only ignores the essential role of government in providing for the common good but also ignores the long-run relationship between consumption and effective demand as well and simply assumes that increasing saving [for the Rentier Class] enhances economic growth in spite of the utter absurdity of this assumption?”
This is a picture that I took in 2012 of derelict homes on the very block where I grew up on the East side of Detroit. At the time the picture was taken, there were only six habitable homes still standing on a block that once boasted 30 or more working class houses and the families that lived in them. I cannot show you images of what they looked like back in the heyday of the Motor City of the 1950’s. But what I hope to do is to somehow illustrate the decaying effects of the neoliberal policies of globalization, austerity, and financialization on a real neighborhood over time. This is what Capitalism does to neighborhoods – my old neighborhood – when it is unchecked.
My parents bought a home on this block in 1947 for $13,000. That same house in 2012, one of the six still standing that can be lived in, was on the market for $4,000. The rest are now inhabited by transients, cannibalizers, ghosts and zombies — all of whom were once believers in the American Dream. Mom and Dad believed in that dream too, and although they never profited much in the Real Estate markets, maybe because Real Estate wasn’t something to speculate with back then, they never liked mortgages and as a result always strove to own their homes outright. You have to wonder whether or not a family can even afford to do that nowadays.
Think about it. If you were to take out a 30 year mortgage at a nominal interest rate of say 6%, because of the nature of compound interest over the term of that loan you could wind up paying more than double the original settlement price of the home to the bank. Double! A $500K fully amortized loan for 30 years at a 6% compound interest rate generates nearly $580K in total interest payments over its term. And this is perfectly acceptable and not considered to be usury. Why? Because keeping you in debt up to your eyeballs is part of The Plan.
Plus that $580K in interest would effectively be removed from the Real Economy where it could have been used to expand business production and create jobs. Instead it would be used solely to reduce the loan principal – for debt deflation – and to fill the coffers of the Rentier owners who would use it to buy more property and create more debt.
No wonder we are all slaves to this four-letter word called work. Come on. Just because your name is on the deed, do you think the home is actually yours? You may be legally responsible, paying property taxes, insurance, and upkeep on it. But you are doing so for the benefit of the real owners, a mortgage or insurance company whom actually holds the Title. The property will not be yours until you pay off that mortgage. Without debt peons like you, how would the rentier class be able to maintain that 5 to 7 percent annual return that compound interest affords them?
Think of what you could do if you didn’t have to pay that interest – or for that matter the property taxes and insurance. You wouldn’t have to work as hard or long and maybe save a nest egg or even buy another home, lease it and become a rentier yourself. Or you could retire early, actively build a better world for your kids and stop working on the chain gang as a debt zombie for someone else.
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