This piece suffers from a certain vulgar Weberian cultral essentialism, but it still provides food for thought as for how different layers of society (as opposed to classes per se) think of themselves.

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Check Your Premises Before You Wreck Your Premises: The Romney Campaign Shrugs

“The rich and the crooks are two sides of the same medal, they are the principal category of parasites which capitalism fostered; they are the principal enemies of socialism.”

-Vladimir Lenin, 1918

“We risk hitting a tipping point in our society where we have more takers than makers in society, where we will have turned our safety net into a hammock that lulls able bodied people into lives of dependency and complacency.”

-Paul Ryan, 2012

“I’m stupid rich, got retarded money/I’m special Ed, I got special bread”

-50 Cent, 2008

Today’s conservative has a rather easy time dismissing leftists as naïve “bleeding-hearts” who are presumably too lazy and perhaps effeminate to undertake the rigorous analysis necessary to achieve an understanding of the contemporary world in all of its economic, political, and social complexities. The straw-man “lib’ruls” that right-wing nutjobs love to hate are a cognitively inferior race of beings first and foremost because, like sissies, they evaluate the world in terms of “fairness” and “justice” without acknowledging inconvenient truths such as ballooning government deficits or shrinking profit margins.

But whenever a leftist acknowledges such inconvenient truths and persists in calling attention to the bankruptcy of the capitalist system in the twenty-first century, the right-wing nutjobs get nervously quiet all of a sudden. How can it be that more government spending, not less, is the best plan for the people in both the short and long run if government borrowing at the current levels is unsustainable in both the short and long run?

The scientific socialism of Marx and Engels has always posed a far more serious intellectual threat to the legitimacy of capitalist rule than the utopian moralism of reformers and anarchists. It sets forth a rigorously scientific methodology for understanding the real world in real time that acknowledges and even welcomes the existence of material contradictions in the social organization of production.

Like most people living on the planet, Marxists are indeed morally outraged by the parade of horribles that capitalism has unleashed and continues to unleash upon society. But the methodology of scientific socialism demands that one temporarily set aside one’s personal indignation when studying the social reality of the present time. It demands that one pay close attention to objective contradictions in the global economy, like the fact that more productive factories that produce more widgets in less time using fewer workers may lower businesses’ operating costs but in so doing produce higher unemployment, lower wages, and thus ultimately less demand for those very widgets. To acknowledge contradictions such as these is to give up any illusion that capitalism can be “fixed” or that we should even be trying to “fix” it. It is this dialectical thought process, and not the rigid adherence to any set of dogmatic principles, that makes one a Marxist.

Ayn Rand, the Muhammad of the Mayberry Machiavellians that comprise today’s Republican Party, did not merely declare war on social democracy and collectivism of all types. She also set out to undermine, by way of sheer philosophical argument, the very dialectical thought process that Marx and Engels introduced into the realm of the social sciences. Rand denied the existence of contradictions and claimed that whenever one perceives a contradiction, one must “check one’s premises,” because surely at least one of those premises is wrong. Thus money cannot possibly be simultaneously a store and a measurement of value on the one hand and a means of exchange, circulation, and repayment on the other. Waves are waves and particles are particles, goddamit! Why? Because Ayn Rand said so. Now get a fucking job, slacker.

Which brings us to the premises Mitt Romney assumed to be true when he shared his opinion about the 47 percent of Americans who don’t pay federal income taxes with what he believed at the time was a private audience of Atlas Shrugged characters. Either Romney himself assumed, or he assumed that his audience assumed, that the same 47 percent of Americans who pay no federal income tax are (a) committed Obama supporters who can never be persuaded to vote otherwise and (b) welfare cheats who produce zero value for society while consuming an ever-growing proportion of society’s resources.

Had Romney or his audience applied dialectical thinking when studying this large chunk of the American electorate, they would have acknowledged the seemingly contradictory state of affairs in which masses of Bubbas and Skeeters numbering in the tens of millions who are part of that 47 percent have been a reliable and absolutely crucial part of the Republican base ever since Richard Nixon’s campaign staff started inventing various innocuous-sounding euphemisms for putting uppity blacks in their place. They may have even pondered the fact that the loyalty of said Bubbas and Skeeters to the Republican Party has always been tenuous because the GOP has not in the past several decades actually benefitted them in any substantial way (other than, ironically, lowering their tax burden!) but has merely validated their (largely valid) resentments against a “liberal” class that threw them under the bus in its drive to appoint slightly more women and minorities to manage its hedge funds and private equity holding companies.

The “47 percent” video will not, by itself, determine the outcome of the election, but it is a prophetic foretelling of things to come. Romney’s statement is symptomatic of the attitude of an entire ruling capitalist class that has long ago given up trying to check its ideological premises.  The apologetic politics of American capitalism today is in increasing jeopardy not, as Rand might have claimed, because any one of those premises is false, but in fact because each of them, taken on its own, is empirically true. Yes, there is a class of parasites and moochers in America who accumulate and consume without working, and yes, a good number of these parasites and moochers—perhaps even Romney himself in previous tax years—are part of the 47 percent who pay no federal income taxes. Yes, Obama supporters are more likely than Romney supporters to believe in a stronger role for government in the economy. Yet when the Republican presidential candidate attempted to weave all these separately valid empirical truths together into a coherent narrative that fits into the intellectual straightjacket that characterizes the mass politics of the contemporary GOP, the contradictions stood naked and exposed for all to see.

Getting rid of Medicare, Medicaid, Social Security, federal college assistance, food stamps, unemployment insurance, and other “free stuff” is not exactly a “surgical strike” that will affect only the black welfare queens, union thugs, and dope-smoking Marxist grad students who probably would never vote for Romney anyway while leaving the Bubbas, the Skeeters, the limbless war vets, the old timers with more “traditional” values, and countless other “decent white folks” unscathed. Romney is now on record as saying essentially to America’s poor and working-class white voters: “You are no better than niggers, and I intend to enslave you.” Maybe it’s about time they took the hint.

The LIBOR Theory of Value Has Been Discredited

Nothing is more amusing in the reports of Parliament for 1857 and 1858 concerning bank legislation and commercial crises than to hear of “the real rate produced” as the directors of the Bank of England, London bankers, country bankers, and professional theorists chatter back and forth, never getting beyond such commonplaces as that “the price paid for the use of loanable capital should vary with the supply of such capital,” that “a high rate and a low profit cannot permanently exist,” and similar specious platitudes. Customs, juristic tradition, etc., have as much to do with determining the average rate of interest as competition itself, in so far as it exists not merely as an average, but rather as actual magnitude.

Karl Marx, Capital, Volume III, Chapter 22

As this crisis develops, if you are an equity portfolio manager and you want to outperform the market, you are going to have to position your portfolio so that it benefits most from your own wealth destruction and that of your family, friends and colleagues. Almost everybody is going to lose and there aren’t many places to hide. This is deeply unpleasant but you can blame the central planners.

Paul Mylchreest, Thunder Road Report, July 5, 2012

The human mind is conservative by instinct. We naturally want to be able to trust authority, because if we can’t, then we have nobody to rely on but ourselves and each other, and that is scary. The more power and influence that a person or institution has, the more we instinctively believe them when they say they know what is best for us—in fact, the more we root for them to be correct in their pronouncements. Surely they know better then we how the world really works, we reason, because the alternative is too terrifying to ponder.

But if those who govern us do in fact have such knowledge of how the world works it does not follow that they willingly share all of it with us, for they know that if they did, they would not be governing us for very much longer.

For decades now, political and social stability in the United States has depended on the economic and financial illiteracy of her people. Year after year, as American wages stagnated, American workers borrowed, spent, saved, and invested based upon certain assumptions about the meaning of value and wealth that simply do not add up when one actually does the math.

When it became clear that the factory job their fathers retired from would no longer be around, they borrowed huge sums to attend a university in order to increase what some snake oil salesman economist referred to as their “human capital.” They took out mortgages from bank representatives who told them the property would appreciate forever and that their ability to make the payments would therefore not depend on income from any source other than rising equity in the property itself. And they stood by trustingly when their employers replaced their retirement pension guarantees with money set aside from their own wages that some “professional” money manager would turn into more money through the magic of globalized securities trading.

And the entire time this was happening, the American worker believed that the USA (and the entire rest of the world after the fall of the Berlin wall in 1989) was governed by something called a free market, which was something real complicated that involved a lot of math but which made it possible for anyone with even mediocre drive and initiative to have a two-car garage, a giant flat screen TV, and a cushy air-conditioned job.

That America was abandoning her productive capital wholesale, that American employers were setting up shop in Asian countries and hiring workers in those countries at wages that would be illegal in the United States itself only to sell the products these “competitive” workers produced back to American consumers at inflated prices, which said consumers could increasingly afford only with borrowed money, did not seem problematic when the “smartest guys in the room” incessantly told the American worker that his country was now a post-industrial “knowledge economy” where value came not from producing goods and services that people need but from ideas!

Now that the jig is up, now that we are finally getting wise to the fact that the those sober, pragmatic grown-ups who now tell us there’s no such thing as a free lunch are the same bullies who stole our lunch money in the first place, more and more of us are peering into the world of the financial services industry and beholding the utter banality of Atlas shrugging.

The banking industry is nothing more than a bunch of dudes sitting in front of computer screens playing World of ClassWarcraft. At the end of the day, whichever brohim racks up the most points in the game wins. Its just that these numbers on the screen are not just points in a video game—they are real currency that can be exchanged for food, clothing, shelter, and all the necessities of life that millions on the planet desperately lack.

In order for John Pierpont Morgan-Chase to unload his losing London Whale sperm all over America’s face and thereby save himself (and human civilization) from total collapse, Mr. Morgan-Chase needs to find willing dupes to buy these worthless securities. These “muppets” include union retirement funds, municipal governments, and millions of trusting, conservative Americans who are just trying to be good savers and not live beyond their means, who understand that the global economy is volatile and risky these days and want to put what little they have somewhere safe where it might grow a little.

Many of these good, patriotic Americans regularly watch Fox News, served or have family who served in the military, and have a personal relationship with Jesus Christ. Whatever will they do when the King of Kings returns to earth and the money-changers give Him a big ol’ Cleveland steamer?

Higher Education Clusterfuck Redux: The Talk

Middle class parents in the United States (and I acknowledge that “middle class” is an entirely subjective term in the United States) are going to have to make sure they have the talk with their college-bound teenagers from now on. You know, the talk.

America’s middling moms and dads already understand they are expected to have the drug talk (marijuana will never kill you and is probably healthier than drinking but a criminal record can ruin your future so just say no), the sex talk (for girls: don’t dress like a slut and save your punany for a guy who’s going places in life; for boys: wrap that shit up and make sure you at least call her within 24 hours lest she accuse you of raping her), and the race talk (for black kids: whenever you see a man in uniform, spread your cheeks, lift your sac, and mind your manners; for Hispanic kids: never leave home without your passport, driver’s license, birth certificate, social security card, three separate utility bills, and a notarized affidavit from the homeowners association swearing that we live here; for white kids: never venture north of 96th Street and always carry a little cash on you because if you’re wallet’s empty when they mug you, they’ll be more likely to violently take out their rage and anger over 400 years of slavery and oppression on you personally out of pure spite; for Asian kids: I don’t care if it’s Saturday, 70 degrees, and sunny and all the other kids are playing ball outside . . . weekends and holidays are for the other, less disciplined races . . . now do your homework!).

But now, rising tuition and persistently high unemployment are giving rise to a new talk that all parents must have with their kids before they matriculate at one of America’s fine institutions of higher learning. That talk goes something like this:

You know how we always used to tell you that you can be anything you want to be when you grow up as long as you work really hard at it and never give up? Well, that’s not exactly true. You see, the cost of sending you to college for four years, when you factor in tuition, room and board, health insurance, books, and so forth, is over $200,000. That’s money we simply don’t have ever since your father got downsized and had to cash in his 401(k) (at a time when it was worth half of what it was worth before the economy crashed) so we can continue to pay our bills. That means you will have to take out student loans. Now I know they never taught you basic principles of personal finance in school, but since you are going to end up owing somebody over 200 Gs in four years, it’s important that you know what interest is.

You see, nobody just lends large sums of cash to a total stranger out of the goodness of their heart. If I’m sitting on a lot of money and I let somebody borrow a bunch of it, there’s no guarantee that person is gonna pay it all back. But if I only let them borrow this money on the condition that they pay it back and then some, something is in it for me to be a lender. Now, the chunk of money that they’re gonna lend you so you can go to school—that’s called the principal. You’re gonna have to pay all of that back. But wait . . . there’s more. You’re also gonna have to pay them an extra chunk of money on top of that which is calculated by taking a percentage of the principal. Now focus . . . did you take your Ritalin today? Good.

Now, after you graduate, you will have to make monthly loan repayments. What will happen is, they will pick a block of time for you to pay it all back – say 10 years after you graduate – and then divide the principal by the number of months in 10 years. There are 12 months in a year, so there are 120 months in 10 years. You will owe $200,000, so $200,000 divided by 120 is $1,666.66 per month for ten years. But that’s just the principal! The interest rate on your loan is 3.4 percent. 3.4% of 1666.66 is $56.66. That means you will owe $1,723.33 per month.

That is to say, you will continue to owe $1,723.33 per month for ten years if you consistently make that monthly payment for ten years. If you miss a payment, the interest you didn’t pay will get added to the principal, and the monthly payment you owe will increase! That is to say, the less able you are to pay back your loans, the more you will owe, and the less you will be able to pay back your loans, and the more you will owe, and so on ad infinitum (which, by the way, is Latin for until the end of time!).

So why is it important that we’re telling you this now? Because very soon you will be picking what courses to take and what to major in and you’ll be discovering who the fuck you are and what you’re good at. What we are trying to tell you today is that it doesn’t matter who the fuck you are or what you’re good at. There are certain fields of study that will qualify you to get one of the shrinking number of jobs that will enable you to pay off your debt before you die. You will have to be exceptionally successful within those fields, whether you are good at them or not, and we don’t just mean getting good grades. You will have to know the right people and probably at some point stab your rivals in the back to get ahead.

What’s that you said . . . ? You don’t wanna go to college at all if that’s the price you will have to pay for the privilege? Do you wanna be a loser all your life? You think flipping burgers is a respectable vocation? Let’s get real – you’ve been raised all your life to feel accustomed to a standard of living that you will have to fight to the death now to perpetuate for yourself as an adult. Most of what you know about college you probably got from the movies, and right now, we’re telling you that in real life, for you, the movie you should have in mind when thinking about college is not Animal House or Revenge of the Nerds but rather The Hunger Games with a little Lord of the Flies mixed in for good measure.

So, what fields of study will be most likely to land you a job when you graduate? Well, where do people make money in America these days? Think F I RE – finance, insurance, real estate. Do whatever you need to become qualified to work in these sectors. Yes, I know those are the very sectors that put America in the situation where we have to have this talk with you in the first place, but part of growing up is learning to accept that life isn’t fair. You can either become a part of the problem and continue to live as an adult with the comforts you grew up with as a kid, or you can try to be part of the solution and end up destitute, with a ruined credit rating, unable to marry and raise a family, much less qualify for a home mortgage, and very likely dead or in jail when its all said and done.

Well, I’m glad we had this talk, and remember, we’re both so very proud of you!

Why Is This Debt Bubble Different from All Other Debt Bubbles? A Deeper Look into the Higher Education Clusterfuck

Going to college and then going to grad school/business school/law school/medical school/etc. is one of those good deeds (in the eyes of our parents) that has hardly gone unpunished as of late. I need not go into detail about how tuition costs have risen so much in the last decade as to outpace inflation or how the total national amount of student loan debt has surpassed the total national credit card debt or how the class of 2011 faces the highest unemployment in history. What I want to talk about is the way the 1 percent and their hangers-on blame the victims of these circumstances. In particular, I want to talk about the idea that the type of knowledge a student decides to pursue has economic implications and that it is the personal responsibility of the student to consider these economic implications when choosing classes or a major.

Is unemployment and insolvency really something a student was asking for by taking out $200,000 in loans in order to study such “worthless” disciplines as history, sociology, anthropology, or, god forbid, women’s studies (are you dumb broads listening?)? If that is so, then presumably the “responsible” decision every student ought to make is to pursue a field of knowledge that is more reliably lucrative, such as business, economics, law, or engineering. But if every student chose these disciplines as the focus of their studies, then the value of those degrees on the job market would plummet proportionally. It’s simple supply and demand. And in any case, ask  most recent law or business school graduates how their job search is going and you will more likely than not hear that they have yet to find a position in their field that will enable them to repay their debts anytime soon.

When we were applying to colleges and grad schools, when we took the tour and the administration was trying to entice us to choose their institution over other competing institutions, nobody mentioned anything about personal responsibility in our choice of classes and majors. No, instead we were told that whatever we were interested in, we should follow our dreams by enrolling in their school and taking advantage of their “world-class faculty” and so forth. At best, we were told that the world would be open to us so long as we studied hard and distinguished ourselves in whatever area we chose to focus on. If a degree from the place couldn’t guarantee a successful outcome, it would at least give us an equal opportunity to succeed. Only after we graduate do America’s education pimps tell us that even straight A’s may not cut it if we picked the wrong course of study after taking out six-figure mortgages on our hides.

Is there some giant conspiracy to screw American youth? It sure seems that way. But conspiracy theories are most often feeble attempts to make sense of a contradictory world that fails to conform to the simple logic we use to solve our everyday problems. We must analyze more deeply the contradictions of this world we live in if we are to truly understand the source of the troubling circumstances we find ourselves at the mercy of.

At some point in our lives, each of us was probably shown a graph displaying how each higher academic degree will guarantee us, on average, a higher respective income over a lifetime. The same wonkish individual who showed us this graph also probably said something about how college tuition is an investment in our “human capital” and that the future return on this investment, in the form of higher wages and benefits and a higher standard of living will more than compensate for increasingly obscene expenses of higher education. More generally, we hear all kinds of experts and pundits telling us that education itself is a panacea for income inequality and that educating the maximum number of Americans will remedy the loss of good jobs to overseas countries. In short, we have been told that education, quite literally, creates economic value. Yet if this were true, then the most educated generation in history would be prospering right now, not living at home with their parents at age 30. The reason why record levels of higher education have, on the contrary, coincided with record unemployment levels remains a mystery unless we understand where economic value actually comes from.

Marx famously distinguished between a commodity’s use value and its exchange value. A use value is simply whatever use we make of the commodity. We value a can of soup because we can open it, cook its contents, and nourish ourselves by eating those contents. That is its use value. An exchange value is the commodity’s market price at any given time, which is determined by supply and demand. One cannot quantify–put a dollar amount on–use values the way one does with exchange values, but every commodity must have a use value in order to have an exchange value, because if an item is of no use to anybody, nobody will pay anything for it, and it will be literally worthless.

Marx also singled out a special kind of commodity – a worker’s labor power – as the only commodity that is capable of creating more value than it is worth. Labor power is simply the worker’s capacity to work for an employer. It is most typically measured by the clock, such that the worker exchanges X hours worth of labor power for Y dollars in wages (and benefits, etc.). This exchange itself, however, does not determine in advance how productive the worker will actually be on the job, and it therefore does not determine the value to the employer of the worker’s labor after the fact. The price of a worker’s labor power–i.e. the value of the compensation the worker can expect from a given employer–is determined by the supply and demand of the labor market. If a lot of workers are competing for a few openings for a certain position, the price of labor power in that position will be lower than if fewer workers are competing for many openings for the same position.

In a simple, hypothetical capitalist economy, where all workers have the same level of education and skill, the only variables determining the price of labor power for each position is the number of openings for that position and the number of applicants for that position. In the nineteenth century, college and graduate schools were largely the province of the elite, and the economy operated far more closely to this model, although different workers of course had different skills. Only in the twentieth century did higher education become open to the working class on a mass scale. By the century’s end, however, something curious had happened. Whereas higher education was once a ceiling through which most workers could never expect to break, it had become a floor below which most workers would not be able to survive. The pressure to go to college and beyond was driven not only by the hope of a better life after graduation but, perhaps more directly, by the fear of a miserable life without a post-secondary degree.

What higher education has become, then, is a vehicle for the relativization of labor power. By graduating from an institution of higher learning, a worker appears to add a premium to the value of his or her labor power, but that degree does not in fact raise the value of the worker’s labor power in an absolute sense; it only does so relative to other workers who lack it. The degree’s exchange value to the graduate–the extent to which it is worth the price of tuition and all of the interest payments–is necessarily a function of its scarcity in the labor market as a whole. The greater the number of workers that graduate from college and grad school and compete on the job market, therefore, the lower the value of each graduate’s relative labor power.

But education also has a use value, does it not? Education enables us to be critical, to smell bullshit and not be hoodwinked. Education allows us to read and understand this blog and others. Education equips us to think outside every box in which the 1 percent incessantly tries to confine us. Education empowers us to be revolutionaries. The use value of an education is wholly distinct and unrelated to the extent to which higher learning translates into higher wages and better working conditions except to the extent that it enables us to better appreciate the value of collective action and solidarity within our own workplaces.

By simultaneously educating us en masse and chaining us to a lifetime of debt slavery in the process, the 1 percent have truly created their own gravediggers. The youngest among us, who have the most at stake, will stop taking out student loans and attending college in the same numbers and with the same blind trust. But that does not at all mean that they will cease to educate themselves, for their very refusal to participate in such a rigged game will be a product of their real education. The bubble that’s about to burst is not merely the student debt instruments that will become assets as toxic as subprime mortgages once the coming wave of defaults begins to hit. The true bubble that is about to explode, a bubble far longer in the making, is the American myth that those who work hard and play by the rules are anything other than suckers and chumps.