Fucking with Neoliberalism

If you watch the video of Simon Springer delivering the original Fuck Neoliberalism talk, at the end there are questions. A Marxist asks why Springer eschews the language of revolution that is at heart of Marxist ideology (Fuck Neoliberalism 15:45). The ideas Springer is talking about are Socialist ideas, and Springer himself is an Anarchist rather than a Marxist. He's strived against the Marxist orthodoxy in his discipline.

"For an opportunity to move beyond Neoliberalism, we don't have to think of a revolutionary moment to do this... that implies the politics of waiting, right? The [revolution], well maybe it will come, but we'll wait for someone else to do the work. But we can actually do the work ourselves, right here in the here and now. The revolution of the every day. If you're stuck on the word revolution, think of it as an everyday process rather than something that is an ideal, somewhere in the future. It is something that we can embrace, here and now, in this moment." (Lightly edited transcript, emphasis added)

Springer emphasises mutual aid, reciprocity and cooperation as ways we can work against Neoliberalism. He says:

"Our community, our cooperation, our care for one another, are all loathsome to Neoliberalism. It hates that which we celebrate."

In other words we fuck with Neoliberalism simply by being active members of our community. Which is fucking brilliant.

But here are a couple of more specific suggestions.

1. Get out of Debt

The basic premise of modern Neoliberalism is to drive economic growth by increasing demand. Demand can be increased in the short-term by banks creating debts. In other words we rent money from the bank to increase our spending power now. A business investing in growth to increase profits makes a certain amount of sense. The investment pays for itself. Similarly with buying a house. But consumer credit is insane for consumers. You are mining your own future and hollowing it out. What you do is impoverish yourself in order to enrich banks. And the banks are corrupt. They don't do any good with your money, they use it to gamble on asset and commodity prices and to gamble on whether their bets will win or lose (aka derivatives and default swaps).

It's quite easy to stop participating in this system. Just stop borrowing money. I have a very low income and live from week to week. But I got out of debt 10 years ago and have vowed never to get into debt now. I don't have any credit cards. Barkleys recently invited to apply for their card which charges 26% APR. No thanks! If you have a lot of debt spread around, consolidate it into one loan and set up regular payments.


2. Don't be a Consumer

"Buy more shit, or we're all fucked." - bag on sale in Fopp some years ago.

Of course there is stuff that we need to buy. The area where we play into the hands of Neoliberalism is in the stuff we only want to buy. We can assess both our needs and our wants. It is of course up to each of us to decide what is essential, what is necessary, and what is not. But the line is something we ought to keep in consciousness. Every time we buy something we don't need, Neoliberalism wins. Every time we remember and resist that is a victory for us and other people who are against Neoliberalism.

We can also look for ways to recycle or re-use rather than buying something new. This is an inherently cooperative strategy, a sharing of resources. If you can't be bothered to sell your used stuff, then give it to a charity. And so on.

Lets all fuck with Neoliberalism in our every day lives. After all Neoliberalism is constantly fucking with us. Fuck Neoliberalism! Each time we save money, pay off debts, recycle, re-use, buy second-hand, give to charity, refrain from mindless consumption, etc we fuck with Neoliberalism and we can say to ourselves "Fuck Neoliberalism!"

The Warning.

I've just watched an excellent documentary which provides another important angle on the 2008 financial crisis. It actually first aired on PBS in the USA in Oct 2009. The Warning.

Hat tip to Ann Pettifor of Prime Economics for tweeting about this.

Asked about the financial crisis of 2007/8 and the subsequent recession/depression, the mainstream - including those still in charge of the economy - often reply that we could not have seen this coming. But this was only ever true because the mainstream were just not looking. Instead, they had their heads buried in troughs of money.

In American a woman called Brooksley Born did see it coming and was in a position to do something about it. She tried, but was shut down by Bill Clinton's financial advisors: Robert Rubin, Larry Summers, Tim Geitner and the Fed Chief,  Alan Greenspan.

Born warned that the market in derivatives--bets and insurance on the future price of assets and bets on those bets--was huge, completely unregulated, open to fraud, and likely to cause huge damage to the USA and world economies if they failed. Evidence that they certainly would fail was already evident in 1994 because of law suits brought by Proctor & Gamble and others against the hedge fund that lost their money in risky investments in derivatives. Banks were massively invested in the derivatives market. In 2008 this market was worth USD500 trillion. For perspective the UK's annual GDP is about USD2 trillion.

Greenspan was an disciple and acolyte of Ayn Rand. He did not believe in the necessity of pursuing fraud prosecution because "the market would sort it out". The others were like-minded. They shut Born down and made it impossible for her to continue in her role. The argued vociferously and repeatedly against any regulation of financial markets.

Greenspan retired in 2006. Then in 2007, Lehman Brothers went bankrupt. In 2008 the Great Financial Crash happened. Later, Greenspan recanted his free market ideology during a senate hearing. But does not seem to have been help culpable for this costly errors.

Rubin took over City Bank in time for it to be bailed out by the US tax payers because of it's reckless gambling in derivatives.

Obama's financial advisors are... Larry Summers and Tim Geitner. So we know that Summers and Geitner basically facilitated the financial crisis and they are the economic advisors to the President.

One of the problems for Hillary Clinton is that she is associated with this crowd of losers who wrecked the economy and walked away from it unscathed, like drunks who walk away unharmed from the multiple car pile they caused.

Brooksley Born is a name that ought to go down in history.


Further Reading

The Great American Bubble Machine (2010). Rolling Stone Magazine. "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression -- and they're about to do it again."

 The Woman Greenspan, Rubin & Summers Silenced (2009) The Nation.

Exploitation at the Heart of Capitalism

The Fundamentals

© Tom Toles

Private Property and Neoliberal Religion

I'm still slowly reading and thinking about The Communist Manifesto.

"You are horrified at our intending to do away with private property. But in your existing society, private property is already done away with for nine-tenths of the population; its existence is solely due to its non-existence in the hands of those nine-tenths." 

"Communism deprives no man of the power to appropriate the products of society; all that it does is to deprive him of the power to subjugate the labour of others by means of such appropriation." 

"It has been objected that upon the abolition of private property all work will cease, and universal laziness will overtake us. 

According to this, bourgeois society ought long ago to have gone to the dogs through sheer idleness; for those of its members who work acquire nothing; and those who acquire anything, so not work." 

The Communist Manifesto. 1848.

This narrative is not unfamiliar, though again it is striking how pertinent this social analysis is 150 years later. Its clear that mainstream ideas of private property are constructed by and for what we would now call the 1%. Oxfam said in January 2016 that the wealth of the 1% was now equal to that of the 99%. They wish to protect that they have; but what they have comes from the exploitation of the labour of others. They appropriate all the products of society and dole out a minimal amount to workers. Too much, they argue will allow the inherent laziness of workers to manifest.

Doing away with private property mainly affects the bourgeoisie because they have appropriated nine-tenths of the property. Those who work for a living, especially in the mid-19th Century had very little to lose from this policy.

Since then I think things have shifted. The 1% have encouraged the middle-classes to aspire to climb the social ladder, to climb the housing ladder, and so. The idea is that if one only climbs the ladder it becomes a stairway to heaven - one can retire to the 1%. The narrative is striking religious in tone. It imitates elements of the Egyptian Book of the Dead for example and of course Christianity. The major difference is that whereas religion encourages people to accumulate good deeds as defined by some divine code, the Neoliberal religion encourages and rewards the accumulation of wealth. Wealth is the modern measure of morality. And one only becomes wealthy by appropriating the products of the labour of others. As such the supposed stairway to heaven becomes a highway to Hell for most people.

As immoral as they might be by other standards, the 1% are deemed good by their own lights simply because they have accumulate much wealth. Wealth is the measure. The wealthier a person is, the more moral they must be. This is the essence of Neoliberal morality. This is why no modern government has been interested in perusing tax reforms or chasing tax reforms. The 1% see taxation as theft of their rightly acquired wealth by people who have not earned it. They believe that "unearned wealth" cannot be spent wisely. No government can spend wisely.

The internal contradictions of this narrative about wealth and accumulation are not apparent to those who live by the Neoliberal creed. But even in 1848 Marx and Engels saw the incoherence of this worldview. As they say "bourgeois society ought long ago to have gone to the dogs through sheer idleness". The wealth of the 1% is not earned. At best it is acquired. But the fact is that wealth is accumulated by the appropriation of the products of other people's labour. In other words, as  French anarchist Pierre-Joseph Proudhon said, property is theft (this was in 1840, a bit before the Manifesto).

It would not be so bad if the 1% were not so obviously stupid and incompetent. If they were some kind of benevolent tyranny that cared for the people and the environment they would be a lot less objectionable. Instead we see consistent mismanagement of the world by the 1%.

It is now clear that if we do not put the breaks on and change direction, we will be facing environmental catastrophe on several fronts: toxic, mutagenic, and carcinogenic pollutants, warming, flooding, extreme weather events, species deaths (bees are a particular concern), and so on. This is not because the 1% are doing such a great job of managing things. It's because they are stupid and incompetent. They behave like monomaniacal psychopaths. And really, we should treat them like psychopaths.

Capital as a Social Power

"Capital is a collective product, and only by the united action of many members, nay, in the last resort, only by the united action of all members of society, can it be set in motion". The Communist Manifesto. 1848.

This comes from the justification for the abolition of private property in the Manifesto. I found I was shocked by the bald statement: "the theory of the Communists may be summed up in the single sentence: Abolition of private property".

What Marx & Engels are getting at, it seems, is that without the concerted effort of workers, capital would never increase. One person working alone can seldom produce much in the way of surplus and so their capital grows slowly if at all. Capitalists exploit the labour of many workers to make their own capital grow, while the capital of the workers themselves does not grow. In many cases it shrinks. This is especially so in the developed world post-2008 financial crisis. We've seen wages falling, conditions of employment being undermined, at the same time as corporate profits rise, shareholder dividends rise, and CEO salaries rise. And yet those same people whose capital continues to grow while the capital of the workers shrink, refuse to pay their taxes. And workers are further enticed into debt slavery to the banks  - UK household debt is 150% of income and rising.

Personally I don't think the abolition of private property is a viable solution. Where it has been tried it is simply replaced by other forms of tyranny and exploitation that are at least as bad as, and have frequently been worse than, capitalism.

One potential model is the John Lewis Group one of giving employees shares in the company. This allows workers a greater share in the profits, when there are profits. Of course this assumes that profits are declared rather than hidden. It would not work in the multinationals who routinely hide profits in order to avoid paying taxes (e.g. Apple. Amazon, Starbucks, Google, etc.)

At the very least we need to acknowledge that if someone has got rich, it is by taking more than their fair share of the profits or by inheriting land (and all that land implies in the production of wealth). No one person working alone can become a billionaire. For every billionaire there are thousands of hard-working people, who just get by. The products of their labour are taken and mostly  redistributed to the rich, who then hoard it or indulge in conspicuous consumption. This is exploitation. In a better world everyone would benefit from their labour. If employers paid their employees the full value of their labour, there would be no billionaires.

No one who works full-time should struggle to pay their rent, food, and utility bills. At present many such people in the UK require "in work benefits" to get by. And this is insane, because it means that tax payers are subsidising supposedly free-market capitalists to keep prices above what is affordable. Landlords, who are largely the same as property developers, can partly do this by deliberately ensuring that the demand for housing outstrips the supply and claiming that high rents are simply a matter "supply and demand" as though it is nothing to do with them, but is just the market operating freely. Meanwhile the world's kleptocrats and drug-lords are laundering money by buying up property in Mayfair and Parklane and forcing property prices to rise at ten times the inflation rate, while wages continue to fall. And the Southern Rail company provides an appalling service, but still receives £25 million in government subsidies and declares a profit of £100 million which goes to private sector shareholders who probably don't pay tax in the UK! Why are we subsidising foreign shareholders with UK taxes while getting lousy service? Why are we not investing in the local economy?

Capitalists say that they deserve the lion's share of the profit that labour generates because they are risking their capital. There is something to this. Risking one's capital ought to bring rewards, if only because investment creates jobs for workers. The relationship is in fact symbiotic. The capitalist who takes all the profits and leaves nothing for workers destroys their own capital because the workers are soon unable to work. The only way for capital to produce profit, is through the application of labour by many workers. Or as the Manifesto says, through the whole community acting together in a concerted way. If there is profit then, necessarily,  the community should benefit.

Unfortunately it has been the policy of the merchantilist thinkers, who have shaped the industrialised world's economic policies for six centuries, to try to ensure that wages did not rise above subsistence level. This was supposed to ensure that workers did not succumb to the laziness and moral turpitude that was assumed to be their natural condition. That it happened to make capitalists phenomenally wealthy was just taken as further proof of their moral superiority. That workers are poor is not seen as a result of centuries of deliberately pursued policies, but instead of the moral inferiority of the workers. The double standard is hardly even remarked on in the mainstream. Instead of arguing over whether workers deserve to be adequately compensated by employers, the debate is over whether poorly paid workers deserve government handouts.

The whole system is fucked up.

Bankers Who Don't Understand Banking

Today Ann Pettifor Tweeted a quote from the Financial Times:

RBS chief finance officer quoted in full: "Every banking group uses deposits to fund loans. It is the basic premise of banking"

{face palm} This is completely wrong. No banking group does this. Banks create loans which then attract deposits. This is how the Bank of England put it:

"Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits." (Money Creation in the Modern Economy, 2014).

Of course, when they say "modern economy" they mean, since the founding of the Bank of England in 1694.

Why is the CFO of a major UK bank confused about fundamentals of banking more than 300 years after modern banking was established? He probably learned economics at university. What universities teach about banking, loans, and deposits is the complete opposite of reality. They get loads of other things wrong as well. But whole generations of economists, journalists, and crucially, politicians, have been taught this stuff.

One of the chief problems with Neoliberalism is exactly this kind of disconnect between theory and reality. Neoliberalism is dangerous because the economic theories involved are unrelated to the real world. The theories do not work in practice. The standard undergraduate textbooks of economics contain no real-world examples whatever. Examples have to be strictly tailored to illustrate the theory, because the real-world does not behave in the way that the theory says it does. So to use a real-world would almost certainly disprove the theory. Apparently economics undergraduates aren't ready for the truth. The graduate texts are not much better. They might acknowledge that the theory is unrelated to reality, but they will argue that it doesn't matter because the models work. But the models don't work or they would have predicted the financial crash of 2008 - the biggest single perturbation of the world's economy since the Great Depression. No mainstream economist, journalist or politician saw it coming.They all assumed that the economic "miracle" wrought by the deregulation of credit would produce a never ending boom. Wired Magazine literally called it the Long Boom in 1997 - watch out they ban ad-blockers.

For more on this see for example Professor Steve Keen: Neoclassical economists don’t understand neoclassical economics.

So we get this seemingly never ending stream of politicians, bankers, financiers, and journalists who don't understand economics, don't understand economic policy, and don't understand the consequences of not understanding. They don't even understand that they don't understand.