capital, it fails us now

01Nov11

“Capital, it fails us now / one day all will be living on credit.” These lyrics, from the great agit-punk band the Gang of Four, never seemed more appropriate.  It seems that just about every advanced industrial state in the world is heavily in debt and on the verge of collapse while the citizenry in most of these countries is becoming increasingly outspoken about the dwindling prospects available to them, the gap between the very wealthy and everyone else that seems to be increasing in just about every country, an international housing crisis, and the bailout of financial institutions that seem to have no stake at all in the social welfare of the very people who are financing their failure.  The anger at the 1% has taken the form of riots in London, organized street protests and general strikes in Greece, and the Occupy movement that is spreading from city to city in the United States.

And it’s no wonder that people are angry: Goldman Sachs reports quarterly losses even though it has set aside 10 billion dollars to pay for bonuses, compensation, and benefits.  Around 18 percent of Americans reported that they didn’t have enough money to buy food at all times last year.  Of the 55 million American families with mortgages, one in five are underwater; meanwhile, it is estimated that home supply will exceed demand by four to six million homes during the next six years, meaning there’s no chance that the houses of those with underwater mortgages will regain their value.  In 1961 the extremely rich paid around 42 percent of their income in taxes (after loopholes), while in 2008 they paid around 18 percent.  Since 2005, Hispanics have experienced a 66 percent drop in wealth, black households a 53 percent drop, and white households a 16 percent drop.  Conservative estimates are that foreclosures have reduced California property values by $650 billion, while Californians with underwater mortgages are overpaying banks by $20 billion a year.  Since the turn of the millennium, U.S. multinationals have fired 2.9 million workers in the United States, and hired 2.4 million workers abroad.  Taking inflation into account, wages for those Americans without college degrees (around 70% of the American population) have been in decline for almost 40 years.  One in six Americans lives in poverty, which is the highest level for 50 years.  The richest one percent of Americans get almost 25% of the nation’s income, and they control about 40% of national wealth.  A typical middle-class family has lost 23% of its wealth since the recession began, while a typical upper-class family has lost only about 12% of its wealth due to the fact that the wealthy are able to better shield themselves during times of financial and economic crisis.

Ajay Kapur, Niall Macleod, and Narendra Singh have coined a term for the type of economy that we’re living with now: a plutonomy.  A “plutonomy” is an economy in which growth is powered by the wealthy and consumed by the wealthy, leaving everyone else to the side.  The Gilded Age and the Roaring Twenties were both economic plutonomies, as is the Great Recession that we’re living through now.  Though businesses have about six trillion dollars available to them to invest as capital, almost none of this is being invested in socially productive enterprises (such as businesses that actually make things) because greater profits are available through playing the financial markets.  This keeps wealth circulating among the richest, with no trickledown effect for the rest of us.

There’s been a lot of talk about austerity and belt tightening, but as far as government funds are concerned this is a fetish of the right, and an absolutely crazy thing to do during a financial downturn.  There are almost no professional economists who believe that the austerity measures demanded by the far right of the Republican party will do anything but hurt the US economy, and even economists on the right are likely to call for austerity measures to kick in after the current slump is over, rather than during this time of crisis.  There is almost no economic evidence to suggest that austerity measures will create jobs and help to bring the US out of the current economic slump.  Real solutions demand permanent job creation in this country and a redistribution of wealth — via a return to higher levels of taxation on the wealthy and corporations — to those enterprises that produce genuine social goods rather than sketchy financial derivatives. During the Gilded Age and the Roaring Twenties there was a progressive slogan that stated that “Wealth is the manure of society.”  Just like manure, you’ve got to spread the wealth around if you want the garden to grow.

Money is a tool that was created to serve human needs, not to be worshiped or fetishized like the golden bull.  When money stops serving our purposes, it’s time to stop worshiping money and instead get to work sketching out what our real needs and desires as a society are, and how to go about making them true.

The final words here are from Shelley’s great poem Queen Mab.  It’s time to ask ourselves whether it’s the plutonomy of Mab that we want, or a democratically equitable society where we all have a chance and a voice.

From Queen Mab:

Commerce has set the mark of selfishness,
The signet of its all-enslaving power,
Upon a shining ore, and called it gold;
Before whose image bow the vulgar great,
The vainly rich, the miserable proud,
The mob of peasants, nobles, priests, and kings,
And with blind feelings reverence the power
That grinds them to the dust of misery;
But in the temple of their hireling hearts
Gold is a living god, and rules in scorn
All earthly things but virtue . . .

p.s. Sources for this post include stories from The Atlantic Monthly, The Nation, Harper’s Magazine, and APM’s Marketplace.

(The image above is by Eric Drooker and can be found at gstrike.org.)

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