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March 02, 2014 - by David Gleicher
Nicholas Kristof, a few week ago, devoted his column in the Times to lamenting the decline of the public intellectual, a term that itself is virtually absent from the vocabulary. Entitled "Professors, We Need You!" (February 15), the piece is a scolding of university professors. Among other things, Kristof complains of their using languages that only those among them (specialists) understand, and criticizes them for "relying on quantitative models or developing theoretical constructs." The consequences are that professors thus exclude themselves from the public debate and (implicitly) thereby render themselves unable to educate the public.
As to research, one of several letters to the editor published in response to Kristof (February 19 [Steinberger]) makes the salient point that "Such criticism [that of Kristof] simply denies the possibility that many important questions are in fact enormously difficult, inherently technical and deeply complex in ways that require modes of analysis and forms of discourse that are equivalently difficult, technical and complex." Coming to grips with mathematical models, for instance, and articulating the foundations of existing theoretical approaches, in various disciplines, is in its own right a valuable aspect of studying at a university. It fosters the ability and even the need both to identify and to question one's own ideas through formalized dialogue with others.
Strangely, perhaps, Kristof does not realize that a crucial contribution of higher education is in fact the great opportunity to master languages of the specialists: philosophy, mathematics, physics, economics, history, literary criticism, the fine and performance arts and so on. The new meanings contained in these languages are sources of real transformation of the subject (the I), at an age, for most college students, when one is developing a consciousness of identity for the first time.
Thus, a university education can be and often is at once a strenuous, intense, exciting and fulfilling experience. It will also be a unique experience for many, like late-adolescence itself, never to be repeated. Enabling the university to provide students such a rich experience is a great contribution made by professors and administrators alike. Sadly, absent in Kristof's conception of the university, like that of so many other's, is this transformative center of higher education, an intrinsic value, internal to the dialogue between student and professor and framed by the wisdom of contemporary thinkers as well as those of the past.
To the extent that it becomes an instrumentality, however, the experience changes and the intrinsic value is liable to become secondary, if not to disappear altogether. Of course, acquiring mastery of these languages, the ones that Kristof is so critical of, ultimately is what connects higher-income employment to higher education. The embedding of professional schools within the university-- usually along-side a liberal arts college that serves them on an undergraduate level--is understandable on that ground. And this structure has long been the norm in the US.
A notable exception are schools, some of the oldest ones in the US, that are solely liberal arts colleges. The share of these peaked during the 1960s and early 70s. Nonetheless they are a significant element of undergraduate education in the US. As exemplified by my own alma mater, St. John's College, they cater to a indomitable set of students for whom the object of education is the intrinsic value of the formalized dialogue. In addition, however, these institutions typify the fact that a conflict exists between that value and economic want. These schools in particular implicitly ask of students that they follow Joseph Campbell's famous rule of the inner-life: "Follow your bliss and don't be afraid, and doors will open where you didn't know they were going to be.”
The professional element within the universities became intertwined with the GI Bill after WW II, lending a patina of universality to going to college. This added to the subsequent explosion of university enrollment between the mid-1960s and early 80s as the baby boomers entered college age. By the time the post-golden age was maturing, around the turn of the century, the stature of a university degree had grown to that which is needed to guarantee a job paying a decent ncome. And in the current crisis, the stature seems to be growing into that which is needed to get a job at all. Thus, even the liberal arts colleges are under great pressure to prove their instrumental bona fides.
In this context, Kristof is unfortunately oblivious to what is actually happening. University professors are coming face to face with the culture of liquidation (entry 11), the corporatization of the university.
February 06, 2014 - by David Gleicher
In the previous entry I described in semiotic terms, a homonymic relationship of Keynesian thought to that of CH Douglas with regard to the concept of effective demand . Here I want to address a similar relationship of the two conceptualizations with regard to the real economy, a term coined by Keynesians.
Of interest is a passage in Keynes's first major work, A Treatise on Money (specifically The Pure Theory of Money, Ch.2:20-27), published in 1930. This work predates Keynes's famous General Theory, published in 1936, and it was written several years before the radical restrictions placed on the large private banks by the Glass-Steagall Act of 1933. It points to the fact that in the midst of the 1920s Keynes, as well as Douglas, are observing a banking system that parallels the present post-golden-age one; the latter ironically ushered in by a dismantling of Glass-Steagall completed in 1999. (This is discussed in previous entries, notably1-3 and 9.)
Keynes distinguishes between passive and active deposits. The former are a way of realizing liquidity, deposits owed by the bank on demand. Active deposits however, are created by the bank, through purchase of debt. The bank opens a new deposit in the name of the borrower. In doing so it effectively creates financial credits. "It follows that the rate at which the bank can, with safety actively create deposits by lending and investing has to be in a proper relation to the rate at which it is passively creating them against the receipt of liquid resources from its depositers ..." (Keynes, 1930: 21-22).
The same observation is made by Douglas, but in strikingly different terms: "Banks and bankers can and do create financial credit, and by successful manipulation appropriate the power resident in the real credit of the community." (Douglas, 1922: 30-31)
Keynes, and Keynesians in general are concerned with a stable banking system that in turn serves the real economy. By the latter is meant the aggregate production of commodities and the employment of workers. Hence, Douglas's complaint that Hobson is a defender of the existing banking and financial system." (1922: 29).
Indicating the homonymic relationship of the two, Douglas, is concerned with money that functions as real (aka social) credit. Such real credit is the means of sustaining lives worth living. A premise of Douglas's is that the such a standard should be met for all individuals and families within a community. And on that basis the process of providing such sustenance is the real economy. Financial credit, on the other hand, functions purely as capital, a limitless self-expansion of what Keynes himself terms a money of account and which Keynes separates from money as such (1930: 3-5).
In an important, though perhaps flawed work--The New and the Old Economics published in 1932--Douglas succinctly states the three most fundamental propositions embraced by his macroeconomic theory: "a) Financial credit pretends to be, but is not, a reflection of real credit; b) Real credit is a correct estimate, or if it be preferred, belief, as to the capacity of a community to deliver goods and services when and where required; c) The cost of production is consumption." (1932: 6). The third of these propositions requires some interpretation.
First, at the risk of putting words into Douglas's mouth, the real economy by his lights is to be judged according to the degree social credits are accrued by individuals and families, coupled with the set of prices, such that the purchases available meet the standard of, life worth living. Given the context of late-industrialization, Douglas suggests it is not technically impossible to achieve a social system in which virtually all are so provided for. The difficulty is the all-inclusive spread of capital.
Second, Douglas rejects the Keynesian (and neoclassical) belief that the origin of money lies in expanding and regularizing barter exchange. Rather he takes the stance of many anthropologists that instead commodity exchange grows out of the emergence of credits. In this case it is the payment of wages to workers, expressed in credits, by owners of capital. These credits then circulate, purchasing commodities for consumption and in doing so returning the credits back into capital. And so on and so forth.
"The worker for wages gives 'credit' to the idea that the more he produces the more satisfaction of primal needs is thereby made possible, i.e., this real credit is based on the rate of determining the required goods (Douglas's italics throughout) The financier uses this belief as a basis for financial credit, which is essentially a measure of the rate of making money. The nexus between the two is the price. ... It is in the lengthening of this nexus that misdirection of effort must occur." (Douglas,1922: 9).
Just as he plays with the words "the worker gives credit" one can't help but wonder whether "the cost of production is consumption" refers, on the one hand, to the cost of the workers' production of goods in the form of their wages, but on the other hand it is also the cost of producing money by the holder of capital. With regard to the latter in particular the perverse motivation is to reduce consumption by the worker to a minimum, while financializing large accumulations of industrial capital.
Along these lines, Douglas implicitly discounts neoclassical price theory, notably long term cost prices marked up by a uniform rate of return. Indeed he overtly makes the point that industry and finance, just as now, are both dominated by oligopolistic institutions, capable of price setting aimed at squeezing the purchasing power of the circulating social credits as much as possible.
CH Douglas. 1922. "These Present Discontents" and The Labor Party and Social Credit. Forgotten Books, 2012.
CH Douglas. 1932. The New and the Old Economics. Tidal Publications, 1973.
John Maynard Keynes. 1930. A Treatise on Money, Vol. V Collect Works of., The Pure Theory of Money. St. Martin's Press, 1971.
January 20, 2014 - by David Gleicher
Congratulations and best of luck--you deserve it--to the MINNESOTA ORCHESTRA--which Entries 7 and 8 concerned. The lockout after more than a year is finally over! LET THE MUSIC BEGIN!
The significant response to Entry 17 leads me to delve further into the thinking of CH Douglas, comparing it to the early Keynesians. Of central interest is the homonymic relationship the theories of Douglas and Keynes have. The two make the same sounds, so to speak, but are communicating sharply different meanings. Moreover, the difference is perhaps of more importance in the contemporary post-golden age, than even the decade prior to the Great Depression, when Keynesian macroeconomics was just leaving the womb of Marshallian microeconomics..
In Entry 17 my chief source is the first reprinting, in 2012, of two essays by Douglas, originally written in 1922: "These Present Discontents" and "The Labor Party and Social Credit." Together they shed great light on Douglas's understanding of money as a pure credit, that which to exist must be realized in the acquiring of a good. And along with this, he clearly places social priority on the allocation of credits as the grounding of price formation in regard to basic goods.
Toward the beginning of the second essay (1922a: 18) Douglas refers to a separate piece in which he responds specifically to Hobson's critique. As it would happen, this other piece was reprinted (by BiblioLife) in 2009, entitled: "The Douglas Theory: A Reply to Mr. JA Hobson" (circa 1922). In it Douglas confronts the key unifying concept of Keynesian theory: effective (aka aggregate) demand.
Setting out the homonymic relationship, Douglas starts:"It is to be noted that, as might be expected from a critic possessing Mr. Hobson's qualifications, there is no disagreement with my statement that the root factor in the whole industrial crisis and problem is lack of effective demand. But at this point the fundamental divergence begins ..." (circa 1922: 3).
He then addresses Hobson's Keynesian (under-consumptionist) assertion that lack of effective demand is due to excess saving. That is, the problem in real terms, according to Hobson, is over-production of capital goods and net exports. And--without Douglas explicitly saying so--this is manifested by unplanned inventories, excess capacity, reduced production and, notably, unemployment.
Douglas's response is that these negative outcomes are not caused by too much savings (what Keynesians refer to as the paradox of thrift). His argument is unique and virtually unheard of by contemporary economists of any stripe. Keynesian theory is not wrong in its own limited social space. But within a broader space lack of consumer demand literally has an other meaning. In terms of money--nominal terms--the lack of effective demand means that too many unrealized credits are being accumulated within the financial system and hence are not available for the purchase of goods.
Lack of demand becomes "a fact arising out of a defective credit system." (circa 1922: 3). For Douglas, price serves a purpose prior to and exclusive of the replication and creation of capital in the form of credits. And conjointly, the premise that credit-allocation is centered in individual sales of labor is removed. Hence if goods that would otherwise constitute a decent standard of living for all are not being purchased, it is because the price of goods per credit being allocated is too high for significant numbers of people. People who do not make a living wage.
In the first instance, then, in Douglas's social space the question of lack of effective demand calls for policies of re-allocating credit. Such policies may or may not include fostering economic growth so as to reduce unemployment and thereby provide more credits via the labor markets. By contrast, as a first principle the State might assure all individuals and families enough credits, in the form of income and benefits, for each to enjoy a decent standard of living.
Douglas writes: "Considered as a fact, it [implicitly Keynesian demand policy] is one of the many premises of which to take cognizance in suggesting methods by which to achieve the greatest enhancement of opportunity of the greatest number. In other words, both Mr. Hobson and I see a world whose financial mechanism is failing to deliver the goods. Mr. Hobson implies that a change in the nature of the steam which provides the motive force is required; I suggest that the valve gear wants re-designing." (circa 1922: 4).
An illustrative case is the current debate over unemployment benefits in the US. These come in the form of a money income--not a living wage--for six months, transferred from the government to individuals laid off through no fault of their own. The issue at hand is whether to continue to extend benefits to those whose six months are up, due to the high rate of unemployment. The latter itself is connected to the low of rate of economic growth since 2008. The homonymic relationship of Keynesian theory and that of Douglas is seen in the fact that both point to extending unemployment benefits, under the circumstances, continuing to provide new credits (government spending) to these individuals.
The Keynesian rationale is that this will increase effective demand and hence contribute to growth and declining unemployment. Along those lines, they adhere to the existing practice of ending the extensions once the rate of unemployment becomes acceptably low (around 5%). Along with those who are against extending the benefits, the Keynesians do not want the norm to be credits provided by the government to individuals and families without the selling of labor.
The Douglas rationale is that any income provided by the government to individuals whose income from labor is otherwise not a living wage, is to be supported. And following this logic leads to a social system that ultimately finances all of an individual's or family's basic goods and services, designing capital and labor markets as we know them, separate from the basic sector. .
Douglas, CH. 1922. "These present discontents" and "The Labor Party and Social Credit." Forgotten Books, 2012
Douglas, CH circa 2012. "The Douglas theory: a reply to Mr. JA Hobson." BiblioLife, 2009.
December 27, 2013 - by David Gleicher
"If an attack were leveled at a treatise on the game of cricket on the grounds that the author's theory did not conform to generally accepted views on stool-ball, it would be necessary to stress some general differences between the games, if for any reason an answer to such criticism were deemed to be desirable." ( Douglas: 1922, The labor party and social credit, Appendix 1: 29).
CH Douglas is an unappreciated and largely unknown but heavyweight thinker about economics and finance in the inter-War period of the 1920s and 30s. His treatise, published in 1922, was reprinted for the first time in 2012. It is composed of two essays, "These Present Discontents" and "The Labor Party and Social Credit." Douglas's ideas are distinctively macroeconomic and were formed around the same time as Keynes's were. One might say they were like Keynesian thought, as cricket is like stool-ball.
Using a semiotic term, the ideas of Douglas and Keynes are homonymic. That is, the concepts used by each appear to be alike. Unlike neoclassical thinkers, each refers specifically to an industrialized market economy. But the "premises" of the social systems envisaged by each are wide apart. Douglas himself specifies four meta-differences between his premises and those of the early Keynesians (1922: 30-31). He enumerates these in response to an attack on his writings ("Report") by JA Hobson, a well-known precursor of Keynes. Douglas asserts: "To the extent that the Report is a reasoned ... document, it is a defense of the existing banking and financial system. (1922: 29).
The first meta-difference between the premises concerns the meaning of contemporary money. To an extent there is agreement that it is, in Douglas's terms, social credit., not commodity money. At the outset of his Treatise on Money Keynes, who is more ambivalent, refers to money as "a debt of the State [which] may then use its ... prerogative to declare the debt itself as an acceptable discharge of a liability" (1930:5).
Money, however, as Douglas uses the term is only actualized by the goods (in the literal sense of "good") that the money attains. Money that is multiplying itself wholly within financial institutions, notably private investment funds, is capital, only an allusion to money. It is never actualized. By the way, this helps explain why the pouring of literally trillions of dollars into the commercial banks by the Federal Reserve since the crisis of 2008, dollars which have multiplied like rabbits purely within the financial markets, have nonetheless failed to have any extraordinary effect on either aggregate production or for that matter price inflation in the real economy.
In the social system envisaged by Douglas, then, money providing, directly or indirectly, fundamental goods to all individuals and families, must be quarantined--as a matter of course--from allusional money. "[F]inancial credit is a mere device, which can have no economic significance apart from real credit. i.e., the correct estimate of the ability [how much money does it take, DG] to deliver goods and services when and where required."
No need to dwell on the second meta-difference cited by Douglas, and which might be thought of as a corollary of the first. Anticipating the post-Keynesian departure from neo-Keynesian orthodoxy (for further discussion of this see entries 9 and 16) Douglas asserts that private banks, independent of the State, can create financial credit (allusional money). Douglas departs from post-Keynesian thought even here, however, by adding to this that in creating financial credit "banks and bankers ... by successful manipulation appropriate the power resident in the real credit of the community for purposes largely anti-social and selfish."
The third and fourth meta-differences refer to a market economy that these days is virtually unheard of, although elements of it have always existed in industrialized market economies to one degree or another. During the golden age these elements were acknowledged by leading neo-Keynesians, e.g., Samuelson, in the use of a term rarely used anymore, the mixed economy. But these elements were literally treated as outside the social system itself, the name for which being externalities. Douglas internalizes them.
The third difference concerns what is meant by a good's price. As Douglas puts it, the Keynesians (and all of us, just about) equate price, in all contexts and regarding any "thing," with effective demand; that is, "the price of an article is what it will fetch." It reflects the willingness and ability of purchasers to pay. Douglas, however, observes that regarding fundamental goods, those necessary for each individual or family to have a decent life--such as early education, health-care and long-term care for the disabled and elderly--the price is different. It is rather: "the price of an article ... that will get it produced and delivered in the maximum quantity desired."
Thus, for instance, private pharmaceutical companies in the US commonly charge prohibitively high prices for certain drugs that can fetch it. The prices are paid by a small proportion of purchasers able to get their hands on sufficient money. By contrast, in many countries, instead, the State purchases the drugs from the pharmaceutical providers, making it freely available to the public. It finds the price at which the producers are willing to provide the needed quantities of maximum quality drugs.
The fourth meta-difference most exposes the homonymic relation of Keynesian theory from that of Douglas. It concerns the objective of macroeconomic policy. The Keynesian premise, Douglas avers, is:: "[T]he objective of the industrial system is employment." From other passages it is clear that Douglas is including in this the Keynesian objective of maximizing economic growth.
This objective is (at the very least rhetorically) championed by an amazingly vast majority of political forces acting n the US, from the Occupy Movement to the Green to the Tea Parties, and the Chamber of Commerce , the Progressive Caucus, even Bernie Sanders and Elizabeth Warren, and of course the Democratic and Republican Parties. And pretty much he same can be said is the case globally.
In Douglas's social system the premise is different: "[T]he objective of the industrial system should be the delivery of goods and services to the orders of individual consumers. It should not be employment." Thus, for example, the great transformation of technology in the last 200 years or so--much of it achieved during the golden age--should be used to reduce the work needed to provide each individual the fundamental goods required to lead a decent life.
Keynes himself points to how perverse his own conception of effective demand is, half-jokingly saying that it would be perfectly fine Keynesian policy to pay for workers to dig holes all day and then fill them up again the next, as long as they are paid wages to do it. Douglas implicitly raises what should be--except for a deep-rooted Calvinist theological belief that keeps it hidden--an obvious question. Why not just pay the individual without linking it to unpleasant work that does not make anything good?
Douglas articulates this in ""a passage from These Present Discontents" (1922: 12), fascinating in its stripping away what we conceive of as an industrialized market economy:
"The practical object of the whole economic and industrial system is to deliver not "more" (quot. marks: CHD), but the right quantity of the right goods to the whole of the people, with the minimum of discomfort to all concerned ... After (itals: CHD) that object has been attained, the productive organization may legitimately be an outlet of creative activity. At no time is it a legitimate object of the general productive process to "provide employment" (quot. mark: CHD) for the purpose of distributing wages--to make things which the public do not need and the makers do enjoy making, in order that some canon of obsolete theological morality ... may thereby be satisfied."
Douglas, CH. 1922. These present discontents. Repriint, Forgotten Books, 20012. Keynes, John Maynard. 1930. A Treatise of Money, volume 5: The Pure Theory of Money. London: MacMillan Press, 1971.
December 08, 2013 - by David Gleicher
From the post-war period of the 1950s to the current crisis Keynesian economics has been a lynchpin of so-called "macroeconomics," even during its decline beginning in the mid1970s. A marker of the post-golden age, indeed, is the official abandonment of basic Keynesian fiscal and monetary policies by both major political parties in the US at that time.
Nonetheless, the term macroeconomics itself, not to say the basic categorization and therefore measurement of the "national economy,." is Keynesian. It is also a fact that, at least through the 1980s when faced with recessionary movements Keynesian theory was still applied by the powers that be, it just wasn't invoked.
Orthodox --"neo-Keynesian"--thought is built around ISLM/aggregate supply and demand models. Among heterodox economists, including many Marxists, there has been a coalescence of sorts around "post-Keynesianism." In general, the latter approach excludes the very strong neoclassical (in particular Walrasian) elements embedded in the orthodox models.
In this regard the baroque phase of neo-Keynesianism certainly was reached with the advent of "rational expectation theory" also in the mid-1970s. The latter, despite its fantastic notions of time (among other things) proved to be the theoretical foundation upon which the jettisoning of Keynesian policy rested. And, it might be said, this in turn spelled the end of the golden age. Of note, rational expectation theory also was intertwined with the infamous "efficient financial market theory," described, perhaps tongue in cheek, by Skidelsky (2009: 38) as "the biggest casualty of the current financial meltdown."
Post-Keynesian theory on the other hand has taken hold and is a major force within heterodox economic circles in terms of basic theory. As discussed in entries 1-3 the post-Keynesian discussion of money has led to deep exploration into the functioning of the financial system in the post-golden age. This has given new insight into truly interesting ways the current crisis developed and has been handled.
But what is seen through post-Keynesian eyes is very close-up, no further than one's nose. There is no uniquely post-Keynesian policy approach beyond the immediate short run. Just like neo-Keynesians of all stripes, post-Keynesians adhere to an underlying and unifying tenet. The problem of unemployment is solved by increasing economic growth and thereby the demand for labor.
Of course the workability of golden-age Keynesian demand policy has been fiercely undercut in recent decades. The immediate causes are a great weakening of labor unions in the US, and more recently in much of Europe as well,, in the face of more and more concentrated and politically powerful corporate oligopolies.
In addition, the complementary globalization of labor markets, via elaborate profit-maximizing supply chains that delocalize production, has created a strong monopsonistic force exercised by the oligopolies, pushing down wage rates even as the oligopoly pushes up prices by restraining supply.
But such difficulties, while considerable, call for resistance to the degree of corporate power--pushing for regulation--rather than necessarily sounding the death knell of Keynesian theory. However it is much more than that. The Keynesian tenet itself is being rendered short-sighted and ultimately irrelevant. What we know now of the social system reveals a crucial blind spot conceptually intrinsic to Keynesian models.
A critical term is growth. As it is conceived by Keynesians it means generating more and more stuff per capita that can be sold for a profit. But this, one cannot help but see, is resulting in an accelerating rate of disruption and unimaginable destruction of the natural environment. Thus, to provide a source of income based on employment, Keynesians advocate unlimited and universal quest for growth for foreseeable future. And in reality that cannot be sustained without catastrophe One that necessarily would upend the social system itself.
The case of the natural environment is emblematic of the blind spot in Keynesian theory. It is known, but has long been put aside, that homogenization of the stuff annually produced and sold for profit through commodity prices is arbitrary. Credit money is only valued in what it purchases. As such, to individual subjects it has no necessary relation to the dollars which it exchanges for in the market.
The fact that a certain design pocketbook is produced and sold for $5,000 does not mean that more has been produced in the aggregate than, for instance, $500 a week of good-tasting nutritious meals or a month of health insurance (whether or not these are measured in so-called real terms). In the same way, destruction of the natural environment beyond a certain point is catastrophic. No amount of credit money can represent the loss.
With this in mind, three categories of the stuff produced and presently sold for profit are: 1) goods and opportunities needed by all individuals to have a decent life; 2) goods that provide fulfillment and perhaps are even needed by some individuals but not others; 3) stuff--but not goods--that are destructive to many purchasers, limiting the chances of their enjoying a healthy life. The first and third categories clearly point to policies aimed at State-guaranteed provision of entitlements, on the one hand, and State sanctions on production and sale of any product that diminishes life on the other.
The first uses what Wray has termed, a "government that does not face an affordability constraint." Through government spending the State can transfer money and production to goods that afford each individual their entitlement. A living wage is a leading example of this.
The second policy aim suggests a strategy to restore and protect the natural environment. This would be to to minimize industries that destroy the environment,, as well as those which through addiction or fraudulent claims creat the stuff produced in category 3. This has occurred, at least domestically, in the case of tobacco. But it would also apply, for example, to the soda industry, processed foods and fast food industries in general, and the gun industry, to name some leading ones.
It would also apply to the elimination of certain other private industries. These would become run by the government or by non-governmental non-profit institutions. For example single-paper health care replaces the private health insurance companies, the elimination of the private drug industry is replaced by non-profit drug producers, replacement of private prisons, and beyond that replacement of the enormous private military goods industry, these also being brought directly under the umbrella of the State.
Skidelsky, Robert. 2009. Keynes: the return of the master. Perseus Book Group.
November 21, 2013 - by David Gleicher
Elizabeth Warren--perhaps the most intelligent US political figure of any significance to have come along since Henry Wallace--surprised and perhaps momentarily puzzled members of a senate committee at a recent hearing (Nov. 5). She asserted that the present health reform law is " a value statement ... [No] one deserve[s] to be bankrupted or shut out of the health system when they get sick."
Warren dares to imply--no matter how subtly--a meta-social condemnation of the global system that has begun to form in the post-golden age. At an accelerating rate basic things that a family would need in order to live decently are becoming less and less available to more and more people across almost all the leading States. We might infer from Warren that a necessary meta-social condition of a good system is one that immunizes itself from immiserating masses of people for the sake of a few.
But it is taboo among those who identify themselves with the culture of liquidation to say, the social system rooted in large-scale corporations serviced by the State is dangerously faulty. Indeed if you listen carefully to US politicians, whenever one of them (and it is rare) upholds the provision of a basic need in its own right, a monetary motive is nonetheless required to clinch the deal: Every one deserves to have access to health care. And, more importantly, emergency-care cost reductions will more than make up for the expense
McMurtry (2013: 1-2) writes: "None [of the world's cultures] are grounded in objective life-goods ... For within the last thirty years there has been a great sea-change towards one system of transnational corporate market rule which is indifferent to this entire life-substructure of humanity and to the consequences of its life-blind rule system."
The U.N Climate Change Conference being held right now in Warsaw is in its 21st year. It includes representatives of States, corporations, and non-governmental organizations (NGOs). It is intended supposedly to address perhaps the greatest threat to human life in its history. But among every one of the world cultures referred to by McMurtry--Anglo-American, Europe, China, India, Islam and Latin America--the leading States have done little to halt global warming.
To the contrary these States, allow corporations to add considerably to climate warming. In protest there has been a walk-out of the conference by a large contingent of NGOs in protest of the refusal of those States to address the catastrophic effect of not reducing carbon emissions by limiting production and use of fossil fuels.
One sees here the amazing blindness of those inside the culture of liquidation. An inability to comprehend the actual lives of other human beings. The making of money, the equation money equals value, the corporatized capture of massive amounts of money only a tiny fraction of which will ever be realized as goods: the global system is such that these trump the right of people to pursue a decent life; to follow ones bliss.
There can be no doubt that this indifference to human life is systemic. Virtually no good, from the point of view of human entitlement (which includes life itself) is immune to the the cancerous drive to expand money for its own sake, effectively siphoning it off from money to use in support and enhancement of human life.
Drug companies commonly hide their own studies if they show a profitable new drug or device of theirs to have dangerous, even fatal effects. Gun manufacturers fight tooth and nail requirements that would have them distinguish between buyers who are likely killers from those who are not. The military-industrial complex puts enormous never-ending pressure on the State to demonize others around the world, and in so doing to generate never-ending warfare, ruining the lives of millions upon millions of people.
Along these very lines, the fact that the large narrative of a Cold War against Communism has been adapted as the War against Terrorism can only be systemic.
Even the health reform that Elizabeth Warren characterizes as a gesture toward human entitlement is based to a great extent on subsidizing the corporate health-insurance industry, enabling it, one hopes, to provide more affordable insurance in the private market.
Those of us that do not identify with the culture of liquidation, and these are most prevalent among the baby boomers, do understand in one way or another that the culture of liquidation is cancerous. I myself know it because movies are rated according to box office revenues, because movies are produced according to box office revenues, because Art and Everything Else is judged and created and admired according to box office revenues. Everything according to money.
What I miss about the 60s really is that for those few years the brands were not there, and the man in the grey suit was Mr. Jones, and singers didn't lip sync their concerts, and the art of meaningless phrases had not yet been cultivated (be all that you can be). The culture of liquidation does seem to be metastasizing at an alarming rate, having already destroyed or at least greatly weakened a myriad of inter-connected social immune systems. Systems that served relatively well during the golden age/Cold War period.
The early baby boomers like me--whose generational fate right to the end seems to be metaphor for the spirit of the whole--are now entering old age (mid to late 60s). I think of my own daughter (age 23) and wonder what she will think, when she is my age, of the world she grew up in.
November 09, 2013 - by David Gleicher
Continued from Entry 13.
Of course, Ringo's complaint "nothing ever happens to me" is miraculously answered. Ringo stumbles into a wondrous world animated by the Beatles. The Yellow Submarine (which we all live in a). The "Sixties"
McMurtry's description of the Sixties as "a brief era of unlimited social interrogation" (2013: 96) is an extremely apt and insightful one. It was an historic moment in which the uniquely cruel appraisal of parents by their adolescent child, had galvanized into a living generational critique, a loud rejection of the silently evolving culture they had grown up up in; hence the infamous "generation gap."
At the heart of the Sixties was a struggle by the baby boomers en-masse to free themselves from what was broadly referred to then as "commercialization." Rooted in the "Beats"--Ginsberg and Ferlinghetti among others remained prominent figures throughout the Sixties--there was an instinctive urge to shed the weight of commercialism, to somehow render it harmless, to create a true reality.
This is captured by Leonard Cohen, himself a unique figure of the Sixties, in this verse of his song Chelsea Hotel, about a brief affair he had with the iconic Janis Joplin:
I remember you well in the Chelsea Hotel // you were famous, your heart was a legend // You told me again you preferred handsome men // but for me you would make an exception. // And clenching your fist for the ones like us // who are oppressed by the figures of beauty, // fixing yourself you said, "well never mind, // we may be ugly but we got the music."
This urge of the baby boomers to escape commercialization is seen in efforts to literally alter the sociological landscape, forming self-sufficient communes, or, within the black-power movement, seeking to effect a return to Africa.
But it is also seen in very personal everyday aspects and customs of life in the sixties that have been forgotten. For example with respect to women, only during the Sixties--not before or after, and more or less just among baby boomers--did it become acceptable (and for a few it still is) to not regularly, if at all, do things like shaving your legs and under -arms, using deodorants, putting on lipstick and nail polish, wearing stockings or high-heeled shoes.
Along the same lines it was unusual in the Sixties, and not before or after, for there to be formal paid weddings. Rather the typical wedding was at the home, often not catered. It was simply a large party with a ceremony of the bride and groom's own making, and often without the bride wearing a formal wedding dress or the groom a tuxedo and without bridesmaids and such.
My own experience of the Sixties was one in which adolescence and the Sixties were inseparable. In 1965 I was a junior in high school and my life changed. Toward the beginning of my senior year I was suspended from school for wearing blue jeans. By the end of the year the school abandoned their dress code except, if I remember, limiting how short mini-skirts could be.
The Beatles of course entered the pop cultural scene around 1964 and transformed it ("the day the music died"). I was transformed in 1965.
That one year I discovered Bee Bop, flowering then--Coletrane, Miles Davis, Eric Dolphy--along with traditional Mississippi and Chicago blues from the thirties and forties, Bill Broonzy, Howlin' Wolf, John Lee Hooker, Lightning Hopkins, all of whose careers were revived in the Sixties. These were the first LPs I owned, along with all three Bob Dylan albums and a few of Joan Baez (all the records still monophonic). And I had my first hi fi system, which I brought with me to college.
By 1966 I was smoking grass. I was sexually active and had a girlfriend who wore miniskirts. My hair was almost down to my shoulders. And I was reading the likes of Hermann Hesse and Albert Camus. My parents were beside themselves.
I blundered through the Sixties. In most respects it was the most difficult time of my life. But nonetheless, in a fundamental respect, I felt more at one with the culture during those years, more comfortable within the social reality, than I have ever been.
In retrospect one thing that set me apart was the consequence of being a red-diaper baby. I adopted the critical view of "big business" from my father and his circle of friends at a young age. I'd argued all through elementary school that nobody went without food in the Soviet Union and advertising made us buy things that we really didn't need. I had grown up on the wrong side of argument and taken it in.
Therefore, I never questioned the sudden appearance of the yellow submarine. A grand flight from commercialization. Indeed, like Mohamed and the mountain, social reality seemed to my adolescent self to be coming to me. Very different from the feeling of being forced up the mountain experienced no doubt by many other baby boomers. Like Ringo I eagerly welcomed the submarine with open arms and got right aboard.
McMurtry (2013: 96) not only understands the Sixties as an unlimited social interrogation, he is equally accurate in its unhappy consequences: "After a few years of this 'raising of consciousness' history's most momentous counter-revolution occurred. It was hardly less than a slow-motion reversal of humanity's social evolution." .
October 29, 2013 - by David Gleicher
At the outset of the classic 60's film Yellow Submarine, a cartoon Ringo Starr, heads down, hands in his pockets, walks across the screen muttering over and over to himself in a sad resigned voice "nothing ever happens to me ... nothing ever happens to me..."
That was me. At least it was a part of me that I was conscious of and still distinctly remember, as the 1950's ended and the sixties had just begun, 1961, 1962 ... I was impatient to get on with it. The huge fins growing out of ever longer and longer automobiles were becoming passé, and the custom of buying a brand new car every single year, trading in of course the "old" one, was being replaced by an exodus to the suburbs where cars properly belonged.
A decade before, the automobile had already pushed out the trolleys in Newark, where I grew up, so that I only knew their obsolete tracks from the way our green 1952 Desoto skidded when we drove on Hawthorne Avenue. I was born in 1949, the quintessential early baby boomer. I turn 65 in June, heralding the fourth year of the boomers' grand entry into Medicare and Social Security, which will go on for the next 15.
One of my first memories is sitting in front of a TV at a neighbor's house; the one on my block I guess that was first to buy a TV set. One of the first altogether, that were heavily marketed immediately in the New York area. The next memory of mine is getting up early in the morning. A pioneer in growing up watching TV. I remember absorbing in wonder and confusion, at the ag an odd stew of shows.
Most are virtually unknown to anyone else now so I'll name them: the elegant New York sit coms, My Little Margie, Topper and Private Secretary (The Anne Southern Show); the creepy Andy Devine Show, incongruously containing within it a film-like series of adventures of a boy and his elephant in the jungle; Flash Gordon, an adumbration of Star Trek, which for some reason I found very disturbing; and the heart-warming I Remember Mamma, are all part of the first experiences of television by one 3 or 4 years old. And they were experiences that were not just new to me, of course, little more than a baby, but new experiences to the whole world.
What is especially of interest to me, then, in writing this entry and several to follow, is that the life of the baby boom generation seems to have continued in that way to contain within it the life of the world. And as it grows older, to me--for what its worth--it is hard not to see that that world is dying of cancer. Literally dying.
In most respects my family life and friendships as a child fitted the norms of the 1950s. (A film that creates an uncannily accurate feeling of life in the 50s I think is Terrence Malik's Tree of Life; with Brad Pitt.) In one respect however I was a member of a relatively tiny subset of baby boomers, apart from the rest, in the way our parents looked at the world.
We were known--as I was only to find out many years later--as "red-diaper babies," an affectionate term mostly used within the tribe. My father had been in the American Communist Party during the 30s leading up to the War. Like many others who had been in the Party, he actually severed ties with it--but not necessarily with Socialism--when the Hitler-Stalin Pact was signed in 939.
He had a tight circle of friends, primarily, like him, high school teachers in the Newark public school system, his closest ones having been in the Party like him. And they loved to talk. Oh, they loved to talk. They would gather at each other's houses for Saturday nighty dinner parties, with their spouses, and there would be a lot of arguing, but never in real anger. And all along it was the things they didn't argue about that really mattered.
A few in the circle, and many that they knew in the Newark Schools at large lost their jobs due to the red-scare led by Joseph McCarthy. One of my father's closest friends, Bob Lowenstein, a French teacher who taught at Weequahic high school was fired and did not teach all during my childhood. Later a court ruled that due to tenure his firing was unwarranted and he received back pay for all those years.
I soaked it all up. I have memories of sitting on the carpeted staircase leading up to my bedroom dead tired but unable to break away from their arguments. Often as I got older I took sides in my mind, not always siding with my father. And by the age of around 10 or 11 I would use what I heard from my father and others to make unusual pronouncements, and get into long arguments with my elementary school classmates. Challenging unquestioned matters such as the threat of the Soviet Union, the Cuban revolution, and freedom in America.
In the end what came of my childhood was a genuine detachment from presumed social agreement. It left me comfortable with taking the wrong side. It is the source of an insight into the reality that is dying of cancer.
McMurtry (2013:87-88) at the outset of a chapter entitled "The ancient taboo" observes: "When people come to explain any way of life in the world, they are conditioned not to expose their own social order to the same critical eye with which they view a different or opposed social order. ... There is not only a rule against recognizing the monstrous in one's own social system, but a rule against recognizing that there is such a rule. This mind-lock is as old as civilization itself."
Later in that same chapter, he boldly asserts: "In the brief era of unlimited social interrogation which emerged between1965 and the early 1970s,humanity witnessed the most fundamental far-reaching and transcultural questioning of the social-structural given in human history. ... After a few years of this 'raising of consciousness', history's most momentous counter-revolution occurred."
McMurtry, John. 2013. The Cancer State of Capitalism. Pluto Press.
Next entry on November 10, 2013.
Comments by baby boomers are very welcome!
October 19, 2013 - by David Gleicher
Readers of this entry might well be interested in a just-published book: The Public Bank Solution by Ellen Brown (2013).
The public-bank movement parallels that of single-payer health-insurance in the US. Each seeks to guard against a perverse outcome brought about by an invasive culture of liquidation. The is well-known when it comes to health-insurance, and indeed the US for that reason is virtually the only nation that entertains such an industry.
The health insurance oligopoly in the US seeks to insure only the sufficiently healthy, charges non-competitive prices in an extremely market with extremely inelastic demand, and goes to the edge of the law, and perhaps even beyond it to some degree, to avoid making payments of insurance to the buyer.
Health-care even in the US is understood nonetheless to be an entitlement. This is demonstrated by the fact that emergency-care for the uninsured is financed by public hospitals, and of course, the State does insure the health of the elderly and the very poor.
These are acknowledgments of the State's responsibility to "promote the general welfare," insuring "life, liberty and the pursuit of happiness." To take full responsibility the US State would quarantine the culture of liquidation isolating it from provision of health-care altogether by itself providing complete insuring; a single-payer solution.
Public banking, similarly, is a means of quarantining the culture of liquidation. Isolating it in this case from the liquidity held in the form of demand deposits.
The perversity of the post-golden age commercial bank oligopoly--in which by far the largest share of household liquidity resides--is striking (see entry 9). The bank oligopoly puts demand deposits at great risk, highly leveraging them in a constant drive to expand money through purchase of debt and increase of deposits. But it is not the depositors or the bank oligopoly that ultimately bear the risk. Much like the free access to the emergency room, the deposits are guaranteed by the State. In practice then safe money needed to purchase goods is also an entitlement.
Unlike Brown, I think it possible to imagine a transformation of the central bank into a national public bank. It would serve household demand accounts, and of course these would be guaranteed by the State. Along with various other banking institution it might provide roughly he same services as the commercial banks during the golden age.
On the other hand, the private bank oligopoly would no longer have their deposits guaranteed. "Too big to fail" would therefore be eliminated. More importantly there inevitably would be a significant shrinkage of the oligopoly's deposits and hence a welcome compression, on a large scale, of money capital, the life-blood of the culture of liquidation.
Brown, Ellen. 2013. The Public Bank Solution. Third Millenium Press.
Next entry will be October 29, 2013
Comments, questions, counterpoints, criticism and suggested topics are always welcome.
October 08, 2013 - by David Gleicher
The question posed by Whitney (see his comment on the previous entry) is a pivotal one. The culture of liquidation is itself a corporate culture, that is a "culture of profit." It has existed and evolved for as long as the corporation has.
The gilded age at the turn of the 20th century clearly adumbrates the current post-golden age that began around the turn of the 21st century. In each, the social immune system is significantly breached and the culture becomes cancerous.
The direct answer to the question, then, is this. What connects the culture of liquidation to for-profit corporations, is the fact that within this culture the corporations are viewed and treated exclusively as financial instruments. No more or less than a form of debt-ownership.
This means that the corporation ceases to have virtually any interest in its product as literally a good, or for that matter its employees as literally fellow human beings.
RK Davis does not care that he is destroying a wonderful orchestra for those who value the experience of it and the musicians who constitute it. As long as he can replace it with extremely low-price musicians and an endowment financed by wealthy donors with edifice complexes--hence generating a large flow of money--then within his culture Davis has succeeded. Tragically, whether he does or does not succeed in his own terms the orchestra will nonetheless have been destroyed in theirs.
The tobacco industry is an exemplar of a key social mutation whose origins can be traced at least as far back as the early 1920s in regard to the Chicago meat packing industry: the use of rats and other rodents in the chopped meat (among other fillers) exposed by Upton Sinclair in The Jungle. With the rise of oligopolies during the gilded age corporate management had quickly seen that there could be huge reductions in cost if one produced and sold things that actually were harmful to the buyers, but without them knowing it, or, eventually, without them caring.
The tobacco industry sold a product that internally was known to be literally deadly, but which you could get teenagers addicted to. And so a near-perfectly inelastic demand for a deadly product was created, by which the industry reaped unprecedented profits.
The long-lasting medical and judicial investigations of the tobacco industry confirmed that the culture of liquidation had been mutating and expanding throughout the twentieth century, including the golden-age. It just wasn't much noticed until the late 60s or so. Thus, the corporations were already freeing themselves from the production of goods in favor of pure money expansion long before the current period.
The transformation of the banking system that ends the golden age (see entry 9) was ushered in, by a corporate-led and unending campaign to de-regulate private industry in general. This was a means of creating unshackled for-profit oligopolies, such as the airline and telephone industries. It was as well a means of freeing industries from governmental limits being placed on the harm observed to be inflicted by the corporations.
Of current interest, the private health industry in the US is an exemplar of a further mutation, one that marks the post-golden age.
The health insurance industry is an oligopoly that, unlike tobacco, was founded on its very capability to do profound harm to the public in the quest for greater money expansion. Like the pharmaceutical industry, for basic health care the private insurance oligopoly enjoys inelastic demand. No need for addiction. Profitability increases to the extent that the industry has the freedom to filter out those who are not in good health, now or potentially. The perversity of this in the light of true insurance service to the public, is perversely a thing of beauty within the culture of liquidation.
This might explain the intense opposition to the health-care reform (despite the fact that the reform leaves the industry remarkable intact). The opposition is not a motley crew of Tea Party congressmen and their followers, but rather it is those within the culture of liquidation who fund them. Over the last two decades the private health insurance industry has held captive, via demand inelasticity, an enormous market, increasing revenues at amazingly high rates. As an insurance industry it thereby creates significant accumulations of money that inevitably find their way into the financial system of expanding money for its own sake.
Next entry will be posted Oct. 19, 2013.
Comments, questions, counterpoints, criticism, and suggested topics are always welcome.
September 26, 2013 - by David Gleicher
The extent to which US health-care reform aimed at wider private insurance coverage is being resisted in the US is certainly extraordinary. But it reveals, once again, the rarely-faced fact that the US body politic is under attack from powerful elements within it. And these are now reaching a point at which there is a threat of them devouring ever-larger chunks of the State; a cancerous growth that may well prove terminal both nationally and even globally. And not just terminal for humans but for the planet itself and a multitude of living beings on it.
This past Friday (Sept. 20), Paul Krugman devoted his column in the Times to the proposition that, based on the extreme measures taken in opposition to the health-care reform Republicans are no longer members of a "stupid party." It has become a "crazy party" that is "out of control."
He takes up much of the piece then with how the Republicans never used to go to such extremes (presumably they were just stupid). He concludes that such extreme behavior was bound to happen because Republican "elites" going all the way back to Nixon's infamous southern strategy have become amazingly cynical. They'll do anything at this point to get what they want.
Thus Krugman substitutes name-calling for a serious deciphering of what and who actually is motivating the health-care extortion. This exemplifies the general state of denial throughout the public discourse in these very trying times. John McMurtry writes in this context, "Once the cancer has become aggressively invasive [it is hidden] at every turn on the social as well as individual plane. That is how the cancer spreads, masking itself [with] every move on both levels" (2013: 31).
Two things already discussed in this blog suggest such a deciphering of the health-care extortion: the rapidly growing culture of liquidation on the one hand (see Entries 5,8.9), and the absence of an affordability constraint on Federal spending, on the one the other (see Entries 1-3).
At the heart of the matter, with reference to each of these, is a simple observation. The resistance to the health-care reform, is at one with a wide attack throughout the post-golden age period on State-insured provision of certain goods, services and income to the public. The attack has been intense, cutting across Social Security, the minimum wage, maternity benefits and universal child-care and pre-K education, also unemployment benefits, subsidized low-income housing and of course insuring health-care of the elderly and the very poor (Medicare and Medicaid respectively). There is not one exception to this rule.
Indeed, even as financing government operations and then the backing of its securities are both being held hostage right now in order to stop health-care reform, the US Farm Bill is being held hostage to a massive reduction of food stamps issued to the very poor.
The culture of liquidation essentially is a money cult. Inside of it the only things of worth are those that command money; as opposed to the belief that money only has worth if it can command a true good. The cult of money has deepened over the last two decades or so. It has increasingly moved to re-route existing flows of money away from the State's provision of life-affirming goods to the public. Leading the money, instead, into flows of the private financial money sequences, money that thereby can multiply without end.
The creation of a private health insurance industry in the US took off in the mid-seventies, and among similar countries it is certainly unique. It was an early triumph of a budding culture of liquidation, and has been equaled in kind subsequently perhaps only by the US private prison industry. For this reason health-care reform at this juncture may have hit a particular nerve, although of course the reform does not in fact do away with private health insurance. In any case the ultimate outcome of the industry remains to be seen.
Secondly, the culture of liquidation must be extremely sensitive to the State's ability to create money at will, even if the absence of an affordability constraint is largely kept hidden (under a pile of Austrian gold). Given the crucial State's guarantee of deposits held by the commercial banks, and its potentially independent control of the central bank, it would be difficult not to realize that health-care could very well be insured by the State. Especially given the uniqueness of a private health insurance industry globally.
More importantly, there is likely to be a deeper sensitivity in the culture to any movement toward a State that is willing to guarantee basic conditions of a decent life, independent of private capital. Should such a movement be set off, then the bare fact that the culture of liquidation is a culture of death will become evident. And that is the fear driving health-care extortion. Beyond that it is behind the resistance it is behind the resistance to any State-insurance provided the public.
Nonetheless, that which is so obvious will be grasped. That culture is causing an ecological disaster beyond human conception and there is nothing done to stop it. There is a massive ongoing immiseration of the many at the hands of the few, nationally and globally. So many have no chance at all of a decent life. There is great production of things capable of warfare and great destruction, of things we ingest that make us sick, that addict us, or that simply provide us no nutrition.
Perhaps it is to give those living in the culture of liquidation too much credit in thinking they might themselves realize that what cannot be allowed by them is a lifting of the veil.
McMurtry, John. 2013. The Cancer Stage of Capitalism. Pluto Press.
Next entry will be posted October 8, 2013
Comments, questions, counterpoints, constructive criticism, and suggested topics are always welcome.
September 17, 2013 - by David Gleicher
I have added an addendum to Entry 8 that readers who are associated with Adelphi--along with the naturally curious--might wish to look at.
Entry 7, as indicated by the first comment on it, was posted on Facebook in the Save our Symphony Minnesota site, and there were many comments on it that readers might find of interest. A few comments had to do with whether Richard Davis was as I called him an investment banker, rather than? ... just a banker.
This leads me in this entry to a look at key elements of the contemporary banking system that remain unknown by many.
Richard Davis is the head of the fifth largest of the so-called commercial banks: US Bank. The key to post-golden age banking is that the commercial bank is now a misnomer. US Bank and the others no longer add to the loans they make by attracting added deposits on the part of the public. Nor do they primarily serve as intermediaries consolidating capital to finance production of goods. That is a myth perpetuated by Money & Banking textbooks. Such commercial bank services now account for a minor share of the profits generated by these institutions.
One thing has been retained in the post-golden age period, to a great extent still singling out the commercial banks and the reason they are so large. The bulk of their deposits, notably checking accounts, are insured by the State.
With the demise of the Glass-Steagall Act the commercial banks were freed to speculate with their deposits. And the prime activity of these banks in the post-golden age then became the creation of deposits through purchase of myriad financial instruments (lending); providing a basis for what is termed money sequences by McMurtry (2013).
A money sequence is an on-going multiplication of money through debt purchases and extreme leveraging by the sellers at every point of the sequence. As long as the multiplication of money is sufficient the commercial banks can back their growing deposits. At the same time they are forced into greater and greater debt purchases, hence creation of more money and more deposits to back.
As head of US Bank, then, Davis's prime responsibility is risk management: i.e., investment banking. The deposits injected by the bank are created out of loans to traditional investment banks (kissing cousins now to the commercial banks),and either directly or through them, to growing hedge funds, private equity funds and many variations of them.
For example Willumstad's Brysom Global Partners is described in a press announcement of its founding in 2007 as: A private equity firm "that will focus on financial services investments in the emerging markets. In addition to making capital investments from its own capital and investment funds, Brysam will co-invest with financial institutions and private equity firms." (AltAssets: 2007).
A money sequence is extended by securities packaged and repackaged over and over, derivatives infinite in variety, and debt obligations in commodity futures markets , swap markets based on hedging, and of course equity firm speculation in corporations and as discussed here, other institutions as well.
Except when there is a crisis, the money being created in the money sequences purchases only debt. This has given rise to a state whereby goods required by all to have a decent life are being transformed into financial instruments designed exclusively to creating money. The consequence is a myopia characteristic of the culture of liquidation--which I will take up in more detail in the next entry--succinctly illustrated by McMurtry (2013: 54):
"[T]he private money sequencing across borders called debt obligations grows through peoples' most basic means of life ... For a poignant example ... multiplying speculations on the three top food commodities--rice, corn and wheat--spikes the prices of the staple diets of the world's 2 billion poorest people. Since high finance got into a frenzy of betting on prices of these foods that people must have, a seventh of the world's population cannot afford to eat when the prices escalate--as between 2005 and 2008 when average food prices rose by 8.3% with no harvest failures."
McMurtry, John. 2013. The Cancer Stage of Capitalism. Pluto Press.
AltAssets 2007. Jan. 23. on-line.
Next Entry will be posted September 26, 2013.
Comments, questions, counterpoints, constructive criticism, and suggested topics are always welcome.
September 10, 2013 - by David Gleicher
Well, what do you know, within little more than one week of the fall semester--(and but two months after the birth of this blog), it already appears that Robert Willumstad's chairmanship is making itself felt. And he is following a strikingly similar path as that taken by RK Davis with respect to the Minnesota orchestra (see previous two entries).
First, there is the following announcement on the Adelphi web-site, made in June but not noticed I would guess, let alone digested by most of the Adelphi faculty until now: A new 100,000 square foot building to house the nursing school, renamed College of Nursing and Public Health ,is about to get final approval for construction next month at a projected cost of 58 million dollars plus. This is to say, equivalent to about 60% or more of Adelphi's entire endowment fund! The run-up to the lockout of the MNO musicians was a 50 million-dollar refurbishing of a concert hall.
Whatever ways the Adelphi project is being financed (information I don't personally have) this leaves Adelphi more vulnerable to budget deficits. It means a greater susceptibility to forced liquidation of the faculty. It also raises the possibility of accumulating debt, loans at usurious rates, large brokerage fees and penalties and so on. A testimony to Willunstad's accomplishments at Citi- Group.
The project itself is clearly a white elephant, far beyond the expense of anything needed by the Adelphi nursing school. (The tell-tale Edifice Complex rears its ugly head again, but I will leave that for another entry.) To the extent that the money is raised through donations, however, such a project cements the university's reliance on the good will of patrons, rather than the interests of students and faculty. This is seen in how oblivious the Adelphi Board and President are to the plight of our students, so many of whom are going into deep debt to finance their education. How much relief could the university provide them with a decent portion of that 58 million dollars? It could go toward lower tuitions more generous scholarships and work/study programs, and so forth. But these are not deemed the stuff of 58 million dollar fund drives. A huge building that you can name after someone who is very rich, is.
A second thing has just occurred this past week that is less public and more confrontational, striking at the heart of liquidating the faculty. An attempt by the faculty to set guidelines for on-line courses, offered as alternatives to existing courses, has just been rejected. The Provost, as told to me, has informed the faculty senate that creation of such courses is going to be done ad hoc, although perhaps sometime in the future there might be a faculty review of them.
Are we to look forward then to a proliferation of these courses, which already exist across the university, and which might very easily become a norm? Learning is a living experience in open time, a direct human dialogue, ideally structured by a qualified teacher existing within a living, healthy academic culture. The experience of real learning, and the academic culture itself, is being weakened and ultimately will be destroyed by eliminating its living components through on-line technologically driven courses.
Such courses at best preserves an outer-shell that imitates learning, but it is not living. It is empty inside. Like processed food about which McMurtry (2013: 41) writes "[P]rocessors and marketers strip foods of their nutriments to cut costs, and inject additives into what remains to maximize sales." In the myopic culture of liquidation this transformation appears as a chance to cut the cost of faculty both by raising student faculty ratios and by reducing faculty qualifications. The on-line course is being treated as if it were actually a replacement rather than an extreme cheapening of a traditional course. All that can be seen apparently the shell.
Where this all leads of course remains a question. Moving in the direction of on-line courses is all the more wrenching in that Adelphi is in such a good position at this moment in time to provide students an education that is genuinely alive as opposed to the large more prestigious universities. There are no huge lecture courses for undergraduates in the first two years, and no domination by an athletic program. Support of highly qualified professors, which in recent years has been considerable at Adelphi, could be sustained (and a real attempt made to curb grade inflation). Instead the opposite looms scarily in the future.. In the manner of a cancer, the cheapening of faculty and courses cheapens the education being offered and ultimately consumes the university as an institution of learning.
A day after this entry was first published the Adelphi President gave his State of the University address to the faculty. His tenor to me seemed unusually diffident, almost defensive, leading me to wonder if Willumstad's new status on the board was having its effect on him. Nonetheless the President was unusually straight forward in stating three lines of action to which the university had committed itself. In the light of the discussion in this entry, none are what you would call reassuring.
The 58 million dollars raised for the construction of the nursing building, the President reported, is just one construction project in a master plan. It calls apparently for further building into the foreseeable future; and presumably further fund drives to finance it. He made brief mention of a 90 million dollar debt. He rushed to add that it was well-financed, without saying how. I don't know what that was about, but it is a bit disturbing.
Second, the President made it clear that there is no consideration being given to reduction even of increases in student tuitions, let alone the needed cuts in tuition both directly and as tuition discount. Of course the President did not broach the obvious connection between this treatment of our students and the mammoth expenditures being made both on buildings and a bloated over-paid and over-spending administration.
Third, the President made it clear that there would be a continuing proliferation of on-line courses throughout the university into the foreseeable future. He did concede in a vague way that these are in fact inferior courses, especially at Adelphi where there are virtually no large lecture courses with hundreds of students in a single class. Particularly distressing is how weak his ostensible reason for this decisive path is. He points to a decline in recent years in the enrollment of some 250 continuing-education (adult) students, due to their going to schools offering the convenience of on-line courses. To attract 250 students, then, there is a willingness to compromise the very quality of what the university offers, that is, higher learning. This strongly implies that the reason for expanding on-line courses lies elsewhere, inside the culture of liquidation. The cheapening of courses and with it the cheapening of the faculty, in the manner of an equity firm rises to the surface.
McMurtry, John. 2013. The Cancer Stage of Capitalism. Pluto Press.
Entry 9 will be posted September 17, 2013.
Comments questions, counterpoints, constructive criticism and suggested topics are always welcome.
September 03, 2013 - by David Gleicher
(Check out the article in the Times, Aug. 31, first page of the Arts section, "Orchestra Calls in Big Gun in Dispute." You might notice that there is an interesting lacuna in the report of what has happened to the Minnesota State Orchestra.)
The analogy suggested in my previous entry between Adelphi, a medium-sized private university
in Long Island, NY, and a classical orchestra in the Midwest would seem at first blush quite a stretch. But then again, through DNA analysis it was discovered that genetically the porcupine is the closest living relative to the platypus. And once discovered it proved to be not too difficult to explain the closeness of the two. In other words sometimes a likeness is not easily seen at first, but once deciphered independently, one is enabled to understand why the connection.
The orchestra like Adelphi is a non-profit institution. And it was financially stable, just like Adelphi is now, prior to the ascendancy of the investment banker, Richard Davis,to the Chairmanship of the Board of Trustees. Davis, like Robert Willumstad, clearly inhabits the almost-sealed culture of liquidation. And looking with Davis's eyes--given what he's already done--two significant commonalities of the university and the orchestra do become visible.
One is the common tell-tale sign of an equity firm, namely drastic tactics used to radically cut labor costs and to liquidate the most valuable assets of the institution. In both the university and the orchestra these two merge, the bulk of employees being the most valuable assets. This is unlike most corporations (including for-profit schools).
Davis has effectively been liquidating the musicians without any apparent concern over or even perhaps comprehension of the deleterious effect on the actual music created. So too, the relentless push to adopt on-line courses, MOOC's and the like-- especially at an institution like Adelphi--can only be comprehended as means of liquidating the faculty.
And parallel to Davis in relation to music in its own right, Willumstad is highly likely to be myopic when it comes to the enormously negative effect such courses (with few exceptions) would have on Adelphi. Transforming the majority of faculty into scripted and therefore homogenized purveyors of a kind of show directed by the teacher,and in which the students are isolated. The show is produced by a precious few, opening up the corporatization of the universities, with virtually all unmediated human interactions of professor and student within a classroom done away with.
A second commonality is the strategy treating the orchestra and university respectively as a patron-delivering business rather than a (non-profit) server of classical music.. One sees in Willumstad's own exorbitant "gift" to the university the signal of Adelphi as a patron-delivery business. (Another telling symptom of this at Adelphi is the Chairman of the Board's seeming edifice complex; the regal announcement scripted in large letters at the entrance of the business school building, you can't miss it, being The Robert Willumstad School of Business.) Moreover--and very disturbing--the University has announced a 58 million dollar construction of a brand new Nursing and Public Health building. Almost the same exact amount spent on refurnishing the concert hall housing the MNO, even as the Board demanded over30% cuts in the musicians' base pay.
Financing the university primarily by donations leaves Adelphi all the more in the hands of Willumstad and those like him. The patron replaces payments by students, or, as it should be, the State, by attracting money from sources that if not outright inhabitants of the culture of liquidation still treat the institution as if it were something like a profit-making corporation. The Adelphi faculty and indeed much of the Adelphi administration seem to have little sense of the exposed position in which Adelphi now finds itself. As one steeped in the culture of liquidation, Wilumstad can hardly be expected to have an interest in delivering quality faculty who offer a true experience of learning to students seeking a "higher education." Indeed, as I plan to address in another entry, the culture of liquidity seeks only liquidity; i.e., money.
Ultimately the widespread movement--well beyond little Adelphi--toward the evisceration of universities writ large, signals a scary advance of what McMurtry (2013) refers to as a cancer system that is attacking contemporary social life in almost all its crucial aspects. "[T]he life-host is increasingly plundered, but the cancer is masked from immune recognition or response." This blog, like Adelphi, is a little fish for sure, but recognition if not yet a coherent response I think is right now beginning to break out in many social domains, not the least of which is higher education. I do hope that in its own microscopic way then that this blog can contribute to such a recognition.
McMurtry, John.. 2013. The Cancer Stage of Capitalism. Pluto Press.
Entry 8 will be posted September 10, 2013
Comments, questions, counterpoints, constructive criticism and suggested topics are always welcome.
WAR WHAT IS IT GOOD FOR? ABSOLUTELY NOTHING!
August 20, 2013 - by David Gleicher
A question raised by the previous entry--see Whitney's comment--is, What of other cases like Adelphi?, where there is a Chair of the Board of Trustees possibly a major figure in the banking system and the present owner of a large private equity firm, or ancillary financial institution. I don't know of any schools like Adelphi in quite this situation, although I would not be surprised if there were others of various sorts.
There are many controversies surrounding universities who have Trustees that own private equity (and/or hedge) funds, and have contracts managing the university's finances, notably its endowment. But Adelphi--and countless other private colleges and universities that rarely are reported on except locally--is primarily financed by tuition. Therefore it is not so prone to this particular corruption. And I have it on good authority that there are no dealings between Adelphi and Byrsam Global Partners.
There is however an interesting case that in itself is certainly not predictive, but nonetheless might give the Adelphi faculty and alumni some pause. It also reveals I believe the peculiarly cancerous nature of the culture of liquidation generally.
In 2009 Richard K. Davis was elected to be Chair of the Board of Trustees of the Minnesota State Orchestra (MNO). Davis was (and is) the President and CEO of Bancorps Investment Inc., located in Minneapolis St. Paul. Also on the Orchestra's Board is Jon Campbell, executive vice-president of Wells Fargo. When the musicians' contract was up for negotiation in 2011 Davis, acting as chief negotiator, demanded draconian cuts in base pay of 32% along with other financial reductions. The Board claimed a sudden deficit, a claim that was later rescinded however.When his terms were not accepted he took the extreme act of locking out the musicians. No movement away from these initial demands has occurred since. (See Eisenberg, 2013; Hogstad, 2013).
The lockout is almost a year old by now and the orchestra has been decimated. Almost every important position in it, including the conductor, has either been vacated or is in the process of being vacated. The Board seems not only unconcerned about this, but has provided financial incentives for musicians over 55 to leave. The orchestra in reality is unlikely to be restored to its previous caliber soon, or ever, particularly if the salaries agreed to are not competitive. The MNO musicians describe it as "suicide by cop".
Similarly, the musicians shake their heads at the absurdity of the Board's "edifice complex." The same Board that raised huge amounts of money (dwarfing the supposed deficit) on a building project during the time Davis was first on the Board, then tries to save money by sacrificing the quality of the music being created.
While the musicians may be rightly perplexed, it is striking that Davis is acting just like an equity firm that has gained control of a corporation. It drastically moves immediately to cut payments to labor. However in this special case--but shared with a university faculty--it can be more aptly conceived as liquidating the most valuable component of the orchestra. Via the lock-out Davis seeks to sell off his musicians by relieving the firm of their salaries. The firm will purchase cheaper ones instead, and thus the net in-flow of money will be increased.
As to the revenue side, there is the suggestion that to Davis the orchestra in its own right is a "loss-leader." Davis sees himself as owner of a "patron-development business." From that point of view, to the extent that a building project can bring in large donations, it is seen as an inflow of revenue from patrons.
Davis's seeming strategy captures what Karen Ho has identified as a key to the culture of liquidation. The latter relies on a worship of money for its own sake. A good is how much money I can get for it. The cancerous nature of this comes from the fact that money not spent is a cipher. That is, money for its own sake is empty. Thus those within this culture empty the orchestra members who cannot really worship music or the university faculty members that cannot really worship learning.
More on the culture of liquidation next time.
Hogstad, Emily. Questions remain about fiscal performance of Minnesota orchestra's board, management. Mnn Post 5/31/13
Eisenberg, Jonathan. How management's self-inflicted wounds are killing Minnesota's two world class orchestras--and what to do about it. Mnn Post 6/10/13
Entry 7 will be posted September 3, 2013
Comments, questions, counterpoints, constructive criticism and suggested topics always welcome.