by P. J. Laska
Given the emphasis on imposing hegemony by military means, it is a splendid irony that ‘American Way of Life’ should share its acronym (AWOL) with the military term “Absent Without Leave.” — http://www.laetusinpraesens.org
Ronald Reagan in the famous “Morning-in-America” speech that was part of his 1984 re-election campaign took credit for the improvement of the economy since his election in 1980. By 1983 the inflationary spiral of the 70’s had been brought under control by Federal Reserve chairman Paul Volker, who was originally appointed by Carter and then reappointed by Reagan in 1983. Reagan could also point to his 1981 firing of 11,000 striking Air Traffic Controllers (and also banning them from federal service “for life”) as an example for private employers to follow in dealing with the demands of organized labor. But it was not until his appointment of Alan Greenspan to replace Volker in 1987 that the full meaning of the “Reagan Revolution” would become clear. Volker was dismissed because he was not deregulating fast enough. His replacement was a follower of the market fundamentalist Ayn Rand, dedicated to the economic philosophy that championed unfettered markets as good and government (meaning democracy’s) regulation of business as bad. And for two decades thereafter it was Hands Off the Market, Tax Cuts for the Wealthy, Trickle-down Economics and The More Capitalism the Better. Systemic risk? Elite gambling? Debt insuring debt? Dark markets? No problem, said Chairman Greenspan, markets are self-regulating. The only question was how to get in on the action. Then, in October of 2008, after a deluded generation had gone in whole hog, Morning-in-America turned into Evening. The Great Pyramid of Troubled Assets went toxic, and, as Night descended, images of another Great Depression flashed on TV screens.
The heady days of the “Reagan Revolution” on Wall Street are recounted by Michael Lewis in his New York Times bestseller Liar’s Poker, which deals with his four years as an insider with Solomon Brothers beginning in 1985. A generation later he revisits Wall Street in The Big Short to track the Meltdown and finds “an umbilical cord running from the belly of the exploded beast back to the financial 1980’s.” The first mortgage-backed derivative, he notes, was created in 1986. Wall Street in the 80’s was given a classic treatment in Oliver Stone’s 1987 film Wall Street, starring Michael Douglas as Gordon Gekko, a middle-aged corporate raider and nihilist autodidact who has climbed the ladder of accumulation with the help of some insider trading that, in the end, gets him sentenced to serve time in prison. In the film’s sequel Wall street: Money Never Sleeps (2010), Gekko, just released from prison and hawking his new book only days before Meltdown, comments on the irony of having served time in prison for doing what has now apparently become legal. Since Gekko’s original mantra was “Greed is Good” one would have expected the title of the sequel to be “Greed Never Sleeps.” The shift to “Money” in the title is interesting because whether intentional or not it suggests something important that began happening on Wall Street in the 90’s. Greed is human and humans get tired and need to rest. With the introduction of computer software working in place of humans, however, money can be made buying and selling securities even when greed is asleep or taking a lunch break. When the closing bell clangs on Wall Street, trading opens or continues on exchanges elsewhere around the globe. After Gekko went to prison financial speculation expanded globally and bets (“investments”) were able to flow instantly across borders. This information remains in the background of Stone’s movie, of course, for cinematic reasons, but it comes to the fore as the primary reason that the collapse of “Late Capitalism’s” financial system has been a global, epoch-ending phenomenon.
In retrospect the Reagan “revolution” of free market fundamentalism turns out to have been a not-so-covert effort to reverse the social and economic democratization of AWOL that began with FDR’s New Deal. That democratization gave birth to the so-called “Golden Age” of AWOL, when after WWII incomes rose for all income groups from 1945 and 1973. The rich got richer, but unlike the years of the Reagan-Bush-Clinton-Bush Era, incomes for working families also improved. The period of Trickle-down Economics, it turns out, coincided with the end of the Golden Age of AWOL, as the majority of American families saw their economic well-being deteriorate to the point that AWOL began slipping away from them in the sense that their participation in it as consumers was not what it had been in the Golden Age. And for a great many the events in the first decade of the 21st Century have had the effect of turning “Morning in America” into “Nightfall.”
Why the ideas of the Neoconservative (“Neo-Liberal” in the UK) social and economic agenda were able to make such headway in spite of their toxicity to the average participant of AWOL is a puzzling question historians will argue over for generations. Even more puzzling, given the widespread pain of the financial Meltdown’s aftermath, is why a sizable segment of Main Street America is now agitating for more of the same. Their activity seems to confirm the tenacity of what William James called the ‘Will to Believe.” Like kudzu, the latter is a weed that is hard to control, especially when liberally fertilized by the accumulated manure of dead labor. The deluded and absurd re-animation efforts by the “Tea Party” in the 2010 Congressional elections are perhaps best viewed in this light. Following a discussion of the great “Meltdown” of global financial capitalism and some of the postmodernist thinking that went down with it, this essay examines the comic pathology of an attempt to re-animate the dead brain tissue of market fundamentalism and tracks its origin to a mental disorder associated with the quest for “capitopia,” the atomistic and sociopathic utopias of capitalist accumulators.
In October 2008 America’s economy was in freefall, poised to take down much of the world economy with it. – Joseph Stiglitz, Freefall
What dissolves in times of crisis is the contextuality that the psychiatrist R. D. Laing referred to as the “dense opacity of social events.” Things previously obscure come into clear view. In the case of the financial system “Meltdown” of October 2008, the emperors of Wall Street suddenly had no clothes. The titans of the “the great world-grasping commercial synthesis” (to adapt the words of G. B. Shaw) were forced to ask the Federal Government for “relief” in the form of a multi-billion dollar subsidy. Those having some acquaintance with American history will see the irony here in the use of the word “relief.” The latter was the Depression-era word for welfare. “Welfare” is the post-WWII euphemism for being on relief, or on the dole. When the Bush administration, with Congressional approval, responded quickly to Wall Street’s request with a $750 billion bailout it was called the “Troubled Asset Relief Program” or TARP, rather than “Troubled Asset Welfare Program.” No doubt this was done because the Great Depression was so long ago that the word “relief” had lost its stigma and could now be substituted as a more neutral euphemism for the now stigmatized term “welfare.” After all, welfare is a program for the poor, not for rich Wall Street investment “bankers” and the flock they fleeced with their “troubled assets.” Irony on this scale is a bit hard to recognize, let alone understand.
As it turned out the Government — the Treasury Department — was able to provide the requested welfare check, even though it didn’t have $750 billion on hand since it has been running a rather large current accounts deficit. Some governments — big powerful governments like the U.S. Government — have the power to create “liquidity” (a power that Wall Street longs to possess more of), and the “relief” took the form of a transfer of fictitious capital that the giant financial firms holding the “troubled assets” could enter into their ledgers and thereby avoid immediate default. This is probably the original form of the practice of debt backing debt that spread on Wall Street in the run-up to the Meltdown. What originates in the debt column of the Government’s books magically shows up in the credit column of the banks holding assets as degraded as the millions of homes suddenly “under water” when the housing bubble burst because their market value fell below the value of the loans that financed them. The Government’s welfare grant to the big players on Wall Street was characterized, interestingly, as an “equity injection,” a distinctly medical term that in this case calls up the less-than-professional image of a needle and a spoon. The fact that the grantor, the U.S. Government, is deeply in the hole poses no problem for the grantee so long as the political will is in place. We see here another obscurity brought into clear view — the intimate tie between politics and economics that led Classical economists, and also Karl Marx, to use the term “Political Economy” when referring to the capitalist system of wealth creation. In this case the political will to bail out massive fraud and private default by saddling future generations of Americans with debt was garnered by employing a time-tested tactic: Fear.
The imperative laid on the table before Congress, therefore, was how to prevent this “freefall” from becoming a general capitalist death-spiral ending in another Great Depression. Stiglitz indicates his opposition to the path taken by the Obama administration, saying that taxpayer money was “squandered on bailing out the financial system.” Most of his book is an argument in support of the claim that the perpetrators of the crisis should have been made to take their lumps, because it was “the reckless lending of the financial sector which led to the housing bubble, which eventually burst.” He argues further that the subsequent erosion of trust will not be reversed and normal lending restored by protecting those who created the “moral deficit.” The behavior of the banks in the four years since the Meltdown (the wealthy welfare recipients pocketing the cash rather than lending it) supports his claim. It is worth noting that Stiglitz blames the financial sector’s breach of trust together with lack of Government oversight for causing the housing bubble in the sense that “the so-called financial innovation allowed the bubble to get bigger.” His view is similar to that found in Reinhart and Rogoff’s This Time is Different (Eight Centuries of Financial Folly). They agree with Stiglitz that the global financial crisis “was firmly rooted in the bubble in the real estate market fueled by sustained massive increases in housing prices,” but they also include as a cause, “a massive influx of cheap foreign capital” (my emphasis), coupled with “an increasingly permissive regulatory policy that helped propel the dynamic between these factors….” Stiglitz, in a chapter titled “The Great American Robbery” is critical of the Obama Administration for treating the big banks as “too big to fail” and “too big to play by the ordinary rules of capitalism” (which entail that failure is the price of folly), and he is especially contemptuous of the Treasury department under Bush and Obama for using fear “as a tool to extract as much as possible for the banks and the bankers that had brought the world to the brink of economic ruin.”
Roubini and Mihm (Crisis Economics) blame Greenspan’s market fundamentalism for allowing vast quantities of easy money to flow into the economy while failing to use the power of the Fed to restrain speculation. In his Amazon interview with Ian Bremmer, Roubini says, “The Great Recession of 2008-2009 (though many analysts say it began in 2007) was triggered by excessive debt accumulation and leverage.” Leverage is financial speak for the ratio between debt and equity in a transaction. A half million dollar home mortgage loan with a borrower contribution of 1% is highly leveraged. The same goes for a hedge fund purchase five hundred times that amount. When the financial sector turned bundles of ordinary home and commercial mortgage loans into “securities” that were sold to global investors, including institutional investors like pension funds, they used credit ratings and “credit enhancement” features to disguise the risk involved in these new “structured financial instruments,” many of which were highly leveraged. Stiglitz comments that “The whole securitization process depended on the greater fool theory,” and that “Globalization opened up a whole world of fools.” His corrective is to replace neo-conservative market fundamentalism with neo-Keynesianism, and Adam Smith’s invisible hand with the visible hand of Government regulation. In the Preface to Freefall he says, “markets lie at the heart of every successful economy, but markets do not work well on their own. Economies need a balance of markets and Government regulation.” Expansion bubbles are as old as capitalism, but Keynesian policies brought a measure of protection to the U.S. economy by restraining financial capitalism’s speculative “innovations” until Reagan’s de-regulation initiatives got under way in his second term with the appointment of the history-deficient Greenspan as Chairman of the Federal Reserve System. It is a coherent narrative as far as it goes, but a key element of the story is missing.
The same can be said of Roubini and Mihm, who see the bubble “driven by a wall of liquidity chasing assets that are becoming overpriced,” but fail to note that the massive influx of “cheap” foreign capital (Reihart and Rogoff) is not the result of Greenspan pumping “vast quantities of easy money into the economy.” The massive influx of foreign capital, a great deal of it from China and East Asia, consists of profits from industrial production transferred there by American corporations in order to avoid the higher labor costs of production in the U.S. In order to understand how this mass of capital and the great credit expansion that sustained AWOL for thirty years are connected to the collapse of financial capitalism it is necessary to replace the Meltdown metaphor with a more adequate descriptor. “Meltdown” is the preferred media term, popularized, for example, by financial writer Charles R. Morris (The Two Trillion Dollar Meltdown — “ultra cheap money and financial innovation gone mad”), but it conveys a misunderstanding of the event. What took place more closely resembles a freeze-up, or a cardiac arrest. Credit, the life blood of financial capitalism ceased to flow, and the organ of accumulation had to be put on life-support. Karl Marx was the first to make clear that capital (“self-expanding value”) has to flow like a liquid in order for it to increase. It flows through a circuit called the “the process of production.” This is the only way capital expands its value. He analyzed the process of production as a flow pattern taking place in three stages: Investment of money-capital in labor-power, plant, machinery and materials, followed by a labor-process that produces commodity-capital (useful goods containing [the value of] “the capital originally advanced, plus a surplus value” — Capital I, 709). In the third stage the commodities/useful goods go to markets (the “circulation” phase of the process) where, upon being sold, the original capital-value invested and the surplus value obtained from labor in the production process “are realised in money…” (ibid.). Capitalists, he says, then return to the first stage to repeat the circuit, so that “this money afresh [is] converted into capital, and so [invested again in the production of commodities] over and over again.” He understood, of course, that this is not the only path of investment after the original money-capital expended and the surplus value skimmed from labor in the production process have been “realized” in the form of profit. He began his analysis with the basic cyclical process of capitalist wealth production in order to explain how surplus value is extracted from labor-power during the production of commodity-goods. Financial investment of the riches that capitalists gain from this process is a topic he addresses later, in Volume III of Capital. To see the full meaning of the “Meltdown” that took place in October of 2008, we need to keep in mind both the basic model of capitalist wealth production and the ancillary processes that go on in the financial world of money, banking and credit.
When he discussed “commercial capital and money-dealing capital” (Capital III, 379) Marx laid down an important theorem which capitalists have refused to accept: “Commercial capital [buying in order to sell]…creates neither value nor surplus value, but acts as a middleman in their realization.” (Capital III, 395). The increase of value (in the form of money wealth), he argues, originates in the production of goods (“use-values”), where “the labour-process unites the labour of the hand with that of the head.” Divorced from the labor-process the products of finance are products of the head, often united with sleight of hand. The financial world of numbers, figures, formulas, and “derivatives” provides the opportunity for trickery and swindle. A telling fact about the so-called “toxic” securities behind the Meltdown is that their toxicity was not entirely due to the collapse of the housing bubble. Many were poisoned by fraud from the beginning in the way they were “structured.” Among the more exotic packages sold to institutional investors around the world were those that included credit card debt. With an eye to credit ratings banks bundled higher income credit card accounts (rated higher because they are paid off each month) together with lower rated accounts and other riskier financial “products” that decline in a recession, such as brokerage fees and insurance or highly leveraged “assets” like sub-prime mortgages that imploded when the housing bubble burst. The complexity of these “structured” securities, assembled off-shore to avoid taxation, is mind-boggling. Their complexity functioned as a veil to hide the fact that many were highly speculative in the risk they involved. The banks were, in effect, marketing risk as though it were an established value, when in fact the “asset” was no more than a paper claim to value carrying hidden risks that the value may not be realized in the future. This is a process Marx called “formation of a fictitious capital” (Capital III, 597).
As Michael Lewis discovered during his tenure with Solomon Brothers, “The line between gambling and investment is artificial and thin.” In Chasing Goldman Sachs, business journalist Suzanne McGee’s traces the changes through three decades that transformed the financial services sector of big Wall Street banks from an intermediary (middlemen guiding capital to profitable investment) into a global gambling casino in which the “house” always wins because the fees, incentives and commissions (both from running a derivatives market that insures clients against risk and from peddling complex “bundled” assets) totaled billions. But since the “profits” from these sales do not come from any new value created, they can only be the result of slicing up the surplus value that has already been skimmed from the labor process and “realized” in the market. As with any gambling casino, players win or lose smaller amounts while the House running the game rakes in guaranteed winnings. And the Wall Street gambling casino raked in hundreds of billions. If that were the whole story global financial capitalism would not now be on life support as a hybrid system enforcing capitalism on the 99% while it practices socialism for itself by nationalizing the system’s bankruptcy, thus reversing the role its ideologists have claimed for it from doctor to patient, from that of advancing innovator, “bringing good things to life,” to that of frail addict looking for the next injection of public wealth to help it perpetuate its drive for unlimited expansion.
What’s missing in non-Marxist accounts of the Meltdown and the Great Recession can be found in The Great Financial Crisis by Foster and Magdoff. This book compiles articles from Monthly Review magazine, beginning with the May 2006 issue. Its argument is based on “the stagnation thesis,” developed by Baran and Sweezy in Monopoly Capital and originally set forth by the New Deal Keynesian economist Alvin Hansen, who argued that traditional growth factors like population increase and technological innovation were no longer sufficient to prevent “underemployment.” In the pages of Monthly Review Paul Sweezy and Harry Magdoff developed the view that “the normal path of the mature capitalist economies, such as those of the United States, the major Western European countries, and Japan, is one of stagnation rather than rapid growth.” Stagnation occurs when the surplus value generated by the growing productivity of labor-power “is unable to find sufficient new profitable investment outlets.” This stagnation shows up in economic charts as a downward trending line indicating profits from manufacture. Beginning around 1970 the line for U.S. manufacture drops from the 50% level to an astounding 13% in 2004 (Foster and Magdoff, 55). Writing in the Sixties at the height of the Cold War Baran and Sweezy pointed out that the trend of industrial under-performance identified by Hansen was met in part by a continuation of military production after WWII driven by fear, anti-Communist hysteria, and war-mongering, all of which remained an important supplement to American corporate profits even after Nixon opened up Communist China to capitalist investment, and even after the fall of the Berlin Wall and the subsequent disappearance of America’s Cold War enemy.
Basically, the stagnation thesis is a reworking of Marx’s “Law of the Tendency of the Rate of Profit to Fall,” and of his general conclusion that capitalism’s enormous and revolutionary productive success is its own undoing. The problem, the “moving contradiction,” which he found in the capitalist mode of wealth creation, lies in the fact that its phenomenal capacity for abundance, made possible by rational industrial deployment of labor-power and machine technology, is crippled by the limiting property-form that the product of labor is constrained to take.
In a capitalist society production cannot take place unless a master is first served, the master being the requirement of increased value in the form of profit, a profit that is realized only when what has been produced is sold for cash. Marx’s idea that a society can produce directly for use, without the requirement of adding to existing private hoards of accumulated cash, is viewed by capitalist ideology as a utopian impossibility. But when one examines the mental and physical stress and hardship the working and the out-of-work population of AWOL are now forced to endure in order to subsidize the wasteful and absurd exclusionary designs of private accumulation, one is confronted with the question of what is really utopian versus what is practical and sustainable, and one is compelled to ask whether what is seen as normal and rational behavior by capitalists is in fact behavior resulting from a mental disorder. Marx himself suggested as much, when drawing on Aristotle’s distinction between “Economic” and “Chrematistic,” he described the capitalist as a “fanatic” who has turned himself into a rational “functionary of capital,” only a mental step away from the dysfunctional and irrational functionaries of accumulation called misers.
The inflationary crisis of the 1970’s economic stagnation was offset by a series of strategic innovations that over the next generation brought an end to the “Golden Age” of AWOL. These changes are fixed in the memory of any American worker who lived through the period and saw private sector union membership fall from an already declining 27% to a low of less than 10% in 2005. This reduction coincided with the move to so-called “lean production” involving automation, downsizing of the labor force, contractually outsourcing work and spinning-off of non-union subsidiary units paying reduced wages with little or no benefits, often with the requirement of mandatory overtime working in unsafe conditions. In addition to lowering labor costs the goal was a general dis-empowerment of workers in the face of the violation of labor laws, as well as safety and environmental regulations. This strategy was accompanied by the cannibalization of American industry by the financial sector (private equity and hedge funds), and by the export of entire lines of production to China and other low wage countries. This return to primitive tactics of accumulation sustained profits for a time, but also created a problem on the consumption side, which Neo-classical economists, ignoring the consequences of these tactics, refer to as a “chronic lack of aggregate demand.” The problem is graphically illustrated in charts that compare real family income growth for the two periods, 1947-73 (the “Golden Age” of AWOL) and the following period, 1974-2004, in which working class households lose ground. In the first, the famous “picket fence chart” — which shows the income growth of five (“quintile”) groups from poor to rich — the growth rates for all groups are roughly even, and the rising incremental bars charting the five “quintiles” resembles a picket fence. The poor making up the lowest fifth of households shows the highest income growth rate, and all four of the lower income groups actually show a better growth rate than the highest fifth, the class of the very wealthy.
This indicates a healthy trend that gives substance to idea of an “equal opportunity society.” The chart for the thirty year period following the Golden Age of AWOL, 1974-2004, shows a striking reversal of this trend. It resembles a staircase with a steep descent from the top floors to the ground floor. At the top, towering above the others, the quintile representing the richest fifth of the population has increased real family income by over 63%. On the floor below them is the next richest fifth who have managed to increase real family income by 40%. The population fifths on the next two floors register much smaller growths, 23.3% and 12.9%, and the one fifth of households at the bottom show the smallest growth at the near stagnation rate of 2.5% (R. Reich, Supercapitalism, 106).
The end of the Golden Age of AWOL, therefore, coincides with a shift of wealth distribution upward to the ranks of those who are already very wealthy. This shift brought an increase of poverty in the lower ranks, putting a strain on the welfare safety net, while middle class working families coped with the downsizing, job loss and wage stagnation in several ways. Women and teens entering the work force took lower paying jobs in the service industries in order to supplement household income. Former union and downsized workers worked two part-time jobs. As the trend toward concentration of wealth at the top continued with the Reagan and Bush II tax cuts for the already rich, working class households began using consumer credit to keep from losing ground. When Marx said the credit system was “a driving force” of the capitalist mode of production, he was referring to “The credit which the capitalists engaged in reproduction give to one another” (Capital III, 610). He lived and wrote in the period before financial capitalists developed the ingenious “instruments,” like consumer credit, that have prolonged the life of “late” capitalism. Consumer credit began as installment credit in the 19th Century. In 1890 Singer sewing machines could be purchased on a weekly payment plan.
By 1899 furniture stores were also offering installment credit. Later, local merchants and major retail department stores like Sears and Montgomery Ward offered charge account cards to regular customers. Less than a generation after World War II credit cards had become the main instrument of consumer credit. The first card, the Diner’s Club card, was introduced in 1950. Eight years later American Express launched its purple charge card and within five years had a million card holders and 85,000 businesses accepting the card. At first these cards did not extend credit beyond the charge and required that it be cleared monthly. The “revolving balance” innovation extended credit with an accumulating interest and became the basis of the modern credit card industry, which Bank of America launched in 1966 with its BankAmerica Card, later called Visa. The same year saw the appearance of InterBank Card Association’s world-wide MasterCard, which competes with Visa. The use of credit cards exploded in 1980’s. American Express issued its own no annual fee credit card and Sears launched its Discover Card. By 2006 Americans held 1.5 billion credit cards. The three top issuers, Bank of America, Citibank and Chase controlled more than 60% of the outstanding credit card debt, which in 2008 was approaching 1 trillion dollars (research.stlouisfed.org).
From the 1980’s on, the broad working population clung to AWOL by means of credit cards and their other main sources of credit: vehicle and home equity loans. In 2009 the post-Meltdown consumer debt total (credit cards plus other types of credit) was 2.5 trillion. AWOL had become a capitalist raft floating on a sea of debt.
Morning-in-America’s hope for renewal founded on free-market ideology turned out to be a cruel hoax. The poor and middle income groups lost ground and the already wealthy class expanded its wealth and influence. The capitalist mode of wealth creation allows for a continuous increase of accumulation (“growth”) – provided that capitalists continue to find profitable investment opportunities, meaning those that return a profit when what is produced is sold in the marketplace. When this requirement of “optimum growth” is not met, profit slows and with it the income going to the accumulated hoards of capital-value extracted from previous rounds of productive investment, and, of course, the income going to working households. The massive influx of foreign capital flowing to Wall Street after the so-called “East Asian Meltdown” of 1997 represented hoards of wealth seeking a way to sustain themselves as outside the productive process by means of financial schemes.
Together with “the vast quantities of easy money” pumped into the economy by Fed Chairman Greenspan, this combined hoard was a bonanza for Wall Street’s exotic instruments. The growth of these complex “securities” was phenomenal. The housing bubble and the credit-debt bubble were contributing factors, but a deeper underlying cause of the bubble of growth and subsequent Meltdown has to be attributed to the massive “capital bubble,” the enormous excess of money-hoards seeking to preserve and enhance themselves outside the productive process. In the decade before the Meltdown Goldman Sachs was generating a return of 25.4% on its packaged securities (McGee, Chasing Goldman Sachs). The housing bubble that they and their sleazy brethren of sub-prime peddlers enabled and encouraged formed a large cut of the toxic pie that the capital bubble of existing and newly acquired hoards to feed on.
Although he placed the onus of responsibility on financial markets and institutions, Stiglitz started from the assumption that what supported American economic growth before the 2008 Meltdown was a “debt-financed consumption binge.” Obviously, there was and still is binging, but to generalize it in a way that blames those lured into debt slavery and those working class (formerly “middle class”) households using debt to stay afloat is myopic, to say the least. Binging is not what people were doing when they used credit as a coping mechanism to keep AWOL from slipping away from them. Participation in AWOL has infrastructural requirements. Remaining a wage-earner in a society not geared to public transportation, for example, requires owning a reliable vehicle, paying registration and insurance, and absorbing increases in the cost of fuel — at a time when wages are frozen or declining. In the case of the two-earner or single parent household there is the additional cost of day-care. For the greater portion of working families binging is either a luxury they can rarely afford, or a debilitating eating disorder brought on by stress and insecurity. To get a sense of who was really binging in the thirty years of hyper-greed that culminated in the Meltdown and the Great Recession, economists who generalize about the whole population would do well to study the second wave of books dissecting the Meltdown (e.g., All the Devils are Here and The Monster) whose titles call to mind the demented protagonists of cannibal and slasher films. Or, if they are pressed for time, they can read Michael Lewis’ entertaining memoir of his days at Salomon Brothers (The Big Short), or John Cassidy’s Nov. 28, 2010 New Yorker article “Wall Street’s Worthless.”
What emerges most clearly from the dense opacity of events surrounding the Meltdown and its Aftermath is the politically organized safety net now set in place to protect “the free-market system” from “free-fall.” Still largely hidden and disguised as a temporary “Bail-Out,” its immediate purpose was to protect existing hoards of money-wealth from losing their value. In the long term, however, it acts as a precedent and an incentive for the new entitlement programs needed to subsidize the failing private, for-profit engine of capitalist wealth production. As the initial report from the President’s Deficit Commission has already made clear, this will amount to a mountainous transfer of social wealth, measured primarily in services and benefits, from the majority of youth, workers and the poor elderly to the vested class that benefits most from preserving the pirate system that stands in the way of a stable and sustainable society.
Capitalist Ideology and Utopia
This continual progression of knowledge and of experience, says Babbage, ‘is our great power.’ This progression, this social progress belongs [to] and is exploited by capital. [O]nly capital has subjugated historical progress to the service of wealth. — Karl Marx, Grundrisse
Now that capitalism has completed its historic march toward a global organization of the world’s productive forces, rendering them capable of supplying more than enough to eliminate poverty and provide for the all-round well-being of the entire human population, and able to do it in an ecologically sustainable manner, the leadership of this system seems strangely impotent to complete the task. Since the great Meltdown of 2008 they have been mired in various financial protection schemes for getting “equity injections” from the only real source equity in the world — the working human population that has looked to them for “progress” toward the promised goal of better living and have given so much of their time and effort to that purpose. In the light of the failure to complete the historic mission, and especially in the light of the extraordinary new equity demands, which we now learn will entail years of sacrifice by the working population and those least able to bear them, certain questions seem justified. And given the complete lack of any reasonable explanation for what looks like mission abandonment at the very moment when the necessary scientific and technical requirements for mission accomplishment are in existence — the first question must be one regarding the sincerity of the mission itself.
It has been argued that the Wall Street Meltdown that threatened the global financial system was the result of “flaws” in the system (Stiglitz, et.al.). Although “flaws” might be a reasonable explanation for temporary delay, it is not reasonable when accompanied by demands for extraordinary equity injections followed by new requirements of sacrifice that put the completion of progressive mission on hold indefinitely. That would mean the road of progress is missing something essential, like a bridge, when in fact the necessary technological and industrial infrastructure is now in place and the labor force waits in readiness. The “flaws” argument won’t wash. In fact, given the 20th Century’s history of capitalist leadership abandonment of progressive development in favor of destructive imperialist wars of aggression, the “flaws” argument has all the signs of being a classic dodge. Dodging, dissembling, and conning comprise the less scrupulous functions of ideology. The guiding idea of these functions is to make something appear to be what it is not. In the case of the “flaws” argument we have a failure of historic proportions treated as a minor glitch in the system. The argument protects the system ideologically by ruling out the necessity for deeper questioning. In The Big Short Michael Lewis noted that people on both sides of the “structured securities” gamble left the table rich. The CEO’s of every major Wall St. firm ran their corporations into bankruptcy or were saved from bankruptcy by the deficits imposed on the U. S. population and “they got rich too.” As a result of the Meltdown the financial heart of the capitalist system may have been fatally weakened, the total costs of the emergency bailout runs into the trillions and has pushed up the federal deficit by forty percentage points (of GDP — baselinescenario.com), and the capitalist system has had to establish the precedent of its own safety net in order to handle future bailouts. Only the naïve think the Meltdown bailout is one-time event. Other bailouts await. The excesses that necessitate them are not anomalies. They grow from the taproot of capitalism itself, which is anchored deep in the 17th Century.
In its original 17th Century Hobbesian formulation capitalist ideology (under the cover of philosophy and speculative anthropology) candidly maintained that the business of accumulation had no mission other than for the individual atoms of market society to gain the power to live “a commodious life” and be secure in their person and property. Any reasoning to the contrary could be dismissed as “utopian” twaddle, not worthy of serious consideration. The word “utopia” derived from Thomas More’s book, published in 1516, portraying an ideal society politically controlling the market in order to guarantee general sufficiency of the means to well being. More coined the word “utopia” by punning on the ambiguity of the ancient Greek phonetic elements he used to form it.
The first syllable can be pronounced either “u” meaning “no” (utopia = “no place”), or “eu” meaning “good” (eutopia = “the good place,” or, as More himself termed it, “a place of felicitie”). The political theorist Russell Kirk in his Beyond the Dreams of Avarice described More’s Utopia as a “little fantasy,” and says that More certainly knew that “Utopia never was and never will be, and that we are not made for utopia.” Kirk was either speaking ex cathedra from the modern capitalist ideological lexicon, or was unaware of the ambiguity in More’s title. For “eutopias,” places where life is good, certainly have existed and exist now, for some people. In spite of this truth enthusiasts for capitalism, as well as a good deal of the academic community writing on the subject, continue to agree with the redoubtable Professor Kirk. A routine Google search, for example, turns up Capitalism.org, a full-blown hysterical repetition of Kirk’s ideological judgment stating that: “Capitalism is not utopian, or does not support utopia. It is practical; it is something of this world.” Well, yes, it certainly is something of this world, but why are its defenders still hammering the obvious — and the irrelevant? Utopias are literary fictions and belong to a genre that was as popular in the Ancient world as it is in the Modern. The real political and economic issue, which was very much a part of More’s work, is and has always been about eutopia. Once this is understood, two questions arise. Why has capitalist ideology occupied itself exclusively with utopias (“no places”) and with ad nauseam denials that they can exist? And why does it continue to ignore the topic of eutopia (“places of well-being”)?
Since the beginning of modern scholarship on the subject the truth about “eutopia” has been systematically concealed. In Hobbes’ time the naked truth could still be plainly stated. Wealth accumulation was the ladder to leisure, which meant living well without the necessity of selling one’s labor-power on the market. Ideologically, this entailed a revisioning of More’s Utopia from a commune-ist to an individualist enterprise, and from realization of a design for sufficiency and well-being of an entire society to the realization of designs for private eutopias within a socioeconomic formation that impoverishes entire classes. These restricted eutopias based on the accumulation of property and money-wealth can be rightfully termed “capitopias” in the sense that they make the good life (eutopia) possible for accumulators of capital. Associating capitalism with eutopias was not possible before the middle of the 18th Century, when the general use of the word “capital” first became common. By l751 the word “capital” had come to signify “the sum of money which individuals bring to make up the common stock of a partnership when it is first formed” (Postlethwayt’s Universal Dictionary of Trade and Commerce), but we also find use of “capital” in the sense of general wealth; for example, in Andrew Hooke’s Essay on the National Debt and National Capital (1750), which treats as national capital “cash, stocks, coin,” “wrought plate and bullion, jewels, rings, apparel, furniture, stock for consumption, stock-in-trade, live stock,” and “land stock,” including “the value of all the lands in the Kingdom.”
Up to this point the market and capital accumulation are given a basis in nature and even in “natural law,” in its Hobbesian formulation where the state of nature implies the right of every man to property as an extension of his power. By the Enlightenment of the late 18th Century, however, recognition of the role of intellect and agency (under the heading of “rational will”) had begun to displace the notion that wealth and its accumulation were the result of natural endeavors and the natural mechanism of the market. Hegel, for example, argued that the market can be likened to “a wild beast thrashing about.” Marx’s wry comment was that nature doesn’t produce “money, a rate of exchange or bankers.” His penetrating analysis and critique of the capitalist mode of production demonstrates that eutopian living rests on “the power of a portion of society” to extract surplus value from “living labor-power,” (Wage Labor and Capital). Far from being a natural system, capitalism was shown to be a historically developed social and political economic system in which capitalist wealth represented “the power of accumulated labor over living labor” and “the domination of [the capitalist class] over the working class.” In this system the enormous wealth of an industrial society, produced collectively through the developed effort of co-operative labor, is forcibly privatized in order for it to remain “capital,” the property form that supports the political power and eutopian living conditions of the capitalist class.
The great revolutionary uprising of the international working class in 1848 was an effort to overthrow the power of capital and the private eutopias of the capitalists that rest on it. It was inspired by the idea of replacing capitalism with a commune-ist form of social production making possible eutopian living and working conditions in a new classless society. After the military defeat of the 1848 uprising the persistence of this idea forced the victorious capitalist class to devise an ideological defense against future attempts to overthrow its rule. As a counter to the commune-ist program of replacing capitalism and its accumulated hoards of private wealth, capitalist ideology embraced the concept of progress. The concept was already present in Adam Smith’s Wealth of Nations, the Bible of free-market capitalism, which sketches the gradual economic progress of human civilization and speculates on the future enhancement of wealth and the general well-being of “civilization.” It is assumed that capitalism is a system of progressive improvement, not only for the well-being of capitalists but for the happiness of all mankind. Progress was all the rage in capitalist ideological circles after the defeat of the 1848 uprising. The Great Exhibition of London in 1851, for example, celebrated “the material progress of the age and the growing power of man over the physical world,” which “was optimistically regarded, not merely as a record of material achievements, but as a demonstration that humanity was at last well on its way to a better and happier state…” (J. B. Bury, The Idea of Progress, 329-331).
With the addition of the doctrine of “progress for humanity” (meaning eventual eutopian living for all) capitalist ideology’s cover story regarding “utopia” gains an important supplement. Utopias may never exist but capitalism has improved the human condition and will continue doing so. The question about eutopia is then moot. Progress means things are getting better for humanity. Capitalism provides the means for a better (eutopian) life, and, according to its ideology, this better life is not restricted to the upper income brackets. Progress makes it available to all who join in pursuing the accumulationist path. The path of progress is not utopian — it is betterment for all, even for the laboring class at the bottom of the income hierarchy.
The doctrine of universal progress became the mainstay of capitalism’s ideological armor. It confirmed the idea that utopias are “ideal worlds” that do not and cannot exist except in literary fiction, and that the “better and happier life,” (which is the meaning of eutopia), can only be established piecemeal over time by increasing national wealth through market growth (gross national product, in Neo-classical economics). Progress defined as market growth (accompanied by temporary setbacks called downturns, recessions) supported AWOL’s mood of optimism about the future and gave legitimacy to the private capitopias that multiplied with the expansion of the market. These accumulationist success stories made celebrities of the very rich and offered visible proof of capitalism’s real world accomplishment in the creation of wealth. The Great Meltdown, however, delivered a counter-ideological body blow to capitalism’s success story. Recent history suggests that capitalism’s accomplishments have peaked, and the foundation of the whole system is crumbling. The desperate grab by the private for-profit system of wealth creation for a government welfare check and its own public safety net are leading indicators.
The problem with the mature capitalism supporting AWOL today can be seen as threefold: the wealth it produces is for the most part bundled into a small number of private hoards. (In the U.S. more than 80% of financial assets is held by 10% of the population — sociology.ucsc.edu, 2010); it is a wealth production system that does not function at anywhere near full capacity because it is hobbled by the imperative that all production show promise of profit before private wealth is committed. And, additionally, the so-called “free enterprise system” is now so risk averse that it has developed its own type of entitlement programs. Many major investments routinely expect subsidization by state and local tax bases. Cities and county are expected to ante-up, for example, in order to attract major busineses, or to keep them for re-locating.
The great strength of Marx’s critique of capitalism is that while acknowledging the organizing and money-wealth accumulating power of production for market exchange rather than for direct use, he was able to empirically analyze the limiting condition that makes it a contradictory mode of wealth production. In his Grundrisse (705-6) Marx argued that capitalism develops the forces of social production by its “ceaseless striving towards the general form of wealth” (By the “general form of wealth,” he means the conditions for all-round human development). But capitalist development constrains and limits the socially productive forces that bring us closer to “the general form of wealth,” because it opposes capital to labor and makes the losses of the latter a condition of the gains of the former. This contradictory form (capital vs. labor) makes “the quantity of labor employed the determinate factor in the production of wealth.” Every utterance of the capitalist mantra that “labor costs must be brought under control” confirms this presupposition. The progressive historical striving of the contradictory form of “capital vs. labor” is seen in the push to reduce labor costs by “modernizing” production through the introduction of labor-saving technology. “[T]o the degree that large industry develops,” Marx observed, “the creation of real wealth comes to depend less on labour-time and on the amount of labour employed than on the power of the agencies set in motion during labour-time, whose powerful effectiveness. . . depends rather on the general state of science and on the progress of technology, or the application of this science to production.”
At this point in his argument Marx drew a conclusion that has not been well understood or generally accepted because it spoke to the future consequence of the replacement of labor by technology and automation in large-scale capitalist industry. His conclusion projects the end of capitalism and its transformation into a new basis for the production of wealth: “As soon as labor in the direct form has ceased to be the great well-spring of wealth, labour-time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value. … With that, production based on exchange value breaks down, and the direct, material production process is stripped of the form of penury and antithesis.” To follow his reasoning we need to imagine a society in which useful goods production takes place with minimal labor costs. Digitally controlled production lines in the major industries turn out great quantities of needed goods, but only a few workers are employed in a supervisory or engineering capacity. (Clothing and other items requiring low-tech low-paid labor are imported from less industrially developed countries.) This advanced form of production looks like the basis for a capitalist heaven of profitability: low production costs coupled with a high margin of return. In actuality, though, what we have pictured is a society whose economy is in a state of crisis, because its markets are “burdened” by an “insufficiency of aggregate demand,” meaning that consumer buying power has been sorely eroded, a situation much like the one experienced by the participants of AWOL today, where 15 to 20 percent of the working age population is without a wage, salary or commission.
A crisis is generated, Marx says, since a hi-tech level of productive industry that “would diminish the absolute number of labourers, i.e. enable the entire nation to accomplish its total production in a shorter span of time, would cause a revolution, because it would put the bulk of the population out of the running” (Capital III, 263-64) (my emphasis). One can question his conclusion about a revolution on the grounds that capitalism has gone part way down this road before (during the Great Depression of the 1930’s) and no revolution occurred. But in that instance World War II intervened and put the population that was “out of the running” (which at its height was above 30%) back to work, so the question cannot be said to be decided. In any event, Marx’s reasoning here should be seen as the establishment of a coherent paradigm rather than as a prediction. That the paradigm bears weight today is evident in the way it shapes the thinking of those in leadership positions, even if only unconsciously. How else are we to understand the urgent meeting at the White House between the President and the CEO’s of major corporations and the incessant media chatter in an election season about jobs, jobs, jobs?
The logic of the paradigm develops out of the fact that capitalism is not just an economy, but a historically emergent, contradictory social and political formation. The contradiction is visible in its inability to bring an end to its recurring and debilitating crises. Economically, the system solves the ancient problem of abundance by applying the advances of science and technology to industrial production. But socially and (increasingly now) politically it prevents this abundance from being made universally available in the form of “general wealth” by insisting on producing for markets instead of directly for use. Why? Because only by producing for markets can it go on growing and protecting the private money hoards called capital. Thus, because capitalist society is divided against itself (capitalist interests on one side, worker and consumer interests on the other) and unable to resolve its internal contradiction it obstructs its own ideological mission of progress for humanity. The ideology services the addiction (money-hoard accumulation), and the addiction sustains the ideology (progress toward eutopia-for-all). Repetition compulsions (debilitating mental disorders though they be) can attain the appearance of sanity and health when addicts set the behavioral norm of an entire society.
One of the more seductive aspects of the dominant mental disorder rationalized by capitalist ideology is its ability to induce reversal in the political or ideological orientation of its opponents, a process that Antonio Gramsci, the Italian communist leader imprisoned by Mussolini (despite his parliamentary immunity) called transformismo. Gramsci was most interested in the transformismo that moved from liberalism to fascism. Geoff Waite in his Nietzsche’s Corps/e (365-372) has thoroughly examined the variant of transformismo in which liberals and leftists move from Marxism to Nietszcheanism. But there is also a postmodernist Marxism to liberalism’s variant of transformismo. In the post-Golden Age of AWOL, for example, the German philosopher Habermas, who had once associated himself with Marxist views, was persuaded that the capitalist accumulation process had been stabilized, that crises were a thing of the past, and that Marx had missed seeing that when the work of scientists is combined with development of the industrial process surplus value derives not only from labor-power, but “from an increase in productivity per se” (Theory and Practice, 232). This “additional surplus value,” he argued, enabled capitalism to offset the declining rate of profit. Instead of advanced technologically-driven production digging capitalism’s grave, therefore, as Marx claimed, Habermas’ transformismo had it functioning instead to secure and enhance existing hoards of capitalist wealth in perpetuity.
And yet here we are in a historic impasse involving the financial collapse of fictitious capital after a period when the supposed increase of surplus value from “productivity per se” was to have stabilized the system of capitalist wealth accumulation. It is fair to say then that the transformismo of Habermas and the postmodernist thinkers linked to the capitalist success story have come a cropper, especially since we now see that the leading capitalist countries are gearing up to “strip away the gains workers have won over the last 60-70 years,” (my emphasis) as Suzi Weissman says in her review of Jack Rasmus’ Epic Recession: Prelude to Global Depression. She goes on to add that, “There appears to be no satisfactory exit solution from this crisis that preserves present power relationships” (Z Magazine, September 2010). Habermas initiated his transformismo by mistaking value for real wealth (wealth in its general human form). Marx maintained that technologically-enhanced productive forces are capable of creating more real wealth, more goods and services, more education and health care and more leisure time, directly without the need for markets and the money-values that control them, but that the possibility of producing this human material and cultural abundance and doing so with less labor time than is now employed, was blocked by the capitalist requirement that wealth-production preserve “the value form of the product of labor,” meaning that the value surplus extracted from labor had to be converted by the market into sums of cash that increase the original money hoards advanced by capitalists. Habermas’ claim about an addition to surplus value coming from an increase in productivity per se, if it were true, would actually make the capitalist’s conversion problem worse, since after “controlling labor costs” in the production process, they would still face the greater challenge of how to keep this additional surplus value (obtained from “productivity per se”) from slipping out of the money form of value.
Too many goods chasing too few dollars is the Neo-classical economist’s way of describing capitalism’s crisis of over-production, an absurdity that would only be amplified if the Habermasian departure from the “labor theory of value” had any basis in fact. Habermas continued his transformismo toward idealist philosophy in his later works through the 1980’s, which led him to reject historical materialism altogether, in favor of a philosophy of consciousness and “communicative competence,” by which he further distanced himself from Marxian thought. His work (and the distancing process) is analyzed well by Tom Rockmore in Habermas on Historical Materialism. Another example of the Habermasian error occurs in the recent Michael Hardt essay, “The Common in Communism” (in The Idea of Communism). Hardt writes that, “The production of forms of life is becoming the basis of added value” (141). “This is a process,” he says, “in which, when put to work, human faculties, competences, knowledge and affects…are directly productive of value.” But again, while these competences increase the production of real wealth, the capitalist problem remains that of containing this wealth in the value form that feeds capitalist hoards, and this is the reason capitalists restrict the growth of wealth in the general sense, and the reason Marx describes the capitalist system as a “form of penury and antithesis,” a class-based, poverty-creating system.
Slavoj Zizek offers a different and more relevant perspective on the value question with his view that capitalists have moved to contain the new wealth-creating potential of the “general intellect” [knowledge and social cooperation] within the money-value form by supplementing realization through sale of commodities with the revenue streams derived from rent or lease. Bill Gates, he says, “became the richest man on Earth within a couple of decades” because he was able to “successfully privatize” (my emphasis) a particularly important form of the “general intellect” and rent it out to users (First as Tragedy Then As Farce, 145-46). That Zizek does not confuse wealth with capitalist money-value is evident in his recognition that the key to Gates’ success was his use of intellectual property rights designed to insure that the value form of the product of labor (in this case intellectual labor) is preserved. Undermining capitalism’s value form are new commune-ist efforts like the Open Source Movement (members of which have made available, for example, the free download of “OpenOffice.org Writer,” a word-processing program capable of replacing Microsoft’s proprietary WORD, which has yet to go generic). This example highlights the conflict between the impoverishing privatization efforts of capitalist accumulators and unrestricted wealth-creating commune-ist efforts. The intensification of this conflict and its spread beyond the area of the “general intellect” is not difficult to foresee. The next section discusses the developing conditions that are favorable for a global transformation of social production that would bring about the creation of wealth in its “general form”.
The current situation in America is by way of being something of a psychiatrical clinic…. [P]erhaps the commonest and plainest evidence of…unbalanced mentality is to be seen in a certain fearsome and feverish credulity with which a large proportion of Americans are affected…. [T]here is a visible lack of composure and logical coherence, both in what they will believe and in what they are ready to do about it. –Thorstein Veblen
The aftermath of the great system-threatening Meltdown has left “late” capitalism with a major ideological dilemma. This is evident from the fact that the current power elite of the capitalist class thinks its financial engine has merely malfunctioned due to a flaw that needs some time to repair, while another subordinate but vociferous class element believes both that liberal government wrecked the engine and that it now needs to be purged of its humanitarian and environmentalist baggage in the interest of recovering and preserving capitalism’s historic “natural right” to accumulation, with all the pain of historical regression that entails. The Tea Party, based on the resources of a few deluded billionaires, seeks to re-animate the 17th and 18th Century capitalist mode of accumulation, although it is doubtful anyone in this ersatz “movement” is aware of the pathological brutality with which the primitive accumulations of capital were initially carried out. One of the more absurdly opportunistic post-Meltdown ploys is the attempt to re-animate the corpse of free-market fundamentalism and blame Government for the crisis.
The transparency of the ploy, as Geoff Waite has shown in his tracking of Nietzsche’s followers, lies in the fact that the corpse is one thing and the corps that elevates it as their symbol of freedom is an entirely different, manipulated body. The corpse the Tea Party carries is grotesque historical putrefaction, but the corps take no notice. They are either accomplished actors or have a genuine olfactory impairment. How the collusion of the Wall St. Party of Capitalist-Socialism (socialism for capitalists) with the sociopathic Tea Party of No Socialism (for anybody) will play out remains to be seen. What neither of these parties is able to recognize, let alone deal with (since they dwell exclusively in the protective bubble of the present) are the forces of global re-structuration now pressing upon humanity’s metabolism with nature.
Nassim Nicholas Taleb’s New York Times bestseller The Black Swan, dealing with uncertainty and our inability to predict rare events, popularized the notion of “future blindness,” which he unfortunately treated exclusively as an individual failing. This makes his book considerably less brilliant and prophetic than it could have been. The real future blindness is a system-reinforced debilitating condition in which an entire society behaves as though the abnormal is normal and therefore fails to respond to a growing threat – in this case the negative negligent consequences of its own designing actions. The leading epistemological categories shaping future global re-structuration, categories that unfold and give definition to these developing consequences, are now familiar to us under the headings of “global warming” (also, “climate change”) and “peak oil.”
Global warming science was recently given a major push by the New York Times in a winter solstice, 2010, article by Justin Gillis. The purpose of Gillis’ essay and of the prominence given it by the NYT is both to celebrate the work of Dr. Charles Keeling and to bring us up to speed on the science that legitimates the warnings of scientists well versed in climate change theory. Keeling is now celebrated for having invented and assembled the technological device (an “analyzer”) that measures carbon dioxide gas in the atmosphere. When he installed his device on Mauna Loa, Hawaii, in the 1950’s, it measured the amount of CO2 at 310 ppm, or parts per million. The device is automatic and measures continuously. In 2005, the year Keeling died, it measured CO2 at 380 ppm. The famous “Keeling Curve” charting the upward movement of the CO2 measurement is now set in stone in a wall of the National Science Foundation in Washington. His successful effort led to government backing and the duplication of CO2 monitoring stations around the world. As a result the Keeling curve is now well-established hard science, verifying that the “greenhouse gas” that warms planet earth has not only been increasing, but that the rate of accumulation is increasing. Rate of accumulation increase is well-understood by capitalists, since as far as profits are concerned an increasing rate signals the happy outcome of rolling-in-dough success. In the case of global warming, however, it signals the exact opposite.
Keeling stated this well in his 1998 reply to claims that global warming was a myth when he pointed out that the real myth was believing that “natural resources and the ability of the earth’s habitable regions to absorb the impacts of human activities are limitless.” With the consumption of the fossil fuels (coal, gas and oil) that powered the industrial revolution, CO2 levels in the atmosphere rose, and are now about 40% higher than before industrial consumption of these fuels began. As for the rate of increase, Gillis points out in his essay that half the extra CO2 now in the atmosphere was put there just since the late 70’s.
The central epistemological status of the human-induced climate change category was cemented in place by scientific studies that followed Keeling’s achievement in measuring atmospheric CO2. Ice core samples of trapped air bubbles have since revealed that over the past 800,000 years CO2 levels oscillated between 200 and 300 ppm, and that at the time of the onset of the industrial revolution two hundred and fifty years ago the level was around 280 ppm. Justin Gillis’ essay reports that by the conclusion of the failed negotiations to set binding emission targets this past December in Cancun, Mexico, Keeling’s Mauna Loa station recorded a CO2 level of 390. Keeling’s son, Ralph Keeling, a climate scientist who took over when his father died suddenly of a heart attack, estimates a reading level of 400 ppm by 2014. If his estimate is correct, a steady rate of increase would push the figure close to 500 ppm by mid-century. A rising rate of increase will push the figure even higher. Some of the consequences of human-induced global warming are already visible in melting glaciers and in the dramatic melting of Arctic sea ice, which for the first time this year opened the prospect of a commercial shipping lane across the Arctic Sea in the summer season that will save time and fuel consumption. This looks like both a commercial benefit and an environmental plus, until one factors in the albedo effect. Albedo is the reflecting power of a surface. With the summer ice gone, so is most of the albedo effect that would return sunlight energy back into space. Instead it is absorbed by and adds heat to the Arctic Ocean and contributes to the overall transformation of the region. Warming is higher over land and is amplified at the poles. Climate scientists estimate that as the amount of CO2 exceeds 500 ppm, sea level rise will be calamitous, and an ominous feedback effect will have kicked in — namely, melting permafrost in what will have become bogs in the Arctic tundra regions will begin releasing massive amounts of methane into the atmosphere. Methane is the primary constituent of natural gas and is 20 times more effective as a heat-trapping greenhouse gas than CO2.
It is a considerable irony, but by no means an accident, that global capitalism, which is confronted with a planetary crisis amounting to a turning point in its dismissal and disregard of the environment, will now be forced to deal with this crisis at a time when the oil production that has fueled its global success story has peaked. It must be acknowledged at the outset that Peak Oil science is not as sound and certain as the science that underlies Global Warming. The main reason for this has to do with the fact that the data on oil production and reserves is not open source, but is assembled and tallied by the International Energy Agency from member government data. In 2009 two Agency whistle-blowers told The Guardian that the “peak-oil zone” had already occurred and that Agency’s then current figures were inflated because member governments feared a report of falling crude oil output in the near term could cause markets to respond with panic. In its 2010 “World Energy Outlook” report, however, the Agency acknowledged that Peak Oil has already occurred, “probably,” in 2006. The term “Peak Oil” expresses the point at which the world’s conventional crude oil production plateaus and begins declining. Oil availability to meet rising demand is expected to continue to increase due to production of the more expensive unconventional oil wrung from the Canadian tar sands, from “fracking” (for natural gas and shale oil), from deep ocean drilling (think BP Deep Horizon rig disaster in the Gulf of Mexico) and biofuels. This increase is expected to peak around 2035. This rising availability of oil from “extreme technologies” is contingent, of course on rising world demand, but the rise in demand is strong because the developing world, especially China and India, the world’s most populous countries, continue their rapid rate of growth (China in 2006 and 2007 opened nearly one new coal-fired power plant per week – Ehrlich and Ehrlich, 294). We can say, then, that the advent of Peak Oil marks a turning point. Its importance consists in signaling that the power generator of AWOL’s capitalist paradigm (which has been exported globally) has an irreversible fuel problem.
For capitalism a perfect storm is brewing (some would say already raging). There is no cheap practical substitute for free crude oil that pours out of the ground after drilling, ready to be “cracked” by technology into all the products that sustain AWOL and much of the world’s cheap food supply. The main source of fertilizer, pesticides, and herbicides is oil. All farm equipment, irrigation, and transportation is powered by oil. It takes seven gallons of oil to produce a synthetic tire, with 300 million tires now consumed in the U.S. annually. Add in a motorized China and India, and the implications of Peak Oil become obvious. One can get a sense of what the perfect storm is likely to bring by drawing an analogy from a concrete historical example. The Arab Oil Embargo episode (October, 1973 to March, 17, 1974) brought sharp price rises, long lines at the pumps, purchase limits of 10 gallons, a nation-wide truck drivers strike involving violence, an “Energy Czar,” and gas and fuel oil rationing plans. In addition, one has to look at the effects on consumer goods. The AWOL paradigm uses countless everyday items made from oil. As an example, according to Grist.org, AWOL consumes 100 billion plastic shopping bags per year, an amount that requires 38 million barrels of oil at a present cost of $20 billion.
Throw in plastic bottles and diapers and we get a picture of the first things to go as the consequences of Peak Oil begin to be felt in the marketplace. No substitute source material of comparable “plasticity” and cost is available (if it were, it would already be in use). Although science may develop substitutes, they will require energy consumption to synthesize. And Peak Oil tells us that the cheapest source of multipurpose energy is diminishing. Solar energy is or will eventually be the cheapest source of energy, but it does not come in the form of organic molecules that can be “cracked” and processed into a variety of products. We depend on plant photosynthesis for that. Bacteriological production of the needed molecules is a possibility at some point in the future. But the Peak Oil era started yesterday. What it means generally is that AWOL in its present capitalist paradigm is not sustainable through the lifetime of a post-Meltdown new-born. With this in mind, the pricing of oil according to Neo-liberal economic theory tells us something important. By the time the price of oil, driven up by demand for diminishing and harder-to-get-at resources, closes in on $200+ a barrel, global re-structuration of necessity will be well underway. The relevant question is what form it will take. Present “foresight capability” (the reverse of future blindness) suggests several possibilities, depending on whether reasoning begins with collapse theory or conversion theory.
Collapse theory in Zizek’s adaptation of Dupuy’s thinking — “to confront the disaster we should first perceive it as our fate” (First As Tragedy, Then as Farce, 151) — projects a future event we can avoid by “fearlessly” rehabilitating the idea of preventive action and mobilizing ourselves “to perform the act that will change destiny…” (ibid.). An entirely different version of collapse theory is seen in Bill McKibben’s Eaarth: Making a Life on a Tough New Planet, which presupposes that we have waited too long, that humanity has pushed atmospheric CO2 beyond 350 ppm, the planet Earth equilibrium level, and that we now inhabit a new tougher planet Eaarth. This means in a sense that the collapse is not only unavoidable, it is already underway. McKibben’s answer to living (somewhat well) on a tough new planet is for “modern society” to get off the high flying path of relentless economic expansion and reorganize “based on smart maintenance of resources.” Although he makes no mention of the capitalist paradigm, the general aim of his program is to greed down to avoid the worst consequences of collapse by making an orderly retreat from unlimited growth. The problem of this approach, besides ignoring the capitalist elephant in the room, is that it proposes to greed down to localized organic food production in a world whose food supply is dependent on the subsidized megafarms of agribusiness. The fact is that localized organic food production, for all its ecological and healthful advantages, feeds populations that are relatively well-off. The corn, grains and soybeans grown with fertilizers synthesized from oil on farms that produce for the commodity exchanges controlled by agribusiness are what feeds the world’s poor through the corporate-capitalist food chain.
Conversion theory has the advantage of the Marxist critique of capitalism – the historical mode of production, social organization, and derelict, future-blind ideology that, since its origins two and half centuries ago, has set in place what is now the principal roadblock to the necessary adaptations for providing humanity with a healthy and sustainable future. Earth-system pressures for re-structuration forces coporate-capitalism to be on the defensive. And because it must defend the growth of existing money-hoards called “equity or “capital investments,” it cannot respond with alacrity and intelligence to the need for carbon neutrality through the development and use of alternative energies. The Capital system is locked into an infrastructural trajectory dependent on fossil fuel. This is evident from the fact that fossil fuel production is still being subsidized. At the same time that the value claim of existing money-hoards is being defended, the greatest resource for conversion to a sustainable interchange with nature is being downsized, marginalized or made idle. There is enough labor-power held hostage, misdirected into military production and war-service and tied up in the hoard-increasing schemes of finance and insurance to transform humanity’s global metabolism with nature. Re-unionization of the labor force and reversal of the marginalization of co-operative non-market activity by the capitalist market imperative will create a surge of social and technological re-structuration. A commune-ist directed design for global sustainability would safeguard the commons while both increasing the “general wealth” of humanity and the NPP (net primary production) of the entire biosphere. To this end the global Capital system obstructs all attempts at a sustainable restructuration while it tries to figure out how it can repair its delusional “flaws” in order to go on pirating from both labor and nature in order to continue hoarding value.
The grim reality for AWOL, and for the entire developed world, is that the for-profit economic system that it depends on “to deliver the goods” is stagnant and dying. Even with the continuing plunder of the global commons and the massive subsidies it extracts from raids on the tax base combined with “equity injections” derived from mortgaging the future of entire societies, capitalism is still unable to succeed in its true mission of proprietary hoard accumulation. The stagnation of its traditional method expanding pools of capital led to the fraud schemes of the devious Wall St. financial sector, which “manufactured” fictitious capital out of debt and sold it globally to future-blind investors. The culmination of this greed-driven repetition compulsion was the collapse we call the Meltdown of 2008. Now the whole interlocking economic (hoard seeking) and political (hoard serving) enterprise stands like a cracked colossus blocking the path to a sustainable future for the world’s population. Without collective resistance, it will march under its banner of “PROGRESS” down the backward path toward more aggressive and senseless exploitation of labor, more looting of the natural world, more enhancement of surveillance, and more regimen under the cover of “security.” What sane alternative is there but to assist in its interment and in the preparation of a historical marker for its grave.
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[Thank you Peter for permission to post this here]
This essay was first published in Issue 35 of the Left Curve.
The writer is poet-philosopher associate of the Left Curve. His recent publications are Night & Day: New and Selected Poems (2010) and The Original Wisdom of the Dao De Jing (2012).