Chapter Eleven

Alan_header


A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines. 

Chapter Eleven
Booms and Busts
Time Range: 1985-Present

The bull market of the 1980s saw greater numbers of people investing and realizing larger returns. A whole new financial investing industry was growing up alongside corporate growth. Workers were working longer hours and taking on second jobs, but day traders could get rich in an instant. As we headed into the ’90s, the political focus was on the economy, stupid. A new president argued that government could smooth out the economy’s rough edges, and by playing by the rules and working hard, we might finally see an end to capitalism’s wild gyrations.

Dot-Com Crash, Silicon Valley, March 2000

On March 20, 2000, the NASDAQ Composite index, tracking stocks heavily weighted with technology companies, peaked at 5,132.53. On average, stock prices for these companies had more than doubled from a year earlier. Venture capital investment provided companies with high levels of cash, giving birth to what became known as “burn rates.” Stock analysts saw no limit to profits soaring, and MBA programs were hotbeds of “flipping” business ideas into cash and then getting out. 

Over the next 18 months, however, the market value of these technology companies dropped by $5 trillion. In the fallout, which included several bankruptcies, unethical practices and wild excesses were made public at companies such as WorldCom, NorthPoint Communications, and Global Crossing. Americans were shocked and alarmed by stories of greed and excess. However, the notion arose that a few rotten apples shouldn’t upset the whole apple cart. 

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HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.

Many rushed in to affirm the capitalist system itself was a good one, only those who acted illegally should be punished.  Some, such as Henry Blodget, argued that excesses are built into the system due to human nature and busts are simply the price we pay for the vitality of capitalism.  REALLY?  Capitalism’s roots lay in a belief that human destiny was malleable, yet the belief that human nature is unchanging persists.

How human it is to live too comfortably with our contradictions.


Bracket-topFLASH POINTS

 Housing Bubble Popped, December 2008 

“Well, we did it again. Only eight years after the last big financial boom ended in disaster, we’re now in the migraine hangover of an even bigger one — a global housing and debt bubble whose bursting has wiped out tens of trillions of dollars of wealth and brought the world to the edge of a second Great Depression… 

“Predatory lenders did bamboozle some people into loans and houses they couldn’t afford. The SEC and other regulators did miss opportunities to curb some of the more egregious behavior. Alan Greenspan did keep interest rates too low for too long (and if you’re looking for the single biggest cause of the housing bubble, this is it). Some short-sellers did spread negative rumors. And, Lord knows, many of us got greedy, checked our brains at the door, and heard what we wanted to hear. 

“But most bubbles are the product of more than just bad faith, or incompetence, or rank stupidity; the interaction of human psychology with a market economy practically ensures that they will form. In this sense, bubbles are perfectly rational — or at least they’re a rational and unavoidable by-product of capitalism (which, as Winston Churchill might have said, is the worst economic system on the planet except for all the others). Technology and circumstances change, but the human animal doesn’t. And markets are ultimately about people.” 

~ Henry Blodget, “Why Wall Street Always Blows It,” Atlantic Monthly

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Henry Blodget was the tech-stock analyst at Merrill Lynch vilified for his role in the dot-com crash. His comments in the Atlantic Monthly article suggested that bubbles in free-market capitalism were a natural consequence of human nature functioning with competing economic incentives. He pointed out that immediate economic self-interest naturally generated individual decisions removed and often at odds with collective consequences. Due to human nature, he seemed to suggest, be warned, but on the other hand, get used to it.

 

Next Week:
Chapter Twelve: Occupy Wall Street
“I have a feeling that right now, this human experiment
on planet Earth is hitting the wall!” ~ Kalle Lasn, Estonian-born former adman lamenting the
environmental and psychological costs of modern capitalism. He suggested in his
magazine, Adbusters, that a September
17 occupation of Wall Street might be a good idea.

Chapter Ten

Alan_header


A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines. 

Chapter Ten
Corporate Persons
What Does Not Serve Me Shall Not Be My Concern
Time Range: 1985-Present

Who even knew that corporations had legal rights as if they were actual persons? In a strange twist of legal gymnastics, the originating idea of a corporation being birthed and legitimized by a government grant had been transformed into a corporate body beholden to no one but its owners.

Economic self-interest was the law of the land, and the corporate persons cultivated in such an environment could be as sweet as your dear auntie or as self-serving and weird as the guy down the block wearing just a raincoat. However, both would be legally obligated to prioritize their shareholder economic interests over other concerns such as the corporation’s effect on human beings or the earth’s resources. Economists even have language for this. Externality is the effect on others, positive or negative, by corporate action that is not calculated into the cost of the goods or services.

“An externality,” wrote the economist Milton Friedman, “is the effect of a transaction … on a third party who has not consented to or played any role in the carrying out of that transaction.” He offers a relatively benign example of a man who must clean his shirt more often due to smoke emissions from a local power plant. He tends to minimize the effects by calling them “neighborhood effects” or “spillovers.” In a free market, positive and negative externalities theoretically cancel each other out or are eventually internalized by the corporation. However, a less cheerful view might look something like this: persons who dissociate their actions from their effects on others are called sociopaths.
 

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HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.

Sociopathic corporate persons would not hesitate to market cigarettes or foods high in toxic chemicals, trans fats, sugar, and salt. They would simply point to positive externalities such as jobs being created or the social benefits of smoking and snack foods. They would feel unjustly picked on, pointing out that government intervention is a slippery slope leading to arbitrary interventions. What next, they would ask, bread with too many carbohydrates? The same logic would be offered as a defense of corporations generating air and water pollution, battling safety regulations, depleting fish stocks, wiping out forests, or underfunding pension funds. Why pick on us? 

Marx’s warning that capitalism would spawn a consciousness of immediate economic self-interest takes on darker shading when extrapolated through corporate externalities influencing climate change, epidemic rates of diabetes and obesity, international instability, and increasing numbers of retirees without adequate access to basic needs of food, housing, and health care. The point is not that these things are easily fixed or that government will always get the balancing act right, but that corporate sociopaths, with society’s legal approval, have a built-in incentive to muddy the water.

Bracket-topFLASH POINTS
Big
Tobacco says that smoking is about freedom and choices. But a battalion of
experts at Emory is showing that better choices can be made—and that not much
about tobacco is free…

“Industries like gambling, alcohol, and tobacco are ‘societal cancers,’ says [Ray] Gangarosa, that cause ‘exceptional social harm, including death, disability, addiction, and secondhand injury, on the scale of a commercial holocaust . . . (and have) escaped society’s usual controls by shifting blame for harmful commerce to their consumers, and then shifting associated downstream costs onto society. We must hold these harmful industries accountable for their costs.’

Gangarosa, who is working toward a PhD in epidemiology at RSPH [Rollins School of Public Health], was disappointed in the Master Settlement Agreement, in which he feels ‘some terrible compromises were made.’ But he acknowledges the complexity of the issue. ‘The tobacco industry doesn’t make enough money to pay for the social harm that they do. We would bankrupt them,’ says Gangarosa. ‘But if we don’t ask them to pay the social cost, then they are effectively being subsidized.’”

~ Public Health, Spring 2002

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“After getting called out by an environmental group, General Motors has pulled support from the Heartland Institute, a Chicago-based nonprofit well-known for attacking the science behind global warming and climate change.

The automaker told the Heartland Institute last week that it won’t be making further donations, spokesman Greg Martin said. At a speech earlier this month, GM CEO Dan Akerson said his company is running its business under the assumption that climate change is real.” 
~ Huffington Post, March 30, 2012

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“Corporations Are Not People”

“Can grassroots victory in Green Mountain state spark national movement?

“With some results still yet to come in, reports confirm that at least 55 towns in Vermont approved municipal resolutions calling for an end to big money’s dominance in US politics and calling for a Constitutional amendment to reverse the Supreme Court’s ‘Citizens United’ decision that has opened the floodgates for secretive, unlimited campaign spending in US elections.

“The initiatives called on the Vermont Legislature and the state’s congressional delegation to support a constitutional amendment that clarifies that ‘money is not speech and corporations are not people.’”
~ Common Dreams, March 7, 2012

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Next Week:
Chapter Eleven: Booms and Busts
The bull market of the 1980s saw greater numbers of people investing and realizing larger returns. A whole new financial investing industry was growing up alongside corporate growth. Workers were working longer hours and taking on second jobs, but day traders could get rich in an instant. As we headed into the ’90s, the political focus was on the economy, stupid. A new president argued that government could smooth out the economy’s rough edges, and by playing by the rules and working hard, we might finally see an end to capitalism’s wild gyrations.

 

Chapter Seven, Part One

Alan_header


A serial journal of cogent reflections and irreverent insights on the social effects of capitalism and the roots of partisan politics. Pairing prose with HDR photography and “flash points” drawn from current and historical perspectives, the author seeks to recover lost wisdom and courageous action beyond the shouting and noise of today’s headlines. 

Chapter Seven, Part One
How Wealth Became Concentrated and the Poor Were to Blame: “Paupers are Everywhere”
1962

“Paupers are everywhere.”
~ Complaint heard from Queen Elizabeth, late 16th century, after returning from travels in the English countryside.

Michael Harrington, political activist, socialist, and professor of political science at Queens College, was no Queen Elizabeth, but his research on poverty came to the same conclusion. As he wrote in his book The Other America, he was horrified to find that 40 to 50 million Americans lived in poverty, a fifth to a quarter of the entire US population in 1962. Where were they hiding?

He believed that a subtle shift had taken place in the psychology and culture of poverty. Whereas the tenements of the early 20th century were seething with a mixture of races and immigrants, there was enough diversity of intelligence, backgrounds, and aspirations to create a modicum of hope and vitality. There was poverty, disease, and poor housing in the past, but they were circumstantial obstacles to be overcome in a country that could provide social mobility and the promise of riches. Something about the very nature of poverty had changed from these historical antecedents.

My father and mother were never rich, but through hard work and frugality they found a way to make a living and see that their children might have more education than they did. There was hope for a better future. In the ’30s, when my parents were teenagers, the context for poverty was the Depression, and it gave them a collective sense of shared hardship and sacrifice. Poverty was a marker not so much of the person as of the times, a condition of society. The poor, which included tens of millions on low wages, had more of a voice politically and were not necessarily stigmatized by their circumstances. The 1930s were also a turning point for unions, which were able to flex their collective muscle and found themselves, just as Marx predicted, able to aggressively pursue their members’ own economic self-interest relative to wages and work rules. 

Becoming Conscious of Capitalism - Chapter 7

HDR (High Dynamic Range) Photography by Alan Briskin: multiple shots at different exposures are combined into one image in order to show “more of what’s there”.

In the late 1930s and early ’40s, the world itself was at risk. The United States went from an economic depression into a fight with an enemy believed to be the incarnation of evil. These were tough times, and the sheer exuberance of victory over evil by the mid-’40s made it easier to believe that the forces of poverty were lessening as well. In the late ’50s and early ’60s, when my parents were finally finding success and Harrington did his research, there may have been a willingness to overlook poverty as a still important aspect of the social fabric requiring attention.

Poverty, as Harrington saw it, had now matured into something separate, multigenerational, and psychological. Separate in the sense that there were whole towns, cities, or parts of cities throughout the United States that were stuck in a downward spiral. Economic and social vitality was in the business hubs of cities, in suburbs where the affluent raised their children, and along geographic corridors, not in rural areas or urban centers, where poverty was concentrated.

Small towns were adversely affected by the greater dependence on skilled labor and technology. Smaller farms were being marginalized by greater mechanization and corporatization. Minorities increasingly congregated within inner cities, which were referred to as slums and characterized by a pervasive attitude of futility. Those who could exit such places did, and the remaining were hemmed in by tight social beliefs and attitudes. The more rural or isolated an area, the more cut off from diverse lifestyles and perspectives, the more insulated and rigid became the social milieu, and the more hostile and unforgiving was its view of others.

No longer was poverty simply across the tracks; it was a contagious mindset of scarcity, fear, and resentments. It was passed down generation after generation and socially reinforced by members of its own community. Poverty and economic hardship manifested psychologically through symptoms of anger, cynicism, and intolerance. The swelling anger that Marx predicted was not crystallized between workers and owners of capital. No, it was fragmented across race, religious, geographical, and educational divisions.

Where were the poor? In the ’60s, the poor were increasingly becoming invisible — the aged tucked away in old-age homes, poor children in failing schools, minorities in slums, rural poor in the countryside just a stone’s throw away from tourist travel. A decade later, when I worked at a state prison located in St. Johnsbury, Vermont, my job was to find local employment for inmates finishing their sentences. My territory was called the Northeast Kingdom, an area as poor as Appalachia. A tourist would never have known this from driving through the area, however — a year-round recreation destination for skiing, fall foliage, and maple syrup. How sweet it might have looked to a person just passing through.

Who were the poor? If you measured the poor by material possessions such as a television set, a refrigerator, or even a decent pair of sneakers, nearly everyone was well off. If you measured only by income, you included many still starting out toward success. If you measured by psychological factors, you risked subjective prejudice. The very idea of poverty was becoming porous, fluid, and ambiguous. Poverty was not only physically becoming separate from society; it was also psychologically separating itself from social awareness, as something to be avoided. Poverty was no longer circumstantial, as it had been for my parents, or temporary until one found productive outlets; it was an all-encompassing and pitiful predicament to be in. Harrington believed, however, that if we looked at poverty with an open heart and mind, social conscience would well up in our breast. Over a million copies of his book were purchased, a surprising number to be sure, and suggesting that something unsettled was still nagging in the American psyche.

Next Week: Chapter Seven, Part Two: What Should Be Done with the Poor? 
Harrington understood something that has only recently been supported statistically by studying geographic zip codes. Harrington argued that poverty was a toxic mix of factors that included poor health, minimal access to health care, high-crime neighborhoods, hostile police presence, failing schools, generational cycles of unemployment, low income, family instability, and inadequate diet. Overcoming any one of these factors was possible, but together they represented a vicious cycle of cumulative obstacles whose aggregate outcome was failure. For example, I have estimated that there are zip codes in my hometown of Oakland, California, in which the chances of an eighth grader eventually graduating from a four-year college are less than 6%.