My grandfather - whom I never knew - was Jewish, and I married into a Jewish-Israeli family, but I belong neither to the race nor the faith. I have always disliked organized religion and any form of tribalism, both of which tend to inspire their adherents with feelings of exclusivity and superiority over those who do not share the same allegiances. I see myself, romantically, as a citizen of the world; though if anyone thinks this an easy option they have not truly experienced the loneliness and isolation such a position involves. To have no tribe, to join in no faith too often leaves one standing at the periphery of human warmth, drawn in, if at all, as a guest, and looked upon as a stranger - a word whose significance Jews as much as anyone will recognize.
This sense of being an outsider, coupled with the personal baggage of being a scion of an impoverished, English working-class family has no doubt spurred my hatred of the class system, of racism and of neo-liberal capitalism - all forms of oppression against the weak and the disadvantaged.
The Holocaust stands out as one of the most extreme examples of such oppression, but I have long questioned whether it's true significance - not just to the Jewish people but to Humanity - has been adequately understood. Some time ago, I wrote an essay in reaction to Claude Lanzmann's Holocaust documentary in which I tried to grasp the meaning of that horrific event for all of us. Here is an extract:
There is a sense in which we are indeed all guilty. However much the Nazi atrocities may repel us, they were committed by people; the same people who write poetry and music, who can speak to us in language of sumptuous beauty; the same people as we ourselves are. Somehow, along the road of human development, we reached a fork and were led in a direction of unspeakable criminality, of which the Holocaust is simply a recent and terrible example. We have all been forced along that road; and the experience has left an indelible stain on our skin. No serious definition of what it means to be human can avoid that stain. Our free will, of which we are so proud, has been shown to be a freedom to create hell. The Nazis made one such hell; but they are not alone. Wherever the diseases of blind prejudice, unthinking xenophobia, or just petty racial arrogance lead us to see other men and women as essentially different from ourselves, inferior, less intelligent, alien, evil perhaps and threatening, then we offer ourselves a licence to treat them as disposable items, creatures to be coerced or, if necessary, extinguished. None of us is immune to such spiritual infections.
It would be easy and comfortable to blame circumstances, or the evil play of chance, for this state of affairs. But it is not life or circumstances that are evil, only we who make them so. And we will continue to do so so long as we believe that we alone are glorious in the sight of God; so long as we visit hatred and contempt upon the children of others; so long as we cannot see that all of us are Nazis just as much as we are Jews.
In this context, I offer here a series of images of the 2008 Israeli attack on Gaza. All but one of the collages were sent to me by a friend. The quotations accompanying each image were added by me. I don't own the copyright to any of the photographs and, in the absence of any information to the contrary, I am assuming they're in the public domain.
Saturday, January 24, 2009
Saturday, January 10, 2009
Greed, Privatization and the Financial Crisis
News clips of shoppers fighting each other to reach the bargains at post Christmas sales remind us that greed is not confined to financial wheeler dealers. Our annual end-of-year shopping frenzy is not a consequence of shortages, as might have been the case in post-war Germany or communist Russia, but of surpluses. Stores are laden with unsold goods for one reason alone: because no one really needs them. That, in a nutshell, is how our economic system works: namely by inducing people to buy things they don't need.
Few better examples exist than New York mayor Rudolph Giuliani's post 9/11 plea for people to return to New York and shop. Commerce, in the end, was more critical to the city's health than the loss of a couple of iconic buildings and a few thousand lives. Shopping - constant, unremitting acquisition of material goods - fuels our way of life. If our lust for new cars, new clothes, new refrigerators, new houses, falters - capitalism falters too. Wall Street's recent scandals - greed written large - are merely a wide-screen version of a soap opera played out daily in every high street in the hemisphere.
If our political leaders are to be believed, the way to resolve the current crisis is to inject a few billion dollars into failing corporations, throw some ne'er-do-well hot-shots into jail, and tinker with the financial regulations. Then we can all go back to buying and selling, and all will be fine in the best of all possible worlds. Right?
Well, maybe not.
For the first time in decades, dissenting voices are beginning to question the consensus. Doubts are being raised about the long-term viability of our economic system. Marx is finding new advocates and not without reason.
Marxist theory tells us that for the system to work, most of us must spend our lives enriching the owners of capital. This seems to be precisely what has occurred.
Those hundreds of thousands, maybe millions who took out mortgages that were beyond their means are a direct reflection of increasing inequality and - yes - poverty. People were promised the dream of home ownership and then found - too late - that carpet-baggers, corporate directors, and feckless politicians had placed it beyond their reach.
Hence why the response of Western governments to the current crisis gives cause for alarm. Effectively, the corporate sector that got us into this mess is now proposed as the only viable means of getting us out of it.
A more bizarre solution could hardly be imagined. If we turn from the current crisis to a more fundamental one, like global warming, the absurdity stands out, perhaps, more clearly. Without "incentives", industry will do little or nothing to help clean up our environment: such is the message from Washington and Westminster. Yet expecting global warming to be resolved through the same greed that created the problem - and that creates periodical economic crises too - is like inviting a thief who's just stolen your purse to burglarize your house as well. Capitalism isn't concerned with social welfare - and the notion so beloved of neo-liberals that individual selfishness promotes the general good is almost too easy to refute. That it continues to hold sway over Western governments and their economic soothsayers probably reflects the familiar human difficulty of owning up to error.
Though government trust in the private sector to do things better remains unswerving, like gospel it rests less on fact than on faith. Let's take the UK as an example. In addition to building the National Health Service and an education system that has produced more than our fair share of Nobel prize winners, the state runs military, police and fire services, and has developed almost all our transportation infrastructure. It created most of our utilities and ran them superbly until they were practically given away to the private sector. Along with allies, it helped to orchestrate the defeat of fascism in WWII. In the past 100 years, the state's achievements on behalf of the citizenry have been nothing short of spectacular.
Still, we are told that if most public services were subject to market discipline, they would be more efficient and cost-effective. It is a baseless argument. In the commercial sector, the consequences of inefficiency are bankruptcy or closure -- and there are no public service obligations such as delivering mail to remote "unprofitable" areas or treating impoverished patients. Unfortunately, water and electricity supplies, rail schedules and rubbish collection can't be closed down if the companies that run these services are poorly managed or unprofitable. Instead, they go cap-in-hand to the government for subsidies or price increases. In place of market discipline, we get licensed extortion -- often accompanied by a net reduction in the quality of service. My water, gas and electricity supplies have not improved since privatization, they have simply become more expensive.
This does not mean, of course, that the public sector always gets things right. Incompetency is a human failing - and an ubiquitous one. But the idea that it is, by definition, blundering, inefficient, and unresponsive is not based on evidence but on ideology riding on a cloud of woolly thinking.
Deaf both to the lessons of history and to the cries of public unease, ministers nevertheless continue to shed state assets and the responsibilities that go with them. In the UK, the latest divestiture has been of our remaining participation in the Aldermaston Atomic Weapons establishment. Next to go will be a handsome share of Royal Mail. Details of such transactions, of course, remain secret, in order - so we are told - to protect "commercial confidentiality". This repellent phrase now stands on a par with the Official Secrets Act as one of the UK government's prime tools for evading public scrutiny. And this despite the obvious - and obviously inconvenient - fact that publicly-owned facilities belong to the tax payer (a.k.a. you and me) and that, as shareholders, we should have a right to know what deals are being struck on our behalf.
Kropotkin pointed out that the price of a house in Paris, which only a rich man could afford, lay not only in the bricks and mortar and the patch of earth on which it stood, but also in the city itself with its roads and sewers, theatres and museums, schools and hospitals all constructed - just like the house - with the sweat and toil of labourers too poor to rent the meanest of its rooms. Public investment in social infrastructure constitutes the bedrock of economic activity without which private enterprise could not function. Taxpayers are by definition investors in private enterprise, and privatization is, therefore, largely a transfer into private hands of the means of producing what Marx called "surplus value" - publicly-generated profits.
If, as I suspect, our current economic arrangements are inadequate to meet the future needs of humanity and of the planet - then our first question must be to decide whether or not we care.
Assuming we do, then the challenge that faces us - and that sooner or later we will have to confront - is how to develop an alternative economic model geared to the general welfare rather than individual enrichment, to meeting need rather than stimulating greed, to preservation of the environment rather than its exploitation. Exactly how such a model could work is open to debate; but it's a sure bet that greed, superfluous consumption, and privatization of public assets won't be in the plan.
Few better examples exist than New York mayor Rudolph Giuliani's post 9/11 plea for people to return to New York and shop. Commerce, in the end, was more critical to the city's health than the loss of a couple of iconic buildings and a few thousand lives. Shopping - constant, unremitting acquisition of material goods - fuels our way of life. If our lust for new cars, new clothes, new refrigerators, new houses, falters - capitalism falters too. Wall Street's recent scandals - greed written large - are merely a wide-screen version of a soap opera played out daily in every high street in the hemisphere.
If our political leaders are to be believed, the way to resolve the current crisis is to inject a few billion dollars into failing corporations, throw some ne'er-do-well hot-shots into jail, and tinker with the financial regulations. Then we can all go back to buying and selling, and all will be fine in the best of all possible worlds. Right?
Well, maybe not.
For the first time in decades, dissenting voices are beginning to question the consensus. Doubts are being raised about the long-term viability of our economic system. Marx is finding new advocates and not without reason.
Marxist theory tells us that for the system to work, most of us must spend our lives enriching the owners of capital. This seems to be precisely what has occurred.
Those hundreds of thousands, maybe millions who took out mortgages that were beyond their means are a direct reflection of increasing inequality and - yes - poverty. People were promised the dream of home ownership and then found - too late - that carpet-baggers, corporate directors, and feckless politicians had placed it beyond their reach.
Hence why the response of Western governments to the current crisis gives cause for alarm. Effectively, the corporate sector that got us into this mess is now proposed as the only viable means of getting us out of it.
A more bizarre solution could hardly be imagined. If we turn from the current crisis to a more fundamental one, like global warming, the absurdity stands out, perhaps, more clearly. Without "incentives", industry will do little or nothing to help clean up our environment: such is the message from Washington and Westminster. Yet expecting global warming to be resolved through the same greed that created the problem - and that creates periodical economic crises too - is like inviting a thief who's just stolen your purse to burglarize your house as well. Capitalism isn't concerned with social welfare - and the notion so beloved of neo-liberals that individual selfishness promotes the general good is almost too easy to refute. That it continues to hold sway over Western governments and their economic soothsayers probably reflects the familiar human difficulty of owning up to error.
Though government trust in the private sector to do things better remains unswerving, like gospel it rests less on fact than on faith. Let's take the UK as an example. In addition to building the National Health Service and an education system that has produced more than our fair share of Nobel prize winners, the state runs military, police and fire services, and has developed almost all our transportation infrastructure. It created most of our utilities and ran them superbly until they were practically given away to the private sector. Along with allies, it helped to orchestrate the defeat of fascism in WWII. In the past 100 years, the state's achievements on behalf of the citizenry have been nothing short of spectacular.
Still, we are told that if most public services were subject to market discipline, they would be more efficient and cost-effective. It is a baseless argument. In the commercial sector, the consequences of inefficiency are bankruptcy or closure -- and there are no public service obligations such as delivering mail to remote "unprofitable" areas or treating impoverished patients. Unfortunately, water and electricity supplies, rail schedules and rubbish collection can't be closed down if the companies that run these services are poorly managed or unprofitable. Instead, they go cap-in-hand to the government for subsidies or price increases. In place of market discipline, we get licensed extortion -- often accompanied by a net reduction in the quality of service. My water, gas and electricity supplies have not improved since privatization, they have simply become more expensive.
This does not mean, of course, that the public sector always gets things right. Incompetency is a human failing - and an ubiquitous one. But the idea that it is, by definition, blundering, inefficient, and unresponsive is not based on evidence but on ideology riding on a cloud of woolly thinking.
Deaf both to the lessons of history and to the cries of public unease, ministers nevertheless continue to shed state assets and the responsibilities that go with them. In the UK, the latest divestiture has been of our remaining participation in the Aldermaston Atomic Weapons establishment. Next to go will be a handsome share of Royal Mail. Details of such transactions, of course, remain secret, in order - so we are told - to protect "commercial confidentiality". This repellent phrase now stands on a par with the Official Secrets Act as one of the UK government's prime tools for evading public scrutiny. And this despite the obvious - and obviously inconvenient - fact that publicly-owned facilities belong to the tax payer (a.k.a. you and me) and that, as shareholders, we should have a right to know what deals are being struck on our behalf.
Kropotkin pointed out that the price of a house in Paris, which only a rich man could afford, lay not only in the bricks and mortar and the patch of earth on which it stood, but also in the city itself with its roads and sewers, theatres and museums, schools and hospitals all constructed - just like the house - with the sweat and toil of labourers too poor to rent the meanest of its rooms. Public investment in social infrastructure constitutes the bedrock of economic activity without which private enterprise could not function. Taxpayers are by definition investors in private enterprise, and privatization is, therefore, largely a transfer into private hands of the means of producing what Marx called "surplus value" - publicly-generated profits.
If, as I suspect, our current economic arrangements are inadequate to meet the future needs of humanity and of the planet - then our first question must be to decide whether or not we care.
Assuming we do, then the challenge that faces us - and that sooner or later we will have to confront - is how to develop an alternative economic model geared to the general welfare rather than individual enrichment, to meeting need rather than stimulating greed, to preservation of the environment rather than its exploitation. Exactly how such a model could work is open to debate; but it's a sure bet that greed, superfluous consumption, and privatization of public assets won't be in the plan.
Sunday, December 28, 2008
Civilian Casualties
Victims of military aggression, whose injuries or death are seldom itemized but may occasionally enter the historical records as a statistical estimate.
Tuesday, December 16, 2008
Circumvention (by proxy)
Illegal activities conducted through third parties or in places not subject to national or international law.
Governments have always abused the law, of course, as Moise Finkelbaum points out in his seminal study of the phenomenon33. Circumvention by proxy, however, came into its own in the early years of the second millennium when the United States - enthusiastically supported by Great Britain - established offshore concentration camps in places beyond any legal jurisdiction so as to be able to abuse prisoners at will and detain them indefinitely without trial. Both countries also acquired the habit of quietly sending detainees off to be tortured by nasty regimes in distant parts of the world.
But to what purpose? Finkelbaum provides a credible answer. “No one considers information obtained under torture as in the least reliable,” he writes, “Truth is not the aim. What matters is to obtain confessions or simply to fabricate evidence that can be used to convince people back home that their lives are in permanent and irremediable danger, that repressive methods are necessary for their protection, that they too must accept injustice, suspension of democratic rights and limits on their freedom, and that their best hope of safety and security lies in this government and this party and no other.”34
_______________
33 Power, Principle and the Law, São Paulo 2111.
34 Finkelbaum, op.cit. pp 214-5.
Governments have always abused the law, of course, as Moise Finkelbaum points out in his seminal study of the phenomenon33. Circumvention by proxy, however, came into its own in the early years of the second millennium when the United States - enthusiastically supported by Great Britain - established offshore concentration camps in places beyond any legal jurisdiction so as to be able to abuse prisoners at will and detain them indefinitely without trial. Both countries also acquired the habit of quietly sending detainees off to be tortured by nasty regimes in distant parts of the world.
But to what purpose? Finkelbaum provides a credible answer. “No one considers information obtained under torture as in the least reliable,” he writes, “Truth is not the aim. What matters is to obtain confessions or simply to fabricate evidence that can be used to convince people back home that their lives are in permanent and irremediable danger, that repressive methods are necessary for their protection, that they too must accept injustice, suspension of democratic rights and limits on their freedom, and that their best hope of safety and security lies in this government and this party and no other.”34
_______________
33 Power, Principle and the Law, São Paulo 2111.
34 Finkelbaum, op.cit. pp 214-5.
Monday, November 24, 2008
Chaos
Unpredictability as a constituent of the universe.
History is the story of human effort to impose order on life, to refashion as much of the universe as possible into a set of complex but organized - and therefore ultimately predictable - events. Most of us are bureaucrats at heart, conscious that things occasionally go wrong but determined that they will do so less and less, and that by taking due precaution we can protect ourselves from the vicissitudes of fate. Wise to the fact that we like to feel permanently armed against extinction, Hollywood earns plenty of cash by having heroes rescue humanity from disaster when all seemed lost.
Acknowledging chaos as part of life’s fabric means leaving that cosy scenario behind in the cinema.
At a personal level we are familiar enough with uncertainty. We know that brakes seize, pipes spring leaks, rains fail, smokers may or may not get lung cancer, we may or may not bump into an old friend on our next trip into town. We know, too, that some chance events are fatal. Yet we like to pretend that, far from being a product of happenstance, the planet earth has a purpose. Day-to-day randomness we can handle, ultimate purposelessness is another matter.
Most of the orbs out there in space (maybe all of them) are devoid of organic matter. It follows that life must be an anomaly; because if the universe worked predictably, it would be uniform, and we couldn’t exist. As it is, we occupy no more than an infinitesimal blip in the space-time continuum; and cosmically speaking, there’s no reason why we should be around for long. When we’ve finished ruining the planet, or the planet has finished with us, we’ll doubtless leave it. And all the beauty of which we make so much, the green fields, the desert sands, the snow-clad peaks and verdant valleys, the masterpieces of our own making, will melt back into the primeval soup from which they and we emerged.
Since we can count ourselves lucky to be here, maybe we shouldn’t lament the fundamentally chaotic nature of existence; for though chaos may one day cause our extinction, it has brought us into being and moulded our aesthetic and emotional response to the world.31 The harmony we find in natural landscapes, in the intricately disordered branches and twigs of trees, in overgrown gardens, in the ephemeral patterns of passing clouds is not accidental. Our brains are tuned to them. Artists understand this, which is why their works so often seem disordered, untidy - complexity being the overriding condition of human experience and the medium in which our imagination floats most easily. Shakespeare who saw many things, saw this too:
Sometime we see a cloud that’s dragonish
A tower’d citadel, a pendant rock,
A forked mountain, or blue promontory
With trees upon’t that nod unto the world,
And mock our eyes with air.32
By contrast, we can’t inhabit a world in which everything that takes place accords with Aristotelian logic. Drama trimmed to the unities of time and place, architecture stripped of ornament and quirkiness, music played strictly to beat and measure - these may offer simple pleasures and even evoke admiration; but we experience them distantly, and tire of them easily. By contrast we enter and move within the worlds of War and Peace, or Lear, or The Iliad, recognizing in the messiness of the life depicted, the multiplicity of characters with whom we mingle, the thoughts they express, the diversions and tangential paths on which they and we embark, a parallel to our own. The best music works in just this way also, by creating expectations in us, and then satisfying them not with the notes our ears might anticipate unaided, but with a sequence that at once meets our expectations yet surprises us with an appeal to something tangential and more involving than we could have imagined for ourselves. All great art is, in that special sense, complex - satisfying to our brains which are complex too, and inimical to our instincts, which are self-protective and conservative. Art best plays its role in our lives when it defies the bureaucrat in us; when it beats against imposed order; when it simulates the chaos that we know lies at the heart of all that exists, and thereby helps us understand how wondrous strange it is to be alive and conscious.
_____________
31 “Impurity,” wrote Primo Levi, “which gives rise to changes, in other words, to life.” - The Periodic Table, Turin 1975.
32 Anthony and Cleopatra, IV.14
History is the story of human effort to impose order on life, to refashion as much of the universe as possible into a set of complex but organized - and therefore ultimately predictable - events. Most of us are bureaucrats at heart, conscious that things occasionally go wrong but determined that they will do so less and less, and that by taking due precaution we can protect ourselves from the vicissitudes of fate. Wise to the fact that we like to feel permanently armed against extinction, Hollywood earns plenty of cash by having heroes rescue humanity from disaster when all seemed lost.
Acknowledging chaos as part of life’s fabric means leaving that cosy scenario behind in the cinema.
At a personal level we are familiar enough with uncertainty. We know that brakes seize, pipes spring leaks, rains fail, smokers may or may not get lung cancer, we may or may not bump into an old friend on our next trip into town. We know, too, that some chance events are fatal. Yet we like to pretend that, far from being a product of happenstance, the planet earth has a purpose. Day-to-day randomness we can handle, ultimate purposelessness is another matter.
Most of the orbs out there in space (maybe all of them) are devoid of organic matter. It follows that life must be an anomaly; because if the universe worked predictably, it would be uniform, and we couldn’t exist. As it is, we occupy no more than an infinitesimal blip in the space-time continuum; and cosmically speaking, there’s no reason why we should be around for long. When we’ve finished ruining the planet, or the planet has finished with us, we’ll doubtless leave it. And all the beauty of which we make so much, the green fields, the desert sands, the snow-clad peaks and verdant valleys, the masterpieces of our own making, will melt back into the primeval soup from which they and we emerged.
Since we can count ourselves lucky to be here, maybe we shouldn’t lament the fundamentally chaotic nature of existence; for though chaos may one day cause our extinction, it has brought us into being and moulded our aesthetic and emotional response to the world.31 The harmony we find in natural landscapes, in the intricately disordered branches and twigs of trees, in overgrown gardens, in the ephemeral patterns of passing clouds is not accidental. Our brains are tuned to them. Artists understand this, which is why their works so often seem disordered, untidy - complexity being the overriding condition of human experience and the medium in which our imagination floats most easily. Shakespeare who saw many things, saw this too:
Sometime we see a cloud that’s dragonish
A tower’d citadel, a pendant rock,
A forked mountain, or blue promontory
With trees upon’t that nod unto the world,
And mock our eyes with air.32
By contrast, we can’t inhabit a world in which everything that takes place accords with Aristotelian logic. Drama trimmed to the unities of time and place, architecture stripped of ornament and quirkiness, music played strictly to beat and measure - these may offer simple pleasures and even evoke admiration; but we experience them distantly, and tire of them easily. By contrast we enter and move within the worlds of War and Peace, or Lear, or The Iliad, recognizing in the messiness of the life depicted, the multiplicity of characters with whom we mingle, the thoughts they express, the diversions and tangential paths on which they and we embark, a parallel to our own. The best music works in just this way also, by creating expectations in us, and then satisfying them not with the notes our ears might anticipate unaided, but with a sequence that at once meets our expectations yet surprises us with an appeal to something tangential and more involving than we could have imagined for ourselves. All great art is, in that special sense, complex - satisfying to our brains which are complex too, and inimical to our instincts, which are self-protective and conservative. Art best plays its role in our lives when it defies the bureaucrat in us; when it beats against imposed order; when it simulates the chaos that we know lies at the heart of all that exists, and thereby helps us understand how wondrous strange it is to be alive and conscious.
_____________
31 “Impurity,” wrote Primo Levi, “which gives rise to changes, in other words, to life.” - The Periodic Table, Turin 1975.
32 Anthony and Cleopatra, IV.14
Tuesday, November 18, 2008
Capitalist Theory of Corruption
The theory - first proposed by George Hiram Arbuthnot17 - that corruption has been a prime ingredient of human progress and remains an elemental component of economic development in capitalist societies.
Oxford’s famed dictionary defines corruption as moral depravity, but Arbuthnot disagreed, arguing that murder, abandoning children, and spreading AIDS were morally depraved but we wouldn’t normally describe them as corrupt. The definition he proposed was the acquisition of power or material advantage through a betrayal of trust; and he gave some intriguing illustrations: lobbying a politician was permissible, murdering him illegal, bribing him corrupt; impartiality was desirable, favoritism inevitable, nepotism corrupt; and so on.
Corruption has probably always been with us, but Arbuthnot was not concerned with tracing its origins or assessing its role in human psychology. His aim was to expose it as one of the fundamental pillars of our way of life.
The corrupt, in his view, have always been the breakers of moulds, the iconoclasts, the novel thinkers and doers, the darers, the explorers and the ruthless. Cortés conquered Mexico by lying to his host18, taking him prisoner and destroying his realm19 . Pizarro performed the same feat in Peru. England lied, swindled and murdered her way to domination of half the world with the help of carpet-baggers, slavers, religious charlatans and power-crazed politicians out to build a reputation.
Not everyone, even of their own kind, thought the pilgrim fathers such respectable creatures. “’Tis a great misfortune,” writes one of them, “that most of our travellers who go to this vast continent in America, are persons of the meaner sort, and generally of a very slender education.”20
Locals - the inaptly-named Indians - treated the newcomers well until their hospitality was repaid with such cheating, hostility and viciousness that they could do no other than try to repel the invaders. “They really are better to us than we are to them,” our author continues, “...they always give us victuals at their quarters and take care we are armed against hunger and thirst; we do not so by them, but let them walk by our doors hungry....We look upon them with scorn and disdain, and think them little better than beasts in human shape, though if well examined, we shall find that, for all our religion and education, we possess more moral deformities and evils than these savages do or are acquainted withal.” One is reminded of Rudyard Kipling’s pithy appraisal of Gunga Din:
“You’re a better man than I am...”
By the time Lawson wrote up his travel adventures in the Carolinas, the natives he described and others like them had seen their women raped, their sons enslaved, their villages burned, and vast tracts of land sold from beneath their feet “...in consideration for valuable parcels of cloth, latchets, beads and other goods...”21
Property prices on the eastern seaboard have risen a little since then.
“The conquest of the earth,” opined Conrad, “which mostly means taking it away from those who have a different complexion or slightly flatter noses than ourselves, is not a pretty thing....”22
Arbuthnot’s familiarity with the details of colonial conquest led him to suspect that modern capitalist societies stood on corrupt foundations - an idea that he was to spend most of his academic life examining. His research focused primarily on the period of fully-fledged capitalism, roughly from the late nineteenth century to the present. With the help of an admiring coterie of radical students - who idolized him - he assembled a unique collection of case studies on corporations that had benefited from corrupt practices. Regrettably, like Freud with many of his patients, he was obliged to conceal the identity of those he studied to protect himself from ruinous litigation, which meant that his results could not be independently verified. Even so, he spent much of his life at PISS fighting off law suits from firms and individuals who claimed to recognize themselves in his work.
One of Arbuthnot’s most celebrated cases involved a firm he called International Home Machinery (IHM) which began life as a manufacturer of domestic refrigerators. The company was founded by Irving Mountebank and Eric Pilfer23 two former shop floor operatives at Thornton Refrigerators which was then the dominant brand in the US market. IHM succeeded in establishing a toehold in the market but then found itself losing ground as Thornton reacted to the competition by increasing its advertising, bribing retailers with loyalty discounts and launching a price war potentially ruinous to IHM. Mountebank and Pilfer, who had taken IHM public, sold out when the going got rough; and in their place the Board appointed former traveling salesman Bert Advent as president. Advent’s qualifications for the job were unimpressive but he was known to be hard-nosed, ruthlessly competitive and unafraid of ethical compromise in pursuit of a sale. His plan to topple Thornton was ingenious. He launched an IHM product range identical in every detail to Thornton’s best selling lines - even down to the labeling. No casual observer could distinguish between the machines. Even retailers thought they were selling Thornton product. Only one problem: the IHM copies had built-in flaws: motors overheated; cooling pipes leaked, doors fell off, thermostats failed. A few months after Advent’s faulty copies reached the stores, complaints began flowing in. Before long, the press smelled blood: Thorntons, they hinted, was in financial trouble and in order to save money was compromising on product quality. The firm reacted quickly, offering a free replacement to every dissatisfied customer, but its reputation was shot. Sales plummeted, the stock price nose-dived, and within a couple of years IHM had bought out Thorntons and effectively closed it down. IHM went on to become the largest and most trusted refrigerator supplier in the world. According to Arbuthnot, IHM’s story demonstrated how ingenuity in the service of corruption can give dynamic firms the edge in competitive markets.
That this is well understood in the world of commerce will be clear to any attentive reader of the business pages of the serious newspapers which are riddled with hints, suggestions and occasionally - where the evidence is clear - accusations of malpractice by company executives and government officials.
Early objectors to Arbuthnot’s theory pointed out that if he was right, then capitalism would be at its best in the most corrupt societies - a patent absurdity. But Arbuthnot responded that this was a misunderstanding. Universal corruption simply ruined everyone and produced either chaos or its obverse, repression and tyranny - circumstances directly opposed to the stability needed for a properly functioning market economy. Capitalism, by contrast, required most corporations and most of society to observe the unwritten laws of honesty and integrity. Few prospered in the long run; but their general probity was what allowed the creative few to bend the rules; and what gave rise also to the commodification and exploitation of labour, and to the triumph of wealth concentration over wealth distribution, of resource extraction over environmental conservation, of Mammon over Mankind.
Arbuthnot himself was a complex and somewhat eccentric figure. Born in South East London, the son of an Ethiopian father and Vietnamese mother, he grew up in a multi-ethnic community of working-class, first-generation immigrants and refugees. His fascination for languages and the use of language began early; and his mixed racial origins gave him entry to many different ethnic and social groups in the area of his home. By the time he won a scholarship to Oxford - only the third to do so from the inner-city school he attended between the ages and twelve and eighteen - he was fluent in Amharic, Vietnamese and French as well as English, and had acquired the rudiments of several other languages including Punjabi, and Polish. He met his wife Greszyna at Oxford where she was employed as a college cleaning lady. She later, of course, became one of the most successful plastic artists of her generation as well as a successful actress and founder of the influential Art Renouvelé movement of the sixties. Commenting on the marriage after his wife’s death in a car accident at the early age of fifty-eight, Professor Arbuthnot had this to say: “Greszyna and I made love the first time she came to clean my room at Oxford. And we made love an hour before she died. Throughout thirty-four years of mutual support and companionship, we never tired of bonking each other. It was the basis of our relationship. Men dream of having a sexual companion like Greszyna, and I was lucky enough to have the dream fulfilled. If I have ever in my life attracted envy, she was the reason.”
After taking a brilliant first in Amharic language and literature24 and gaining a fellowship at All Souls, Arbuthnot came to international prominence with two books, “The aetiology of allophylian languages - a study in the decline of meaning,” and its sequel, “From multicolour to monochrome”, a historical analysis of the impact of language on vision which concluded shockingly that, after a long efflorescence between the dawn of history and the mid 1950s, our imaginative and intellectual horizons, as reflected in what we say and see, are now shrinking at roughly the same rate as the polar ice caps.
Arbuthnot would probably have remained at Oxford had it not been for the commotion that followed this second work, which aroused a volatile blend of controversy and ribald mockery. Students in Oxford demonstrated noisily outside the gates of All Souls, and hurled eggs at him during his weekly lectures at the Taylorian Institute. Opinion columns in the media prosecuted and defended him with equal vigour. Pickets at the West End theatre where Gryszyna was appearing as Madame Ranevsky shut down performances, forcing the management to replace her with an understudy. In the end Arbuthnot gave in to pressure from his university colleagues and resigned his fellowship.
As so often happens, American academic institutions proved less squeamish than their staid British counterparts, and Arbuthnot’s disgrace resulted in a flood of offers for his services from across the Atlantic.
After a brief spell as a visiting professor at Yale, he was offered a tenured professorship at PISS, initially in the department of linguistics. Two years after taking up the post, in an open letter to the Connecticut Journal of Palaeography , he announced that he had abandoned linguistic science, having concluded that the store of meaningful statements about language was exhausted and replenishment improbable. The remainder of his life he devoted to corruption - the field for which he is best known. At first PISS reacted adversely to this unilateral role change and tried to revoke Arbuthnot’s professorship; but his employment contract, leak proofed by New Haven litigation guru Max Sprackett, would have made the cost of paying him off ruinously expensive for the institution. Later, Arbuthnot took delight in recalling PISS’s failed efforts to fire him which he cited as corroboration of his corrosive view of capitalism. “I reneged on my contract, but I won anyway,” he was fond of saying. “I myself am corrupt insofar as corruption is available to me.”
A new phase of Arbuthnot’s career now began which eventually led to a reconciliation with PISS and accession to the Chair of Semiotic Casuistry which was created specially for him. Over the following years, he produced a stream of books and monographs, the most important of which is his seminal “Double Dealing and Double Dutch” a monumental two-volume attempt to demonstrate that capitalism flourishes best in societies openly hostile but covertly tolerant of corruption. Most of the first volume is devoted to addressing what he called the “blithe assumptions” of Max Weber and later Richard Tawney in their attempts to equate the rise of capitalism with the Protestant Ethic.25 Weber thought that protestantism sanctioned wealth as the reward of ascetic devotion to work. Tawney, who disapproved of acquisitiveness, tried to reverse the equation by positing an accommodation of religion to the capitalist ethos. According to Arbuthnot, neither understood the power in the European Christian tradition of biblical strictures against wealth. Every Christian in Europe was brought up with the idea that personal enrichment was sinful. It was easier for a camel to pass through the eye of a needle than for a rich man to enter into the Kingdom of God.26 Love of money was the root of all evil.27 He that hastened to make riches should not go unpunished.28 Etcetera.
Jews, who interpreted their Torah differently, had no problem with believers getting rich provided they observed the requirement to share a portion of their good fortune with those who had too little wealth or none at all (a mitzvah). Hence why Jewish prosperity, which is open and generous, struck Christians as the moral equivalent of an alliance with the devil; and also why lovers of gold like Shylock, Volpone, Uriah Heep, and Scrooge - are counted among the villains of European culture.
Protestants - and puritans most of all - advocated not personal enrichment but cooperative productivity: work for the good of all. Even Adam Smith’s invisible hand was supposed to promote the general welfare.
If opulence was illicit and its getting corrupt, the desire for it had to be concealed, or at least cloaked in dark puritanical cloth. And so riches were best accumulated underground, out of sight of men - and of God.
In the United States, home of capitalism, the founding fathers and their descendants rebelled against their puritanical forefathers (as children do) and publicly set personal enrichment on a pedestal next to holiness. But since they remained among the most religious people on earth, their wealth needed to be justified in the eyes of the Lord. For, as Orwell noted, “Even the millionaire suffers from a vague sense of guilt. Like a dog eating a stolen leg of mutton.”29 No accident, then, that in the United States charitable donations became big business, for they were a salve of conscience - a bulwark against the schizophrenic paradox of being at once richer and holier than everyone else.
By the same token and for the same reasons, corruption became bigger, bolder, and ultimately more ruthless than elsewhere, on a par with the size of the country and the bluster of its history.
One of the most interesting sections of Volume II of Arbuthnot’s great work deals with money-laundering - which he interpreted as a desire on the part of those who had transgressed in amassing great wealth to return to the way of heaven and to the path of probity here on earth. For, he argued, most great fortunes rested on some kind of skulduggery at their origin, even if with the passing years their possessors had acquired an aura of graceful respectability. The trick with ill-gotten gains, then, was to disguise their origin by re-deploying them in a legal activity.
At the end of his life, Arbuthnot wrote a series of valedictory essays30 , somewhat in answer to his many critics, in which he explained that far from considering corruption a necessity of life, he saw no reason why humanity could not progress happily without it. As a scientist, however, he did not see himself as an advocate of one mode of being over another. “People talk to me of morality,” he wrote, “and accuse me of a dreadful neglect of duty because of my refusal to condemn the corruption in capitalism. I recognize no such duty. Human nature is what it is; and insofar as I am human, I share humanity’s foibles. If that makes me a scandalous reprobate, a vile apologist for evil, so be it. If the Maker of all things exists, I can expect shortly to encounter Him. When that moment arrives, perhaps He will take the opportunity to acquaint me with His views.”
___________
17Professor of Semiotic Casuistry at the Princeton Institute of Semantic Sciences (PISS) (2012 - 2039)
18 Moctezuma.
19 Tenochtitlan, “the world’s most beautiful city,” according to the Spaniards who burned it.
20 John Lawson, A New Voyage to Carolina, London 1709.
21 Shaftesbury Papers and other records relating to Carolina and the first settlement on Ashley River prior to the year 1676,” Langdon Cheves (ed), 1897
22 Joseph Conrad, Heart of Darkness, 1902.
23 All names have been changed.
24 As the only Amharic expert in Oxford, he was obliged to examine himself and mark his own papers.
25 See Max Weber, Protestant Ethic and the Spirit of Capitalism, 1902; and R.H Tawney “Religion and the Rise of Capitalism, 1926.
26 Matthew 19:24.
27 1 Timothy 6:10.
28 Proverbs 28:20.
29 George Orwell, Essay on Dickens, 1939.
30 Notes for the nether world, Plainsboro Paperbacks, 2038.
Oxford’s famed dictionary defines corruption as moral depravity, but Arbuthnot disagreed, arguing that murder, abandoning children, and spreading AIDS were morally depraved but we wouldn’t normally describe them as corrupt. The definition he proposed was the acquisition of power or material advantage through a betrayal of trust; and he gave some intriguing illustrations: lobbying a politician was permissible, murdering him illegal, bribing him corrupt; impartiality was desirable, favoritism inevitable, nepotism corrupt; and so on.
Corruption has probably always been with us, but Arbuthnot was not concerned with tracing its origins or assessing its role in human psychology. His aim was to expose it as one of the fundamental pillars of our way of life.
The corrupt, in his view, have always been the breakers of moulds, the iconoclasts, the novel thinkers and doers, the darers, the explorers and the ruthless. Cortés conquered Mexico by lying to his host18, taking him prisoner and destroying his realm19 . Pizarro performed the same feat in Peru. England lied, swindled and murdered her way to domination of half the world with the help of carpet-baggers, slavers, religious charlatans and power-crazed politicians out to build a reputation.
Not everyone, even of their own kind, thought the pilgrim fathers such respectable creatures. “’Tis a great misfortune,” writes one of them, “that most of our travellers who go to this vast continent in America, are persons of the meaner sort, and generally of a very slender education.”20
Locals - the inaptly-named Indians - treated the newcomers well until their hospitality was repaid with such cheating, hostility and viciousness that they could do no other than try to repel the invaders. “They really are better to us than we are to them,” our author continues, “...they always give us victuals at their quarters and take care we are armed against hunger and thirst; we do not so by them, but let them walk by our doors hungry....We look upon them with scorn and disdain, and think them little better than beasts in human shape, though if well examined, we shall find that, for all our religion and education, we possess more moral deformities and evils than these savages do or are acquainted withal.” One is reminded of Rudyard Kipling’s pithy appraisal of Gunga Din:
“You’re a better man than I am...”
By the time Lawson wrote up his travel adventures in the Carolinas, the natives he described and others like them had seen their women raped, their sons enslaved, their villages burned, and vast tracts of land sold from beneath their feet “...in consideration for valuable parcels of cloth, latchets, beads and other goods...”21
Property prices on the eastern seaboard have risen a little since then.
“The conquest of the earth,” opined Conrad, “which mostly means taking it away from those who have a different complexion or slightly flatter noses than ourselves, is not a pretty thing....”22
Arbuthnot’s familiarity with the details of colonial conquest led him to suspect that modern capitalist societies stood on corrupt foundations - an idea that he was to spend most of his academic life examining. His research focused primarily on the period of fully-fledged capitalism, roughly from the late nineteenth century to the present. With the help of an admiring coterie of radical students - who idolized him - he assembled a unique collection of case studies on corporations that had benefited from corrupt practices. Regrettably, like Freud with many of his patients, he was obliged to conceal the identity of those he studied to protect himself from ruinous litigation, which meant that his results could not be independently verified. Even so, he spent much of his life at PISS fighting off law suits from firms and individuals who claimed to recognize themselves in his work.
One of Arbuthnot’s most celebrated cases involved a firm he called International Home Machinery (IHM) which began life as a manufacturer of domestic refrigerators. The company was founded by Irving Mountebank and Eric Pilfer23 two former shop floor operatives at Thornton Refrigerators which was then the dominant brand in the US market. IHM succeeded in establishing a toehold in the market but then found itself losing ground as Thornton reacted to the competition by increasing its advertising, bribing retailers with loyalty discounts and launching a price war potentially ruinous to IHM. Mountebank and Pilfer, who had taken IHM public, sold out when the going got rough; and in their place the Board appointed former traveling salesman Bert Advent as president. Advent’s qualifications for the job were unimpressive but he was known to be hard-nosed, ruthlessly competitive and unafraid of ethical compromise in pursuit of a sale. His plan to topple Thornton was ingenious. He launched an IHM product range identical in every detail to Thornton’s best selling lines - even down to the labeling. No casual observer could distinguish between the machines. Even retailers thought they were selling Thornton product. Only one problem: the IHM copies had built-in flaws: motors overheated; cooling pipes leaked, doors fell off, thermostats failed. A few months after Advent’s faulty copies reached the stores, complaints began flowing in. Before long, the press smelled blood: Thorntons, they hinted, was in financial trouble and in order to save money was compromising on product quality. The firm reacted quickly, offering a free replacement to every dissatisfied customer, but its reputation was shot. Sales plummeted, the stock price nose-dived, and within a couple of years IHM had bought out Thorntons and effectively closed it down. IHM went on to become the largest and most trusted refrigerator supplier in the world. According to Arbuthnot, IHM’s story demonstrated how ingenuity in the service of corruption can give dynamic firms the edge in competitive markets.
That this is well understood in the world of commerce will be clear to any attentive reader of the business pages of the serious newspapers which are riddled with hints, suggestions and occasionally - where the evidence is clear - accusations of malpractice by company executives and government officials.
Early objectors to Arbuthnot’s theory pointed out that if he was right, then capitalism would be at its best in the most corrupt societies - a patent absurdity. But Arbuthnot responded that this was a misunderstanding. Universal corruption simply ruined everyone and produced either chaos or its obverse, repression and tyranny - circumstances directly opposed to the stability needed for a properly functioning market economy. Capitalism, by contrast, required most corporations and most of society to observe the unwritten laws of honesty and integrity. Few prospered in the long run; but their general probity was what allowed the creative few to bend the rules; and what gave rise also to the commodification and exploitation of labour, and to the triumph of wealth concentration over wealth distribution, of resource extraction over environmental conservation, of Mammon over Mankind.
Arbuthnot himself was a complex and somewhat eccentric figure. Born in South East London, the son of an Ethiopian father and Vietnamese mother, he grew up in a multi-ethnic community of working-class, first-generation immigrants and refugees. His fascination for languages and the use of language began early; and his mixed racial origins gave him entry to many different ethnic and social groups in the area of his home. By the time he won a scholarship to Oxford - only the third to do so from the inner-city school he attended between the ages and twelve and eighteen - he was fluent in Amharic, Vietnamese and French as well as English, and had acquired the rudiments of several other languages including Punjabi, and Polish. He met his wife Greszyna at Oxford where she was employed as a college cleaning lady. She later, of course, became one of the most successful plastic artists of her generation as well as a successful actress and founder of the influential Art Renouvelé movement of the sixties. Commenting on the marriage after his wife’s death in a car accident at the early age of fifty-eight, Professor Arbuthnot had this to say: “Greszyna and I made love the first time she came to clean my room at Oxford. And we made love an hour before she died. Throughout thirty-four years of mutual support and companionship, we never tired of bonking each other. It was the basis of our relationship. Men dream of having a sexual companion like Greszyna, and I was lucky enough to have the dream fulfilled. If I have ever in my life attracted envy, she was the reason.”
After taking a brilliant first in Amharic language and literature24 and gaining a fellowship at All Souls, Arbuthnot came to international prominence with two books, “The aetiology of allophylian languages - a study in the decline of meaning,” and its sequel, “From multicolour to monochrome”, a historical analysis of the impact of language on vision which concluded shockingly that, after a long efflorescence between the dawn of history and the mid 1950s, our imaginative and intellectual horizons, as reflected in what we say and see, are now shrinking at roughly the same rate as the polar ice caps.
Arbuthnot would probably have remained at Oxford had it not been for the commotion that followed this second work, which aroused a volatile blend of controversy and ribald mockery. Students in Oxford demonstrated noisily outside the gates of All Souls, and hurled eggs at him during his weekly lectures at the Taylorian Institute. Opinion columns in the media prosecuted and defended him with equal vigour. Pickets at the West End theatre where Gryszyna was appearing as Madame Ranevsky shut down performances, forcing the management to replace her with an understudy. In the end Arbuthnot gave in to pressure from his university colleagues and resigned his fellowship.
As so often happens, American academic institutions proved less squeamish than their staid British counterparts, and Arbuthnot’s disgrace resulted in a flood of offers for his services from across the Atlantic.
After a brief spell as a visiting professor at Yale, he was offered a tenured professorship at PISS, initially in the department of linguistics. Two years after taking up the post, in an open letter to the Connecticut Journal of Palaeography , he announced that he had abandoned linguistic science, having concluded that the store of meaningful statements about language was exhausted and replenishment improbable. The remainder of his life he devoted to corruption - the field for which he is best known. At first PISS reacted adversely to this unilateral role change and tried to revoke Arbuthnot’s professorship; but his employment contract, leak proofed by New Haven litigation guru Max Sprackett, would have made the cost of paying him off ruinously expensive for the institution. Later, Arbuthnot took delight in recalling PISS’s failed efforts to fire him which he cited as corroboration of his corrosive view of capitalism. “I reneged on my contract, but I won anyway,” he was fond of saying. “I myself am corrupt insofar as corruption is available to me.”
A new phase of Arbuthnot’s career now began which eventually led to a reconciliation with PISS and accession to the Chair of Semiotic Casuistry which was created specially for him. Over the following years, he produced a stream of books and monographs, the most important of which is his seminal “Double Dealing and Double Dutch” a monumental two-volume attempt to demonstrate that capitalism flourishes best in societies openly hostile but covertly tolerant of corruption. Most of the first volume is devoted to addressing what he called the “blithe assumptions” of Max Weber and later Richard Tawney in their attempts to equate the rise of capitalism with the Protestant Ethic.25 Weber thought that protestantism sanctioned wealth as the reward of ascetic devotion to work. Tawney, who disapproved of acquisitiveness, tried to reverse the equation by positing an accommodation of religion to the capitalist ethos. According to Arbuthnot, neither understood the power in the European Christian tradition of biblical strictures against wealth. Every Christian in Europe was brought up with the idea that personal enrichment was sinful. It was easier for a camel to pass through the eye of a needle than for a rich man to enter into the Kingdom of God.26 Love of money was the root of all evil.27 He that hastened to make riches should not go unpunished.28 Etcetera.
Jews, who interpreted their Torah differently, had no problem with believers getting rich provided they observed the requirement to share a portion of their good fortune with those who had too little wealth or none at all (a mitzvah). Hence why Jewish prosperity, which is open and generous, struck Christians as the moral equivalent of an alliance with the devil; and also why lovers of gold like Shylock, Volpone, Uriah Heep, and Scrooge - are counted among the villains of European culture.
Protestants - and puritans most of all - advocated not personal enrichment but cooperative productivity: work for the good of all. Even Adam Smith’s invisible hand was supposed to promote the general welfare.
If opulence was illicit and its getting corrupt, the desire for it had to be concealed, or at least cloaked in dark puritanical cloth. And so riches were best accumulated underground, out of sight of men - and of God.
In the United States, home of capitalism, the founding fathers and their descendants rebelled against their puritanical forefathers (as children do) and publicly set personal enrichment on a pedestal next to holiness. But since they remained among the most religious people on earth, their wealth needed to be justified in the eyes of the Lord. For, as Orwell noted, “Even the millionaire suffers from a vague sense of guilt. Like a dog eating a stolen leg of mutton.”29 No accident, then, that in the United States charitable donations became big business, for they were a salve of conscience - a bulwark against the schizophrenic paradox of being at once richer and holier than everyone else.
By the same token and for the same reasons, corruption became bigger, bolder, and ultimately more ruthless than elsewhere, on a par with the size of the country and the bluster of its history.
One of the most interesting sections of Volume II of Arbuthnot’s great work deals with money-laundering - which he interpreted as a desire on the part of those who had transgressed in amassing great wealth to return to the way of heaven and to the path of probity here on earth. For, he argued, most great fortunes rested on some kind of skulduggery at their origin, even if with the passing years their possessors had acquired an aura of graceful respectability. The trick with ill-gotten gains, then, was to disguise their origin by re-deploying them in a legal activity.
At the end of his life, Arbuthnot wrote a series of valedictory essays30 , somewhat in answer to his many critics, in which he explained that far from considering corruption a necessity of life, he saw no reason why humanity could not progress happily without it. As a scientist, however, he did not see himself as an advocate of one mode of being over another. “People talk to me of morality,” he wrote, “and accuse me of a dreadful neglect of duty because of my refusal to condemn the corruption in capitalism. I recognize no such duty. Human nature is what it is; and insofar as I am human, I share humanity’s foibles. If that makes me a scandalous reprobate, a vile apologist for evil, so be it. If the Maker of all things exists, I can expect shortly to encounter Him. When that moment arrives, perhaps He will take the opportunity to acquaint me with His views.”
___________
17Professor of Semiotic Casuistry at the Princeton Institute of Semantic Sciences (PISS) (2012 - 2039)
18 Moctezuma.
19 Tenochtitlan, “the world’s most beautiful city,” according to the Spaniards who burned it.
20 John Lawson, A New Voyage to Carolina, London 1709.
21 Shaftesbury Papers and other records relating to Carolina and the first settlement on Ashley River prior to the year 1676,” Langdon Cheves (ed), 1897
22 Joseph Conrad, Heart of Darkness, 1902.
23 All names have been changed.
24 As the only Amharic expert in Oxford, he was obliged to examine himself and mark his own papers.
25 See Max Weber, Protestant Ethic and the Spirit of Capitalism, 1902; and R.H Tawney “Religion and the Rise of Capitalism, 1926.
26 Matthew 19:24.
27 1 Timothy 6:10.
28 Proverbs 28:20.
29 George Orwell, Essay on Dickens, 1939.
30 Notes for the nether world, Plainsboro Paperbacks, 2038.
Tuesday, November 11, 2008
Sub-Prime Poverty
Bank failure and the sub-prime mortgage fiasco have provoked so much debate, analysis, hand-wringing and finger-pointing as to leave the impression that everything that can be said about them already has been said. We all know by now that the banks loaned too much money to folk who could neither muster an adequate deposit on the house they wished to buy, nor keep up with their payment obligations.
Nobody, however, seems to have wondered why - after a decade of prosperity and economic growth - so many people were unable to get a conventional toehold on the property ladder. Why the need for sub-prime mortgages in the first place?
Part of the answer lies in house price inflation. But why did house prices rise by so much when other prices didn't? To answer this, we need to understand that when banks make a loan - not just a mortgage loan but any loan - a large of proportion of the funds will consist of money that didn't exist before the loan was made. That's right. No matter the guise under which it appears, or the complexity of the financial instrument that creates it, under a fractional reserve banking system - which is what we have - new debt means new money. And when new money unlinked to output enters the economy it causes inflation. Remember those loan offers that dropped into our mail box every morning? Many of us took the bait. Result: loads of new cash scurrying in search of something to buy. We spent a great deal of it on cheap imports from the far East and elsewhere and thereby hid some of that inflationary pressure. But you can't import real estate; and that's where the underlying inflation showed itself. House prices went skyward.
The second part of our answer is more sobering. During the five years from 2000 to 2005, the US economy grew 14% and productivity grew even more - by nearly 17%. Over the same period, median family income - the level at which half the households earn more and half earn less - actually fell by 3%, while unemployment rose slightly. So where did the income from growth go? Mainly to corporate share-owners and company bosses. By 2006, Chief Executive Officer pay was over 250 times that of the average wage. In the 1960s that ratio was only 24 to 1.
Therein lies the source of the sub-prime phenomenon.
Those hundreds of thousands maybe millions who took out mortgages beyond their means are a direct reflection of increasing inequality and - yes - poverty. People were promised the American Dream and then found - too late - that carpet baggers, corporate directors, and feckless politicians in Washington and Westminster had placed it beyond their reach.
Nobody, however, seems to have wondered why - after a decade of prosperity and economic growth - so many people were unable to get a conventional toehold on the property ladder. Why the need for sub-prime mortgages in the first place?
Part of the answer lies in house price inflation. But why did house prices rise by so much when other prices didn't? To answer this, we need to understand that when banks make a loan - not just a mortgage loan but any loan - a large of proportion of the funds will consist of money that didn't exist before the loan was made. That's right. No matter the guise under which it appears, or the complexity of the financial instrument that creates it, under a fractional reserve banking system - which is what we have - new debt means new money. And when new money unlinked to output enters the economy it causes inflation. Remember those loan offers that dropped into our mail box every morning? Many of us took the bait. Result: loads of new cash scurrying in search of something to buy. We spent a great deal of it on cheap imports from the far East and elsewhere and thereby hid some of that inflationary pressure. But you can't import real estate; and that's where the underlying inflation showed itself. House prices went skyward.
The second part of our answer is more sobering. During the five years from 2000 to 2005, the US economy grew 14% and productivity grew even more - by nearly 17%. Over the same period, median family income - the level at which half the households earn more and half earn less - actually fell by 3%, while unemployment rose slightly. So where did the income from growth go? Mainly to corporate share-owners and company bosses. By 2006, Chief Executive Officer pay was over 250 times that of the average wage. In the 1960s that ratio was only 24 to 1.
Therein lies the source of the sub-prime phenomenon.
Those hundreds of thousands maybe millions who took out mortgages beyond their means are a direct reflection of increasing inequality and - yes - poverty. People were promised the American Dream and then found - too late - that carpet baggers, corporate directors, and feckless politicians in Washington and Westminster had placed it beyond their reach.
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