Monday, December 31, 2007

Petting the Golden Calf

I've been gnashing my teeth as French radio commentators fawn on Sarkozy for the sheer openness and transparency of his luxury holiday in Egypt with his new movie-star girlfriend. Two weeks ago these same folks were griping about secret business deals with Kaddafi, the Libyan despot who was living in his tent in the backyard of the Palais Matigny across from le Jogger's digs. Le J is as conniving and secretive about business and politics as any leader in French history, but after his celebrity holiday all was forgiven - and worse, forgotten.

But let me try to say something nice for once about le president de la republique. He IS more transparent about an important thing: his total worship of wealth and wealthy people, to whom he has devoted his life. In contrast, most of our countries have leaders who claim to serve the public while they in fact serve money. They just lie about it more, and lie to themselves more. This is very confusing for the public, and excellent for the rule of money.

In addition to Segolene Royal the Socialist Party candidate who ran against Sarkozy without ever defining her big difference from him, I'm thinking of the Dims back in the USSA, who finally couldn't see taxing the hundred-million dollar annual salaries of hedge-fund managers at the same rates as schoolteachers (35% or so, as income) rather than at the same rate as Bush family investors in the Carlyle Fund (15% as capital gains).

This happens all over the world: Blair and now Brown's New Labour Party have the same independence of UK financial leaders as Catholic bishops have of the Pope. No doubt they express private gripes, but never have public policy differences. Same in Australia, where Tom Nairn reports that new Labour prime minister Kevin Rudd ran on a fiscal prudence platform. He will be much better for the Australian counterpart to my sector - higher education - which the past PM Howard gutted, but he shares the business-prudence ticket with the right.

None of these folks can do the obvious thing this invisible blog always calls for: putting social development first, and then building the effective economic base society needs. Doh!

When oh when oh when oh when? Aussie novelist Thomas Keneally says all sorts of things will happen, in Nairn's paraphrase, "Only if the whingeing latte-sippers and culture-heads get their act together for another push against the system. Penal colonisation has given way to ‘independent’ self-colonisation." What will make them push, exactly?

It's embarrassing to be a Western culture-head and look on at the acts of courage undertaken by the professional and middle-class folks of other countries (to say nothing of the daily constructive labors of the poor). Pakistan springs to mind, where everything from Gen. Pervez Musharraf's martial law to last week's assassination of presidential candidate Benazir Bhutto was propelled by a combination of poor folks and federal judges protesting a despotic executive firing last spring. What if American judges took to the streets? Can we still imagine it?

On the assassination, see a good piece by Tariq Ali, and a strange but intriguing one by Robert Fisk. See also Ali on the imposition of martial law last month, and his excellent longer overview from the London Review of Books.

Friday, December 28, 2007

Class War Concepts

I woke up this morning wondering not how I could help the writers at left against the studios but if I overdo the critique of elites in my forthcoming book, "Unmaking the Public University." I wondered about my comments about the Duke lacrosse saga on my new blog. Gaa. It's never good to wake up with a self-reproach, especially of the chickenshit kind. But then it did get me out of bed at a decent hour.

What's the issue? The book offers an historical account of a post-war threat to American conservatism that produced an organized backlash against "liberal" culture and core values associated with it. I argue that this is a core source of the public university's now-perpetual funding problems. The Long Squeeze comes not from the business cycle, or from prisons budgets alone, or from the sheer efficiency of public-private partnerships, but from a multi-faceted attempt to undermine an institution whose independence was underwriting a new outlook, a new culture, and not only among society's oppressed but, more frighteningly, in the mainstream middle class. Universities were doing what I call "civil-rights science" - offering a base of validated socio-cultural knowledge to the social movements that were changing society. Inspired by these movements, university communities were advocating cross-racial power sharing and the evaluation of economic practice by its human and social impacts. The university was humanist ("people before profits") and egalitarian (even as it remained in itself highly elitist). Ever since these trends became widely known forty years ago, the university - especially the huge, high-quality public research universities that educate the mass-middle class - have been targeted by the Right for containment.

Through all this I have struggled with how polarized my account should be. I don't think people come in two flavors or that the culture wars can be understood as a binary conflict. In addition, Americans have a learned phobia about polarization, and I want to accept people as they are and take it from there. I thus try to avoid the slap across the face with a cold fish. On the other hand, Americans can be the world's biggest babies about politics, and fly into rages over disagreements (call it the O'Reilly syndrome) that other political cultures handle as a normal part of democratic debate. Finally, the myth of the classless society has damaged our national ability to understand the American economy as it really is. I've blogged about this often here. The prominent columnist Paul Krugman has been flogging the issue, along with many others. Critiquing grossly elitist economic and social politics is an educational process, and there's no turning back now.

Some relevant tidbits:
  • Writers of the world unite: Adding to previous data on the writers' little piece of the pie, Kate Coe writes the following:
    The WGA is demanding that writers get 2.5 percent of all gross “new media” revenue flowing from content they write. Currently, writers’ residuals are based on a far smaller slice of gross sales. A recent study by Global Media Intelligence suggests that studios are paying out as much as 25 percent of a film’s profits in residuals. Last year, that amounted to $3 billion in after-release payouts. Yet from this river of cash, writers received only $121 million. By contrast, an actor or director can receive residuals ranging from $20 million to $70 million for a single picture.
  • Bush's Class Warfare: The urban planning expert Peter Dreier had a straightforward piece about this last week. How do you know when there's a class war? When leaders defend grotesque disproportion in returns no matter what. Dreier has good concrete examples.
Both cases illustrate the core fact that business leaders manage "knowledge workers" in the same way they do everyone else - as a cost to be reduced as much as possible. This is of course central to the logic of capitalism, which leads us back to the core polarity: the middle-class worker interest is starkly opposed to that not only of wealthy shareholders, but to that of the top executives who are now paid in the millions or tens of millions a year, i.e. proportionately more than the colonial-era ruling class.

There are no grounds to claim that the US has no distinct elite that opposes the vast majority. Growing economic disparity shows that elites have figured out they don't need to give the middle or bottom the same raises they get either to keep the economy running or to keep society quiet.

Does this have to be resolved as a simple power-struggle, one which the majority could in principle use their voting strength to win? At some point yes, there will have to be direct political confrontation.

In the meantime, there has to be much better accounting. Egalitarians need to do more to define the limits of acceptable inequality and to say more exactly where the line is crossed. We also need to redefine the sources of wealth. Corporate revenues, for example, are earned by the company as a whole and not by its CEO and inner circle. These revenues are created in no small part by society. The goal has to be to correct initial distribution of income with correct sourcing of the creating of value and not simply to demand a retroactive redistribution of money people allegedly "earned" on their own only to have it taxed away. Little will change until we can make conceptual headway here.

The good news is that, judging from polls about economic stratification, a popular majority wants quite a bit more equality than their leaders to.

As for my initial worries, I first thing found a nice email about my Duke entry from Reharmonizer, a composer who is more or less the best blogger on the lacrosse business. He pointed me to another very interesting analysis of the same, which ponders among other things the attraction to polarized stories.

Monday, December 24, 2007

Our Entire Post-Cold War Paradigm Revealed

First, I just want to say that I hope you all have had the chance I've had to eat pain au chocolat half-naked in a sun-filled living room on the morning of Christmas Eve.

Sated as I therefore was, I wonder why I went on line to read the Financial Times so that I could run into the Sum of all Errors in the form of this column from December 18th. It made me have 2 big wishes for 2008 - wish for reductions in two big kinds of dumbness. Please!

1. Could we remember that value doesn't just come from technology and fossil fuels, but also from people working, aka Labor?

2. Could we realize that value doesn't just come from incarnations of "entrepreneurial spirit" - aka CEOs of corporations larger than half the world's economies - but from collective effort in complex social systems?

Of course we could! Except that the opposite views - these two giant, pervasive mistakes - have become pillars of Western Civilization.

Take the terrible column I read as an evil chaser to my pain au chocolat. Its author is the basically sensible but compulsively orthodox Martin Wolf, more or less at the top of the English-language profession of business journalism. He posits something he calls "the positive-sum economy," which he worries will be damaged by our global encounter with some basic environmental limits. OK. But things go downhill very quickly.

Wolf says that "fossilised sunlight and ideas have been the twin drivers of the world economy." Translated, this is oil and technology. The "clever use of commercial energy" has yielded endless new "goods and services" and led to greater justice: "Serfs and slaves need no longer satisfy the appetites of narrow elites."

The latter claim is false: legalized forms of serfdom and ye olde wage slavery are the backbone of emerging economies. So is the former claim. Wolf can ignore serfdom and slavery because he simply omits the two elements I mentioned above - labor and social systems - as sources of value. People and society: not positive factors in the production process. Exploitation and tryanny: figments of our imagination. Not.

Next comes this: in contrast to the perpetual-growth economy, "A zero-sum economy leads, inevitably, to repression at home and plunder abroad. In traditional agrarian societies the surpluses extracted from the vast majority of peasants supported the relatively luxurious lifestyles of military, bureaucratic and noble elites. The only way to increase the prosperity of an entire people was to steal from another one." Now Wolf is claiming that democracy also comes from the energy-intensive growth economy. This is also wrong: democracy comes from people, especially from people who have had to battle the leaders of the growth economy.

Wolf moves on from democracy to peace: "Equally, a positive-sum global economy ought to end the permanent state of war that characterised the pre-modern world. In such an economy, internal development and external commerce offer better prospects for virtually everybody than does international conflict." This is a version of Tom Friedman's old "Golden Arches Theory" of conflict prevention, in which no two countries that have a MacDonald's franchise ever go to war with each other. That one was wrong, and so is Wolf's theory - completely wrong. He ignores Columbus, New World gold and silver, Algeria, the colonization of Africa, World War I, World War II, Korea, Vietnam, Iraq, and dozens of others conflicts that show that economic growth and war have gone hand in hand throughout modern history.

Getting towards the end: "But if there are indeed limits to growth, the political underpinnings of our world fall apart." No - except in Wolfworld, where wealth, democracy, and peace - my pain au chocolat and his nightly Talisker's - all come from Growth, and growth alone.

Finally, the fatal finger of blame: "The response of many, notably environmentalists and people with socialist leanings, is to welcome such conflicts. These, they believe, are the birth-pangs of a just global society. I strongly disagree. It is far more likely to be a step towards a world characterised by catastrophic conflict and brutal repression." War, invasion, inequality, misery, hunger, and three billion people living in shantytowns are the once and future fruits of environmental and socialist leanings. Again, completely and absurdly false.

Wolf's worldview is worth this detail only because it is a neutral statement of the worldview of leaders in the Anglo-American world: capitalist growth causes prosperity, democracy, and peace. Restraints on growth cause poverty, tyranny, and war. Attention to the needs of the environment, of people, and of society, cause restrains on growth. That's really our entire post-Cold War paradigm.

The paradigm has a permanent crawler on the bottom of its screen. It says, attention to the needs of nature, people, and society can be tolerated only if those needs are defined in advance by the Growth Model. Look at the side of your cigarette pack - it says it there too. There can be no autonomous discourses of those needs. It is Wolf's task to equate the emergence of such an autonomous discourse with the coming of World War III.

Wolf won't state his real fear, which is that the leaders of Anglo-American capitalism will never ever do the one thing that will save them.

Some quick background: These leaders have spent decades celebrating "creative destruction" that deliberately destroys the social systems that support collaborative problem-solving. The West thus approaches the environmental crisis of its growth model with what I call a cooperative disadvantage. Western leaders have pissed off a majority of their own population,s which haven't had a raise in decades, and have pissed off a majority of the world population, which experiences unequal development, exploitation, intense poverty and political oppression. These leaders have a good minority in the most abused subordinate countries (oil despotisms in the Middle East) baying for their blood.

The one thing that would save the West would be for its leaders to give a little - actually, give a lot. Shut up about chopping down the people's "olive tree" so Tom Friedman can have his era of the Lexus, and redistribute wealth. Stop supporting every last one of its pillaging tyrants while selling them your country's brand of helicopter gunships. Start letting wealth flow more to the work that produces it in the first place - the work that is happening every minute all over the world and that makes "the West" possible in the first place. Doh.

What Wolf knows is that Western leaders will never share like this - share in a considered, systematic way that acknowledges the role of people and societies alike. And that is the real reason why we continue to face economic decline and perpetual war.

Saturday, December 15, 2007

Middle Class Workers of the World?

One of my favorite questions is this: when the heck will the middle classes of various countries dispute the interests of moguls and political bosses rather than generally serving them?

The problem got some attention in the Financial Times in the seventh week of the Writers Guild strike, when columnist John Gapper looked for a trend at the various strikes by the writers, the stagehands, and finally the Viacom temp slaves who got mad about cuts to their health benefits.

As a journalist, Gapper is much like the "knowledge workers" whose labor politics he tries to analyze, and his piece shows how limited the white-collar critique continues to be. The main thing collective bargaining could get these media workers, Gapper says, is "outside the workplace – by providing health and pension benefits that freelance workers do not get." So labor negotiations will be most useful where they don't actually concern labor itself. Ouch!

Why does Gapper say this? Because for him, white-collar workers are too individualistic to want to bargain collectively for wages. That is because they care only about themselves, which means they focus on beating their peers rather than cooperating with them for general improvement:
Collective bargaining has a role in this world – to set standard contract terms or percentages for royalties and residuals – but individual negotiation is where the big money lies. Many technicians and writers are freelancers because it suits them: they get greater freedom to work across the industry and earn more.
Gapper's implicit "should" here is wrong. There's no reason why WGA members should ever leave salaries to individual bargaining: TV writers work in a semi-feudal system of medieval inequality and they do as well as they do only because they have long had one of the stronger unions - collective bargainers - in the country.

As a description of a certain middle-class mentality - his included - Gapper is right. Many of us seem to be primitive, pre-conscious merit fundamentalists who act as though the writer who makes $3 million a picture is a hundred times better than the one who made $30,000. Many of us thus are focused on standing out from our peers rather than rising with them and sharing the spoils - though in reality we generally shared the work.

This is not a uniform middle-class view, however. I have seen the split firsthand in the University of California, where a large majority of those faculty involved in an attempt to raise salary levels (while keeping the peer-review "step system") wanted the solution that would raise the scales for everybody. This majority knew perfectly well that therefore the "high flyers" with large "off scale" salaries would be flying a little closer to the ground formed by the regular salary scale, which was raised to be closer to their cruising altitude. Even many off-scale people - myself included - supported this, though it meant smaller raises for us. The professional school folks were already appeased with their own special higher scales - as were the economists - and finally the opposition was lead by some top administrators in the system and not by the faculty as a whole.

My experience is that the group psychology of white-collar types is like that of everybody else: they will support group advancement until it seems about to screw them. Thus the best way to destroy solidarity isto create lots of internal inequality. The fact that the WGA has held together in the face of its own grotesque pay inequalities is a tribute to the vision of leaders and members alike. Needless to say, the inequality boom in the US and UK over the last thirty years has both splintered the middle class and made the post-war practice of general development seem naive. Once many people begin to think that the best way to damage their own well-being is to work for collective betterment, there will be no more work for this betterment.

The Right understands this quite well: its success is based largely on creating higher levels of individual insecurity and fear, for these gnaw at social projects until they are dead. Liberals and leftists still often blame the duped lower-middle and white working classes for their political failures - witness the ongoing popularity of Tom Frank's dupe theory of Republican victory, which says well, all those millions of folks just voted against their own economic self-interest! But the real reason for the Right's success is that the professional center - the media- and sometimes university-based official intellectuals of the middle-class - abandoned Left social projects as having no dependable payoff for themselves.

To some extent the professional center has been right: the top 5 percent (above @ $150,000 family income in 2006) of every society gets not so much out of public services as they do from private treasures - Harvard, not UC Irvine; a borrowed Malibu Colony beach estate, not a nice chain hotel in Miami Beach. So there is always some good chunk of the middle class trying to get to the very top by adopting the views of the people already there, and in the U.S. these views are 99 percent business and 1 percent social (1 percent is the proportion of their net worth that charities try to extract annually from the wealthy).

But the bigger reason that the middle (and working) classes have lost their social projects is that the Right has a) ideologically reviled and b) functionally degraded all public operations - schools, hospitals, transportation, water delivery, food inspection, environmental protection, you name it - so that the middle and working classes alike can no longer believe that these operations will work for them. The game then becomes everyone for themselves - take your kid out of the public school rather than helping to fix it, buy a bigger car rather than taking the bus, etc. etc. The environmental damage of all this panicky self-interest is obvious. The social damage is just as great.
The cure starts with becoming aware of the vicious cycle of degraded public services and narrow self-interest that leads to "social dumping," general decline, and bad union deals. This can still be turned around.


While we're doing this we need to realize that another realm of confidence has been under attack as well: the financial services industry. I blogged about the meltdown in August; the
Financial Times has been ahead of the American media on this, and recently published a good overview of the "shadow banking system" to sustain a wake-up call to folks who still know how to read.

It's important to remember that the financial crisis is not really about subprime mortgages. It is not really about a failure of liquidity. It is not finally about the solvency of many major banks. The crisis is about the failure of markets to determine accurate values for complex financial instruments. There has been widespread market failure in the financial sector and a corresponding failure of trust.

I mention this now because the contemporary middle class is such a devout believer in market values, market signals, market outputs, and market measures of value, but unfortunately this belief has just screwed it again. The financial crisis shows that financial values are often determined by the off-stage behavior of a small number of elites, in this case, the creators of "strucutured investment vehicles" and other novel instruments that even professional investors could not accurately value in the moment of purchase. Values were fixed by what sellers could persuade buyers into paying, where the persuasion consisted of complicated - indeed, often indecipherable - financial arguments, not to mention very good returns at the start of it all.

In cases like this, by the time the general buyer decides the real value is much lower than the value he paid - "he" meaning either the individual or the fund manager who controls lots of savings and pension money - the insiders have gotten their money out. Losses accrue to the outsiders - the late buyers, the naive buyers, the dumb buyers, the eager, greedy buyers, the desperate buyers, the buyers who worried about being shut out and thus bid too much. Markets are always a game of I say/ you say, a running sales pitch, a giant advertising campaign. The crucial thing is that they know and you don't: they, the top rung of financial professionals and their shadow helpers; you, the beleaguered salarywoman or man.

People think financial elites are upset about the "financial crisis." But let's be a little more Noir than that. These folks have destroyed confidence in the public systems that create egalitarian, general development. They have destroyed the "investor economy" alternatives for the mass middle class (the one that hasn't gotten a raise in 35 years, and whose men made 12 percent less in 2004 than they did in 1974.) They have generated a series of financial scandals over decades and haven't paid much yet (see a bit of financial history from "common man" investment manager Ben Stein).

They pick up what the middle class doesn't earn in either the real or the fianancial economies. They win at poker, and they win at roulette too. These financial folk don't bet against the house: they are the house. What's for them to be upset about??