It will be very interesting to see if Philip Mirowski, author of Machine Dreams: Economics Becomes a Cyborg Science, decides to update his thesis in light of Scott Patterson's new book, Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System. Or perhaps Mirowski might just write a review instead. I haven't read the book yet myself, so I can't comment on whether Patterson's thesis itself presupposes technological determinism, but journalists are certainly quick to resort to it when characterising Patterson's arguments. The Sydney Morning Herald's Paul Sheehan, for example, argues that "regulators are always caught in the wake of technological change. This wake has grown into a froth as the computer age keeps accelerating its own evolution (emphasis mine)".
And there's a viscosity in the imagery quoted from the book, somewhat reminiscent of The Terminator, which speaks in terms of ''a worldwide matrix of dazzlingly complex algorithms, interlinked computer hubs the size of football fields, and high-octane trading robots guided by the latest advances in artificial intelligence''.
"At the end of World War II, the average holding period for a stock was four years. By 2000, it was eight months. By 2008, it was two months. By last year, it was 22 seconds. By now it will be as long as it takes to read these first two paragraphs...This evolution includes the ''dark pools'' that gave Patterson the title of his book. They are giant pools of liquidity which financial institutions use to trade with each other, outside the sharemarkets, to avoid the preying Bots that seek to exploit any large trade. Dark pools are also an attempt to create stability. As Patterson writes: ''Insiders were slowly realising that the push-button, turbo-trading market in which algos battled algos … at speeds measured in billionths of a second had a fatal flaw … a vicious self-reinforcing feedback loop … Because speed traders had pushed aside more traditional long-term market makers … algos could trigger their own form of self-reinforcing mayhem.''
But if such systems are portrayed as autonomous, then any attempt to regulate them risks appearing a hopelessly dated and defeatist humanist gesture. This is where Patterson's work could reinforce the posthumanist presuppositions of Luhmann's theory and dovetail with Knorr-Cetinna's thesis of the "post-social" environment inhabited by traders. So this book is a reminder of why we have to make sure our social theory does not become too complicit with its object of analysis, without sacrificing any of the complexity needed to adequately address emergent social phenomena. I can't see that this need be too difficult though, especially when Patterson states that his thesis is postmodern:
''With electronic trading, a placeless, faceless, postmodern cyber-market in which computers communicated at warp speed, that physical sense of the market's flow had vanished. The market gained new eyes - electronic eyes …"
Social theory and sociology have been dealing with postmodernists now for more than twenty years, and have proven, contra Baudrillard, that reports of the "death of the social" have been greatly exaggerated. So I feel confident that a new generation will be able to rise to this latest challenge as well.
One final thing, be sure to watch the clip I've posted here till the end, because it concludes with some interesting speculations about the future applications of drone technology. Drones legally become available for commercial use in the United States in 2015.
The philosopher Christoph Spehr sums it all up, in a film that violates every provision of copyright. On Blood and Wings: A Study in the Dark Side of Cooperation is a contribution to the cutting edge of Marxist theory, clipped from the archives of B-grade vampire flicks. It starts from the classics of 1930s expressionism, then goes on to hilarious 1990s video, dubbed over with Spehr’s cutting-edge ideas on free cooperation. In this film, the Prince of Darkness counsels you.
The first thing is to understand is a monetary compulsion, a senseless momentum. Listen to its logic in the ghostly voice of narrator Tony Conrad, intoned in deep bass against a gory backdrop: 'The blood thing is the only thing you have to know to understand capitalism. The vampire can’t act without the blood. And he doesn’t keep it, he doesn’t feed on it in a way that he would ever be full…. He’s more like a machine that is fueled by blood. And the blood he takes only drives him to search for new blood. Like Marx put it in Capital: B leads to B prime. If you understand this, it will greatly improve your life under capitalism.'
Spehr ranges through the depravity of a civilization and its spectacles, showing how everyone in the developed societies – whether in the academy, the technology sectors or even in activism – comes gradually under the fangs. We are the dash between B and B prime. But the leading edge of a new productive system carries its promise along with its poison, at least when it remains in touch with the past that gives the future meaning. The next thing to understand is what that productive system is good for: 'Technology becomes more and more important in the fight against capitalism: networking, communications, the Internet, new forms of organizing. But the core of the action – the social struggle – is still the basis, and cannot be replaced by any of that.'
The film that began with the Prince of Darkness comes to an end with a sunrise in Mexico, and with a reflection on the way that solidarity acts as a grounding force to control the avant-gardes, who are necessarily infected: 'The ones we expose to highly contaminated areas – like boards, parliaments, any forms of leadership and representation – are always in danger, and they are a danger.' So while the would-be hero from the North goes off to a new struggle, the comrade from the South tells him he will 'pray… pray for the good medicine.' And the lesson of the pharmakon returns, as we hear the ghostly voice repeating 'pray… pray for the good medicine.'
I've never forgotten that essay published in Logics of Television (edited by Patricia Mellencamp) all those years ago about how electronic freeway billboards offer a glimpse of what it might be like for all of us to live inside "one gigantic machine". This analogy points to how cityscapes can evoke circuitboards of desire, with the mobile privatization of the car, which is used to navigate public space, in effect reducing this space to a means to an end: individual consumption. One could refer to the Situationists in this context (we are becoming more beholden to "the spectacle" etc) as well. But rather than link to Ken Wark's animated history of the Situationists, which has gone viral, I thought I'd draw attention to another piece that impresses in terms of its ambitious scale and accompanying bibliography: please check out Landscapes of Capital to help contextualize this South Korean example; it has relevance, of course, to other "global" cities as well. The critical point then is that the construction of these "dreamworlds" is dependent on a process of abstraction:
Abstracted, aestheticized, and decontextualized, the signifiers of landscape in corporate advertising have been cleansed of the ravages of Capital -- the shantytowns and barrios, unemployment lines, soup kitchens, polluted air and water, or IMF austerity measures and ensuing riots. What remains is less a contested terrain than a reflection of the wonderment brought on by Capital.
Another central element of this process must be referred to here: the elimination of any reference to the workers who ensure these products are manufactured, stocked, and then delivered to meet customers' expectations of "convenience". As an antidote I recommend the excellent documentary called Manufactured Landscapes, which shows the changes to landscapes due to industrial work and manufacturing. Such manufactured landscapes can be contrasted with the "second-order" landscapes removed from materiality (by the process of representation) utilized by the advertising industry, that we find in this South Korean example.
According to 'A Companion to Science Fiction', edited by David Seed, the Rand Corporation wrote a report "which suggested that...production-line sub-humans [would be available] as workers by the year 2025 (Lane 1991: 9). This inspired Stephen Gallagher to write his 1982 novel, 'Chimera', which "traces modern genetic engineering back to concentration camp experiments and thereby implies, and denounces, the parallels between capitalist exploitation and Nazi atrocity." The British t.v. version of the book (which from some of the screen shots I've seen looks slightly underwhelming) apparently "removes this theme, [although] it retains its critique of a government intending to further disenfranchise its people of economic self-determination by manufacturing subhuman workers... As it stands, it is a disturbing view of what the cooperation between capitalism and science could achieve." Gallagher, it should be noted, also wrote the Doctor Who story 'Warrior's Gate', which concerns the enslavement and exploitation of an alien species.
Over the last 20 years, the United States Patent and Trademark Office has been issuing patents to universities and private companies on raw human genes. One company or university is given a legal monopoly over a molecule that is inside every human being and many other animals. This documentary explores the legal, ethical, and clinical ramifications of human gene patenting.
If you can, please donate to the film at our Kickstarter page:
"This is the first book to analyse the food industry from a Marxist perspective.Respected economist Robert Albritton argues that the capitalist system, far from delivering on the promise of cheap, nutritious food for all, has created a world where 25% of the world population are over-fed and 25% are hungry. This malnourishment of 50% of the world's population is explained systematically, a refreshing change from accounts that focus on cultural factors and individual greed. Albritton details the economic relations and connections that have put us in a situation of simultaneous oversupply and undersupply of food.This explosive book provides yet more evidence that the human cost of capitalism is much bigger than those in power will admit."
"The critical question then becomes one of means, of how to escape not via politics but beyond it. Because there are no truly free places left in our world, I suspect that the mode for escape must involve some sort of new and hitherto untried process that leads us to some undiscovered country; and for this reason I have focused my efforts on new technologies that may create a new space for freedom."
"The future of technology is not pre-determined, and we must resist the temptation of technological utopianism — the notion that technology has a momentum or will of its own, that it will guarantee a more free future, and therefore that we can ignore the terrible arc of the political in our world. A better metaphor is that we are in a deadly race between politics and technology. The future will be much better or much worse, but the question of the future remains very open indeed. We do not know exactly how close this race is, but I suspect that it may be very close, even down to the wire. Unlike the world of politics, in the world of technology the choices of individuals may still be paramount. The fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism". Peter Thiel from The Seasteading Institute Annual Report 2008
"I deal in the market, every man, woman and child is a target / A closet full of faceless, nameless pay more for less empitness /I’ll make you scrounge, in my executive lounge / you pay less tax, but I’ll gain more back"
Corporate Cannibal ~ Grace Jones
"Writing in 1930, Keynes was most interested in the process of deflation and in countering the dangerous advice of conventional finance. Orthodoxy put the pound back on gold at a punishingly high rate in 1925, torturing British industry and pushing up unemployment in the name of sound money. Central banks, Keynes feared, were being too timid about bringing down interest rates. Against orthodoxy’s austerity nostrums, Keynes celebrated booms in a manner that would do a Texas populist proud. Shakespeare, said Keynes, died rich, and his days were 'the palmy days of profit — one of the greatest "bull" movements ever known until modern days in the United States…. [B]y far the greater proportion of the world’s greatest writers and artists have flourished in the atmosphere of buoyancy, exhilaration and the freedom from economic cares felt by the governing class, which is engendered by profit inflations' (CW VI, p. 137). The Shakespeares of the era of junk finance have yet to be discovered, unless Bret Easton Ellis qualifies."
It must be something like 20 years ago that I originally took in Pasolini's Canterbury Tales at the Empire Cinema in Surry Hills. I walked out of the film absolutely stunned and reinvigorated at the possibilities of pure cinema. A few years after that I took in Salo as part of Sydney's Mardi Gras, which also made an indelible impression. So many memories; I wasn't sure I'd ever see this again, particularly the sequence in this clip that totally blew me away. Before you ask ahuthnance, no, it is not the commercial that would have screened had John Howard defeated Kevin Rudd in the election, but in a way it's not unrelated. As a dedicated communist, Pasolini was fascinated by feudalism, and his work should be seen as consonant with that of later critical theorists warning of a "back to the future" scenario, in which we find ourselves living in a new [sic] Middle Ages. For example:
The Middle Ages ended when the rise of capitalism on a national scale led to powerful states with sovereignty over particular territories and populations. Now that capitalism is operating globally, those states are eroding and a new medievalism is emerging, marked by multiple and overlapping sovereignties and identities -- particularly in the developing world, where states were never strong in the first place.
Having digested these thoughts, watch the clip, then immediately rewatch it just to be sure of what you have witnessed....
Ong’s anthropological and ethnographic approach to neo-liberalism and citizenship is presented in part as a critique of authors such as Michael Hardt and Antonio Negri, who contend, inter alia, that a uniform global labour regime is emerging. Rather, Ong argues in favour of more localized and situated analyses of labour regimes, focusing on the various manifestations of ‘translocal publics’, for example, where specific interests intersect and are given particular formulations (p. 62). As an alternative to examining ‘identities’, which are often simplified interpretations of national groups or ethnic communities possessing considerable diversity, Neoliberalism as Exception emphasizes that the concept of translocal publics describes ‘the new kinds of borderless ethnic identifications enabled by technologies and forums of opinion making’ (p. 63). Ong’s work examines a wide range of regional events and assemblages, from the Chinese diaspora after the 1997 Asian financial crisis (chapter 2), to foreign domestic workers in Singapore, Malaysia and Hong Kong (chapter 9). Neo-liberalism as exception is also a critique of juridical-legal interpretations of the connections between citizenship and government. Ong argues that this method is evident in Giorgio Agamben’s focus on the bifurcation of the population into two halves: zones of citizenship, consisting of political beings, and zones of bare life, consisting of those without citizenship protections (p. 22). Instead, Ong contends that a ‘temporal conceptualization of the politics of exception’ is a more appropriate means for recognizing the validity of other ethical regimes - such as the various world religions - that also ‘operate along the continuum of inclusion and exclusion, though without mapping onto the same division between citizens and bare life’ (p. 197). In contrast to Agamben, Ong argues that new modes of analysis are necessary for examining the ways in which those without territorialized citizenship might make claims, whether through local communities, NGOs or corporations (p. 24). While most of the book’s content consists of essays already published elsewhere, Ong also presents new contributions, and has reworked and reorganized the existing material to provide an ethnographic perspective critical to an understanding of the global economy and socio-political systems. By placing each article in a particular context that reveals new insights into neo-liberal transformations of citizenship and sovereignty, Ong brings theoretical potency and empirical energy to a growing field of scholarship.
Eliot Che's review, "Rethinking Neoliberalism", Originally published in: International Affairs 83(4), 2007.
I'm deep in the throes of editing a paper for an academic economics journal, so my thoughts here will have to be impressionistic and require future unpacking. But I'm in a playful mood and need to unwind for a moment. Suffice to say, I'm struck of late by the serial effect of so much of what passes for critical analysis in the blogosphere: take the latest Continental philosopher who refers to "capital", and then apply said reading method to the film, dubstep album etc of your choice. In my earlier "Crash" post I touched on a few characteristics of the kind of "interpretive community" that may have generated these tendencies, and I've wondered ever since if they could bear closer examination in terms of a sociology of knowledge, or the perspective I'm more familiar with, social epistemology.
The questions asked would need to be reflexive ones about why these people blog, which should ideally help to elucidate any commonalities between them. It would also have to be determined why this reading method has proliferated to the point where it seems to be the preferred option when it comes to sociocultural theory in the blogosphere. A cynic might argue that it has to do with Donald Campbell's infamous "fish scale model of omniscience", where those who conduct the least amount of empirical research are particularly suited to the mobile conditions of a network society. When such individuals have tenureship, one can expect to find them disproportionately represented at international conferences. When there is no tenureship, cyberspace substitutes as the preferred space for generating network connectivity. Crosscutting both situations, however, is the tendency for depth of knowledge to explode in direct proportion to interdisciplinary/transdisciplinary mobility.
What typologies could potentially be used to draw the relevant distinctions? As I see it, there are essentially 3 choices. Surprisingly, in a moment of rare lucidity, Slavoj Zizek has managed to sketch 2 of these, which could serve as heuristic devices when investigating the blogosphere of Continental philosophy. In his words:
If I understand this point of a one-mind-entity correctly, then it's a version of cyberspace I didn't mention. I first of all mentioned the deconstructionist version of cyberspace which is this post-Cartesian one: Each of us can play with his/her identities and so forth. This is the feminist, deconstructionist, Foucaultian version. But as you probably know there is another, let's call it the New Age school of cyberspace-ideology. It is this neo-Jungian idea that we live in an age of mechanistic, false individualism and that we are now on the threshold of a new mutation... ...the Noosphere... Slavoj Zizek: Yes, that's precisely the idea. We all share one collective mind.
The first alternative is clear enough, but I'm wondering if the second has any explanatory power when it comes to understanding the curious phenomenon in which capitalism is portrayed as increasingly emancipated from human agency, and that it is this inherent tendency that might explain its current dysfunction? I suspect the answer would be "yes", insofar as the Continental response, for all of its rhetorical appeal to complexity, merely complements the widespread disenchantment with human subjectivity as the driver of change on the contemporay scene. We are typically presented with portrayals of the "alien" nature of capital, which affords the Continental commentariat the luxury of just in effect sitting back and anticipating how the disaster will play itself out. Only at that point may the rising crescendo of voices proclaim the emergence of a "new mutation"; in Deleuzian terms, for example, something like "a non facialised individual", and/or a realisation of the promise of "the multitude" (Hardt & Negri). If these preliminary speculations are amenable to further analysis, then their provenance might also be traced back even further.
Intellectual pathologies of our times I: Continental philosophy
Generally speaking, today’s stereotype of the intellectual is the continental philosopher – a quasi-literary, somewhat deep figure of French or German origin. The origin of this image is normally traced the existentialist Jean-Paul Sartre, who regarded himself as a ‘universal intellectual’, very much on the model of an Enlightenment figure like Voltaire. However, this image came under serious reconstruction after the disappointments of the student revolts in the 1960s. At this point Michel Foucault emerges as a downsized and more academicised version of the Sartrean intellectual. Here we shall explore how continental philosophy provides intellectual rationalisation for political impotence that has spread to cover a wide range of movements, including feminism.
The third alternative is one which I am more familiar and sympathetic with. What needs to be determined here is the extent to which the blogosphere can be modelled on a public sphere. Unlike the Continentals, it is a perspective less preoccupied with the complexities of "the virtual", than the development of new concepts and their practical, collective applications, such as "information war". A key figure here is Frank Webster, who is one of the most renowned, sociologically influenced, critics of the idea of "the information society". A further advantage of his work is that it spares one from the option of having to endure the crude polemicism that oftentimes features in exchanges between the Continental blogosphere and its opponents. Like Fuller then, Webster has developed a detailed system of thought which offers the promise of constructive criticism when engaging with the mediation of ICTs by capitalist interests.
I did once come across a superb Adorno quote from Minima Moralia that speaks to the sense of how the historical moment can give the tenured Continental philosopher an innate sense that they are a fraud (which I'll have to track down again). It's particularly frightening when this sense of powerlessness is compensated for by the overzealous marking of students' work. The image which came to my mind was of some of the younger dons, who are more likely to perceive students as future competition, thereby increasing a feeling of insecurity, as resembling Jack Torrance in The Shining; except in the philosopher's case the university substitutes for the Overlook Hotel. In each scenario, the place where they toil merely teases out the innate destructive capacities by giving them a space for their free reign. Word counts and body counts hence become indistinguishable as writing transmutes into a form of serial violence repeated ad infinitum (Mark Seltzer style)........
But rather than end on such a pessimistic note, I can at least report that my preliminary research on the noosphere has yielded an interesting science fiction find: the anime, intriguingly titled, in light of my last remarks, Serial Experiments Lain. I hope I can track it down some time.
After President Bush signed the controversial bailout bill into law, Paul Jay, Senior Editor of The Real News Network, talked with Leo Panitch, the Canada Research Chair in Comparative Political Economy and a Distinguished Research Professor of Political Science at York University in Toronto, to get his analysis of the situation.
'Free markets' depend on state intervention Pt1/4
PANITCH: When you're defending a Wall Street institution, you're not just defending that one institution; you're defending all of the people who expect that their money will get paid back from those Wall Street institutions, which is a much, much wider and larger part of the globe. It's partly to do with the pension funds that workers have that, you know, need to be met by those institutions; it has to do with all the world's capital that's invested through those banks. So you're not just, you know, dealing with you're going to save that bank. In fact, for the most part they've let the shareholders go under. You know, in that sense, the shareholder's taking a hit for every one of these corporations. They've all taken a hit. But who's been saved are the people who have assets in these banks. And that's what's been saved. That's a much larger group than these particular Wall Street banks. In that sense the United States, in playing that role, is playing the role of guaranteeing to capital that they will be able to get assets out of New York and, more broadly, out of London.
JAY: So you think they didn't really have a choice.
PANITCH: They had to act. There's no question. And in any case, you know, any understanding of the nature of a capitalist state would lead you to know that they would act. It's the illusion that the state somehow stands apart from capitalism, is not part of capitalism; it stands outside of it. It's all this misunderstanding when we speak of states versus markets. These markets are full of power, asymmetric power, very unequal power, and those power is founded on the backing that states give them. The free markets that we know have been made by very active state intervention, and people enter into market activities knowing that states will back up property in those markets. So it's an illusion to think that states are something other than capitalism. When you understand American capitalism, you understand the state is part of it. Federal Reserve and Wall Street, right, need to be seen as part of a whole—sure, in which the Federal Reserve is not acting as a competitor inside the market; it's acting as an overseer of it; more or less regulation in different periods, it's true, but it's an overseer of it.
The cash-out society Pt2/4
JAY: The entire society's sitting around, waiting to cash out, in theory. Most people don't get a chance, but this cash-out mentality—. I heard this term the other day, which I thought was great: a liquidity event. Everyone's waiting for the liquidity event.
PANITCH: For the liquidity event. That's lovely. Exactly. And everybody had confidence in this growth of this asset bubble that has been going on since the early '80s, with constant crises in it, you know, with constant moments of crises. Then the American state would come in and it would throw an enormous liquidity at the crisis, a helicopter would drop it in, and then the thing would take off again. Well, what happened this time was that it really began to unravel in a serious way, and in such a way that because it hit in the mortgage market and in, above all—it's not surprisingly—that portion of the mortgage market that was trying to integrate African-American communities, and Chicano communities, etcetera—.
JAY: Well, this is one of the points you make in your recent article is that they needed and got sections of not just the middle section of the working class but even a poorer section of the working class to buy into the cash-out mentality: get into a house with cheap money, sell it for a fortune later on, and everyone will live happily ever after.
PANITCH: Well, in order to be fair, in order to sustain your income, re-mortgage your house, which a fair number of people did. And a lot of these subprime mortgages were not only got into—and although it was that, it was also re-mortgage your house. Part of that was, if I re-mortgage my house, I can maybe add a room and then sell it for a hell of a lot more money, and part of it was that people consume through that. So, you know, at root this has to do with the fact that American trade unionism was defeated 30 years ago, that the Great Society programs which were [inaudible] the 1960s—.
The financial crisis at the local level Pt3/4
JAY: So what can be done?
PANITCH: So, well, a very radical move is needed here. One needs to go back to remember that the Great Depression really began with municipalities defaulting on their debt, and closing down relief, etcetera. The only thing that can be done is for the federal state to guarantee the bonds at state and local levels, and to guarantee that it will back up a default in any of those. And that would overcome this problem. This is a very radical step.
JAY: Why? Why is it so radical?
PANITCH: Well, because it means that the federal state is taking on a responsibility for spending that would be done by local aldermen and councilors, many of whom they would see as irresponsible, unconstrained, etcetera, etcetera, in the usual balance-the-budget kind of way. And this has a lot to do with what has really been the populist essence to the neoliberal era, to the Reaganite movement, to the free market ideology. It's never been about getting the state out in the sense of backing up capital; it's been about cutting taxes. That's been oriented, of course, substantively towards the rich, towards capitalists, towards the wealthy, and so on. Very true. But it's had this great appeal to people who come to define politics, democracy, their vote in terms of "Will I pay $100 less a year in taxes or a maximum $1,000 less in taxes?"—the ordinary working person. So if you look at the presidential debates, the vice presidential debates, the Canadian election debate, so much of it was bound up with "I will not increase your taxes." And the irrationality of this is staggering, in the sense of if, you know, municipalities are going to go bankrupt, are people really saying that they will not pay $100 more in taxes? And the mentality of it is irrational. But the notion is democracy's about "I use my vote to pay as little as possible," when they, you know, will pay $100 more to Rogers at the bat of an eye without even fighting it, or a cable company.
JAY: Or Time Warner or Comcast.
PANITCH: Or Time Warner. Yes, exactly.
JAY: But isn't there a point that if the federal state, the American state, is going to defend Treasury bonds, perhaps even if under critical circumstances defend even some state or municipal bonds, at what point does that backing up by the state meaningful if they don't raise taxes?
PANITCH: Sure.
JAY: 'Cause you can't just print money and say, "We're now backing up the bond."
PANITCH: Well, let's remember that during the Second World War you had enormous deficits, the highest in history, and nobody was calling the States' bonds at that moment, because of the enormous deficit, when it came to a major project like that. Moreover, when you have a major recession or a depression, where do capitalists or anybody have to put their money that's safe? In public debt. Right? You know, back in the 1930s, everybody was screaming that Roosevelt was a socialist, all the capitalists, for his union reforms and welfare reforms. They were lending money to the state. They were lending money to all the agencies he'd created to build all the infrastructure, etcetera, etcetera. And that's going to happen again if states are prepared to take this on. That's not to say that there shouldn't be a massive redistribution of wealth through the tax system. Bernie Saunders, the American congressman, in the face of the bailout, was saying you could raise $300 billion by imposing a surtax, a 10 or 20 percent surtax, on all incomes above $500,000, and I totally agree with him, but it doesn't go far enough. They've done away with the estate tax, as they call it in the United States, the wealth tax. We ought to have a wealth tax. I mean, after the enormous inequalities that have grown in wealth over the last 30 years, there ought to be a very major wealth tax.
It's time to make banking a public utility Pt4/4
JAY: And maybe just to get some context, especially for some of the younger people in our audience, there were cities burning in the 1960s. You had the Civil Rights Movement. You had workers demonstrating for their rights and for higher wages. The entire society in North America was at a state of intense conflict.
PANITCH: Yes, and you were sending off young black men, conscripting them and sending them off to the Vietnam War. There was the Black Power movement. And the response more under Lyndon Johnson than under Kennedy was to create the war on poverty, or what was known as the Great Society programs, which involved increasing public expenditure at the same time as you were prosecuting the war in Vietnam at great expense. And that was part of the period of inflationary pressures that public deficits were causing, that workers wage demands were causing, 'cause when workers had full employment, they, you know, felt they could make high wage demands in order to buy everything that they were being told to buy that the good life was all about. And the response in the 1970s—and it was a product of the fact that the United States dollar was the world currency, and on here was the rest of the world holding dollars, and they didn't want their dollars to be devalued by inflation, were demanding of the United States that they cut back on their public expenditure. And they did, and they cut back on it.
JAY: You're talking about the Volcker shock treatment.
PANITCH: They cut back on it even before that, even under Jimmy Carter in 1976-77. And they cut back on public expenditure, but they still had to try to integrate the masses in the cities. They still had the problem of how do you house people. And one of the things they did was to try to integrate them through getting them into the financial system as borrowers. A act which a lot of radicals were pushing—and they didn't mean it in a way that would end up in this crisis that we're now in—was that banks ought to be required to lend to poor people, that they had to lend to those portions of their communities they'd never lent to. Right? And the banks all objected. "What do you mean? We can't lend to poor people. We're not going to be sure we're going to get paid back." They said, "Okay. We'll allow Fannie Mae and Freddie Mac, the government-sponsored mortgage housing corporations, to create this secondary market in mortgages. They'll buy them off you."
JAY: When the Republicans now critique this, they leave out the extent to which there was social unrest that had to be dealt with.
PANITCH: Well, they leave out the fact that this was actually a poor option relative to the Great Society programs, that it was happening because they were cutting back on welfare, on the Great Society programs, on food stamps, on public expenditure in the cities, etcetera. So in a sense they drove people into, "Okay, you want to deal, you want to be able to buy in our society, get it from the banks." And Clinton made it worse: having bought into neoliberalism as all part of the third way, I mean, partly he said, "I'm being driven into this because of some"—and he used a word we can't use on television, blank-blank-blank 28-year-old bond trader. Right? But once he did, he cut back on welfare. He did away with the American welfare system, Clinton, right? And what he then did was he radicalized this community reinvestment act, radicalized it in the sense of push people further into trying to get mortgages through this. Right? And this created it even more. And then Bush came in and let every shyster in the mortgage system into this as a competitor, completely unregulated; removed the reserve requirements on Fannie Mae and Freddie Mac, who—you know, banks have a 10 percent reserve requirement that they have to loan as cash—they only have to have 2.5 percent rather than 10; and you got this mountain of debt. It isn't the poor people's fault; it's the product of not being willing to have public expenditure. It's a scandal that the United States doesn't have a massive program of public housing.
JAY: So they could have had two strategies here. One is state investment in cheap public housing direct. Get people to borrow money, get into debt, to somehow buy their own housing.
PANITCH: Exactly. And they pushed it through the private sector; they pushed it through private finance. And of course it was the biggest portion—.
JAY: And they were making money on both sides here: they make money on the interest on the debt, and they make money through the asset inflation in the real estate market.
PANITCH: Yeah, until it all blows up in their faces. So, you know, in terms of what is to be done, we need to look at it historically. Sure, there needs to be regulation; sure, the Bush administration should not have allowed every shyster in the mortgage industry in.
JAY: I can't resist doing a Sarah Palin, her doggone, do you want to look back again [inaudible]. Go on.
PANITCH: Yeah. Well, we do. I mean, we need to learn the lessons from mistakes of the past. And we need to go back to public expenditure. Now, I think it is true that, you know, this is a capitalist system, and that will itself create contradictions. So down the road you have to be able to think ambitiously about being prepared for what's going to happen if you're doing redistributed taxation in order to raise that money. If you're pushing out the private sector through public expenditure, what's going to happen in the long run? And I think you have to build support during that process of public expenditure for actually taking the banking system into public hands, making that a public utility. You can't do that right now apart from a bailout. But I think there's enough anger around that you could be building towards it, not just as a bailout, but as this will become a way of redistributing what is produced in our society in a more rationable, more equitable way, will have a banking system that serves a different function.
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"Defects of empirical knowledge have less to do with the ways we go wrong in philosophy than defects of character do; such as the simple inability to shut up; determination to be thought deep; hunger for power; fear, especially the fear of an indifferent universe" (David Stove The Plato Cult and Other Philosophical Follies 1991: 188)
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