[Marxism] What is it?

Louis Proyect lnp3 at panix.com
Wed Jul 28 12:06:55 MDT 2010

What Is It?
By James Howard Kunstler
on July 26, 2010 9:26 AM

The New York Times ran a story of curious import this morning: 
"Mel Gibson Loses Support Abroad." Well, gosh, that's 
disappointing.  And just when we needed him, too. Concern over 
this pressing matter probably reflects the general mood of the 
nation these dog days of summer - and these soggy days, indeed, 
are like living in a dog's mouth - so no wonder the USA has lost 
its mind, as evidenced by the fact that so many people who ought 
to know better, in the immortal words of Jim Cramer, don't know 

Case in point: I visited the Slate Political Gabfest podcast 
yesterday. These otherwise excellent, entertaining, highly 
educated folk (David Plotz, Emily Bazelon, and Daniel Gross, in 
for vacationing John Dickerson) were discussing the ramifications 
of the economic situation on the upcoming elections. They were 
quite clear about not being able to articulate the nature of this 
economic situation, "...this recession, or whatever you want to 
call it..." in Ms. Bazelon's words.  What's the point of sending 
these people to Ivy League colleges if they can't make sense of 
their world.

Let's call this whatever-you-want-to-call-it a compressive 
deflationary contraction, because that's exactly what it is, an 
accelerating systemic collapse of activity due to over-investments 
in hyper-complexity (thank you Joseph Tainter). A number of things 
are going on in our society that can be described with precision. 
We've generated too many future claims on wealth that does not 
exist and has poor prospects of ever being generated. That's what 
unpayable debt is. We have such a mighty mountain of it that the 
Federal Reserve can "create" new digital dollars until the cows 
come home (and learn how to play chamber music), but they will 
never create enough new money to outpace the disappearance of 
existing notional money in the form of welshed-on loans. Hence, 
money will continue to disappear out of the economic system 
indefinitely, citizens will grow poorer steadily, companies will 
go out of business, and governments at all levels will not have 
money to do what they have been organized to do.

This compressive deflationary collapse is not the kind of cyclical 
"downturn" that we are familiar with during the 
two-hundred-year-long adventure with industrial expansion - that 
is, the kind of cyclical downturn caused by the usual exhalations 
of markets attempting to adjust the flows of supply and demand. 
This is a structural implosion of markets that have been 
functionally destroyed by pervasive fraud and swindling in the 
absence of real productive activity.

The loss of productive activity preceded the fraud and swindling 
beginning in the 1960s when other nations recovered from the 
traumas of the world wars and started to out-compete the USA in 
the production of goods. Personally, I doubt this was the result 
of any kind of conspiracy, but rather a comprehensible historical 
narrative that worked to America's disadvantage. Tough noogies for 
us. The fatal trouble began when we attempted to compensate for 
this loss of value-creation by ramping up the financial sector to 
a credit orgy so that every individual and every enterprise and 
every government could enjoy ever-increasing levels of wealth in a 
system that no longer really produced wealth.

This was accomplished in the financial sector by "innovating" new 
tradable securities based on getting something for nothing. That 
is what the aggregate mischief on Wall Street and its vassal 
operations was all about.  The essence of the fraud was the 
"securitization" of debt, because the collateral was either 
inadequate or altogether missing. That's how you get something for 
nothing. The swindling came in when these worthless certificates 
were pawned off on credulous "marks" such as pension funds and 
other assorted investors.

Tragically, everybody in a position to object to these shenanigans 
failed to issue any warnings or ring the alarm bells - and this 
includes the entire matrix of adult authority in banking, 
government (including the law), academia, and a hapless news 
media. Everyone pretended that the orgy of mortgage-backed 
securities, collateralized debt and loan obligations, structured 
investment vehicles, credit default swaps, and other chimeras of 
capital amounted to things of real value.

Certainly the editors and pundits in the media simply didn't 
understand the rackets they undertook to report. You can bet that 
the players on Wall Street made every effort to mystify the media 
with arcane language, and they succeeded beyond their wildest 
dreams. (Making multiple billions of dollars by trading worthless 
certificates based on getting something for nothing must be the 
ultimate definition of succeeding beyond one's wildest dreams.) 
It's harder to account for the dimness of the news media. I doubt 
they were in on the caper. More likely there is a correlation 
between their low pay and their low capacity. But I wouldn't 
discount the fog of assumptions and expectations about the way the 
world is supposed to work that can disable even people of 

I'm as certain as the day is long that the folks on Wall Street, 
from the myrmidons in the trading pits to the demigods like John 
Thain, with his thousand-dollar trash basket, knew that they were 
trafficking in tainted paper. Many of them deserve to be locked up 
in the federal penitentiary for years on end, and they probably 
never will because president Barack Obama lacked the courage to 
set the dogs of justice after them and now it is too late.

The most confused of any putative authorities are the academic 
economists, lost in the wilderness of their models and equations 
and their quaint expectations of the way things ought to go if you 
can tweak numbers. These are the people who believe with the faith 
of little children that if you can measure anything you can 
control it. They will go down in history as the greatest 
convocation of clowns ever assembled, surpassing all the collected 
alchemists, priests, and vizeers employed in the 1500 years 
following the fall of Rome.

It's harder to tell whether the elected officials and their 
appointees in sensitive places like the Securities and Exchange 
Commission and the FBI had a clue as to the scale of misconduct in 
the financial sector, or if they were bought off plain and simple, 
or just too stupid to understand what was going on all around 
them. The term "regulatory capture" provides valuable insight. How 
could Christopher Cox at the SEC fail to notice the stupendous 
malfeasance in the mortgage-related securities rackets. Why isn't 
he working for fifty cents a day in the laundry of Allenwood 
Federal Correctional Facility? Why is the grifter of Countrywide 
mortgage favors, Christopher Dodd, still free to guzzle the fabled 
bean soup in the Senate lunch room? I could go on in this vein for 
two hundred pages, but you get the drift.

The collective failure of authority, whether of intention or 
oversight or mental deficiency boggles the mind. And it leaves us 
where we are: in a compressive deflationary contraction, a.k.a. 
the long emergency.  This is not a cyclical recession. It's the 
end of one thing and the beginning of another thing, another phase 
of history in which people will have to learn to live differently 
or perish. I'm convinced that just about very elected official who 
can be swept out of office will be swept out of office - even if 
their replacements turn out to be a very unsavory gang of sadists 
and morons who will certainly make things worse.

But these dog days of summer nobody will be paying attention, even 
as the markets themselves roll over and puke, as I rather imagine 
they will between now and Halloween, if not next week.

P.S. I have not come to any conclusions about the fate of the 
Macondo blow-out and the claims of Matthew Simmons, though I have 
certainly got a lot of mail about it, some of it very intelligent. 
The BP oil spill has vanished from the news headlines again as the 
world waits for the final push at the relief wells. We do know 
that we are entering the heart of the hurricane season and that 
will make for some excitement.

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