|
Weekend
Edition
February 14 / 15, 2004
How Privatization
Sterilizes Culture
An
Interview with Michael Hudson
By STANDARD SCHAEFER
Since the 1980s computer technology has been promoted
as democratizing leisure by lowering the production costs of
knowledge and culture. Consumers were promised more free time,
yet a quarter or even a third of family income for the low- and
middle-income brackets now goes to pay debt service, leaving
insufficient revenue available for the promised leisure society.
Culture traditionally was a luxury, often the first item cut
from in lean times. In these times, however, we're told consumption
is patriotic, something that should be maintained even during
national emergencies. Curiously, when it comes to cultural products
like music, prices come down but quality is sacrificed. Anyone
who knows how "live" recordings on LP records sound
fuller, despite the occasional hiss or click, than music on a
CD understands that technological improvements do not always
accompany improvements in quality.
Somewhat analogous is the way television
and radio suffered after large corporations began to undermine
the Communications Act of 1934. Commerce Secretary Herbert Hoover
staunchly advocated that the air waves remain in the public domain,
free of commercials, serving the public interest. When the federal
government auctioned off airwaves leases not only did it do so
at unreasonably low prices, but cultural production became the
purview of fewer and fewer companies.
Television and radio never approached
their potential to raise consciousness in the way that publicly
sponsored cultural events had for eons. Commercials disrupted
the integrity of the programming. In discussing the financialization
of culture, Prof. Hudson elaborates on the relation between technological
innovation, the role of public and private financing of culture
historically, and their more recent role of promoting consumption.
How debt is foreclosing
cultural as well as technological advance
SS: Let's begin with the recent
breakthroughs in consumer technology. Is all the new hardware
and internet access opening up new horizons for cultural advance,
or are we "entertaining ourselves to death"?
MH: It would be a mistake to assume
that technology elevates culture just because it has the ability
to open new horizons for people by freeing them from the mind-numbing
drudgery of manual labor. Culture seems to have been trumped
by the economic dynamics that over-layer today's technology.
Privatization of the media in particular has replaced the old-fashioned
cultural forms with new, more synthetic ones that have a different
content and social function.
In the beginning the common aim of culture,
along with religion, was to promote altruistic rather than narcissistic
values. One finds this objective even in the case of table manners
and the etiquette of group meals, as well as in the design of
public monuments and of the public sections of cities. Classical
drama, for instance, was all about hubris and the destructive
effects of egoistic self-seeking. This ethic helped society survive
in an epoch when most gain-seeking tended to be at the community's
expense.
Ever since antiquity, and in fact from
time immemorial, civic bodies have financed music, drama and
culture in general. This meant the wealthy families in one form
or another, either directly as philanthropic good works, or indirectly
as taxpayers. In Athens the richest property owners were designated
to  serve as the chorearchs to
outfit and lead the chorus for public dramas. Rather than trying
to avoid such taxation they competed with each other for excellence--and
the prestige that went with it.
The golden age of musical tradition from
ancient and medieval times down through the early 19th century
is now being marginalized. Live music in these centuries was
sponsored by royal patrons, city bodies and especially the church,
often on ceremonial calendrical occasions. The privatization
of culture has made music one of the casualties of economic change,
along with classical drama and even art.
SS: You are talking mainly about public
performances in which most citizens participated.
MH: Yes. The context and purpose was
different. The mode of access to music, drama and art has changed
to reflect their new functions. The new role is not to inspire
group solidarity or patriotic feeling. Art forms have been transformed
into commodities, and in the 20th century into vehicles to sell
products. The mass media's designated role is now primarily to
attract peoples' attention to commercials.
This line of development was not anticipated
when radio began in the 1920s and television a few decades later.
The ability to broadcast and reproduce classical drama and music
was expected to spread it to a much broader audience than could
be reached by live performances. But this phenomenon was surprisingly
short-lived, at least in the United States as compared to Europe.
One of the most notorious examples has
been the phasing out of symphonic and chamber music on radio.
When I moved to New York City in 1961, most small offices run
by their own proprietors, from book stores to butcher shops,
had a classical music station on--WNYC, WBAI, WNCN, or even the
then-modestly commercial-laden WQXR. These stations have now
gone out of business, except for heavily commercialized stations.
And small businesses have been replaced by conglomerates with
innocuous canned background music at best.
For years radio stations across the country
carried the Saturday afternoon opera sponsored by Texaco, but
the oil company is now pulling out as culture no longer adds
enough to its bottom line. Non-profit and public radio stations
have not picked up the slack. After staging a fund-raising drive
to buy New York City's own public radio station, WNYC, the new
management announced they were stopping 90 percent of its classical
music programming. They said that classical music drove their
audience away to talk-show stations, and that most of their contributors
preferred talk shows.
The situation has become even worse for
live music. Orchestras throughout America are faced with near-bankruptcy
for lack of civic funding. In past years real estate interests
promoted them as a way to increase property values around such
sites, as if culture somehow could be absorbed by propinquity.
But today such planning is deemed too long-term to be attractive.
The cutback in income taxes for the highest
brackets has played a major role in this. Given the tax cuts
over the past twenty years, the tax benefits from philanthropy
no longer are anywhere near what they once were. So the traditional
patrons have stopped contributing, forcing orchestras to cut
back their budgets. Jobs for musicians are getting scarcer. Without
hope of employment, how can prospective musicians be persuaded
to undertake the training and long-term study needed to carry
on a tradition that has taken many centuries to develop? It looks
like a few countries such as Finland have moved almost alone
to fill the void.
SS: More listeners are getting classical
music through CDs. Do they end up with as much music, but via
reproduced performances?
MH: The problem has a number of dimensions.
One is the commoditization of music associated with the star
system. The record companies sought to market personalities,
making them the commodity rather than the music. The effect has
been to turn a few musicians into brand names.
The vast majority of young musicians
need to pay for their own debuts, so the system weeds out most
performers who do not inherit enough money to finance their careers.
Many are reduced to the drudgery of teaching. Music has survived
primarily as a hobby, although an important one in shaping the
creative abilities of teenagers and others.
SS: A similar star system exists in
the fine arts.
MH: Painting and literature also have
become vehicles for celebrities--not so much the artists themselves
as their patrons and collectors. The criteria held by the major
collectors I've met regarding the artists they promote are more
commercial than inherently artistic. First of all, the artist
has to be prolific enough so that most of the major collectors
can buy an example of his or her work for their collections.
The guiding obsession is much like postage-stamp collectors who
want to get a complete profile of stamps for the countries they
collect. Second, the serious art collector has to be able to
buy a dozen or preferably two dozen of the art works to put in
the warehouse. This principle works well with anonymous art if
it is a "style" like American Indian art or Indian
or Tibetan paintings and bronzes, as well as op art, pop art
and other recent fashions.
Having taken their position in this way,
the collectors arrange to bid up a high price for one or two
of the pieces at auction, and then donate the pieces to a museum,
getting a tax write-off at a multiple of what they paid. They
actually end up with more money through the taxes they save on
such transactions. Meanwhile, they let late-comers buy into the
artist or style. The basic strategy is much like venture capitalists
getting favorable stock prices and options early, making latecomers
pay much more. The principle begins to approach that of the emperor's
new clothes turned into a chain letter or Ponzi scheme by the
time you get to celebrity art such as Andy Warhol and banal "conceptual"
art.
I've known a number of such collectors,
and at one time helped arrange tax deals for them. They're quite
proud of the killings they've made in the art market. Meanwhile,
patronage of cultural institutions has become a social trophy
for wealthy individuals, while tax breaks enable them actually
to make money by contributing to tax and music.
SS: Some critics argue that this situation
has reduced the content to the same simple, inoffensive imagery
as that found in the mass media. Has it changed the content
and how so?
MH: You now have art without the iconographic
or social context that gave it a deeper meaning in the past.
You do not even have the bourgeois figurative "art of everyday
life," but nonfigurative fads that lack either the personal
or visibly ideological dimension of symbolic meaning, such as
op art and pop art, which merges naturally into celebrity art
because there is little other standard of judgment.
SS: Thorstein Veblen coined the phrase
"conspicuous consumption" to describe a leisure class
spending money on luxuries that attest to their immunity from
everyday toil. Do you think this is true, say, in literature?
MH: Art and also rare books have been
turned into gift shopping and trophies. This has happened especially
with rare books. Dealers concentrate increasingly on first editions,
not on books that actually are to be read by the buyers. The
book jackets often are as expensive as the books themselves,
conveying the idea of pristine purity--which of course means
sterility as far as the cognitive content of the book is concerned,
because the less read it is, the more valuable it becomes to
collectors.
SS: What role has finance played in
transforming culture into mass culture?
MH: Commercial radio, TV and other media
have transformed culture not just in the sensory ways that Marshall
McLuhan pointed out a generation ago, but in a specifically economic
way associated with commercialization of the air waves. The broadcasting
spectrum has been monopolized as the vehicle for disseminating
radio and television in order to sell space on it. The way to
make the highest profit is to turn the content of broadcasts
into a vehicle to sell goods.
This aim has been decoupled from the
promotion of traditional cultural values. In fact it is antithetical,
by spurring consumption and opportunism while not addressing
political and social problems.
SS: Wouldn't defenders of today's
media describe it as being more democratic, because it is market-oriented?
In decrying the loss of classical culture don't you run the danger
of being snobbish like the ill-tempered Prof. Alan Bloom of the
University of Chicago?
MH: The sense in which I refer to classical
culture is almost diametrically opposite to that of the Chicago
Boys. Denouncing government, they have been in the forefront
of privatizing culture just as much as for public utilities,
Thatcher-style. They see commercialization as efficiency. Bloom
describes Athenian culture as promoting individualism. What he
misses is the radical reformist character of the 6th century
under Peisistratus, his sons, and subsequent opponents of the
oligarchy. They standardized equality, and at the end of the
century it was Cleisthenes that created the key urban reform
of dividing Athens into equal "deme" units. The American
equivalent would be county townships or school districts.
In Ancient Society the great anthropologist
Lewis Henry Morgan treated this reform of the old aristocratic
units as the key breakthrough not only for Athens but for civilization.
Marx and Engels agreed. City planning became a vehicle for political
and cultural equality, based on standardization of rights rather
than hereditary inequality. But to Bloom and the Chicago libertarians,
what was great about Athenian individualism was its room for
inequality. Chicago School economics has no constraint on economic
polarization being made perpetual through abolition of the inheritance
taxes and what opponents of Vladimir Putin call "managed
democracy" via Russia's media, even as Bush's FCC appointee
Powell abolishes regulation that had aimed at preventing monopolization
of the media.
How the media extract economic rent
from the communications spectrum
SS: Robert McChesney and Ed Hermann
have described how large corporations gained control of what
started out looking like it would lead to a public broadcasting
system. We ended up with commercial networks rather than developing
along the lines of the BBC in Britain. Should anyone have foreseen
this?
MH: McChesney's and Hermann's account
of how corporate conglomerates took over the air waves and popular
press parallels the land grants to the railroads in the mid-19th
century. One of the best descriptions of these giveaways is Gustavus
Myers' History of the Great American Fortunes, originally
published in 1907 and reprinted widely ever since. Its first
publisher was Charles H. Kerr, best known for publishing Marx's
Capital. The similarity is worth noting in order to see
the tactics at work.
Myers wrote at a time when socialists
were inspired by Henry George's idea of taxing land rent, and
by logical extension natural resource rents and monopoly rents
as representing unearned income. Industrial profits were smaller,
because the value of capital equipment, machinery and buildings
was far less than the value of land and mineral resources. The
same is true with the broadcasting spectrum and other assets.
For this reason, European and other foreign governments kept
them in the public domain until the 1980s.
SS: Can you clarify the parallel between
the railroad land grants and the giveaway of the TV and radio
spectrum? Most people think of the broadcasters as earning profits,
not as gaining rent and rising property values.
MH: The land grants were supposed to
enable the railroads to provide transportation and freight services
so that the government would not have to undertake, plan and
pay for them. But the cost of privatization ended up involving
a giveaway to insiders who gained control of the economy's commanding
heights, much like Yeltsin's kleptocrats did in the 1990s in
Russia.
The land grants made the railroads the
nation's largest real estate companies. Their financial managers
were interested in supplying transportation only to the extent
that it helped increase the value of their stocks and bonds,
which dominated the securities markets by the late 19th century.
The two functions--public service and
private financial values--did not go well together. By the 1970s,
Penn Central abandoned its transport functions altogether when
financial raiders from Philadelphia, the Butcher brothers, spun
off its real estate into one set of companies and left the money-losing
transport activities as a residual. They then let the railroad
functions go bankrupt, abandoning the obligation to provide passenger
and freight service.
Penn Central's bankruptcy left the Eastern
Seaboard of the United States limping along with Amtrak. The
government eventually had to take back the railroads to provide
transportation, just as has been the case with Railtrack in Britain.
But by now the public lands had been privatized and sold off.
Penn Central's real estate included Grand Central Station in
New York City and other prime properties. These were sold, dividends
were paid, and then the raiders took their capital gains and
bailed out.
A parallel development has occurred with
the broadcasting companies, which have all but abandoned the
public-interest dimension of the bargain originally envisioned
in the 1920s. The difference is that they have not yet officially
bought their frequencies, but are still nominally leasing them
from the government for merely nominal sums, much like mining
companies and paper companies lease mineral, oil and timber lands
out west.
What the government gives up by not charging
the full economic rental value is taken by the companies, which
then turn around and pay out to their bankers and bondholders
who have advanced the credit to buy up these property and leasing
rights.
Like the railroad land grants, most of
the media deals for positions on the radio and TV dial were insider
arrangements. This is a common denominator of privatization in
almost every country throughout history. What is important to
recognize is that the major insiders pulling the strings are
the banks and financial companies, which have merged in a symbiosis
with the privatizers and rent-seekers. The financial sector has
ended up with the lion's share of the gains through its management
fees, insider stock dealings, underwriting fees, and of course
the notorious stock waterings through which the great railroad
barons--basically, Wall Street manipulators--built fictitious
costs into their railroad charges. Today's counterpart would
be stock options for management, diluting stock ownership. At
least in the 19th century, they had a culture in which it was
possible to try to reign in these abuses with the creation of
the Interstate Commerce Commission (ICC) and other regulatory
agencies intended to govern pricing for public monopolies.
SS: This all legal though. You're
saying the insider dealing is built into any system based on
privatization?
MH: The corporations managed to steal
these rights fair and square by writing merely nominal obligations
and regulatory constraints for into the laws. Just as today,
the laws passed based on campaigns contributions. In the 19th
century this was done so openly that the insiders did not need
think tanks to put a rhetorical veneer on their maneuverings.
It didn't matter much what people thought, once grabbing the
public domain could be made a fait accompli.
It was not necessary actually to take
ownership of the domain. In cases where the government retained
nominal ownership, as in the national forests and in much of
the land's subsoil rights, exploitation licenses were obtained
for only a slight fee, nowhere near the real rental value of
these properties for the government.
The effect was to turn the public lands
into a giveaway, and this is what happened with the air waves
in the 1920s. Broadcasting frequencies and radio stations were
leased out for five-year intervals, at low rates in return for
the stations' promise to devote some of their programming to
serve the public interest. In exchange for this business opportunity,
stations would bear some costs for public programming. That
was the idea, anyway. In Britain, they same idea led to user-fees
on radios and later TV sets, although there consumers directly
bore the cost.
In the case of the railroads, these giveaways
created a gap between commercial promises and reality, one that
foreshadowed the Reagan-Thatcher era. Governments have let the
networks and other broadcasters rent the spectrum at rate less
than the use value it would have under a well-run government.
The broadcasters then turn around and rent the spectrum to advertisers
at profits proportional to the degree that the advertiser can
still make it money as well.
SS: So the radio and TV spectrum is
like land in the sense that it yields a rent.
MH: That's right. Culture needs a vehicle.
TV and radio need airwaves just as cinema needs theaters and
journalism needs newspapers and magazines--and space on newsstands.
All these vehicles may be thought of as sites. A good location
on the radio or TV dial is the equivalent of a good geographic
location for a retail store. In this analogy cable TV would be
something like a strip mall.
SS: That sounds like what is going
on with internet sites. How did this problem develop?
MH: There were two policy failures. The
first one was that the profits from leasing out the air waves--technically,
their rental charge--should accrue to the public domain. This
is where the frequencies lie, after all. But the government made
no attempt to increase charges to reflect their rising value.
SS: These huge networks still
pay 1920s prices?
MH: Essentially.
SS: What is the second policy
failure?
MH: The second policy problem is
that commercialization ends up almost antithetical to what the
public interest would require for radio and TV to be used as
the cultural medium originally envisioned.
It did not initially seem likely that
radio would follow the newspapers in becoming advertising vehicles.
The first serious effort to sell air time to commercial interests--"toll"
broadcasting--was initiated by AT&T's station WEAF in New
York City, but was unable to make much headway at first. In his
now-classic survey of Telecommunications, Mass Media, and
Democracy: The Battle for the Control of U.S. Broadcasting, 1928-1935,
Robert W. McChesney reports that in 1924, AT&T "attempted
to support its activities by having WEAF solicit listeners for
direct donations to subsidize the programming. . .
Indeed, commercial advertising in the
modern sense of the term was almost nonexistent prior to 1928.
In 1925 the advertising representative of General Mills called
upon twenty large broadcasters and was unable to purchase time
from any of them. In 1927 the American Newspaper Publishers Association
(ANPA) even assured its members, 'Fortunately, direct advertising
by radio is well-nigh an impossibility.' The toll broadcasting
of AT&T restricted the firms that purchased airtime 'to giving
their name and the name of their product,'" much as now
occurs on National Public Radio and TV stations.
As television programming got under way
after World War II, prospects looked rosy for a while. By the
early 1950s, television appeared as a dramatic medium that might
reach much larger audiences than was possible through live theater
performances, while becoming a "complete medium" by
providing the visual dimension that radio had lacked. Just as
radio had brought operas and symphonic music into millions of
homes, the hope was that TV might promote classical and contemporary
drama, historical docu-drama, investigative journalism and public
education. A group of "live drama" TV playwrights,
including Paddy Chayefsky, Rod Serling, Abby Mann and Reginald
Rose, sought to develop serious television work (with leftward
political leanings, to be sure), but ran up "against the
clout of sponsors who sought to avoid anything that might be
considered even slightly controversial or downbeat. The Holocaust
was out; sit-coms and westerns were in. As Mr. Serling once noted,
'How can you put on a meaningful drama when every 15 minutes
proceedings are interrupted by 12 dancing rabbits with toilet
paper?'" Each hour of commercial TV time breaks up attention
spans with commercials totaling 15 to 20 minutes.
Mr. Serling's response was to shift to
producing the successful science fiction show Twilight Zone
as a means, he said, of having "Martians saying things Democrats
and Republicans could never say." So much for the promised
new art form!
By 1961 the situation grew so bad that
Newton Minow, chairman of the Federal Communications Commission
(FCC) accused network television of having become a cultural
wasteland. Speaking before the National Association of Broadcasters,
he asked them to provide a quid pro quo. On the one hand,
they received from the government the right to operate on the
air waves for a merely nominal charge. Licensing rates were set
so low that TV channels multiplied immensely in value as advertising
revenues increased.
The air waves are a natural monopoly.
Minow reminded the stations of their obligation to maintain public-interest
standards. High on the list was earmarking a certain amount of
broadcast time for educational programs, above all Saturday morning
television for children. Minow imposed no formal regulations.
That would have smacked too much of censorship. Public television
received a partial grant (with listeners adding their own contributions),
but "the market" was left to make its own "choice."
The barometer turned out to be the Neilsen ratings. Programs
with the largest audiences won out in the competition for advertising
dollars. Looking back in 1995 in their book Abandoned in the
Wasteland, Minow and his co-author Craig LaMay found that
TV had become "an instrument of child exploitation and abuse
. . . principally by salesmen, animated assault artists and leering
talk-show hosts."
SS: Is the problem with today's media
that they have become passive vehicles for entertainment, or
do they actively promote a superculture that has problems of
its own?
MH: Companies profit from the right to
sell their channel time to advertisers. Advertisers gained control
of TV programming just as they earlier wielded control over newspapers,
magazines and the radio. This hardly is surprising. Just as
newspapers became less politically partisan as their economic
basis turned to advertisers, TV became political neutered, although
by no means politically neutral.
Although America led the process, the
situation is by no means limited to the United States, Of New
Zealand, Jane Kelsey wrote: "The historically weak New
Zealand press and broadcast media were blunted further after
1984 by the privatisation and concentration of ownership, commercialisation
and Americanisation of programming, self-censorship of editorial
content and journalistic style . . ." She cites another
media critic, Joe Atkinson describing "the 'morselisation
and depoliticisation' of television news content as stories were
dissected into saleable segments and packaged into a tabloid
format. Hard stories on domestic politics and foreign and defence
policy gave way to emotionally and visually appealing items on
human interest, disasters and crime. . . Analysis of complex
issues became structurally impossible. By 1992, more than three-quarters
of all interviews had been reduced to ten-second sound bites."
This applies to United States or most other countries.
SS: It's clear that no analysis of
complex issues is possible in the mass media. No sound bite
can account for the intricacies of healthcare coverage in the
US. But how can anyone measure the value of cultural loss?
Doesn't that fall outside the realm of economics?
MH: It is just like with pollution.
National income accounts do not include any assessment charge
for what the public interest has lost in the process of letting
industry pollute water sources. Such cleanup costs are considered
"externalities". Cleanup charges have to be accounted
for--in this case for the noise pollution of commercials that
clog up one-third of the time, 20 minutes of every hour. Instead
this commercialization counts as an economic gain.
I suppose that one could take the economy's
average wage rate, multiply it by the number of hours people
watch radio and TV, and divide the balance by the proportion
of time (a third) spent being subjected to commercials, multiply
by size of the population. After all, economists have estimated
the overhead of telemarketing disturbances to the nation's consumers.
Why not extend this idea and its methodology to commercials in
other media?
SS: The reason may be that people
voluntarily turn on their TV or radio stations. Some even claim
to enjoy the commercials.
MH: But they don't necessarily want the
commercials. TV and radio commercials probably are less desirable
than those in newspapers. As for enjoying the commercials, perhaps
one time there is something funny, but you don't see it just
one time. This is why the "mute" button was developed.
SS: At this point in the interviews,
it is clear you're most concerned with long-term effects. What
public benefits are we missing out on most?
MH: The rents charged for airwaves rise
as economies grow and monopolies siphon off the fruits of this
growth by levying an access charge. In times past such charges
would have accrued to governments as a user fee. This could still
be the case for the broadcasting stations. Like the land or other
preconditions for production, these frequencies are not "factors
of production," but pressure points to charge fees for access.
The resulting rental charges do not represent payment for any
investment input from the broadcasters themselves. Like public
land, water and the air itself, these frequencies are in the
public domain.
SS: Monopolies claim to be creating
wealth for stockholders as prices for their shares rise. By commercializing
the value of the frequencies, isn't wealth being created, at
least in the stock market?
MH: If this is called "creating
wealth," it is wealth in the form of a zero-sum activity
in which the monopolist's gain (economic rent) is the customer's
loss.
SS: We've discussed before the inadequacies
of evaluating the economy in terms of productivity despite all
the emphasis placed on it during the bubble. How is the productivity
of a broadcasting company measured? Can you properly say they
produce a product?
MH: Much like that of newspaper publishers,
in the case of TV and radio news broadcasting. The economics
are similar. Reporting the news is an expense, to be minimized
as much as possible. But without providing news coverage the
papers will not have readers. And without readers they will not
attract advertisers. So newspapers hire reporters and editors,
along with advertising salesmen.
To the reader, much of this advertising
is just visual noise, to be skipped over, although there is to
be sure some benefit, and some read for the various kinds of
ads. But in the case of broadcasters, commercials are more intrusive
because listeners cannot simply "speed through" by
turning the page over.
The networks have news writers, but either
try to minimize spending on news gathering or (most recently)
turn broadcasts into celebrity entertainment. Content is lost
in either case.
SS: What you're describing is a perversion
of market forces. Viewers think of themselves as a market. They
like to believe that if more people wanted real news, then stations
would scramble to provide it because it would increase their
market share, and thus their advertising prices. But actually,
viewers aren't the actors in this market. Viewers don't compete
with other viewers to dictate what ends up on TV. Instead, broadcasters
compete for advertising dollars and thus create content scarcity.
In free market theory, competition should create abundant quality.
In this case, competition (between broadcasters) creates a
surplus of attention-grabbing drivel. The medium is the message,
as Marshall McLuhan might say. Most viewers don't realize that
they're not really there to watch what they want, but to be told
what they want.
MH: Society's drive for self-understanding
has run into the problem of the least common denominator. In
this case it is the most impressionable audience, composed mostly
of teenagers (THAT BRANCH THAT CAN RESIST LEASTI think you should
say something like this because at the end you recall "path
of least resistance"the symmetry is off-slightly, the connection
not quite as clear). This leaves the rest of society underserved,
and that part of the bell-shaped curve includes many of the most
active and thoughtful people.
Once adults come to feel disenfranchised
and lose faith in their ability to influence their society, they
become alienated and tune out. So what appears at first to be
an economic democracy degenerates into an autocracy as people
feel economically victimized by the government--not seeing the
private interests that stand behind the government to paralyze
its support of popular development.
Governments are supposed to determine
the public interest and defend it. Their sovereign duty is to
protect their citizens against the private appropriation of the
public domain--essentially, opportunities for rent extraction--to
be taken over. This problem becomes especially important in view
of the fact that the financial sector's objective is to disable
the government's sovereign power and its threat of regulation.
The effect is to derail economic growth
into rent-taking. This is the financial sector's own path of
least resistance to appropriate resources whose revenue can be
converted into interest payments. It is what makes financially
controlled policy-making so destructive.
SS: So we are brought back to the
financial influence over national cultural policy and the media.
MH: The financial sector's rent-grabbing
dynamic has backed commercialization and virtually locked it
in as a financial imperative of broadcasting.
Finance is inherently rent-seeking. It
searches out all the areas of the economy that can siphon off
the fruits of economic growth as a monopoly charge. These are
the best opportunities for lending money, because so many buyers
want to obtain rent-yielding resources because their price rises
as population and prosperity grow.
Land is the prime rent-yielding asset,
because all real estate needs a land site. That is why 70 percent
of bank lending in the United States and Britain take the form
of mortgage loans. Most of the remaining bank loans are for rental
sites or monopoly positions of one form or another. This explains
the financial sector's interest in lobbying for their privatization.
The air waves are a prime example.
The effect on culture--on TV and radio--is
indirect, but major. Under privatization these sites will be
sold to the highest bidders. And the highest bidders are those
who will rent these sites for commercials or for mass-market
media. Noncommercial culture cannot compete on price, because
it is not selling anything. So it is outbid. In fact, the aim
of culture through the ages has been to minimize personal self-indulgence
and to promote altruism, just the opposite personality characteristics
promoted by the commercial media. Society loses culture, and
gets nuisance value of commercials instead.
SS: Should broadcasting be returned
to the public domain?
MH: At least the rents from the air waves
should be fully collected, just as they should be for logging
and minerals extraction. Subsidies can be given for public-service
broadcasting, or the government could operate its own stations,
as long as it did so along pre-commercialized lines rather than
simply emulating the commercial broadcasters as the BBC has begun
to do in Britain and the CBC in Canada.
SS: Can you spell out how the privatization
of the broadcasting spectrum affects culture?
MH: To the extent that music, drama and
literature are disseminated through these media, they need sites.
They have to pay an access charge for these locations. This access
charge is their rental price.
These sites are still legally in the
public domain, much like the public land, subsoil mineral rights
and forests which the government has leased out since the 19th
century at only a fraction of their economic value. Most of these
leases reflect insider deals that go way back in time--in the
case of radio and TV, to the 1920s.
The media are like department stores.
They need a good location to sell their products. In this case
the location is a place on the radio and TV dial for a particular
space of time. The effect has been to turn the radio and TV spectrum
into an opportunity to charge rent for specific frequencies at
specific time slots that represent space in the public's attention.
Somebody needs to write a new history
of how the great American fortunes of the 20th century were formed.
You would find that they came largely from insiders grabbing
rent-yielding activities from the public domain.
Economic rent is a kind of super-profit.
It is best thought of not as profits that are earned by producing
output, but are a free ride simply from charging more for natural
monopolies. Finance has promoted privatization and provided loans
to buyers, recognizing that this is its major market, after real
estate mortgage lending. Over the past century the financial
sector has raised the money to enable outsiders to buy up the
most lucrative monopolies, as well as real estate, creating a
symbiosis between Finance, Insurance and Real Estate--the FIRE
sectors.
Bankers and bond investors realize that
corporate raiders and indeed, buyers in general are willing to
pay out all the income taken by monopolies (or apartment buildings
or other assets) as interest in exchange for the money to buy
them. So the financial lobby has backed the monopolies in urging
deregulation of the checks and balances put in place from Teddy
Roosevelt to Franklin Roosevelt during the first three decades
of the 20th century. The more monopoly rent can be extracted
(or real estate rent, for that matter), the more revenue can
be pledged as interest to creditors putting up the money to buy
these assets. The financial sector thus has led the attack on
regulation, on government ownership, and of course on the taxation
of rental income and capital gains. The financial objective is
to lend money to companies against their flow of income--all
the better if it is monopoly income rather than seeing the
government tax this revenue.
In effect, the financial sector has become
the deregulator and planner, taking over what most people expected
to become public-sector functions in the 1920s and '30s. All
the better if money can be lent to broadcasters with a right-wing,
anti-government perspective. Via "talk radio" and slanted
news broadcasts, Clear Channel, FOX and CNN, along with the major
newspaper chains, promote an anti-government view that in effect
is pro-financial while pretending to be populist.
SS: You are still talking about the
mass media and how it uses public airwaves, but what about the
industries that actually set the particles moving across those
airwaves. Don't the same principles extend to the telecoms?
MH: Yes, and that brings up an interesting
point. In the 1990s the largest telecoms asked their governments
to auction off the communications frequencies for all-cash. Their
aim was to price these so high, and on such hard credit terms,
that only the very richest conglomerates could afford to buy
into these frequencies. Paying this higher price meant that what
they really were buying was not a use value but a monopoly right.
The high payment ensured that the rights would be held so closely
and narrowly that the frequencies could be monopolized and extortionate
rack-rents charged.
This was the essence of privatization.
On easier credit terms--or on a rental basis of leasing the frequencies
for, say, ten-year intervals--smaller companies would have been
able to bid. They would have bid what they could have rented
out the frequencies for to retail users. But the large conglomerates
wanted to obtain a super-profit--technically, what economists
call an economic rent--by controlling these frequencies and benefiting
from their scarcity in the face of growing demand for use.
The would-be monopolists ran into a problem,
however. In their attempt to lock up the frequencies, they paid
for what these would be worth in the future rather than what
they were worth in the present on the basis of current cash flow.
They did this with borrowed money, and the interest charges exceeded
the current revenue. This meant that current revenue would not
cover the debt charges, and the money had to be earned elsewhere.
However, the telecom companies were not earning enough to cover
the capital investment charges of putting in their new transmission
capacity and marketing costs. So they fell into insolvency.
SS: What is the moral?
MH: Privatizing the air waves has decoupled
broadcasting from traditional culture and its educational functions,
promoting cultural values that are opposite from those traditionally
held. The object of TV and radio programs is to serve as a vehicle
to attract an audience to commercials. This is achieved more
by absorbing attention than by engaging the mind. The cultural
effect of this media and data overload is a spread of Attention
Deficit Disorder (ADD). This particular form of alienation is
thus a byproduct of privatization.
The effect is for the audience--that
is, the population--to respond frenetically without really thinking.
The distinction between fame and notoriety is compressed into
superficial the idea of "celebrity." Free-enterprise
advocates claim that this reflects the morality of individual
fulfillment, but it trivializes the ability to think coherently
about how the world is being shaped politically and economically.
To watch the media today one would think that the criterion for
success is a one-dimensional measure--net worth, not the manner
in which it is obtained. At the end of this process, monopolists
such as Microsoft's Bill Gates head the list of "most admired
men," along with Donald Trump and even Citibank's Sandy
Weil. I guess Enron's Ken Lay used to be on this list. Even more
confusing, they are admired as industrialists, not as exploiters
whose main achievement was to get something for nothing.
Less widely seen is the financial motivation
underlying this inversion of traditional attitudes toward the
public utilities and the responsibilities of government. The
key is to be found in the degree to which financial institutions
have raised loans for the moguls who have bought the broadcasting
companies with borrowed funds, and then find that they need to
turn around and carry their debt by selling as much air time
as possible to commercial buyers. Banks and brokerage underwriters
have long seen that privatization creates a market for buying
public enterprises and assets to be financed on credit. The more
the broadcasting frequencies and monopolies are deregulated,
the more their frequencies will be worth, and hence the more
money will be borrowed to buy them--or indirectly to obtain them
by buying out the companies that control the rental rights to
these frequencies.
As long as the government controlled
and operated the airwaves and other infrastructure and utilities
in the public domain, it did not need investment bankers and
stockbrokers. It did not need to pay interest, dividends, underwriting
fees and management fees. Also, public media do not provide an
opportunity for the private sector to make capital gains as they
raise their rent charges for their broadcasting frequencies.
Precisely because they are not financed by debt, the large financial
institutions have little interest in promoting their success.
The public interest was not seen as being maximized by using
the airwaves simply as media for commercials.
To drum up popular support for getting
governments out of regulation and operation of broadcasting and
other public enterprises, the financial sector's spokesmen--led
by the Chicago School--spearheaded a campaign asserting that
governments cannot run enterprises efficiently, and depicting
public enterprise as imposing the equivalent of burdensome taxes
rather than charging user fees.
Where government enterprises are run
inefficiently, it is largely the result of financial or ideologically
monetarist constraints being imposed arbitrarily and with the
intent to cripple public efficiency. One of the most notorious
examples occurred in Britain after 1975. To prevent public enterprises
from modernizing, the IMF and other monetarists succeeded in
blocking these enterprises from raising money to modernize. All
investment by such enterprises was counted as part of the public
sector's overall budget deficit, and hence deemed to be inherently
inflationary--and was blocked on this ground. The tacit implication
was that investment by borrowing money from private creditors
would have a different, inherently less inflationary effect.
There was of course no basis at all for this, as John Kay and
other British critics of privatization have demonstrated for
two decades now.
At the lowest end of the intellectual
spectrum, privatization is promoted as a way of raising money
that enables governments to avoid taxing people--mainly the wealthiest
classes. At the end of this process the financial sector gains
control, because the winning bidders for privatized enterprises
or assets such as the air waves are obliged to borrow in order
to outbid their rivals.
The essence of matters is that private
enterprise in today's economic environment means debt-financed
enterprise. One of the favorite projects for which banks will
lend money and brokerage firms will underwrite stocks is the
purchase of public monopolies. This enables their new private
owners to charge rent as an access charge for whatever is monopolized.
In the case of culture this is the airwaves, which are like land
sites, literally frequency sites on the radio and TV spectrum.
In the 1920s most governments recognized
that society's objectives would be best served by the government
renting out these sites to broadcasters on the condition that
their stations provide public-interest programming. But this
turned into a dead letter as the definition of "public interest"
was trivialized as compared to countries that kept an active
government broadcasting presence, such as Britain with the BBC
and Canada with the CBC.
Finance Capital's
Victory and Cultural Alienation
SS: Neoliberals argue that classical
culture is still available, but people just have to pay for it.
How do you respond to their argument that culture doesn't need
public financing, on the ground that someone will provide it
if there really is a demand for it? People can buy CDs or tickets
to the symphony.
MH: The rhetorical sleight of hand here
is the word "demand." To economists this word doesn't
mean desire or need, but actual spending. The result is circular
reasoning. Attributing the decline of classical culture to a
"lack of demand" simply means that there is an insufficient
market. That is like saying that the railroads are being dismantled
because of a lack of demand. All this is a euphemism for Thatcherizing
culture simply by not financing it. The "market" for
culture, like that for transport and most public utilities, hitherto
was served by government.
The fact is that classical music and
the related classical culture isn't being provided. That means
that nobody is buying it, by definition. But what does this really
mean? It masks the fact that throughout history, symphony orchestras
never have been self-supporting from ticket sales. Culture is
just one of the spheres that the public sector traditionally
has been charged with supporting out of tax revenue. Even in
the case of philanthropy, it has long been tax breaks that induce
the wealthy to give to museums. Other philanthropy of course
is either a form of social trophy-collecting (board memberships
on prestigious cultural or medical institutions) or guilt-assuaging
sanctimony.
The reductionism of "market demand"
to mean only "user costs," as distinct from public
patronage, would have precluded most of history's cultural achievements.
On this basis, by the way, there also would have been no armies
or navies, or public health, education or even transport or other
sectors customarily in the public domain, along with most scientific
research and religion.
The idea that all "users" should
pay for the costs of what they "use" flies in the face
of the idea of governments providing services on the basis of
what society needs. The less affluent need medical care, if only
to prevent pandemics from spreading. Society is better off with
culture whose costs fall on the government as defrayed by taxes
on wealth. This has been the case for thousands of years, and
the idea of privatizing hitherto public functions is a much more
radical position even than socialism, to say nothing of the idea
of a mixed economy in which governments shape market incentives.
SS: In essence, you are saying that
wealth has divested itself of its traditional responsibilities
to support public-sector activities.
MH: The urban financial crisis resulting
from Pres. Bush's tax cuts for the wealthy (including his slash
in capital-gains taxes) has drastically reduced local funding
for the arts and culture. Less noticed is a parallel development,
the deterioration of social responsibility felt by wealthy families
for cultural philanthropy. Now that it pays less, they have little
economic or social incentive to finance the arts.
In countries spanning the world from
time immemorial, anthropologists have found a precondition of
wealth to be a spirit of open-handedness. As society's surplus,
wealth has been associated with a fiduciary aspect to manage
the economy in the interest of long-term growth. The breaking
of this responsibility is what is so radical about today's economic
privatizers and the financial interests behind the anti-government
doctrines of free enterprise. Even the 19th century's great robber
barons believed they had an obligation to subsidize culture.
Andrew Carnegie and John D. Rockefeller endowed rich foundations.
Although they made the working lives of their employees miserable
and degraded their living conditions, at least the leading magnates
of most cities could be depended on to fund the local symphony
orchestra and art museum or "palace of culture," as
well as a wing of the municipal hospital or, on the national
scale, medical research foundations.
This no longer is the case. The traditional
pattern of giving has yielded to commercial sponsorship promoting
a mass consumer culture. Instead of people drawing their thoughts
and vocabulary from dramas involving the highest human ideals,
many parrot the phraseology of commercials. Advertising jingles
replace music, and the frenetic visual montage of advertising
and computerized movies replaces the leisurely pacing of the
classic drama and cinema.
The mental condition analogous to global
warming is an "attention-deficit" culture based on
commodity addiction. Attracting and absorbing an audience's attention
is best done by making it nervous or worried. The pacing of modern
films is much faster than older ones, more frenetic, largely
because the new directors come out of working on TV commercials.
There is so much information to be digested that it appears as
a raw mass of facts with so little context of cause and effect
that the only relationships that most people are able to see
are simple correlations. They often get cause and effect backward,
a state of affairs that allows politicians and special interests
to manipulate voters and propose solutions to problems that only
make them worse.
The same tactic is reflecting in the
saying that "defense lawyers pick juries." Lawyers
exclude the most highly educated and trained members of the jury
pool, preferring people they think can be most easily manipulated
and distracted from the actual character of the crime or law
suit, and most subject to character assassination. Just as lawyers
hire professional "profilers" to help them anticipate
the responses of jury members, commercial sponsors hire accountants
to take polls. The idea is to aim mass culture at the age group
most susceptible to marketing--teenage boys and girls, and young
adults. Cinema and other profit-seeking culture now aims at the
teen market, not to shape them into adults but simply to play
on their ideas of conformity to persuade them to buy products.
With this tendency is a policy of avoiding
contentious issues so as not to offend potential customers. A
few years ago Proctor and Gamble received publicity for pulling
out of sponsoring a TV rerun that dealt with the topic of gun
control. The company feared to have its name associated with
anything controversial, worrying about a consumer backlash or
even a boycott.
The problem here is that any kind of
regulation is controversial--the abusers being regulated always
have what the media call "their side of the story."
Both sides are presented as if they are equally viable, just
as in court the guilty party always has a lawyer presenting his
or her side of the story. But one side almost always is lying,
exaggerating, misrepresenting or diverting attention from the
real issue. The media should help people see through the rhetorical
cover stories and false logic. Instead, they tend to present
narrow perspectives without helping to clarify the big picture.
SS: It doesn't help that the media
is right wing. Even a conservative like Pat Buchanan admits
that no one who is serious can truly believe the media is liberal.
MH: It is no secret that the large
communications monopolies are right-wing. This is only natural,
as their main threat is government regulation or the enforcement
of the public-interest legislation which remains on the books.
This alone would give a right-wing slant to network news, as
it has given to radio hate-talk shows.
The political power of advertising to
be mobilized to promote right-wing political doctrine was demonstrated
recently by the Republican campaign to mobilize "consumers"
to write CBS to oppose its docudrama on Ronald Reagan. If the
political right does not think that treatments of its heroes
and policies are suitably hagiographic, it brings pressure on
the commercial sponsors to withdraw. This forces the networks
to cancel the show. In that was organized Republicans, masked
as consumers, have brought pressure.
The upshot is that the fight for a public
service component of the media and the fight for democratic news
policies is being fought now on the local level, just as the
fight for financial regulation is being fought by the New York
and Massachusetts Attorney Generals rather than by the SEC and
other federal government bodies. Locally, listeners can intervene
to ask that radio licenses be cancelled if their owners have
not lived up to the public-interest commitments that remain on
the books.
It is as if the federal government is
being stripped down, left only with its obligation to pay interest
to bondholders, to bail out savers (that is, speculators) and
to lobby for the large campaign contributors. The fact that this
basic change is not being discussed in the major public media
themselves attests to the powerful economic force behind this
dropping of traditional ideas of the role of government and the
public sector.
This is just the inverse of what culture
traditionally promoted. The function of culture traditionally
has been to deal with the most important spheres of life, that
of creating personal values (including mobilization for war,
to be sure). It dealt with basic socialization issues to shape
personality, and specifically to promote altruism. That is why
so much art was linked to religion. Instead of seeing a moral,
active personality actuating itself through labor, the mass consumer
personality is that of passive conformity and escapism. Today's
mass consumer culture encourages consumption and narcissism and
promotes self-indulgence. There is a tendency to dumb down culture
to the most common denominator in order to turn audiences into
extroverted brand-name consumers.
Classical ego satisfaction took the form
of achieving excellence in service. What Veblen called the Instinct
of Workmanship, Abraham Maslow described as the highest need
of humans for self-expression. This requires self-reliance rather
than extroverted dependency on others for one's values. Its standard
of success is different from that which is valued in terms of
monetary value or brand names.
Classical education was a vehicle to
create total personalities. Modern education has become more
technical, mainly to train students for jobs. A broader cultural
foundation would make students less patient and hence more dissatisfied
with the narrowness of today's employment opportunities.
SS: What do you propose as an alternative?
MH: Imagine how TV might work without
commercial sponsorship. Without TV ads its shape might be analogous
to Britain's green belt, whose rules prohibit billboard advertising
in the countryside. Instead of programs being vehicles to promote
consumer goods, the content of TV programs would be more cultural
and cognitive.
Take news broadcasts, for instance.
One would think that the most logical sequence would be to rank
news reports in terms of their importance and hence the intrinsic
interest in their content. Turning the news into a sales and
entertainment vehicle inverts matters. The new idea is to hold
the potential consumer's attention through the commercials. So
announcers throw in teasers for people to watch through the sales
pitch, being told the topic that will be coming up without saying
just what the news is. The broadcast is turned into an obstacle
course making viewers and listeners wade through an underbrush
of ads in order to get to hear what they want to learn about
the news.
Behind these dynamics lie the economics
of privatization, which the World Bank and IMF have demanded
since the 1980s. Thatcherist privatization policies are now a
condition for loan rollovers. Governments that refrain from privatizing
their telecom and other sectors are threatened with chronic financial
crises.
SS: We had better leave this for our
future interviews on Britain and on privatization in general.
Professor Michael Hudson is an independent Wall Street financial economist.
After working as a balance-of-payments economist for the Chase
Manhattan Bank and Arthur Anderson in the 1960s, he taught international
finance at the New School in New York. Presently, he is Distinguished
Professor of Economics at the University of Missouri (Kansas
City). He has published widely on the topic of US financial dominance.
He has also been an economic adviser to the Canadian, Mexican,
Russian and US governments. His books include Trade, Development,
and Foreign Debt (Pluto, 1992, 2 vols.). He is the author of
Super
Imperialism.
Standard Schaefer is an independent economic journalist, a cultural
historian, literary critic, poet and short-story writer. He teaches
at Otis College of Art and Design. He is the non-fiction editor
of the New Review of Literature. He can be reached at
ssschaefer@earthlink.net.
©2004 Hudson and Schaefer, from
book-in-progress.
Weekend
Edition Features for February 1, 2004
Paul
de Rooij
For Whom the Death Tolls: Deliberate
Undercounting of Coalition Fatalities
Bernard
Chazelle
Bush's Desolate Imperium
Jack
Heyman
Bushfires on the Docks
Christopher
Reed
Broken Ballots
Michael
Donnelly
An Urgent Plea to Progressives: Don't Give in to Fear
Rob Eshelman
The Subtle War
Lee
Sustar
Palestine and the Anti-War Movement
George
Bisharat
Right of Return
Ray
McGovern
Nothing to Preempt
Brian Cloughley
Enron's Beady-Eyed Sharks
Conn
Hallinan
Nepal, Bush & Real WMDs
Kurt Nimmo
The Murderous Lies of the Neo-Cons
Phillip
Cryan
Media at the Monterrey Summit
Christopher
Brauchli
A Speech for Those Who Don't Read
John
Holt
War in the Great White North
Mickey
Z.
Clueless in America: When Mikey Met Wesley
Mark
Scaramella
The High Cost of Throwing Away the Key
Tariq Ali
Farewell, Munif
Ben
Tripp
Waiter! The Reality Check, Please
Poets'
Basement
LaMorticella, Guthrie, Thomas and Albert
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