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Around the mid-1970s a shift in economic reasoning took place that reflected the capture of the Western academy by post-industrial capital. This isn’t to argue that industry has, for better or worse, ceased to be, but rather that the theoretical reasoning guiding economic policies shifted from the material of industry to the ethereal of finance. This movement found its livelihood in two trends—the shift away from direct government intervention in the economy and toward ‘monetary policy’ and the shift in focus away from the material conditions by which people exist toward ‘expectations’ of future conditions.
Both of these trends landed with a thud last week when the Census Bureau released a report (link) detailing how, since the financial crisis of 2008 began, the rich have consistently gotten richer while the fortunes of the rest of us have declined. And associated with both of the above-mentioned trends, the Federal Reserve announced a new round of financial asset purchases (QE), with total purchases now expected to reach around four trillion dollars. The alleged purpose of this fresh round of monetary stimulus is to boost ‘expectations’ of monetary excess until the job market, a/k/a material conditions, improves. (For those who have been paying attention, this is a different rationale than was previously offered—more below).
A few aspects of the Census report are noteworthy and have as of yet gone unreported in the mainstream chatter. In the first, the hierarchy of the southern colonial political economy—connected rich white men using slave labor from kidnapped Africans and women deriving economic status from the ‘men folk’ has been largely retained. From the report, economically speaking, the rich have done quite well while African Americans have done poorly and women less well than men—not an exact replica of the colonial experience, but the historical memory embedded in these outcomes requires an explanation from theorists of the ethereal. Second, the all-out effort by the political establishment since 2008 to boost the fortunes of the already ‘fortunate’ while leaving the rest of us to rot appears to be bearing fruit.
For those regular folk unsure of what to make of the effort underway in DC, behind the rationale of the Fed lies the Woodford ‘pricing kernel,’ a bit of ethereal voodoo that is to academic economics the rough equivalent of the power of positive thinking. And to help the rich think positively the Fed will, as mentioned above, ultimately conjure up around four trillion dollars of the people’s currency for their benefit. I take this detour to reinforce the point that we, the people, are really and absolutely on our own. (The ‘pricing kernel’ is Wall Street detritus, the DSGE models of academic economics, the same, and ‘expectations’ theory is one with Descartes’ ‘brain in a vat’ hypothesizing that finds adherents among people who have never been introduced to an interesting idea or needed one that mattered).
But ultimately the conditions outlined in the Census report do matter, as does the historical memory behind current economic relations. What is taking place broadly in the economy is the diminishment of economic circumstance in the order of a social hierarchy established several centuries ago. Writer Chris Hedges calls the move ‘neo-feudalism,’ which seems an apt description. And this isn’t just a matter of economic circumstance—the modes of domination and control being used for economic exploitation are growing in intensity to the point of suffocation for significant segments of the population. What is a matter of not very urgent debate in policy circles is a current and real emergency in the lives of a large and growing population.
The prison industrial system is the most straightforward example of this in that it derives its coercive power from residual institutional racism, economic use value for prisoners created through prison privatization, legitimization strategies such as ‘crime’ control to support the use of state power to incarcerate, and a policing system designed to police economically marginalized populations while leaving the ruling class to commit socially destructive acts with impunity. Private prisons no more fit their explanations as ‘capitalism’ than did slavery. They serve a market created exclusively for their self-justification. And the race / class divisions in play are direct descendants of slavery.
The poverty statistics from the Census data have been widely reported—46 million Americans living in poverty, the same approximate number that is on ‘food stamps’ (SNAP- Supplemental Nutrition Assistance Program). Median household income has fallen nine percent since 1999. Permanent and transitory unemployment play roles in declining incomes in that the permanently unemployed constitute a ‘reserve army’ that can be called back to work should wages begin to rise and the transitory unemployed are taking new jobs at a fraction of the wages of their previous jobs. And as of as much importance as the raw statistics is the trajectory—the economic conditions for most Americans are declining at rates last seen in the Great Depression, if from higher starting points.
As of yet, retained monopoly power on the part of the upper middle class (doctors, professionals with specialized skills) sustains a political bifurcation. The upper middle class suburbs surrounding major cities support the political status quo. But the strategies of domination and control being used against the lower classes are being built out to broaden inclusion. (The prison industry is expanding to incarcerate the white lower and middle class and the economy of ‘anti-terrorism’ must find ‘terrorists’ to justify its existence the same way that private prisons must find ‘criminals’ to justify its own).
With respect to the ongoing actions of the Federal Reserve, the Fed began buying financial assets in early 2009. The most conspicuous effect to date has been rising stock and bond prices. (This relationship is known fact on Wall Street. The only people so obtuse as to miss it are professional economists). Astute readers may notice that the most rapid appreciation in the relative fortunes of the ruling class has taken place when the Fed has been buying financial assets. And another way to say this is that the fortunes of most Americans have declined most rapidly while the Fed has been buying financial assets. With this last point I’m not suggesting a causal relation, but merely pointing out that claims that Fed policies benefit ‘the economy’ depend very much on where in the economy one resides.
The current mantra from the political establishment eager to promote the status quo is that one or the other party has the economic solutions and that those who are watching their fortunes rapidly decline must have patience. While this will likely satisfy the still existent upper middle class and the ruling class that is seeing most of the benefits from the status quo, further declines in the incomes, wealth and prospects of the long-term and newly poor are rapidly and inexorably increasing human misery. The prison industry is emblematic, but neo-slavery is also making a rapid return in agriculture and in ‘off-shored’ industry.
Something more to consider is that even reasonable sounding solutions to lost industry such as currency devaluation won’t undo the modes of domination and control being used to facilitate economic exploitation—these forms of neo-slavery are political-economic in that their power of coercion derives from integrated institutions—laws, courts, policing, and international agreements, and not primarily from ‘markets.’
Furthermore, the persistence of political-economic hierarchy in slightly differing forms across the centuries raises more fundamental questions for the practice of economics sans the political. The Marxian critique that the state serves the institutional needs of the ruling class could not be more straightforwardly apparent than in the prison or agriculture industries. And again—the modes of domination and control needed to facilitate economic exploitation are being expanded coincident with the rising prospects of the ruling class and declining prospects of the rest of us.
Last, the question of why four trillion dollars has been conjured to buy financial assets rather than to put the unemployed directly to work needs to be answered? The establishment line, that the prior is politically feasible while the latter isn’t, needs to be explained in light of the Census report that the rich are benefiting from current (Fed) policy while the majority of citizens are seeing rapid declines in economic fortune.
Rob Urie is an artist and political economist in New York.