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Sticks and Stones | davelovell.net
Oct 202011

orig­i­nally pub­lished Octo­ber 2010

If mar­kets truly do pos­sess “tip­ping points”—those sto­ried moments when they spon­ta­neously rearrange them­selves in mys­ti­cal accor­dance with the gen­eral will—then our recent eco­nomic calamity should have pro­duced a rev­o­lu­tion in our com­mon tongue. For the argot of eco­nomic spe­cial­iza­tion has long been an almost per­fect inver­sion of how we actu­ally live our pro­duc­tive lives. In the late years of the aughts, we’ve seen no end of bil­low­ing, mul­ti­syl­labic abstrac­tions take on lethally pre­cise traits of social destruc­tion. Col­lat­er­al­ized debt oblig­a­tions, credit default swaps, mortgage-backed deriv­a­tives, secu­ri­tized risk—all these con­cepts, and (just as impor­tant) the words used to char­ac­ter­ize them, seem in ret­ro­spect to be the kind of incan­ta­tion wor­thy of only the most unread dis­ser­ta­tion in Ger­man metaphysics.

And so it is, one might argue, with the forces that have so deeply deranged our com­mon life. As the invest­ment econ­omy laid siege to the Amer­i­can moral imag­i­na­tion in the past twenty-odd years, we seemed instinc­tively to real­ize that there was some­thing dan­ger­ous in say­ing out­right just what the thing was actu­ally doing. And so we entered a true golden age of blood­less euphemism, affix­ing no end of har­mo­nious social mod­i­fiers to the term “econ­omy” as a bold sort of speech-act—“new infor­ma­tion,” “knowl­edge,” “dig­i­tal,” and “soft.” We often used such terms inter­change­ably to mean, roughly, “postin­dus­trial” and always employed them with the same rev­er­ent cer­tainty that accom­pa­nies the more famil­iar cat­e­chisms of the High Church.

As with the older spir­i­tual acts of prayer, the great age of post-productive euphemism has been an exer­cise in per­fect­ing word for­ma­tions in the pure con­vic­tion that the wish­ing would make it so. The ideas that bound us to the old indus­trial order—the site of so much social con­flict and gray ide­o­log­i­cal neurosis—were sud­denly melt­ing into air, and new ways of think­ing now had to sum­mon forth an entirely new way of being in the world. In time, even the notion of an “econ­omy” seemed inad­e­quate to describe the great social trans­for­ma­tions we were liv­ing through. One heard of “tele­cosms,” “the long boom,” “big sorts,” “long tails,” and “the wis­dom of crowds”—even, lo and behold, the end­lessly com­fort­ing notion that “every­thing bad is good for you,” as one pop­u­lar work of cul­tural the­ory had it at the height of millennial-boom cul­ture. Social virtue had become a fric­tion­less soft­ware appli­ca­tion, and the econ­omy was deliv­er­ing fun­da­men­tal change at a clip far faster than our mea­ger Industrial-Age brain­pans could assim­i­late it all.

How­ever, for the peo­ple still actu­ally work­ing in the Amer­i­can economy—those who had been denied these won­drous pow­ers of social prophecy—things looked very dif­fer­ent indeed. Social inequality—measured by the gap between the high­est and low­est per­centiles of income earn­ers, sharp­ened through­out the Clin­ton years, the moment when we were vouch­safed most of these sooth­ing visions of the New Infor­ma­tion Val­halla. And things got implaca­bly worse dur­ing the Bush years, with extremely prej­u­di­cial tax cuts redis­trib­ut­ing wealth upward, as the spec­u­la­tive paper econ­omy not only crowded out con­ven­tional pro­duc­tive enter­prise, but also hol­lowed out the finan­cial foun­da­tions of our homes. The Bush years saw the first five-year period of eco­nomic expan­sion in mod­ern US his­tory that pro­duced no increase in median wages. Instead of rec­og­niz­ing this for the dis­tress­ing struc­tural defect that it plainly was, Bush eco­nomic offi­cials ral­lied to find inven­tive new ways of appeas­ing the investor class. In 2005, for instance, SEC chair­man William Don­ald­son was effec­tively cashiered for advo­cat­ing unpleas­ant lev­els of trans­parency, for share­hold­ers and finan­cial mar­kets alike. His replace­ment, for­mer Cal­i­for­nia Repub­li­can Rep­re­sen­ta­tive Christo­pher Cox, was overtly tasked with keep­ing the great Wall Street bar­be­cue going. Hous­ing prices and deriv­a­tives mar­kets con­tin­ued soar­ing upward, until they, well, didn’t.

What’s most strik­ing about the long unwind­ing of this spec­u­la­tive night­mare is the still-impoverished vocab­u­lary we are con­demned to use in our efforts to explain just what’s hap­pened to us. The usual store­house of red-faced business-press expres­sions such as “down­turn” and “recession”—and even their more-robust vari­ants such as “col­lapse” and “meltdown”—seemed like so much pal­lid, inad­e­quate phrase­mak­ing com­pared to the scale of the dis­as­ter upon us. Faced with the prospect of the full-tilt col­lapse of global finan­cial cap­i­tal­ism, we were left with terms almost solely of the government’s devising—expressions such as “too big to fail,” “trou­bled assets,” “frozen credit,” and “mark to market.”

In this atmos­phere, many sturdy advo­cates of plu­toc­racy are still protest­ing the expres­sion “preda­tory lending”—which seemed, under the cir­cum­stances, a fairly gen­er­ous way of putting things—as an overly loaded phrase that in any event couldn’t pos­si­bly describe an actual mar­ket phe­nom­e­non. Peo­ple entered into ARMs and nothing-down loan arrange­ments vol­un­tar­ily, after all, and the mer­chants of cap­i­tal were fur­nish­ing them with unprece­dented access to credit. Couldn’t they be a lit­tle more grate­ful, for God’s sake? As mort­gage econ­o­mist Arnold Kling har­rumphed over Congress’s plan to insti­tute a mod­est Con­sumer Finan­cial Pro­tec­tion Agency, “The idea of preda­tory lend­ing is to sad­dle the bor­rower with an expen­sive mort­gage so you can fore­close on the prop­erty and sell at a profit.” Dis­be­liev­ingly, he asks, “Have you read of a sin­gle instance in the past three years when the bank made a profit on a fore­clo­sure?” It there­fore fol­lows, of course, that while poor peo­ple may be wor­thy of some abstract pity “because of their poverty…I can­not feel sorry for some­body who was given a basi­cally free option on a house and the option didn’t hap­pen to come into money.”

All socially accept­able talk of pre­da­tion, bizarrely enough, has been reserved for the poor saps try­ing to hang onto crim­i­nally over­val­ued mort­gages in the wake of the great ’08 reck­on­ing. Con­sider the famed on-air out­burst of the petty and indig­nant CNBC mar­ket cor­re­spon­dent Rick San­telli—speak­ing on the floor of the Chicago-based futures exchange, the CME Group. This moment served as “the found­ing doc­u­ment of the Tea Party move­ment,” in the judg­ment of con­ser­v­a­tive polit­i­cal writer Michael Barone. And like that movement’s entire antigov­ern­ment plat­form, it is a stag­ger­ing dis­play of inco­her­ent socio-economic enti­tle­ment. “This is Amer­ica!” San­telli egged on his cheer­ing on-camera audi­ence of bro­kers. “How many of you want to pay for your neighbor’s mort­gage that has an extra bath­room and can’t pay the bills?”

No one—least of all the puta­tive eco­nomic cor­re­spon­dent and his admir­ing ret­inue of traders—paused to reflect that, in the vast major­ity of cases, those mort­gage hold­ers were the least con­se­quen­tial play­ers in a global chain of secu­ri­tized debt that ran into the tril­lions of dol­lars. Far less did any­one on the CME floor inter­rupt to men­tion the kinds of domes­tic improve­ments that they had man­aged to fund, free and clear, via the upstream fees they col­lected on mortgage-backed deriv­a­tives. The spec­ta­cle of Santelli’s staged “rant” was very much like see­ing a room full of arson­ists, reek­ing of flame accel­er­ants, blam­ing a city­wide con­fla­gra­tion on a sin­gle defec­tive fire hydrant.

But it’s an awk­ward busi­ness, own­ing up to the way the model of one’s pro­fes­sion is founded on what amounts to a long-term for­mula of finan­cial ruin. Bet­ter, by far, to sum­mon the sin­is­ter wheez­ing specter of com­mu­nism. “Cuba used to have man­sions and a rel­a­tively decent econ­omy,” San­telli huffed. “They moved from the indi­vid­ual to the col­lec­tive and now they’re dri­ving ’54 Chevies—the last great car to come out of Detroit.” (Because, you see, it’s not suf­fi­cient merely to demo­nize the mort­gage hold­ers tricked out of their unre­cov­er­able nest eggs by the finan­cial indus­try; no, to do the job right, one has to work in a gra­tu­itous attack on the heav­ily union­ized Amer­i­can auto work­force.) By the time he was wind­ing down, San­telli was sum­mon­ing the spirit of the Found­ing Fathers—“What we’re doing now in this coun­try would make them roll over in their graves”—and announc­ing that, yes, “We’re think­ing of hav­ing a tea party in Chicago this July.

It’s brac­ing, in the face of such vicious, ana­lyt­i­cally empty show­boat­ing, to recall that things were not ever thus when Amer­i­can cit­i­zens con­tended with the wreck­age of a money cul­ture. When notions of eco­nomic jus­tice and equal­ity still fig­ured promi­nently in our polit­i­cal debate, past finan­cial abuses were described openly as trea­sons, infamies, or crimes. Indeed, the post-bellum Green­back Party adopted as its ral­ly­ing slo­gan “the Crime of ’73″— ref­er­enc­ing the retire­ment of Civil War paper cur­rency in favor of the gold stan­dard. As a straight­for­ward descrip­tion, it was entirely apt, con­sid­er­ing the swift­ness with which the resump­tion of gold dis­patched an entire gen­er­a­tion of farm­ers, small pro­duc­ers, and labor­ers into debt peon­age. Their per­pe­tra­tors, mean­while, were graced with vivid—and usu­ally spot-on—descriptors that com­bined moral assess­ments of their defi­cient char­ac­ters with a vis­ceral sense of the dam­age they’d wrought on the repub­lic. They were “blood­suck­ers,” “plu­to­crats,” “brig­ands,” and “rob­ber barons.” When nineteenth-century ora­tors were feel­ing more philo­log­i­cally minded in their abuse, the lords of com­merce would be described as “Croe­suses,” “Judases,” “Cae­sars,” “Neros,” “Pharaohs,” and “the pagan wor­shipers of Moloch.”

This ear­lier vocab­u­lary of finan­cial crime was a cru­cial ori­ent­ing device. It per­mit­ted its users to envi­sion the oth­er­wise harsh and imper­sonal work­ings of the mar­ket as a reflec­tion of fallen human nature, as opposed to a remorse­less, unde­vi­at­ing nat­ural law. Indeed, where the older rhetoric of eco­nomic con­fronta­tion was vis­ceral and per­sonal, the gov­ern­ing rhetoric of latter-day finan­cial crises is stu­diously ambi­ent and clin­i­cal. To take just one exam­ple, these crises are no longer spo­ken of, as they were in the late 19th Cen­tury, as “panics”—a word that admirably sum­mons the vivid, all-too-human feel­ing that accom­pa­nies the real­iza­tion that an invest­ment, a secu­ri­ties deal, or, indeed, an entire spec­u­la­tive sec­tor has become a worth­less stack of paper. Instead, the ever­more fre­quent mal­adies of the invest­ment world are now depicted as mys­te­ri­ous, cause­less epidemics—“infecting” for­eign mar­kets, accru­ing “toxic” debt, mov­ing “risk” around in ways that ulti­mately only made mar­kets that much more risk prone.

As the San­telli episode makes clear, what’s sur­pass­ingly odd about our present vocab­u­lary for eco­nomic affairs is that it tends to sound most spe­cific pre­cisely at its points of great­est ana­lyt­i­cal vague­ness. Any casual reader of the busi­ness press knows that the threat of “class war­fare” is omnipresent and to be smote ever vig­i­lantly. But those who would actu­ally pros­e­cute this species of war are mad­den­ingly dif­fuse and anony­mous. They cer­tainly can’t be labor mil­i­tants, with just 7 per­cent of the private-sector work­force now belong­ing to unions. Nor can they be the sort of social­ist intel­lec­tu­als who’d formed the back­bone of the heady New Left upris­ings in places like Paris and Prague. Our intel­lec­tual class has grown far too jaded and media addled for any dal­liance with ideas of mass social rebel­lion. Social­ism itself is dead as an ide­o­log­i­cal force. It’s only spo­ken of now as a mys­te­ri­ously viral trait held in com­mon among our elite lib­eral gov­ern­ing class—sort of like an embar­rass­ing sex­u­ally trans­mit­ted dis­ease picked up at an Ivy League reunion. Social­ism no longer serves as a uni­ver­sal ral­ly­ing cry to the dis­en­fran­chised; it is, rather, an irk­somely gnomic float­ing sig­ni­fier, used here to describe the alleged redis­tri­b­u­tion­ist schemes of an Obama eco­nomic team dom­i­nated by invest­ment bankers, and there to decry a health-care reform plan that is nearly a letter-perfect replica of the plan offered up by con­gres­sional Repub­li­cans in 1993.

No, the specter of pop­u­lar resis­tance in our eco­nomic order is very much akin to the char­ac­ter of our late high-bubble pros­per­ity: It is a mul­ti­lever­aged asset, tapped out for oppor­tunis­tic cable-shouting fod­der, that actu­ally con­ceals enor­mous deficits in the Amer­i­can social imag­i­na­tion. Only our belea­guered her­itage of eco­nomic pop­ulism won’t ever find itself on the receiv­ing end of a fed­eral bailout; its only hope of revival is for us to start think­ing, and act­ing dif­fer­ently as we finally begin to ask who ben­e­fits from a sys­tem that remorse­lessly dis­trib­utes wealth upward, while social­iz­ing risk downward.

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