Wednesday, September 20, 2017

Loving Our Debt-Serfdom: Our Neofeudal Status Quo

Democracy (i.e. political influence) and ownership of productive assets are the exclusive domains of the New Aristocracy.
I have often used the words neoliberal, neocolonial and neofeudal to describe our socio-economic-political status quo. Here are my shorthand descriptions of each term:
1. Neoliberal: the commoditization / financialization of every asset, input (such as labor) and output of the economy; the privatization of the public commons, and the maximizing of private profits while costs and losses are socialized, i.e. transferred to the taxpayers.
2. Neocolonial: the exploitation of the domestic populace using the same debt-servitude model used to subjugate, control and extract profits from overseas populations.
3. Neofeudal: the indenturing of the workforce via debt and financial repression to a new Aristocracy; the disempowerment of the workforce into powerless debt-serfs.
Neofeudalism is a subtle control structure that is invisible to those who buy into the Mainstream Media portrayal of our society and economy. This portrayal includes an apparent contradiction: America is a meritocracy--the best and brightest rise to the top, if they have pluck and work hard-- and America is all about identity politics: whomever doesn't make it is a victim of bias.
Both narratives neatly ignore the neofeudal structure which disempowers the workforce in the public sphere and limits the opportunities to build capital outside the control of the state-corporate duopoly.
The book The Inheritance of Rome: Illuminating the Dark Ages 400-1000 shed some light on the transition to a feudal society and economy. While the author is a fine writer, the subject matter doesn't lend itself to light reading. The transition from the Roman legacy of centralized governance (empire, monarchy, theocracy, etc.) to feudalism (governance by local lords / aristocracy) was complex and uneven, and the author takes pains to describe the process and many variations that arose in a highly fragmented post-Roman Europe.
(Note that the Eastern Roman Empire, a.k.a. Byzantine Empire, endured until 1453 AD. I've written often on both the western and eastern Roman empires: The "Secret Sauce" of the Byzantine Empire: Stable Currency, Social Mobility (September 1, 2016)
Don't Diss the Dark Ages (October 26, 2016)
Neofeudalism is not a re-run of feudalism. It's a new and improved, state-corporate version of indentured servitude. The process of devolving from central political power to feudalism required the erosion of peasants' rights to own productive assets, which in an agrarian economy meant ownership of land.
Ownership of land was replaced with various obligations to the local feudal lord or monastery--free labor for time periods ranging from a few days to months; a share of one's grain harvest, and so on.
The other key dynamic of feudalism was the removal of the peasantry from the public sphere. In the pre-feudal era (for example, the reign of Charlemagne), peasants could still attend public councils and make their voices heard, and there was a rough system of justice in which peasants could petition authorities for redress.
Of course peasants usually lost to the aristocracy and monasteries, but at least the avenue of redress was at least partially open. This presence in the public sphere was slammed shut in feudalism.
From the capitalist perspective, feudalism restricted serfs' access to cash markets where they could sell their labor or harvests. The key feature of capitalism isn't just markets-- it's unrestricted ownership of productive assets--land, tools, workshops, and the social capital of skills, networks, trading associations, guilds, etc.
Our system is Neofeudal because the non-elites have no real voice in the public sphere, and ownership of productive capital is indirectly suppressed by the state-corporate duopoly. Various studies have found that politicians ignore the bottom 99.5% who don't contribute to their campaigns or crony-capitalist wealth (five quick speeches for $200,000 each is $1 million. Rinse and repeat.)
The vast majority of incumbents are re-elected, as they leverage their power to vacuum up enormous sums of campaign contributions that then buy the compliance of a cowed public.
As for ownership of assets-- small business startups have been crushed by soaring costs, heavy regulations and the dominance of cartels and quasi-monopolies enforced by the state.
Income growth is now the exclusive domain of the Financial Aristocracy:
The so-called middle class owns little to no productive capital; what it "owns" is a house, which is ultimately a form of consumption. I say "owns" for two reasons: one, most households have a mortgage, so their ownership is still contingent on making monthly payments to a lender, and two, the government collects property taxes on the home regardless of the owner's income or ability to pay.
Compare this to taxes levied on business income: if the business has no net income, it owes no taxes. Not so with property taxes--they are the modern equivalent of "rent" paid to the feudal lord.
Note that the aristocracy owns productive assets while the serfs own housing and debt. This is not a flaw in the system, it's a feature of the system.
Democracy (i.e. political influence) and ownership of productive assets are the exclusive domains of the New Aristocracy. This is Neofeudalism in a nutshell.
"Under a scientific dictator education will really work -- with the result that most men and women will grow up to love their servitude and will never dream of revolution."
"The nature of psychological compulsion is such that those who act under constraint remain under the impression that they are acting on their own initiative. The victim of mind-manipulation does not know that he is a victim. To him, the walls of his prison are invisible, and he believes himself to be free. That he is not free is apparent only to other people. His servitude is strictly objective."
Aldous Huxley
source of quotes (read the entire thread)


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Tuesday, September 19, 2017

Financialization and The Destruction of the Real Economy

Strip an economy of capital, productive incentives, talent and yes, ethics, and what are we left with? An economy spiraling toward an inevitable collapse.
Financialization is destroying the real economy, but few in power seem to notice or care. The reason why is painfully obvious: those in power are reaping vast fortunes from the engines of financialization--for example, former President Obama:Obama Goes From White House to Wall Street in Less Than One Year.
This is not to single out President Obama as a special case; politicos across the spectrum depend on the engines of financialization to fund their campaigns and make them multi-millionaires, and corporate managers and financiers have skimmed billions of dollars in gains not from producing new, better and more affordable goods and services but by playing financialization games such as borrowing billions to buy back stocks, leveraged buyouts, and so on--all of which have reaped the insiders gargantuan fortunes while hollowing out the real economy.
Financialization necessarily hollows out the real economy, as Gordon Long and I detail in this new video program: The Results of Financialization - Part I (34 minutes)
The key dynamic is that financialization creates irresistible incentives to ramp up debt and leverage at the expense of the real economy. Those who fail to exploit financialization will underperform the market and be fired.
As Gordon explains, if a CEO refuses to load a company up with debt, a private-equity financier with access to cheap Federal Reserve credit will scoop up the company in a private buyout, fire the management, extract immense profits by loading the company with debt, then take the hollowed-out shell public again, reaping another windfall of financialized gains.
Note that the private-equity financiers have every incentive to lay off employees, especially experienced workers who earn higher salaries, to reduce costs before they take the hollowed-out shell public.
How can corporations pay out more to shareholders than they actually earned? Easy--financialization.
Another key dynamic in financialization is limitless liquidity and super low interest rates set by central banks--rates that are so low and liquidity so abundant that corporations can roll over their debt and actually add more debt and keep their interest payments unchanged.
This dynamic inevitably leads to zombie corporations--corporations with low rates of growth and profitability and high debt loads that in an unfinancialized economy would be recognized as insolvent and liquidated.
As we explain, financialization skews the risk-reward in favor of financial games, so real-world investments no longer make sense. Why risk building a factory in the U.S. or training workers when the pay-off is uncertain, when there are so many ways to reap immense fortunes via financial games that are ultimately backstopped by the Federal Reserve or federal agencies (i.e. the taxpayers)?
As many observers have noted, these perverse incentives have siphoned human talent away from productive employment and into enormously well-compensated but parasitic, exploitive financialization-related jobs.
Strip an economy of capital, productive incentives, talent and yes, ethics, and what are we left with? An economy spiraling toward an inevitable collapse. The metaphor I've used to explain this in the past is the Yellowstone forest fire. The deadwood of bad debt, extreme leverage, zombie companies and all the other fallen branches of financialization pile up, but the central banks no longer allow any creative destruction of unpayable debt and mis-allocated capital; every brush fire is instantly suppressed with more stimulus, more liquidity and lower interest rates.
As a result, the deadwood sapping the real economy of productivity and innovation is allowed to pile higher.
The only possible output of this suppression is an economy piled high with explosive risk. Eventually Nature supplies a lightning strike, and the resulting conflagration consumes the entire economy.
I explain all this in greater detail in my short book Why Our Status Quo Failed and Is Beyond Reform.


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Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Monday, September 18, 2017

What Is Real Wealth?

As for acquiring capital--the most important types of capital don't require much money.
What is real wealth? Money, right? Currency, gold, quatloos, you name it. Money is real wealth because you can use it to buy whatever you want.
I would argue money in any form is only the means to acquire real wealth, which is the agency, opportunity and time to pursue your life's work.
The conventional view of wealth is money and leisure has it all wrong. Let's imagine the owner of a vault of conventional treasure: jewels, gold coins, etc.
If the "wealth" stays in the vault, what's the point of owning this "wealth"? The secret satisfaction of being "wealthy"?
If "wealth" is only an internal state, then let's measure friendship and being needed/wanted as the metrics of "wealth." You see the point; if "wealth" is merely an internal state of satisfaction, then a vault full of "money" is a poor metric.
What money buys that is real wealth is freedom and control of one's life. This control over one's life is called agency. Agency is defined as "the capacity of an actor to act in a given environment." This may not seem like a profound concept, but another way to describe agency is that agency is the opposite of powerlessness.
People with agency define themselves and their identity; they shape the world they inhabit rather than passively await whatever circumstances deliver up.
In the real world, people with agency move on when things no longer work for them in a particular situation. Agency is not just the opposite of feeling powerless; it's also the opposite of victimhood, i.e. the state of being in which others are held responsible for all of one's travails and difficulties.
Agency and responsibility are two sides of the same coin: each manifests the other.
Opportunity is a form of wealth--and so is the wherewithal to take opportunities that arise. Though there is a random element to opportunity--i.e. getting lucky--the wherewithal to take the opportunity is not a matter of luck. It requires a specific appetite for risk, perseverance, the ability to discern how best to use the opportunity, and access to the capital required to exploit the opportunity.
Capital is a type of wealth that isn't limited to "money": Character traits are capital, social networks are capital, experience is capital, knowledge is capital. All of these forms of capital are often more important than "money" capital.
As for "money" buying leisure--leisure in abundance is a disaster for the vast majority of people. Humans are designed to be needed by others, to be part of something greater than themselves, and to gain dignity and pride by doing useful work--whether they are paid "money" for this work or not.
This is why so many of those with the "money" to have endless leisure are miserable. Their lives are an endless treadmill of frivolous consumerism, neurotic pettiness, hypochondria, expressing their infinity of heartaches to counselors, and saddest of all, medications in abundance to relieve the ennui and the dead weight of their purposeless existence.
"Money" is only useful if it is a means to acquire real wealth, which is the agency, opportunity and time to pursue your life's work. There are many people who can spend $600,000 a year on various things (i.e. their "lifestyle") who don't feel "wealthy"--and if they don't have agency and time for work that's meaningful to them, they aren't wealthy: they're as impoverished as the person earning a fraction of their income.
Real wealth doesn't actually require a vast horde of "money." It requires some money, but how much depends on the cost of agency, opportunity and time. For those with few needs and the right priorities, the cost of agency, opportunity and time needn't be all that high.
As for acquiring capital--the most important types of capital don't require much money; determination, self-discipline, organization, a voracious appetite for knowledge and work, an insatiable curiosity, a generous heart, a knack for friendship, the purposeful pursuit of goals-- these are the tools to acquiring real wealth: agency, opportunity and time to fulfill one's life work.
I explain how to amass the most empowering forms of capital in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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Sunday, September 17, 2017

Are Facebook and Google the New Colonial Powers?

To qualify as colonial powers, Facebook and Google must effectively limit the choices and power of users, and punish or coerce those who question or resist their power.
I was struck by a phrase from a recent essay on advertising and social media,You Are the Product: As Taplin points out, that remark 'unwittingly revealed a previously unspoken truth: Facebook and Google are the new colonial powers.'
As you've no doubt noticed, the dominance of Facebook and Google in online advertising is now "in the news" for a variety of reasons: the possibility that agents of other governments influenced U.S. elections with media buys on Facebook; anti-trust concerns; the potential for these advert-tech giants to effectively silence legitimate online voices under the guise of limiting "fake news", and of course, the ongoing issues of click fraud and the underperformance of digital ads.
The phrase that captures this broad narrative is: When an online service is free, you're not the customer. You're the product.
In other words, if you're not paying for the service or content, then your information (harvested by Google, Facebook, et al.), your time online (i.e. your attention, a.k.a. eyeballs) and the content you create and post for free (videos of your cute cat, etc.) are the products being sold to advertisers at a premium.
The characterization of the two dominant digital-advert giants as new colonial powers is interesting on a number of fronts. To get a handle on a few of the issues, I recommend reading these two essays:
And watching this video on the archiving of digital information on individuals--including meta-data, that is, data about your behaviors, transactions, posts, etc. that have been scrubbed of your identity markers (name, account numbers, etc.)
Haunted by Data - Maciej Ceglowski (via GFB)
The key dynamics of colonialism for the residents are 1) a lack of choice and 2) a lack of power: the colonial power imposes a regime, either formally or informally, that limits the choices enjoyed by residents and limits their power to bypass or replace the colonial regime.
In the classic Plantation Economy of overt colonialism--a topic I've discussed numerous times here--residents are stripped of any options other than working on the plantation and buying their goods at the plantation store. This coercion need not be direct; the colonial regime can strip residents of choice and power by making it impossible to live without cash, for example, and then providing one source of paid work: the plantation.
Once cash is necessary to live, then credit is introduced--but only if you buy at the company store.
I've also written extensively about the Neo-Colonial Model in which corporations and banks bring the colonial model of exploitation to the home country, stripmining the domestic populace via dependence on credit.
This model is also used in the developing world, where it has replaced the old overt form of Colonialism with the new and improved credit-based version.
To qualify as colonial powers, Facebook and Google must effectively limit the choices and power of users, and punish or coerce those who question or resist their power. As the dominant corporations in search, social media and digital advertising, Facebook and Google limit the options of users simply by being essential due to their dominance.
As for punishing users--the potential to do so is what's worrying observers. The cover for silencing or banning critics is opaque: non-compliance with guidelines. So who's to say that users who criticized or questioned the policies of Facebook and Google aren't silenced along with click-fraudsters, "fake news" purveyors, etc.? Who gets silenced is completely up to the companies, and there is no recourse to the corporation's opaque judgment.
The Orwellian possibilities are real enough.
Here's a look at the digital advert market:
And the dominance of Google/Facebook:



If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.
Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

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