laborer, worker, employee

While reading the first chapter of Keynes General Theory, I came across this sentence:

Now the assumption that the general level of real wages depends on the money-wage bargains between the employers and the workers is obviously not true.

I guess I shouldn't say I just came across it: it pretty much outlines the greater part of the argument he's making. I was somewhat surprised to find that the greater part of the text is devoted to the question of involuntary unemployment. I thought that the latter was mostly a canard that was meant to counter Friedman's brand of liberalism, but it appears that this was already central to the marginal movement before Keynes' day.

Of course, in exploring whether unemployment is voluntary, we have to assume that all employment is voluntary--or that the wage contract is, anyway. This was a hotly contested issue in the US at around the time Keynes published his general theory and it is quite interesting to see that liberal economists have come up with no better defenses for the capitalist system than existed in the early 20th century, despite it going through enormous changes. In a way, it gives me a great deal of respect for R. H. Coase because, although he was evidently committed to the creed till the end, his early empirical work--i.e. his essay on "The Firm"--seems unique in this tradition for trying to evaluate these enormous industrial firms using the creed itself.

In any case, in reading Keynes', I noted that the word he uses to describe workers is, well workers. Or "Labour." The latter is a more British formation and the former is still often used in US speech today to talk about people who work for other people. But since all these terms inevitably sound Marxist or at least leftish, I started wondering about the term "employee." It is a more formal term and seems somewhat more washed of the political baggage the other two contain. More than that, it places the "worker" and "employer" in a relationship of interdependence: The employee is employed by the employer. It makes the Durkheim argument about the division of labor seem accurate.

I don't really know what the origins of it are, but according to the OED, "employer" or "imployer" has been around, in English, since at least the turn of the 17th century. "Employee" however, doesn't appear until the mid 1800s--about 1850. Here is the entry:

a. A person employed for wages; =EMPLOYÉ, which it has now virtually superseded. b. (nonce-use.) Something that is employed.

1850 L. H. GARRARD Wah-To-Yah xii. 172 Horses and mules..were here herded, by their employees. 1854 THOREAU Walden iv. (1886) 113 They take me for an employee. 1879 TOURGEE Fool's Err. xxxv. 241 Their commands are..obeyed by the..employees. 1886 A. MORGAN in Lit. World (Boston, U.S.) 15 May 172/1 The supines of Shakespeare outnumber the employees of most authors. 1891 Pall Mall Gaz. 23 Oct. 2/1 To arrange a forty-eight hour week for the few binders, while retaining the fifty-four hours for the bulk of the employees. 1906 Daily Chron. 9 May 5/5 ‘I don't like this affectation of “employee”,’ observed Judge Addison, in the Southwark County Court. ‘I prefer English words.’ 1909 Ibid. 15 Dec. 1/3 The employee shares in the company are 50,000 of £1 each. 1928 Britain's Industr. Future (Lib. Ind. Inq.) III. 141 The stimulation of employee-ownership under schemes of profit-sharing and investment by employees. 1954 J. A. C. BROWN Soc. Psychol. Industry iii. 84 The supervisors of high production groups were those who were..more employee-centred.

The inflections here--"I prefer English words" and "schemes of profit-sharing and investment"-- suggest the French word from which it was taken, employé, which seems to have a slightly longer history, at least in English use:

One who is employed. (In Fr. use chiefly applied to clerks; in Eng. use gen. to the persons employed for wages or salary by a house of business, or by government.)

1834 O. P. Q. in Spectator 22 Nov. 1112/2 An old bankrupt employé of the Empire.

1848 MILL Pol. Econ. I. ix. §2. (1876) 87 Connecting.. the interest of the employés with the..success of the concern. 1860 GEN. P. THOMPSON Audi Alt. III. cii. 4 No representations against a Government employé shall be entertained. 1862 Macm. Mag. July 257 All these employées should be women of character. 1879 G. C. HARLAN Eyesight v. 64 In Italy, all railroad employés are subjected to rigorous examination.

Here, the pattern, basically, is that it is used to describe workers who are employed in government and, later, in corporations. The sense above of "schemes of profit-sharing and investment" is actually crucial to J. S. Mill's use of the term, which is obviously influenced by his experience as an "employee" of the British East India Company, where he spent most of his life as what might be called a PR clerk. The term comes from his Principles of Political Economy, and follows a section where he recommends "production on a large scale" be promoted in much the same fashion as a joint-stock company, such as his current employer. Overall, he says, these are an excellent model--save the problem of inefficient management, which he notes Adam Smith was concerned about. Here, he basically enunciates a philosophy of business that is still around today: that the people at the top are of superior intelligence and discipline to keep themselves--and everyone below them--on task; hence their very, very fat paychecks:

Adam Smith fixed his observation too exclusively on the superior energy and more
unremitting attention brought to a business in which the whole stake and the whole gain belong to the persons conducting it; and he overlooked various countervailing considerations which go a great way towards neutralizing even that great point of superiority.

Of these one of the most important is that which relates to the intellectual and active qualifications of the directing head. The stimulus of individual interest is some security for exertion, but exertion is of little avail if the intelligence exerted is of an inferior order, which it must necessity be in the majority of concerns carried on by the persons chiefly interested in them. Where the concern is large, and can afford a remuneration sufficient to attract a class of candidates superior to the common average, it is possible to select for the general management, and for all the skilled employments of a subordinate kind, persons of a degree of acquirement and cultivated intelligence which more than compensates for their inferior interest in the result. Their greater perspicacity enables them, with even a part of their minds, to see probabilities of advantage which never occur to the ordinary run of men by the continued exertion of the whole of theirs; and their superior knowledge, and habitual rectitude of perception and of judgment, guard them against blunders, the fear of which would prevent the others from hoarding their interests in any attempt out of the ordinary routine.

And in the case of both this class of professional managers and anyone below them, there were ways to incorporate them into the enterprise such that the self interest that was supposed to make them function as enterprising little workers in the free market would still be brought to bear in the large corporate structure: namely, stock options. The introduction of the latter is what prompts his use of the term "employé." The employee, in other words, is one who is incorporated into the corporation by making its interests their own.

It must be further remarked, that it is not a necessary consequence of joint stock management, that the persons employed, whether in superior or in subordinate offices, should be paid wholly by fixed salaries. There are modes of connecting more or less intimately the interest of the employés with the pecuniary success of the concern. There is a long series of intermediate positions, between working wholly on one's own account, and working by the day, week, or year for an invariable payment. Even in the case of ordinary unskilled labour, there is such a thing as task-work, or working by the piece: and the superior efficiency of this is so well known, that judicious employers always resort to it when the work admits of being put out in definite portions, without the necessity of too troublesome a surveillance to guard against inferiority in the execution. In the case of the managers of joint stock companies, and of the superintending and controlling officers in many private establishments, it is a common enough practice to connect their pecuniary interest with the interest of their employers, by giving them part of their remuneration in the form of a percentage on the profits. The personal interest thus given to hired servants is not comparable in intensity to that of the owner of the capital; but it is sufficient to be a very material stimulus to zeal and carefulness, and, when added to the advantage of superior intelligence, often raises the quality of the service much above that which the generality of masters are capable of rendering to themselves.

So, much in the way that I suspected, the term employee was used to talk about the interdependence of employees on employers and their mutual employment in the firm. However, somewhat surprisingly, from nearly the beginning of the use of the term it has referred to a particular class of workers in a firm: those who are given a share of the profits via stock options of some kind. Note, that as Mill goes down the labor hierarchy--from the managers to unskilled laborers--the method of using money to make them work shifts. The unskilled laborer isn't given stock options, he is given the option to do piece work, which Marx called, "the most fruitful source of reductions of wages and capitalistic cheating." Yet the effect of both the piece wages and stock options is to incorporate the worker or employee into the concerns of the efficient production of profits for the corporation:

In England this system is characteristically called the “sweating system.” On the other hand, piece-wage allows the capitalist to make a contract for so much per piece with the head labourer-in manufactures with the chief of some group, in mines with the extractor of the coal, in the factory with the actual machine-worker — at a price for which the head labourer himself undertakes the enlisting and payment of his assistant work people. The exploitation of the labourer by capital is here effected through the exploitation of the labourer by the labourer. ^[7] Given piece-wage, it is naturally the personal interest of the labourer to strain his labour-power as intensely as possible; this enables the capitalist to raise more easily the normal degree of intensity of labour. ^[8] It is moreover now the personal interest of the labourer to lengthen the working-day, since with it his daily or weekly wages rise. ^[9] This gradually brings on a reaction like that already described in time-wages, without reckoning that the prolongation of the working-day, even if the piece wage remains constant, includes of necessity a fall in the price of the labour. [. . . .] The wider scope that piece-wage gives to individuality tends to develop on the one hand that individuality, and with it the sense of liberty, independence, and self-control of the labourers, and on the other, their competition one with another. Piece-work has, therefore, a tendency, while raising individual wages above the average, to lower this average itself.

The mechanisms that Mill describes, and that are implicit in the use of the term "employee" are basically a restatement of the lessons that Mill likely learned at the hands of his childhood tutor, Jeremy Bentham. Namely, that the most efficient organization is one in which the worker polices himself.

I don't know exactly how this relates to the French bureaucratic origins that this term; but Bentham himself is evidence enough that the strict division between laissez-faire and the absolutist, bureaucratic state was never all that apparent to the people at the top advocating both. In this, the major difference in Bentham and Mill is that one advocated a stick and the other a carrot, respectively. According to L. J. Hume in his article "Jeremy Bentham and the Nineteenth-Century Revolution in Government" (The Historical Journal, Vol. 10, No. 3.)

Bentham provided first for the systematic arrangement of his functionaries in a hierarchy based on the line of authority or command, and in which all authority, all power of direction, flowed downwards from the legislature to successive levels of subordinates. Within the hierarchy, he sought to establish, at all levels, 'the completeness of the necessary mass of responsible power, together with the exclusion of all irresponsible exercise of power.' Subordinates' adherence to the legislature's instructions, and their acceptance of the limits to their power imposed by the legislature, were to be enforced through a chain of responsibility and liability to punishment (buttressed in turn by the administrative procedures which Bentham devised to detect and to prevent malpractice) that extended back to the legislature. Characteristically, the functions, the chain of command, and the arrangements for enforcing responsibility and punishing malfeasance were to be prescribed by legislature's instructions, and their acceptance of the limits to their power imposed by the legislature, were to be enforced through a chain of responsibility and liability to punishment (buttressed in turn by the administrative procedures which Bentham devised to detect and to prevent malpractice) that extended back to the legislature. Characteristically, the functions, the chain of command, and the arrangements for enforcing responsibility and punishing malfeasance were to be prescribed by law. (367)

The "employee" here, in the guise of the government functionary was supposed to be limited by law and governed by the legislature. And, in its broad strokes, this seems to be largely what, internally at least, would be necessary to have a large company function. Instead of laws, there would be company policies and, as in Bentham's system, where

He saw that in the ordinary course of administration functionaries must face choices between different lines of action, and that they must make the choices without specific guidance from the legislature. Thus he noted the existence of functions 'mutually competitional or say antagonistic. . .as to which, on this or that occasion, option may require to be made, by the appropriate functionary as to which of them exercise shall. ..be given to'. Again, he conceded that it would on occasions be necessary to permit subordinate officials, on their own judgement, to adopt emergency measures running counter to or lying outside the permanent law of the land. His analysis of this problem revealed him as equally concerned to provide authority for such action and to prevent its abuse. (368)

The ability to make independent choices is what supposedly makes the joint-stock model more efficient. But anyone who has worked for a large corporation knows that, except for a few people near the top, one's range of independent action is fairly limited; choices must be run past superiors and, in the event that they are not, one must be able to justify them according to company policy.

The Public Choice argument that this is impossible to do in government unless one introduces market mechanisms into its structure represents the supposed partition of these two traditions: at roughly the same moment that Foucault started writing about governmentality. The argument went that, the government employees have their own self interest in mind and if the mechanisms of government aren't set up so that they can satisfy them, well they are sure to figure out a way to use those mechanisms to profit from their position in another way. The early 1980s saw James Buchanan entering the British civil service and trying to elaborate his utopia on the British public.

Fast forward to 2001, when much of Buchanan's philosophy was more apparent in the total deregulation of, for instance, the energy and finance industries in the US. There is no need to chronicle the effects of this extensively (Enron being the quintessential example), but just to note that, as a result, the US Congress passed the Sarbanes Oxley Act which, more or less, made it mandatory that the heads of corporations be able to verify their financial statements: in other words, it made it mandatory for the managers--the geniuses at the top of Mill's organization--to know what was actually going on in their organizations: to be so confident in it that they would stake their reputation on it. In other words, the market mechanism that was supposed to keep the whole structure of management in line had failed: it was necessary to have the Benthamite Law come in and "Stick" it to them.

Now I'm getting off on a tangent, but it is worth noting that, all those employee stock options: well they might have helped keep some of the "employees" at the bottom in line, but the ones at the top...not so much. In the end, Enron culminated in the upward distribution of wealth and employee stock options ended up being worthless. The Smartest Guys in the Room ended up gaming the system so that they could retire in style while their subordinates, who had worked much more dutifully in the interest of the company, "rode the stock to the bottom" along with the rest of the shareholders. So much for market discipline.

Education for life

One of the predominant dispositions of the habitus of intellectuals is illuminated the unenlightened with what seem to be counter intuitive views--observations of fact which go against what conventional wisdom would assume to be the case. In fact, one could say that this is the first trick performed by anyone trying to claim legitimacy for their interpretation of the world. Hence the 9/11 truth movement depends on its legitimacy for some twist in what is supposedly a settled case. The difference being that, since it remains marginal (and since it basically has only one trick), it can only concentrate on amassing data to support its case, pushing for support of its case.

The fact that there is not much else to its interpretation of the world (if Bush did it, why? What would this mean down the road? If all these thousands of government workers collaborated with them in perpetrating the fraud, how can we understand what led them to do so? In short, so what?) would place it in a precarious position if conventional wisdom were overturned. It actually acts as a sinkhole for all radical ideas about society--especially those which would talk about the banal violence of the everyday functioning of our culture--so that, to the hegemonic view, all marginal ideas are marginal because they are fragile, ignorant, or despicable.

The more acceptable, and totalizing, intellectual narratives work with a similar sleight of hand in their more public observations. And, like the 9/11 truth movement, they work by using a selective filter (an odd move for totalizing narratives, but whatever works.) Hence it is a commonplace of libertarian views on economics that, since everything must be done through the free market, nothing that is done directly except for working towards the more efficient functioning of commodification, privatization, and accumulation through the profit motive. Cherry picking, for instance, government regulations that produce the opposite effects is a favorite--chief amongst them being minimum wage requirements which, according to marginal economists and those of a more radical Austrian bent, inevitably increases unemployment.

I'll lay this canard to one side for the moment. The point is that, if the only way to approach social good is through the market, that is the only way to achieve social good. Oh yes--we forgot about that premise: social goods can be achieved efficiently through the market. It's easy to leave that out because it is basically just something brought in as window dressing for its apologetics of the status quo. It basically says that we can't choose social benefits or goods directly: instead, if they are something that everyone values (which, supposedly, social goods should be) the market will provide them. This is, of course, based on an assumption that everyone is rational, fully informed, and at least mildly motivated by the future effects of their choices. Polluting water and air; poisoning the food system with antibiotics; killing your customers with cancer; working employees to their breaking point; allowing yourself to be exploited to the detriment of your health and well being: these should be impossible externalities which the long run benefits of capitalism would eventually undermine, just, as Richard Epstein and others claim, child labor was eventually eliminated (though, according to them, the law was useless: the market provided!)

The point, in other words, is that the only directed activity should be the profit motive: these external costs should be figured into the prices of the commodities and activities you undertake. In weak cases, the omniscient, omnipotent force that helps determine, allocate, collect, and distribute the proceeds of this tax is something like the state; in extreme versions, it can only happen through the voluntary participation of the market: if it doesn't happen there, well then I guess it isn't a problem after all. In any case, taking direct action to create some social good is generally seen as failed before it begins. Social goods--the rising quality of living in general--cannot be proscribed: they can only be created, like black lung or repetitive stress injuries, as externalities to the voluntary, profitable contracts of private individuals in the market.

There is, of course, something to be gained by seeing the logic behind this system. Cass Sunstien has made a good career of trying to square the peg of his mildly liberal (in the post-war, Keynesian sense) disposition with the atomistic cubicles of Chicago School legal and economic theory. If this theory remained marginal, it could simply spin its counterintuitive logic and provide a source of cautionary information about previous regulatory attempts. However, since it assumes the totality of human society is either the product of 1) human nature; 2) the natural market economy, i.e. the interplay of atomistic nodes of human nature on a larger canvas; or, the source of all complication and distortion of the above: the government--it cannot actually conceive of the forces that have made it possible for it to assume these things and still seem rigorous and rational. As Bourdieu quotes Bergson: "It takes centuries of culture to produce a utilitarian such as John Stuart Mill."

This is especially true in the field of education. One of the points made by Harry Braverman in Labor and Monopoly Capital is that education in the USA--and science education in particular--has almost always been wrapped up with creating more productivity in the marketplace. That is, in so far as science education and research has been supported, it must be "scientific calculation" to lead "to quicker solutions," science "confined to trouble-shooting and [. . .] product engineering [. . .] the guiding principle seems to have been almost entirely fast payoff" (163). He does not mean that this was just a corporate model either: it was the focus of the entire science establishment, as it has developed in the US, up until the mid twentieth century.

To this he contrasts the German (or Prussian) model of science education, which was more concerned with basic research. He cites P.W. Musgrave's research into technical change, who had credited Hegel's influence with that culture's advanced scientific culture:

Hegel's influence on the development of science was, as Musgrave points out, both direct and indirect. In the first instance, there was his role in the reform of Prussian education in the second decade of the nineteenth century. And next, there was the pervasive influence of German speculative philosophy, of which Hegel was the culminating thinker, in giving to German scientific education a fundamental and theoretical cast. Thus while Britain and the United States were still in the grip of that common-sense empiricism which stunts and discourages reflective thought and basic scientific research, in Germany it was these very habits of mind that were being developed in the scientific community. It was for this reason more than any other that the primacy of European science passed from France to Germany in the middle of the nineteenth century, while Britain in the same period remained mired in, "what J. S. Mill called 'the dogmatism of common sense' backed by the rule of thumb. (160)

The lack of funding and support for basic science continued in the US throughout the remainder of the nineteenth century, with some of the larger enterprises finding the need to borrow from Germany--both by importing scientists or, in the case of the wholesale appropriation of German patents after WWI, simply stealing their discoveries--in order to advance the technical aspects of industry more than the "fast payoff" would allow. The change came at mid-century, when the Nazis drove all the Jewish intellectuals and scientists out of Germany

that the United States acquired a scientific base equal to its industrial power, which had prior to this development depended largely on the engineering exploitation of foreign science. Thus it has only been since World War II that scientific research in the United States, heavily financed by corporations and government, and buttressed by further drafts of scientific talent from all over the world, has systematically furnished the scientific knowledge utilized in industry. (166)

Braverman overplays the depth of the instrumentality that then occurred, in some ways undercutting his larger point. This seeding of investment in basic science research--of education that is not directed completely towards its instrumental association with capitalist profit--led to many important discoveries. In large part, what it showed was that there could be indirect benefits to carrying out undirected research. And that the public funding of seemingly mundane or ridiculous experiments and research may result in simply finding the answer to the particular hypothesis one was looking for: or it may lead to a breakthrough that others can build upon later.

Recent proof of this tradition still existing at the university level occurred a few weeks ago when the NYT reported on a team of Harvard physicists that had discovered the light sensitivity of a substance they called "black silicon." It can be used for ultra sensitive sensors and possibly for harnessing solar energy.

This would never have happened if the physicist, Eric Mazur, and his graduate students had stuck to the original purpose of their research. He says their experience offers a lesson in government financing of science and technology, which is becoming so narrow and applied as to make discoveries like theirs much less likely.

A more narrow focus does have its advantages: for one, it can be more likely to produce an immediate payoff.

But in the current research environment, “you are less likely to be open to serendipity,” said Judith L. Estrin, an electrical engineer and author of “Closing the Innovation Gap: Reigniting the Spark of Creativity in a Global Economy” (McGraw-Hill, 2008).

Black silicon was discovered because Dr. Mazur started thinking outside the boundaries of the research he was doing in the late 1990s. His research group had been financed by the Army Research Organization to explore catalytic reactions on metallic surfaces.

Of course, this example does confirm some of what Braverman laments: most basic science research comes out of efforts to create more effective weapons just as often as it is hoped it will result in an indirect benefit for an entrepreneurial enterprise--which, in this case, it did: the article says that, "Harvard plans to announce that it has licensed patents for black silicon to SiOnyx, a company in Beverly, Mass., that has raised $11 million in venture financing." This, in turn, points to the problem of patents of this kind, more thoroughly explored by Michael Perelman who points out that much of the basic research on which patents in technology or medicine are based is done by government funded labs. I will speak more about this in the dissertation--and it is indeed an enormous problem, especially when, in the case of pharmaceuticals, the Government hands the companies to whom they grant these patents an even larger subsidy after the fact.

At the moment, I want to point out the basic misunderstanding in US culture about science and, in a larger scope, education. Whatever the actual changes that have been made to the development of science and education at the university level, the rest of the system is still polluted with the nineteenth century presumption of how knowledge and technological innovation occur in relation to these institutions. Thus, in the presidential debates, candidates often (as Sarah Palin did in the Vice Presidential round, as well as on the stump) pick on government funding for what they deem useless (i.e. unprofitable) scientific research (on Fruit Flies or seal DNA, as the two links above describe). When a candidate assumes that, just by mentioning these studies to any average American audience, you can make them groan with this absurd use of their tax dollars. As Josh Marshall's commenters point out, there are other mechanisms for government funding than earmarks (the NSF, other peer-reviewed institutions) but the point here is not whether it went through these channels or not: it is just that the candidate can assume people will find government support for any basic research a ridiculous proposition--especially when you simply read the proposals. As a principle, perhaps, people will claim to support it: but when they are told, specifically, what that means, the presumption is that they will groan.

The assumption is based in the longstanding culture of US approaches to education and knowledge production: that they really should be focused on creating payoffs, not dabbling around with the basics. The quintessential US image of innovation is found in the lone, somewhat eccentric, even uneducated innovator, tinkering in the garage, Edison-like, to find a marketable invention that will make him rich: hence the popular mythology of how Apple got its start in a garage (a myth that Manuel Castells sees as organizing much of the libertarian ethic in silicon valley, in stark contradiction to the massive state funding that went into the college system there.)

It is a basic presumption about how things should work. The paradoxical shift in our understanding of how science and education should function in our culture--along these utilitarian yet libertarian indexes. We like to have the image of the instant success, the burst of genius, but never the long hard slog through basic education and learning. It may be that these don't make for good T.V. Watch an episode of CSI or even Law and Order: the basic fantasy here about the use of science, technology, even the law is that there are people who are so seemingly enlightened and adept that nothing delays their swift, effective use of the tools at hand to produce the required result. Sure, there is the general running down of hypotheses about who killed who or what their human motives are--a mystery in which the viewers are invited to participate. But in running these through the mechanism of science or the law--the effective use of the tools, long in production, long in education, often inconclusive, even counterproductive and contradictory--the results are quick and the process hidden from view.

If it were to be a real display of the struggle involved in producing results, each plot twist in which science is the pivot--particularly when it is an unusual or flashy use of science or technology--would likely play out like an entire episode of HOUSE, where the process of illuminating the truth that science and education can provide is so long and painful that angry, volatile characters involved in salacious interludes of sex, drugs and violence are required to make us pay attention. Yet outside the "immediate payoff" resulting from the NYT article above calls narrowly focused research and education--that is, narrowly focused on financial remuneration or, in the case of CSI and Co., catching bad guys (i.e. military hardware)--science and education are simply not that exciting to watch in a 30 minute segment.

Thus, when Obama speaks of improving science and math education, as in the one doesn't really see him advancing the push for basic research. He frames it, as does the author to the book cited in the NYT piece, in terms of competitiveness. In fact, this is almost the only way we can frame education in the US environment: learning for learning's sake is basically frowned upon and proving results in instrumental enculturation of specific learning tasks becomes the only goal of teachers. Competativeness becomes the watchword, with schools competing with each other to have better scores on instrumental standardized tests; teachers competing with each other within schools; students competing with each other in class; states competing with each other for federal money; etc. It could be said that, in such a deeply--primitively, as Paul Smith would say--capitalistic culture, these would be good survival lessons for educators to impart. But we can't say that this culture will necessarily produce any increase in the standard of living or, in fact, give us any leg up on our international competition.

It is the unhealthy focus on the last issue--the competitiveness in terms of international economics--that Paul Krugman calls "A Dangerous Obsession" in his book Pop Internationalism. Here he argued (in 1996)

that the obsession with competitiveness is not only wrong but dangerous, skewing domestic policies and threatening the international economic system. [. . . .] Thinking in terms of competitiveness leads, directly and indirectly, to bad economic policies on a wide range of issues, domestic and foreign, whether it be in health care or trade.

Lest it appear that I'm making him out to sound like some sort of commie (which the Libertarians already believe anyway) his basic point is that placing people who have this competativeness bug--the idea that we need to have a workforce that is instrumentally prepared to be plugged into any task, that the purpose of education is rote learning rather than undirected, experimental exploration, critical thinking, and collaborative endeavors--in charge of public policies that, on the surface have no background in dealing with them, is ridiculous. Further, by assuming that the thing that these endeavors need is a focus on paring down, efficiency, and cost cutting (a philosophy that, more and more, seems to be taking hold in higher education, where upwards of 60% of the staff are overworked, non-tenured faculty--a model mostly advocated by the dominance of former CEOs in the role of university presidents) we misunderstand what these endeavors are supposed to do.

It is the logical conclusion of the limited utilitarianism of libertarian philosophy: namely, that, by making education run more efficiently, more in line with the rules of the market, we will produce a more competitive, educated workforce. This ideology is so dominant that, even in framing my own argument for this short piece, I can only fall back on it in some skewed way. Like Braverman and Perelman above, the implication of the argument I am building is that they can, in fact, create a more profitable workforce, they just have to approach it from a different direction. The basis of judging a pragmatic success is therefore already given: instead of making the goal the best educated population, the most enlightened critical thinkers--just because we value learning and thought--we have to focus on how this can be beneficial in the war we face in the marketplace. Learning for learning's sake just sounds naive and weak.

Unfortunately, it is this short sighted understandig of education itself that continues to plague the nation--and may likely bring the US as we know it to its knees during this crisis. As Mike Davis said last week

If you've been watching the sad parade of economic gurus on McNeil-Lehrer, you know that the intellectual shelves in Washington are now almost bare. Neither major party retains more than a few enigmatic shards of policy traditions different from the neo-liberal consensus on trade and privatization. Indeed, posturing pseudo-populists aside, it is unclear whether anyone inside the Beltway, including Obama's economic advisors, can think clearly beyond the indoctrinated mindset of Goldman Sachs, the source of the two most prominent secretaries of the treasury over the last decade.

Or, more provocatively, as the now infamous manager of Ladhe Capital said in his farewell letter to the financial industry:

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, "What I have learned about the hedge fund business is that I hate it." I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

In our stuggle to carry on the unending competative war, in our misguided attempt at structuring education for instant payoffs without considering the investment necessary for making those actually occur, we have forgotten what the purpose of education was supposed to be. It was not simply to prepare us to be good workers, to indoctrinate a class of managers, to justify the unofficial aristocracy: it was supposed to help us live a good life.

In this, one would think the best use of our resources would be to try to improve the health care, the infrastructure, the old age assistance, the education and basic nutrition of the population as a whole. One would think that the best goal of education would be to prepare us for making life better for one another. Surely this would be the best ground on which we could be competative internationally, if that were the goal. Instead, it is seen as an ineffective strategy that ignores the realities on the ground: governments need to be trim, efficient, transparent (you know, unlike multinational corporations.) The goal--competativeness, a.k.a. market freedom-- is the only goal: it must be pursued single mindedly. Any attempt to alter it will fail--and the forces that favor it will do all in their power to make sure that it does, ignoring the failure of their favored mechanism and casting all the blame, as they have with the CRA and ACORN, on any attempt to alter the cold rational logic of their utopia. That this mechanism has never existed in its purity, that it depends on the work of the larger society, that it feeds on people educated in basic research and critical thinking and needs them to compete, these are denied or explained away. Standardized testing, standardized education, after all, is a big business.

It seems like a better time than ever to dismiss this rationale and institute a more coherent understanding of what education and science should look like. On this, the idea of education for life has two meanings. On the one hand, it points to the focus mentioned above--on teaching people how to care, how to create a better life in the domestic sphere. This certainly relies on the scientific institutions in a clear way and would be equally dependent on the infusion of money from the embedded market economy. There will, most likely, always be some form of market through which some commodities are exchanged: that doesn't mean that everything has to take this form or use this mechanism. There will likely be plenty of places to make a profit and, if we really have to combat the obtuse charges of naivete, we might point out that a system that was supportive in this way would likely produce a myriad of contraptions and arrangements that could be profitably exported. Since the basic accusation seems to be "supporting life directly is wrong; life can only be supported indirectly by privatization of life processes," I sincerely believe we have come to an impass in rational discussion. The empirical results of the failure of privatizing health care, food production, medicine and pharmaceuticals seems fairly clear: it has reinstated a steep hierarchy where the working poor find themselves without all or enough of one or even all of these on a regular basis. The fact that we still mostly have to deal with trash, shit, and crime--the three most unappealing issues brought up against anyone proposing even mild forms of social democracy--are still dealt with through public or semi-public mechanisms, it is a fallacy to say that these would fall by the wayside. Having investment and education focused on life, directly, seems like a reasonable alternative.

On the other hand, it refers to the consequences of this changing environment--consequences that seem to be here no matter what. And it refers to a principle we should reinstate whether the above emphasis is ever able to take hold or not. In a way, it actually seems to be something that we have forgotten in the last two generations. Namely, that education isn't just something we do once and then get on with the money-making. The time when the same kind of problems would face us forever and require the same people with the same knowledge of them are behind us--if they were ever here before. We will need to have people learning throughout their lives, building on their knowledge and filling in the gaps, continuously.

But more than this, we need to adjust our understanding of how education fits into the average person's life. This is all the more pertinent in the current atmosphere of education and work, which doesn't allow for the kind of learning--or at least the liesure to do it--just mentioned. In this atmosphere, to justify the runaway profits of a select few, we are greeted with the narrative about how bravely they have risked their capital in putting it to work for the social good in the profitable investment. I've recently said what I think about this notion of risk. And I stand by the idea that there has been a starkly unequal reward provided for this kind of risk in the current atmosphere. In large part this is because the risk that workers undertake is sleighted in favor of the glamorous Objectivist capitalist/entrepreneur-porn above.

To this, I could just say, bollocks: there's no risk and you know it. You might go under but you won't lose your shirt. You might lose some money, but there is, as you seem to think, plenty of it to be made.

But I'll be a little more nuanced. In starting a trade, training for a career or beginning college, the fanciful thing to ask people is what they would like to do. Of course few people will get to do what they would like to do, and only a marginal percentage settle on doing something they can tolerate. The point being here that when people decide this, more than likely they are forced to look around and see what employment opportunities are out there for the doing of that thing they might "want to do." More than likely, there isn't and they have to reconsider. I see this struggle often with students I advise, who are pulled in various directions. The unfortunate thing is that, those who don't consider this in a calculated way, those who are really into a university education for the learning, for the education, find themselves in pretty desparate straits at the end, trying to figure out what they will now do after graduation: they have been educated, many of them, far above what their class position necessitates: yet in order to make a living they will likely have to find some new career, one they will need to be trained for, to invest yet more time in, in order to support themselves. The education they have, in this way, is usually very ill suited for the work they will ultimately have to do.

This is, of course, fine. Many people do things they don't like and have to undergo training and put in time in an industry in which they only slowly learn to take an interest. But, on the other hand, in whatever path they choose--whether before training, in beginning college or a trade school, after college in starting at ground level in a career path--they take a risk. It is a significantly greater risk than the simple, short term investment of one's already plentiful capital: it is an investment of valuable, irreplacable time in one's life. Granted the prudent capitalist will invest in similar time and effort, but the stakes are lower. And while there is always lament about investors losing their money, when the average worker suddenly finds that their chosen career path is no longer viable, this is not seen as a similar sort of risk: it is seen as a force of nature, overtaking a poor cog in an enormous machine. But, just as the system supposedly depends on capitalists taking risk with their capital, it equally depends on workers risking their time--and often their mental energy, their health, their relationships--in order to work for those capitalists. When they are suddenly turned out of an industry, when a shop is shuttered and sent abroad, when any number of world events occur to displace workers, the risk that they have taken is not rewarded with, for instance, the golden parachute of the CEO. In increasinly rare cases, they are given six months of meager benefits in order to 1) discover whether it was just a single closure in an industry that still has viable employment options or 2) discover a completely new industry at which they could be qualified, get training, and, in either case, find a placement in a job. In other words, they have to embark on another set of risks which will possibly lead to another set of failures.

This is not the case of people not wanting to work or asking for more than their share: it is the case of people trying very hard and their effort being squandered, often by the very system they train themselves to serve.

Education for life, in this case, means that workers--as they are starting to--will need to be more nimble in their association with the relationship of their education with their job. Retraining for the next career will need the be something that we all continue doing throughout our lives in order to combat the chaotic turnover that the market creates--the exponential destruction of our investment in life time through devalorization of our work experience and knowledge. Most of us should deny loyalty to this system or to its administrators, except in so far as we are paid to do so. This is the fragile, fragmented association it has deemed we are worthy of and we should afford it no deeper relationship.

Perhaps this could be mediated by more government or community programs--and if there are any wise administrators in the system left, they will suddenly find this in the back of the intellectual cupboard Davis refers to above--but in the event that it is not, it should be a cue to all of us that, if the system isn't ready to educate us for life--in either sense of the phrase--we need to be laying the groundwork for a new system which will.

indicators of things to come?

Two stories this PM that make the coming months look bleaker:

Gun sales thriving in uncertain times

Economic woes, fears that Dems will enact new controls drive increase

By Fredrick Kunkle

The Washington Post

updated 11:38 p.m. CT, Sun., Oct. 26, 2008

Americans have cut back on buying cars, furniture and clothes in a tough economy, but there's one consumer item that's still enjoying healthy sales: guns. Purchases of firearms and ammunition have risen 8 to 10 percent this year, according to state and federal data.

Several variables drive sales, but many dealers, buyers and experts attribute the increase in part to concerns about the economy and fears that if Sen. Barack Obama of Illinois wins the presidency, he will join with fellow Democrats in Congress to enact new gun controls. Obama has said that he believes in an individual right to bear arms but that he also supports "common-sense safety measures."

"Even though [Obama] has a lot going for him, he's not very pro-gun," said Paul Pluff, a spokesman for Massachusetts-based Smith & Wesson, which has reported higher sales. Gun enthusiasts are "going to go out and get [firearms] while they still can."

Gun purchases have also been climbing because of the worsening economy, which fuels fears of crime and civil disorder, industry sources and specialists said.

"Generally, we know that hard economic times always result in firearm sales," said James M. Purtilo of Silver Spring, who publishes the Tripwire Newsletter.

and

ATF: 2 neo-Nazi skinheads' plot to kill Obama, 102 black people broken up

By LARA JAKES JORDAN
Associated Press

via Detroit Free Press

WASHINGTON — Federal agents have broken up a plot to assassinate Democratic presidential candidate Barack Obama and shoot or decapitate 102 black people in a Tennessee murder spree, the ATF said today.

In court records unsealed today, federal agents said they disrupted plans to rob a gun store and target a predominantly African-American high school by two neo-Nazi skinheads. Agents said the skinheads did not identify the school by name.

Jim Cavanaugh, special agent in charge of the Nashville field office for the Bureau of Alcohol, Tobacco, Firearms and Explosives, said the two men planned to shoot 88 black people and decapitate another 14. The numbers 88 and 14 are symbolic in the white supremacist community.

The men also sought to go on a national killing spree, with Obama as its final target, Cavanaugh told The Associated Press.

“They said that would be their last, final act — that they would attempt to kill Sen. Obama,” Cavanaugh said. “They didn’t believe they would be able to do it, but that they would get killed trying.”

On the (re)Distribution of Wealth

It should, first, be said that this is explicitly not about party affiliation.

McCain advocated a similar set of tax policies when he ran in 2000 and was even quoted as saying that people who made more money can afford to pay more (video link here). And the terms of Obama's plan (which, it's also worth noting, are being significantly misrepresented by McCain's campaign) are hardly extreme. The actual Socialist candidate for president, Brian Moore is fond of pointing out, Barak Obama is a pretty mainstream candidate over all. Here are interviews with him: print, FOXNews Video 1 and 2.

People making the assertion that Obama is "Socialist" or "Marxist" either have no idea what these terms actually mean or are being very disengenuous in their use of them. At most, he is recommending a more progressive income tax with government funded programs to improve access to market provided health care. In other words, he isn't even recommending a mild version of the social democracy they have in most other industrialized countries. Nor is he advocating even what we used to have before the Welfare State as it existed in the US was dismantled over the last thirty years.

In this regard, it's worth noting, that the latter has definitely been a bipartisan effort and the changes in the socioeconomic profile of the US were even more extreme--with the rich getting richer and vice versa--under the most recent Democratic president. As Robert Pollin notes, in his book on the Clinton Years, Contours of Descent:

The general requirement of product differentiation in an electoral market entails that at the margin any Democratic President will offer more social concessions than a Republican of the same cohort. Unlike Clinton, Bush is unabashed in his efforts to mobilize the government to serve the wealthy. But we should be careful not to make too much of such differences in the public stances of these figures, as against the outcomes that prevail during their terms in office. It was under Clinton that the distribution of wealth in the U.S. became more skewed than it had been at any previous time in the previous forty years—with, for example, the ratio of wages for the average worker to the pay of the average CEO rising astronomically from 113 to 1 in 1991 under Bush-1 to 449 to 1 when Clinton Left office in 2001.(9)

Just to clarify, that means that it would take the wages of 449 average workers to equal the wages of one average CEO. This is actually only the disparity in income: the actual distribution of wealth is even more skewed. It is difficult to find a study that states it in a comparable ratio, but here is a study which comes close. As many people point out, we don't actually know some of these numbers because people who have a lot of wealth are incredibly efficient at hiding some portion of it. Still, the study shows a large disparity in wealth, though there seeme to be little change in the proportion of wealth over the last 30 years.

In the United States, wealth is highly concentrated in a relatively few hands. As of 2001, the top 1% of households (the upper class) owned 33.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 51%, which means that just 20% of the people owned a remarkable 84%, leaving only 16% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth, the top 1% of households had an even greater share: 39.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2004).

The tables they provide here make it clearer, as do the graphs further down the page. It also distinguishes between financial wealth, trusts, stocks/mutual funds, business equity, and non-home real estate. Further down they make the point that, in so far as there was a change in the early 1970s,

this time in good part due to a fall in stock prices, meaning that the rich lost some of the value in their stocks. By the late 1980s, however, the wealth distribution was almost as concentrated as it had been in 1929, when the top 1% had 44.2% of all wealth. It has continued to edge up since that time, with a slight decline from 1998 to 2001, before the economy crashed and little people got pushed down again. Table 3 and Figure 4 present the details from 1922 through 1998

In other words, there has, in general, been very little redistribution of "wealth" but, despite the fact that many wealthy people have been rather secure in their wealth, over the past thirty years they have been given an increasing share of the income. Studies confirm this many times over. Another study on the increase in CEO pay is here. Here are a table and a chart, reporting similar data to that of Pollin, taken from the 2005 version of the Economic Policy Institute's "State of Working America" report. (The latest version can be viewed here). The longer article in which this appears is here.

Doug Henwood, the business reporter that I mentioned who'd been talking about the housing bubble and it's possible consequences for several years, also has some good data on this on his website, which he's been keeping up with for several years. Here is data from 1997; 1998; and here is an update in 2004. The upshot to these is that, as the 2004 article puts it:

Real income of the median household—the income of the household at the exact middle of the income distribution, adjusted for inflation—fell every year between 1999 (the peak of the 1990s boom) and 2004. As of the latest reading, it was off a total of almost 4%. That’s not as bad as the 5% drop from 1989 to 1993, the period of the first Bush recession and subsequent jobless recovery, but that time it took just two years for income to begin rising after the cyclical bottom. This is the first time since the Census Bureau began publishing figures for household income in 1967 that there have been five negative signs in a row; the previous records were four, clocked in the early 1980s and early 1990s.

And, upon inspection, he has an interesting chart which shows the increase in wealth disparity as well over the period of the last decade. As he points out later in the 2004 article, this wasn't just a natural change; not just the progression of one set of people working harder or getting luckier: this was structurally created, state policy driven. In short, it was an explicit redistribution of wealth from the previous era.

These contrasting material fates are succinctly illustrated by the nearby chart, a history of the Gini index for the U.S. since 1913. The Gini index is one of several stats used to summarize the course of income distribution over time, or to compare it across countries. The Gini is a number between 0 and 1; if a society were perfectly equal, its Gini index would be 0, and if it were perfectly unequal (one person had all the income), it’d be 1. In the real world, the Gini usually falls between .25 (the Swedish neighborhood) and .50 (the Brazilian neighborhood). As the chart shows, the U.S polarized in the early decades of the 20th century, reaching a peak in the late 1920s/early 1930s. The depression and New Deal began a process of equalization, which continued through World War II and into the late 1960s, thanks to unions, tight labor markets, and an expanding welfare state. For a while, it looked like what economists call “depolarization” was a natural feature of a maturing capitalist economy. But that was demonstrated to be false, as the U.S. repolarized, thanks first to the deep recession of the mid-1970s, the subsequent inflation, and then the long wave of social spending cuts, union-busting, factory closures, the explosion of Wall Street wealth and power, and all the other familiar features of the neoliberalism of the 1980s and 1990s. The Gini index for households was .466 in 2004, tying the level of 2001, which was the highest since the early 1940s.

This now puts the US as among the most unequal in the industrialized world and it makes it much more difficult for those who do work hard to ever save enough to get ahead. A larger study of this was done by an American University economist a few years ago. His analysis in "Understanding US Mobility" concluded that it was getting harder and harder for people who started out poor or middle class to ever make a transition to being economically secure, muchless wealthy. In fact, for people in the middle class, it was just as possible that their children would be *poorer* than they were as it was that they would make a transition to a higher class. This was especially the case for minorities. On all accounts, this trend is becoming worse, at least from the perspective of working Americans.

In 2005, Alan Greenspan--never one to advocate class warfare--noted that,

The income gap between the rich and the rest of the U.S. population has become so wide, and is growing so fast, that it might eventually threaten the stability of democratic capitalism itself.

In other words, the revolt we are seeing at the current moment against traders, hedge fund managers, etc. is the evidence of the fact that a lot of people are getting upset. As more people are made homeless by forclosures, as the unemployment and underemployment levels (right now, together, at about 10%) get worse, there could be the threat of people not believing the government is there to do anything but protect the wealth of the rich. This is a recipe for riots, looting, and all sorts of civic problems which, to be honest, would eventually be far, far worse for the value of the dollar than any apparent sharing of the wealth. As one of the threads on a listserve I'm on recently asked, of the recent rise in the US Dollar, "The U.S. economy is in very bad shape and the debt is ballooning. Why buy the U.S. dollar?" One of the answers, reflecting some of Lee's wisdom (things are bad here, but...):

Perhaps 'they' know something that we don't: That Europe, England, Russia, China are also in very bad shape, and that as bad off as the U.S. is, the rest are as bad or worse?? If the crisis is worldwide, then the safest place is whatever place is least apt to be wracked by riots.

Greenspan, of course, isn't anticipating riots, but that is because, every time we've gotten close to one of these precipices since the Great Depression, the government has stepped in to reassure everyone that it was trying to work for everyone's interest. If the "democratic" part of the capitalism really stops functioning--if we can't elect people who at least appear to have the interest of all Americans in mind, then protest becomes one of the more potent options.

The idea that the economy should work for everyone is a pretty widespread idea. It is, after all, ultimately regulated (even in its unregulated sectors) by the democratically elected government. I got the Greenspan quote quote in an AP report on a recent poll asking people about their feelings on the subject. In that poll.

A substantial majority of Americans say the rich don't pay their fair share of taxes, opinion polls show. A growing number say the U.S. is becoming a nation of haves and have-nots.[ . . . .] A majority of Americans — 51 percent in a poll by Gallup this past April — said they support "heavy taxes" on the rich to redistribute wealth. That is significantly higher than when the same question was asked in 1939, at the tail end of the Great Depression, when 35 percent agreed.

Of course, as the pollster says, "It's a complicated area to try to understand American attitudes, It's kind of like, in some instances, conflicting medical research ... There's no one answer." Still, in terms of recent history, the point is that there is objectively already a redistribution of wealth relative to the years before that, when the US was trending towards a more equitable distribution.

Meanwhile hedge fund managers in NYC are able to make hundreds if not thousands of times more than the security gaurds at their buildings--and are currently able to pay taxes at a lower rate than their secretaries. Here is an article that looks at each of these facts and here is a policy paper confirming the statistic about these taxes. We are living, more an more, in a guilded age.

Finally, a small note in terms of the national issue of taxes and spending. The Tax Foundation has numbers which show the ultimate irony about the supposed Red/Blue divide over the issue. Using the electoral college map of which states voted each way in 2004 and predicted in 2008, the states who vote against taxes (if that's what voting republican means) may not being paying them, but they sure are receiving the benefits. When you look at the federal money that is spent in each state, relative to the taxes that state pays, it is predominantly the "Blue" states which are taxed to provide federal services for "Red" states.

So the top ten recipients, in 2005, of federal spending, relative to taxes are:

1. New Mexico (RED 2004, leaning BLUE 2008)
2. Mississippi (RED 2004, 2008)
3. Alaska (RED: 2004, 2008)
4. Louisiana (RED: 2004, 2008)
5. West Virginia (RED: 2004, 2008)
6. North Dakota (RED: 2004; tied 2008)
7. Alabama (RED: 2004, 2008)
8. S. Dakota (RED: 2004, 2008)
9. Kentucky (RED: 2004, 2008)
10. Virginia (RED: 2004; leaning BLUE 2008)

On the other hand, the states that paid the most in federal taxes and received the least--in other words the states whose federal taxes were "Redistributed" to the states above--in terms of federal spending:

1. New Jersy (BLUE 2004, 2008)
2. Nevada (RED: 2004; leaning BLUE 2008)
3. Connecticut (BLUE 2004, 2008)
4. New Hamshire (BLUE 2004, 2008)
5. Minnesota (BLUE 2004, 2008)
6. Illinois (BLUE 2004, 2008)
7. Delaware (BLUE 2004, 2008)
8. California (BLUE 2004, 2008)
9. New York (BLUE 2004, 2008)
10. Colorado (RED: 2004; leaning BLUE 2008)

In other words, if there is a redistribution of wealth between the states, it is predominantly from the Blue states to the Red ones. This seems quite ironic, frustratingly so, to people who are more realistic about the role that government plays in our lives.

RISK

RISK: we assume that we have evolved beyond the medieval forms of value, where knights jousted for superiority or undertook dangerous quests through unknown lands. But all that has shifted is the space in which these take place. In a world of direct producers, the greatest risk was to one’s body; to one’s ability to fight or work on behalf of one’s family. The freedom to work on the land was offset by the unfreedom of arbitrary political power and the source of valor and power was in standing strong against invaders; battling stronger forces on the field; literally risking life and limb.

Productivity gains should allow for us to live without working constantly; political freedom should keep us from needing to fight the forces of arbitrary power; advanced civilization should make the value of brute strength and physical tenacity less significant than enlightened thinking and careful use of science, knowledge, and industry. Yet the cash economy and its metaphysical battleground in the stock market simply opens a space for the previous discourse to take root, often making the strategies and intellectual rigor now seen as pivotal to the medieval battlefield the justification of this continued struggle. Here, it is the strength to hold on as one watches one’s future livelihood drain with the drop in the Dow.

The latter becomes the symbolic representation of vitality in western culture—like a “life force” bar on a video game. Suddenly the discourse shifts to those with the stomach, with the tenacity to psychologically and physiologically weather the crisis. Keeping one’s money in the market, when all the signs point to this being as foolhardy as a quest for the holy grail, is seen as a symbol of the endurance and strength we used to revere in knights of legend. Like the latter, of course, in the future we will only hear about the few who basically got lucky in the grand casino of Wall Street. Every person who decides to double down as this crisis expands will think they have their tenacious bid to stay in the game is based solely on their superior knowledge of the financial world; yet many of them will lose. Those who happenstance will smile upon will concoct elaborate stories to explain their achievement and this will enable future generations to believe that knowledge, power, and wealth are synonymous, legitimating all who have more with the belief that they acquired it in similar fashion.

The whole accumulation and distribution of the capital of the world is seen as rightly acquired through a fantastic game of chicken. Graft, corruption, exploitation and outright robbery will be dismissed as myths perpetrated by the unbelievers or seen as more evidence of the spectacular intelligence and extraordinary character of these Übermensch demigods: they were able to see a space where the rules could be exploited—or ignored outright—to their advantage and they ruthlessly marched towards victory. Or as the Economist stated in 2006,

[T]he trading models that have propelled Goldman [Sachs] will be tested one day. At worst, the bank itself—or, more likely, a second-tier rival or a hedge fund—might fall into the kind of dramatic spiral that killed off Long-Term Capital Management (LTCM), a hedge fund, in the late 1990s. Financial markets have always been subject to crises. Any crisis would affect Goldman, because it is so intertwined with the system. The bank says it keeps plenty of liquid reserves against the dread day. It might well profit from any crisis (it did from LTCM). But the chances are that some banks, somewhere, will get into serious trouble. If that happens, the losses of any bank will be for its shareholders; they should not expect any bail-out. The wider question has to do with systemic risk. If the much vaunted systems do not work, then the central banks will have to step in (as the Federal Reserve did with LTCM). In the past, though, such collapses did less damage to the financial system than the regulatory over-reaction that followed them. If policymakers were to respond to the next crisis by ushering in a more conservative regime that severely limited financial risk-modelling and risk-management, the global economy would be the poorer for it. That is what should stick in people's minds when the day comes. Until then, why not do something too often forgotten? Love Goldman or hate it, you ought to admire it and the system it epitomises. And hang on tight.

Two main flaws exist in superimposing this narrative: they did so not in order to battle against evil and the risk they took, in most cases, was not their own. The above narrative is usually enjoyed by the domestic audience when seen as evidence of their strength against a common enemy. The valiant knight is admired not just for his bravery or strength: it is because that bravery and strength are employed to the advantage of all within the group. They are constructed in an era of crusades and ideological superiority is supposedly evidenced by victory on the battlefield. Granted this narrative is meant to justify the feudal political framework on some level, but, as Schmidt would be quick to point out, it is ultimately the framework adopted by every political entity. In the case of the financial actor in question, however, the loser is not an evil knight that is dispatched because of his weakness—although the Austrian theory of “Creative Destruction” is not far from making the economic sphere as topical to Schmidt as the political. Instead, the loser is either another knight, possibly on the same team. And, though it could be said that the financial wizard is acting in the interest of us all, in so far as that is the case, the bulk of the risk s/he takes is not his/hers.

Most of risk taken by the players in the current crisis was with other people’s money. Hedge funds, mutual funds, pension funds: the managers certainly take a large cut of the proceeds, but when they lose other people’s money they only lose other people’s money. This is why the bailouts and injections of state capital became so necessary. It was as if, instead of a valiant squad of Financiers Templar, risking life and limb for all of us, instead we had a ragtag band of hackers who had just inadvertently injected a virus into our body economic. They had fought a good battle with our collective resources, been fine puppet masters for the production of wealth using other people’s funds. Yet now it was obvious that they were simply gambling with heavily leveraged funds, unaware that the awesome rewards they were gaining were only acquired by an enormous expansion of risk: they will surely miss their annual bonuses and fat commissions, but, ultimately, few of them will lose their shirts.

The victims on the battlefield, were the government not to intervene, would not be these valiant soldiers, but the millions of pawns they used to play their game. Whether this was done dishonestly or just in the blinding ignorance of naïve hubris, it is clear that they can’t be trusted with the keys to the castle—nor should those that weather the collapse (whether because they stick it out or are able to convince enough of their investors to) be honored with tales of their spunk and grit. If we are all to collectively tighten our belts, to renew the protestant ethic and so on, the first place to start is by limiting the aspects of our life world that are left up to the gambling ring of the market. Going to Vegas is a fun activity and buying a lottery ticket might be a thrill now and then: but we are beyond the adolescent stage where everything existing should be left up to the market.

This is ultimately the real problem with the current round of financialization. It is one thing to bet on events in the world; it is quite another to make the events of the world contingent on a series of bets. The former is the route that Cass Sunstein, in his Infotopia, uses to prove Hayek’s description of the information aggregating power of markets. I’ll leave to one side the degraded understanding both seem to have of what entails “communication;” the point for both is that markets help to aggregate the information possessed by distant and diverse individuals. This is, of course, not all that markets do, but the predictive power of markets that Sunstein happens upon is largely due to their disconnection from actual events. But Hayek doesn’t just want them to be predictive: he wants them to discipline people, to effect their decisions in one way or another no matter if they would like to play the game. It is a Hobbesian world of “live and let die” which he sees as functioning best when no one can opt out of it and no force can come to anyone’s rescue. In other words, as the pinnacle of civilization, Hayek pitches us the world of Leviathan without a Leviathan. Though the latter—as observers from Marx to von Mises, MacPerson to Marcus Rediker and Peter Linebaugh have noted—was a society and culture that, in so far as it ever flourished, expressly depended on what Bourdieu calls “the enforced conversions” to the market modality, the libertarian virtue depends on bracketing this process, seeing, instead, the “extended moral order” to be at once completely natural and the pinnacle of civilization.

Here, Sunstein gives credence to the liberal Hayek’s most conservative claims: that not only does the market aggregate value across space, but across time. Thus the tradition of the present moment (i.e. the distribution of wealth, the ordering of preferences structured by previous cultural imposition, and all the other refuse of power politics that was ultimately the foundation of the present order) can be forgotten: the “amnesia of genesis” as Bourdieu calls it allows for Hayek to claim project far into the past what he claims to be the greatest achievement of our culture. Its hegemony, evident in his celebration of “operations which we can perform without thinking about them” (along with all its anti-intellectual implications), should be seen as simply the product of the market mechanism working long ago—evidently even into the feudal past which it supposedly supercedes: “We have developed these practices and institutions by building upon habits and institutions which have proved successful in their own sphere and which have in turn become the foundation of the civilization we have built up.” Ultimately, this concludes that the best practice is not question the system as it is. Invoking Burke, Sunstein paraphrases Hayek as saying that, “if a practice lasts, then it is likely to have value and make sense” (123). Hayek’s Burkean tendency appears as the logical extension of his rationality about markets to culture and morality. In this, the actual institutional framework of the “extended moral order” he celebrates, we likewise find none of the dynamism that supposedly characterizes markets. On the other hand, we see the full flowering of his ahistorical reasoning.

Unfortunately, as the quote from The Economist above illustrates, both of these tendencies form crucial pillars of the dominant culture of the moment. Goldman Sachs has created an elaborate web of risk and the whole thing could come crumbling down, taking much of the financial system with it. But there is nothing that can be done to stop it. Government intervention will only come too late and make the problem worse: the system is as it is for a reason—Goldman Sachs has made it so. If it comes crashing down, that is part of the ride: “Until then, why not do something too often forgotten? Love Goldman or hate it, you ought to admire it and the system it epitomises. And hang on tight.”

Sunstein manages to rescue his unequivocal celebration of Hayek by noting that “In many cases, traditions last not because they are excellent, but because influential people are averse to change and because of the sheer burdens of transition to a better state.” Likewise, both the neoclassical, marginal assumptions and the more ambitious Austrian characterization of markets, are ultimately empirical questions which, in many contexts, do not bear the weight of their assumptions: “The simplest reason is that consumers have limited information and markets are not entirely free” (128). The latter argument, has, of course, been the party line on the Austrian side in response to the present crisis. The above articles, observing the unusually high ration of debt and risk being accumulated by investment banks—on the back of what any rational observer would have termed a housing bubble—are not portentous insights about the inevitability of the collapse, evidence of the ignorance of the market or its egomaniacal players: the problem was never in the market itself, but instead in the previous interventions, “the regulatory over-reaction that followed” previous collapses. In this, the free market has not been allowed to be free: that this is why it apparently functioned as a “free market” is, for these observers of little consequence. Trying to reduce risk in the future would only cripple the system and rob us of the heroes of our “extended moral order.”

That the latter operate under the assumption that they know all—with claims to omniscience that would rival any bureaucrat Buchanan wanted to skewer—that they did so with the resources of countless other people and with the blessings of the actually existing Leviathan: this does not matter. The only moral of the story that the Libertarian philosophy will allow is that we can ultimately trust no one. This is the collective punishment that we all must face for placing our faith in the various institutions of the free (or unfree) market or trusting the mechanisms of government oversight.

I have a lot more I could say about this particular topic, but I will end with an extensive quotation from Gabriel Thompson's Nation article from the summer titled "Meet the Wealth Gap." In it he chronicles both the disparities in wealth in the financial services industry (e.g. especially between the managers themselves and the workers at private security companies that keep them safe) but also at the ideological warfare being fought by think tanks to keep these disparities from being righted. The reason that the managers make all this bank is because, as they say of themselves in a congressional hearing, [and I'll leave off with the final passages from the article] they need these big returns because they take big risks (with other people's money):

At a House hearing on the bill [to close the tax loophole such that "instead of paying an income tax, which for the wealthy is 35 percent, a manager pays only the 15 percent capital gains tax"], Bruce Rosenblum, managing director of the Carlyle Group and chair of the Private Equity Council, the industry's new lobby group, argued that the risks taken by fund managers are "significant." Primarily, they "forgo other opportunities that provide greater security and guaranteed returns in exchange for the greater upside potential." In other words, for the risk of forgoing the chance to earn lots of money in investment banking in order to potentially earn even more money in private equity, firm managers deserve to be taxed at lower rates than your average teacher or janitor. Perhaps sensing that this argument wasn't persuasive enough, Rosenblum went on to highlight the other "assets" that managers stand to lose if their funds perform poorly, namely "good will, business relationships and reputations."

The brave risk-takers of the hedge-fund and private-equity worlds are on my mind as I listen to Timothy Williams, the security guard who protects John Paulson, describe his tour of duty in Iraq. Much of the time was spent in Anbar province, conducting raids and patrols and manning traffic checkpoints. His battalion lost nine soldiers, but it could have been worse.

"During one patrol I saw my lieutenant's Humvee get hit with an IED right next to us," Williams recounts. "The Humvee was completely destroyed, but somehow everyone survived. In Iraq, things are always exploding. The first week I was nervous all the time, but you get used to it. My mom, though, never wanted me to sign up."

Williams, uninsured and working for a nonunion company, sees taking these risks as his only means to a stable career. That's why, despite his opposition to the war, he signed up for a six-year term with the National Guard. "After that," he says, "I only need ten more years to retire." Meanwhile, Kovner, who never served in the military, is chair of a think tank that aggressively pushed the United States to invade Iraq and is now fighting (from desks in air-conditioned offices) to maintain troop levels until "late 2009," in the words of AEI resident scholar Frederick Kagan. Domestically, Kovner funds groups that rail against the living wage and unions alike, curtailing the chances for working people like Williams ever to earn a decent living as civilians. Kovner's daughter hasn't ever faced such a choice; her path eased by her father's connections, she worked as a reporter for the paper he funds, the Sun, and now clerks for conservative Supreme Court Justice Antonin Scalia.

For Williams, higher wages and generous benefits can't be found guarding buildings in Manhattan, and without union organizing, the security guard industry will continue to be made up of the working poor. And when jobs like these--which have replaced the unionized, decently compensated blue-collar jobs of old--remain union-free, with stagnating wages, the military can become the best option for advancement. Someone needs to provide the "vigilant and effective defense" that is AEI's mission, after all, and it certainly isn't going to be the children of people like Kovner.