by Tim Di Muzio
As corporate power concentrated in one of the largest merger and acquisition waves in history, the bamboo and iron curtains came down. China and the former Soviet Union were now open for transnational business, effectively adding 1.5 billion more people to the global workforce and providing one of the major reasons given for the declining power of workers. If workers ask for too many demands, or the wrong ones, corporations can threaten relocation. At the same time as the corporate assault on standards of living intensified, so too did the rise of personal debt in many countries. This took the form of high-interest-rate credit cards, student loans, home equity loans, mortgages and various other debt instruments. Since money can expand only through loans, this has had the effect of injecting liquidity into the system, and, for a time, boosting demand for goods and services. The problem, of course, is that there are limits to how much debt households can afford, and by March 2001 that limit appeared to be reached. The United States, the largest economy in the world, went into recession for eight months.
The solution to this problem was to create more debt. Alan Greenspan, then chairman of the United States Federal Reserve and either duplicitous or a fool, slashed interest rates to encourage borrowing and spending. With most of the middle class suffering from high household debt to disposable income ratios, mortgage loans were offered to people who could scarce afford to repay them on the faulty premise that house prices always go up. As we have already discussed, mortgage debt is a leading way in which money is created in most economies, but personal and business debt are also growing massively. These subprime loans were then securitised by Wall Street banks and given investment grade status by the oligopoly of rating agencies. Fraud, corruption and deceit ran throughout the supply chain of credit but, with a strong seal of approval from the rating agencies, the securitised loans were sold on to global investors or kept as income-generating assets on the books of financial institutions. These loans added over a trillion dollars to the money supply of the United States and temporarily boosted the economy. However, as more and more people failed to meet their mortgage payments due to inadequate incomes, the subprime mortgage market began to crash. The loans went from being assets to non-performing loans on bank balance sheets. In addition to this crisis, increasing prices for food and petroleum further squeezed working-class budgets, adding to the problem of insufficient disposable income and insufficient diets for many in the 99%. This perfect storm of conditions – millions of indebted people without the ability to service their loans, rising oil and food prices and sinking housing prices – dampened the mood of global investors and global capitalisation plummeted. The market value of virtually every company was chopped. As reported by the World Federation of Exchanges, global capitalisation went from a high of US$63 trillion in October 2007 to US$29 trillion by February 2009 (Di Muzio 2014: 29). Within the span of months, investors slashed the value of global companies by over half. Unemployment soared and, according to the International Labour Organization (ILO), the problem continues to get worse:
What began as a crisis on the financial markets has become a global jobs crisis. The risk of increased unemployment has augmented, and the crisis is a direct threat to decent work across the globe. Responses to the crisis cannot be restricted to fiscal stimulus packages, and the social dimension of the crisis should not be ignored.2
As was the case during the Great Depression, there are now plenty of people who want to work but there appear to be fewer and fewer jobs. The youth have been the most affected by the crisis of unemployment. Currently, in 2013, the ILO places the total number of unemployed at 202 million, with that number expected to rise in the coming years (ILO 2014: 3).
As the financial crisis deepened, governments were forced to step in and rescue the financial institutions and the economy. Once again, the solution was the creation of more debt. As national debts mounted to pay for stimulus packages and the fraud of reckless bankers, the political class promised to take measures to curtail government spending to please the very financial markets they had bailed out! Organised financial crime, accelerating inequality, widespread political corruption, a fear of future prospects and policies of austerity inspired the Occupy movement to fight for the 99%.
According to the Guardian’s detailed corroborated database, there were 750 Occupy movements in cities around the world,3 with the majority in North America and Europe. The fact that the movement was so widespread in the heartland of global capitalism demonstrates the degree to which the 99% have come to realise that they are on the wrong road into the future and that this is because the 1% effectively own the economy and have used the political system to further their own narrow goals. As global as the movement became, it was started by a group of anarchist New Yorkers who organised a call to action published by Adbusters:
On September 17, we want to see 20,000 people flood into lower Manhattan, set up tents, kitchens, peaceful barricades and occupy Wall Street for a few months. Once there, we shall incessantly repeat one simple demand in a plurality of voices.4
The ‘one demand’ was modelled after the success of Mubarak’s ousting by protesters in Tahir Square in Egypt. Occupy Wall Street suggested that their one demand should focus on the removal of money from US politics, the reinstatement of the Glass–Steagall Act, the dissolution of corporations found to have broken the law three times, or the dismantling of the many thousands of US military bases around the world. The movement aimed to have a democratic and horizontal power-sharing structure so that decisions could be made in consensus. However, it appears that the New York movement turned from repeating ‘one simple demand in a plurality of voices’ to repeating a plurality of demands in a babel of voices.5 As admirable as the original encampment was for its energy, its concern for democracy and its collective desire to found a social order centred on people and the planet rather than on the symbolic accumulation of power, its tactics and strategies doomed what could have been a far more powerful movement. To be fair, had the pressing need for an income combined with displacement by the police been non-issues, the movement could have developed a stronger political programme out of its experiment with direct democracy. Either way, one thing is for certain: Occupy Wall Street and the Occupy movement more generally have drawn so much attention to the growing divide between dominant owners and the rest of society that the idea of ‘the 1% versus the 99%’ will not go away any time soon.
Five reasons why present trends will likely continue
It is also highly likely that current trends in gross inequality will only be exacerbated for at least five immediate reasons. First, as Polanyi suggested, dominant owners have:
no organ to sense the dangers involved in the exploitation of physical strength of the worker, the destruction of family life, the devastation of neighborhoods, the denudation of forests, the pollution of rivers, the deterioration of craft standards, the disruption of folkways, and the general degradation of existence including housing and arts, as well as the innumerable forms of private and public life that do not affect profits (Polanyi 1957: 133).
The most important indicators used by the 1% are virtually all financial and tied in with profit as the chief measure of success. We should never forget that the politics and the purpose of the 1% are to make ever more money – this trumps all other sentiments and political leanings. Each member of the 1% may not hold this view directly, but their money managers, who must obey the iron law of differential accumulation, certainly do. And when all these things harm society, there is always charity – a secular confession akin to the rich being forgiven their sins by the Catholic Church. Both involve the exchange of money; the only difference is that the latter exchange is given to enter extraterrestrial Heaven, the former to gain more status and power. We would also do well to recall that finance does not develop as some neutral science disconnected from power and designed to better planetary life. It does not emerge to conquer a general risk encountered by humanity. The evidence is that the majority of humanity lives in a co
nstant state of risk – risk of being thrown out of work, risk of not being able to afford food, risk of not being able to fund an education, risk of suffering indignities from a boss and so on. Even those who appear to have secure jobs are in constant fear of losing them. Finance emerges as a rationality of power to capitalise the control of humans and the natural world for the differential accumulation of dominant owners. It is the chief reason why we have a 1% at all. Moreover, as we have seen in Chapter 4, the rich have built their own virtual world relatively free from the 99%, except where and when we serve them. The history of human sociality since the agricultural revolution has demonstrated that no constituted power gives up its power willingly, despite evidence of illegitimacy or its destructive nature. In examining once complex and rich societies that have collapsed, Jared Diamond, like Polanyi, makes a prescient observation about those at the top of the social hierarchy:
A further conflict of interest involving rational behavior arises when the interests of the decision-making elite in power clash with the interests of the rest of society. Especially if the elite can insulate themselves from the consequences of their actions, they are likely to do things that profit themselves, regardless of whether those actions hurt everybody else. All of these examples in the preceding several pages illustrate situations in which a society fails to try to solve perceived problems because the maintenance of the problem is good for some people (Diamond 2005: 431, 432).
The fact that the 1% currently benefit from differential accumulation and the widespread destruction of nature for profit is thus extremely worrying in light of the history of our species. It could very well be that extreme forms of hierarchy and the lust for power over creativity and cooperation threaten our survival – particularly in the age of fossil fuel energy, extreme climate change and nuclear weapons.
Second, we have entered an era of expensive oil – what Huber (2013) has called the lifeblood of our modern societies. The costs of this increase, as well as the abject failure to transition away from oil, are being felt most acutely by the 99% in rising transportation costs and rising prices for food. The 1%, however, can continue to live their energy-intensive lifestyles and barely take note of the price. All the while, unless there is some sort of public intervention, the dominant owners of oil and gas companies will collect a fortune from declining supplies and relatively inelastic demand. The inequality produced by the 1% is also the inequality energy access, use and profit.
Third, as long as the banks control the extension of credit and therefore make the bulk of investment decisions, we will have a system of debt slavery and unequal access to money from which bank owners profit. Until money comes under democratic control and is produced debt-free, the 99% will continue to give a portion of their income to bankers who create money credit out of thin air. Any country that has a banking system owned by a small minority cannot properly be called a democracy. The great financiers of European bloodbaths – the House of Rothschild – understood this all too well (Ferguson 1998). The sentiment was also noted by Bill Clinton’s former professor at Georgetown University, Carroll Quigley:
the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations (Quigley 1966: 324).6
The fact that most people have no idea how money is created today provides considerable evidence of the early men of finance’s success in setting up their global operations. If money is power, what should we call the power to create it?
Fourth, the 1% effectively control the apparatus of violence. While the majority of the police and soldiers worldwide are in the 99%, their pay cheques come from being able to do their jobs and their jobs are contingent on what orders they receive from governments desirous of maintaining ‘stability’. Outright slaughter of protesters or rioters is much more difficult to accomplish now with the means of communication more readily available to the general population. State forces killing people en masse would be a public relations nightmare both at home and internationally. The Pentagon learned this during the television broadcasts of the Vietnam War, and this knowledge probably spread to other armed forces through military-to-military cooperation. Since then, and given the many protests against elite social forces, for example at the G8 or G20, a new category of weapons has been in constant development and refinement: non-lethal weapons. While these less-than-lethal weapons have been used internationally, it appears that the arms industry in the US plays a special role:
The US is at the forefront of an international arms development effort that includes a remarkable assortment of technologies, which look and sound like they belong in a Hollywood science fiction thriller. From microwave energy blasters and blinding laser beams, to chemical agents and deafening sonic blasters, these weapons are at the cutting edge of crowd control. The Pentagon’s approved term for these weapons is ‘non-lethal’ or ‘less-lethal’ and they are intended for use against the unarmed. Designed to ‘control crowds, clear streets, subdue and restrain individuals and secure borders,’ they are the 21st century’s version of the police baton, pepper spray and tear gas (Khalek 2011).
The ability to control crowds by inflicting pain from a distance is a powerful tool of the 1% and the political leadership they largely sponsor. Demonstrations may still take place, but they could be easier to control. Compounding this inequality of force and violence is the growing market for private security. Peter Singer, one of the first to chronicle this worrying phenomenon, noted that:
the military privatization phenomenon means that military resources are now available on the open market, often at better prices and efficiencies than could be provided by individual clients. So, contrary to predictions about the divorce of military and economic power, power is more fungible than ever … The ability to transform money into force returns the international system to the dangers of lowered costs of war. A new international market of private military services means that economic power is now more threatening (Singer 2003: 171, 174).
Fifth, as long as the 99% remain fragmented and disorganised, the 1% will continue to rule by advancing their interests in accumulating more symbolic power. We have just witnessed a major financial crisis when it became blatant (once again) that bankers cannot be trusted with the money supply. Evidence of fraud, corruption and insider trading abounded (Ritholtz 2009).7 Still, bankers walked away with enormous bonuses many times the size of an average worker’s salary. But the largest market crash since the Great Depression did nothing to overturn the capitalist mode of power or the policies that support differential accumulation: it merely intensified them. One glaring example is the intensification of mergers and acquisitions post-crisis – which, again, only serve to intensify corporate power and consolidate ownership. Moreover, if we rely on traditional political parties we are likely to experience much of the same. Not only are these parties beholden to business interests and influenced by money but they all seem willing to accept the fundamental premise of differential accumulation – the very root cause of this increasing inequality between dominant owners and the 99%. To stop this trend, in each country I would argue that the 99% organise themselves into a visible and effective political party with clear goals for social transformation and the end of capital as power. This will require a wholly new apparatus of number indicators to coordinate society quite different from gross domestic product, interest rates and capitalisation. These indicators should be concerned with people, future generations and the environment, not profit. A return to the so-called golden era of Keynesianism, which some
are wont to revisit, should not be pursued for two main reasons. First, Keynesianism never challenged the dominant ownership of the world’s money supply by private individuals and families; in fact, it encouraged more government debt, a key source of profit for bank owners. As Rowbotham perceptively pointed out: ‘What Keynes unwittingly provided was a theoretical framework for the exercise of government power and banking profit, dressed up in the guise of support for the economy’ (Rowbotham 1998: 240). Second, the ecological and energy challenges we currently confront have intensified since the time of Keynes. These have to be addressed with immediacy and this cannot be done by advancing policies that continue to encourage ruinous economic growth premised on debt money and fossil fuels (Heinberg 2011).
Ten priorities
Confronting the destructive power-seeking nature of the 1% is the political project of our times. Our job is not to inherit the old system and somehow run it better, as neo-Keynesians would like to do, but to found a new one. There will be much to do and there is little doubt that anything progressive must be done collectively. Many are already organised and working towards a future form of sociality and economy that is constructive, inclusive, cooperative and democratic. I am familiar with many of these projects but I would still argue that little can be advanced to challenge the systemic nature of differential capitalisation without a modern political party of the 99%. As long as we remain fragmented we will continue to be ruled – and perhaps ruled into oblivion. After my examination of the 1%, a few things have become clear to me; for what it is worth, I single out ten priorities that I think an effective party of the 99% should strive for if a future society is to take shape based around the creativity of humans rather than the power of capital. These ten priorities are certainly not the only things to pursue, but getting them right would go a long way to putting us all on a more sustainable and progressive path to supporting decent livelihoods and planetary health.