In lands where rivers split the soil, and borders draw a line,
Two cities share the sun and earth, yet fates do not entwine.
One thrives in ordered liberty, the other’s hope grows cold—
Not by gold or ancient myths, but by those for the power they hold.
The seeds of wealth are sown in fields where many voices speak,
Where laws are not the playthings of the cunning or the meek.
A council broad, a restless crowd, a parliament of dreams—
These birth the chance for newness, and the strength to mend the seams.
Yet power’s hand is seldom still; it grips the past with might,
And those who taste its honeyed wine will seldom yield the right.
They build their walls of privilege, their towers of decree,
And fear the storm of change that comes to set the many free.
For every age of rising light, a shadow stalks behind,
The fear of loss, the dread of change, the prison of the mind.
The press was silenced by decree, and rebels stormed the stage,
And all the while, the world awaits the birth of a lesser age.
But history is not a stream that flows in one fixed bed,
It twists with chance and accident, with dreams and with the dead.
A plague, a war, a merchant’s sail, a voice that dares to speak—
These turn the wheel of fortune’s game and lift the low, the weak.
No law of stone or blood or land shall set who will be blessed,
But only how we choose to bind the rulers and the rest.
For when the many shape the rules, and power’s chains are checked,
The soil of hope is watered deep, and futures intersect.
So let the lesson echo out: the world is what we make,
Not by the whims of gods or kings, but by the paths we take.
In every heart, a nation’s fate, in every mind, a key—
To open doors, to break the chains, and set the spirit free.
Let institutions not entomb, but nurture and renew,
For only where the many build can justice come to view.
The past is not our destiny, nor fate a final wall—
But in the hands of all who live, rests the power to rise for all.
And so the wheels keep grinding down the hungry crowds in pain.
As gilded halls ignore the cries and justice dies in vain.
The banquet’s set, the candles drip, the laughter starts to twitch,
At last, the table turns: the poor rise up to eat the rich.
Jim Jarmusch’s 1986 masterpiece “Down by Law” with its rolling panorama of bleak pre-Katrina Louisiana, and distant, blank character stares suggesting inchoate malaise, effectively captured the unarticulated angst of the ascendant Reagan generation.
Like canaries in a coal mine, Jarmusch and other artists of the era anticipated the contemporary assault on class consciousness with pinpoint precision-decades in advance of the more cognitive punditry in evidence today.
This brings us to an interesting development in today’s post crash histrionics, which provides a conveniently compact diorama on display for all to view and interpret. We begin with what is intuitively obvious to any who care to observe, and that is the dynamic change in the character of the residential real estate market in most parts of the country, but especially evident in those areas hardest hit by the bursting bubble of speculative real estate.
This can be nicely cataloged by examining the infill areas of Southern California know as the “Inland Empire”.
Pre-2008 crash, these areas offered semi-affordable buying opportunities for homeowners priced out of the highly desirable coastal California markets, as well as respite for inner city residents looking to escape gang violence. Properties could be had for 1/3-1/2 of the price of a comparable dwelling in the more desirable areas near the coast and employment centers, but in return a 30-50 mile one way commute was extracted as compensation. In the era of $2/gal gas, this was deemed acceptable, especially as around the water cooler scuttlebutt yielded the notion that such a property could be bought and sold at a 50% profit 3 years later, with the proceeds used to buy a house closer to the employment centers thereby rendering the commute temporary.
This became a de rigueur business plan of many lower middle class workers, who one must acknowledge otherwise had a 1 in 10,000 chance in aggregating enough savings to achieve even a modicum of survivability in retirement.
I would make the case that the motivations were at the very least in line with the conventional bourgeoisie wisdom of bootstrapping one self’s upward in the social mobility chain by taking on some risk and making investments to better one’s life standing.
This explanation of course runs afoul of the current bourgeoisie narrative, which seeks to demonize those that participated in such shenanigans as irresponsible slobs and layabouts, lying on loan applications in a blatant attempt to defraud the salt of the earth folks in the financial industry of their hard earned capital. Because to concede that these people were simply following the time tried examples set forth by their more well endowed peers would be to point out structural cracks in a system that is perennially corrupt and unworkable.
So it goes something like this, if I do it and succeed, I shall be valorized, if you do the same thing and fail, it’s because you’re a dishonest layabout gaming the system.
OK, so now here is where it gets interesting.
The combination of rising gasoline prices, massive job losses and a real estate market in free fall meant that the “Inland Empire” was to become a major epicenter in residential foreclosures. To add insult to injury, the daily commutes to employment centers had become traffic nightmares, with a typical 40 mile commute taking 2 hours each way, so naturally private companies put in toll roads and toll lanes on state owned freeways and charged substantial toll fees to avoid this congestion.
As is well documented today, when 15 homes in a tract of 40 homes goes into foreclosure, no one else can sell their home either.
So guess what happens? Groups of institutionalized investors swoop in to buy these properties for pennies on the dollar, paying for them in cash as no realistic mechanism for property appraisal exists when such a large percentage of homes are in foreclosure.
All this anguish comes in pursuit of a modest home in the exurb of San Bernardino County, the epicenter of the Southern California housing crash. Plummeting values here sparked a vicious wave of foreclosures.
But it’s precisely because prices fell so far here that Sepe can’t buy a house now. In a sharp irony, many would-be homeowners in hard-hit markets can’t compete with a flood of all-cash offers from investors, some backed by Wall Street war chests.
So they’re missing out on the only upside of the real estate crash: historically low prices and interest rates.
The repeated rejections come despite Sepe’s solid qualifications: a stable job as a cell tower technician and a pre-approved home loan. He watches as houses hit the market, then get scooped up within an hour. He offered a battle metaphor to describe his plight.
“I am this little country,” he said. “And it’s like this huge country is coming and attacking my country, and I can’t win.”
No one thinks to consider this effect in terms of class consciousness, as the investors are of course valorized and the free market is commended for saving the real estate world in general, and those hapless former homeowners in particular. It is important to realize what is happening here, before our very eyes, and that is a.) the erasing and transference of an entire generation of home owners into permanent renters, and b.) the beginning of capital consolidation into the rentier class, effective displacing mom and pop rental property owners by big investment conglomerates like Blackstone Group and Oaktree Capital Management.
San Bernardino County, as well as two of its largest cities, Ontario and Fontana, stirred a national controversy when it recently considered — then shelved — a plan to use eminent domain to seize and restructure underwater mortgages. In a testament to the lasting effects of the crash, about 40% of borrowers in the region still owe more on their properties than they’re worth, according to mortgage tracking firm CoreLogic.
But a turnaround is well underway, thanks in part to deep-pocketed investors snapping up bargains with cash. The housing supply is now so tight that it’s common for home shoppers to put in 20 or 30 offers before securing a house, real estate agents say.
Aware of the destructive dynamic and further slide down the slope of income inequality, the county (with support from the State under Jerry Brown) put forth a proposal to seize the blighted properties under eminent domain laws, and then once owned by the county, to issue a county bond to provide funds at below market rates to loan back to the foreclosed homeowners allowing them to keep their homes.
Note the issue here is not so much below market loan rates, but availability of a lender (the county) to fill in for private mortgages, who will not loan under any circumstances into these blighted neighborhoods.
But of course this well meaning effort was drowned in the bathtub by the small gubymint crowd, you can well imagine the hew and cry of the conservative bourgeoisie when faced with such an obvious interference in the “free market”. Imagine the perceived travesty of a government entity intervening to prohibit free market evangelists from extracting their pound of flesh and smashing down an entire generation of the middle class back to the stone age and, I hope it goes without saying, perpetually converting these hapless suckers into a permanent revenue stream while they pay rent.
Private equity groups, including Oaktree Capital Management and Blackstone Group, have formed or partnered with companies dedicated to buying single-family homes. Unlike the flippers made famous by the housing boom, these institutional investors are in it for the long haul. They’re buying homes in bulk, then renting and holding them to reap long-term price appreciation.
Some of these private equity giants and Wall Street firms have employed former homebuilding pros and partnered with big apartment managers. Their plan is to transform the single-family home rental business, once a largely mom-and-pop affair, into a full-scale industry.
The Santa Monica real estate investment firm Colony Capital, founded by Tom Barrack, last year won an auction by the federal government to purchase 970 foreclosed homes in California, Arizona and Nevada from mortgage titan Fannie Mae for $176 million. Most of the California properties were in the Inland Empire.
Carrington Mortgage Holdings, based in Aliso Viejo, has partnered with Oaktree to buy and rent out single-family homes. Carrington spokesman Rick Sharga acknowledged that cash buyers have an advantage. But he said competition has helped revive a depressed market.
As promised, this neatly packaged diorama shows the full circle of exploitation and alienation of a full blown class war, in one easy to grasp trajectory:
– Financial capital consolidates and exploits the residential home mortgage market, securitizing these lousy loans for huge profits.
– When the boom goes bust, the same actors campaign aggressively to prohibit any mortgage relief, forcing widespread bankruptcies and foreclosures.
– The marketing arm of the financial capitalist spends tens of millions of dollars socializing the idea that these homeowners were and are morally deficient, and deserve no recourse. They are to be punished for their transgressions.
– These same financial capitalists with prey now firmly trapped then look for ways to further exploit their captives, and find examples in privatizing freeway systems to extract more revenue from commuters trapped in gridlock.
– The conservative and tea party fanatics interrupt their sheet-less Klan party long enough to advance the popular notion that further deregulation is needed, and demonize any government participation that might circumvent capital’s relentless desire to crush all but the few. In their capable hands, it becomes fashionable to decry government of any kind with a full throated call of Statism, and a groundswell is created to “restore liberty” and allow unfettered capitalism to thrive.
– Having discouraged any state intervention by conflating ideological association to diminished freedom, the mark is ready for the takedown. Large groups of investors swoop in with pennies-on-the-dollar all cash purchases of distressed properties en masse, displacing large segments of the population, and sometimes even renting the properties back to the original homeowner.
The upshot of this large scale displacement by capital effectively unwinds 70 years of New Deal and post WWII governance. State encouragement of home ownership was thought to be a useful means to ensure “skin in the game” for the working class, as in encouraging home ownership, labor strikes were thought to be less likely to occur with heady financial commitments hanging overhead, as well as community ties, might discourage labor activism.
They were right.
So this leaves a vulnerability and an internal contradiction, as large groups of former homeowners become permanent renters, they are disinclined to invest in the community, local economic spending goes way down (what renter will invest in the property?) impacting local business, and property crimes go way up as alienation and other side effects of visible and blatant exploitation percolate to the surface for the working class. Ironically, the size and magnitude of police state intervention will rise significantly as compared to the aborted eminent domain intervention, as now the upper middle class and general bourgeoisie will demand increased police (State) action to knock down property crimes and lawless behavior. Think police checkpoints and constant aerial drone surveillance of these communities.
The other effect as mentioned is the consolidation of the rentier class, wherein these large investment groups begin to “brand” the single family residence as part of a larger portfolio of related revenue streams, e.g. grouping big box stores nearby corporate owned rental developments in backdoor revenue sharing arrangements, eventually degrading to a truck system to more efficiently extract any remaining surplus from the working class. This large scale consolidation will bring the capitalist death spiral to small scale rentiers who own only a few rental properties, they will face exclusionary tactics wherein associated mercantilist outlets will give discounts to large company renters, but not to renters of the small independently owned properties. Further, the coercive laws of competition will be brought to bear on the independents, wherein access to community pools and other trinkets will be offered free or nearly free by the large corporate rent factories, and marketed as “lifestyle” destinations with corporate parties for renters only extending into the domain of social reproduction.
The demise of the independent rentier, or more aptly, the petite bourgeoisie, will follow almost as quickly as the former homeowner himself.
It would be a mistake to view today’s finance capitalism as the “final stage” of industrial capitalism. The name of the new game is neofeudalism and austerity, and its preferred mode of exploitation is debt peonage. Like creditors in ancient Rome, today’s financial power is seeking to replace democracy with a financial oligarchy. The result is a resurgence of pre-capitalist “primitive accumulation,” by debt creation and foreclosure rather than the military conquests of past epochs.
Much of the dismantling of the social fabric that describes the general malaise of our times is not visible to the consumer or generic citizen. However, to peer down the darkened hallways in the backstage of American business is to glimpse the machinations of a frightening leviathan that subsumes social power in a manner that cannot be conceptualized in the traditional left vs. right paradigm.
The issue at hand is privatization, the stalwart conviction that free markets are the only means of adjudication for the natural tension between self seeking utility maximization of the individual, and the needs and rights of society as a independent entity. The perpetrators have constructed an arena of false contest, populated with sacrificial ideological tropes in pursuit of their real agenda.
It is the purpose of this article to examine some of the hidden means by which privatization- as practiced by the bourgeoisie- is being used to subsume the sovereignty of both individuals and small businesses.
A critical component to understanding privatization is to understand the need for obfuscation, e.g. to become invisible. Barring this, the next best defense against revolution and dissent is to deny that any disagreement exists, or if it does, then to valorize it and present it as irrefutable status quo, thus enjoining the conservatives who are loathe to change anything deemed as established, and can be counted on to circle the wagons in the so called “pursuit of liberty”.
Staunchly in the category of invisibility is the entire concept of rent-seeking, which is to say, the premise of unearned labor, or in plain English, getting something for nothing. Much of the financial economy of today is nearly totally dedicated to rent-seeking activities, so called financial engineering that attempts, through various debt mechanisms, to extract value from either land or industrial production without adding any value whatsoever. (For a particularly good and thorough discussion of rent seeking see this article)
If you are getting something for nothing, the last thing you want is for anyone else to know of this; so much of the current media discussion is either valorizing the financial class, or by working to maintain the invisibility of the rent-seeking genre. An understanding of this rent-seeking activity, and it’s relationship to so-called “free market” dynamics is critical to debunking the more mainstream conservative and Libertarian theories of economics, which crumble rather quickly within this framework.
Another frame of reference which adds to this discussion is a remedial listing of the three circuits of Capitalism, a.) Industrial capitalism, b.) Mercantilist Capitalism, and c.) Finance (Money lending) Capitalism. All three strains utilize exploitation to achieve access to surplus value, and all three seek to exchange supra-profits for social power. To illustrate, we can look at the Forbes list of the top 10 wealthiest Americans, and we can see that these three strains are all represented:
1. Bill Gates Microsoft (Industrial Capitalist)
2. Warren Buffett Berkshire Hathaway (Finance Capitalist)
3. Larry Ellison Oracle (Industrial Capitalist).
4. Christy Walton Walmart (Mercantile Capitalist)
5. Charles Koch manufacturing, energy (Industrial Capitalist)
6. David Koch manufacturing, energy (Industrial Capitalist)
7. Jim Walton Walmart (Mercantile Capitalist)
8. Alice Walton Walmart (Mercantile Capitalist)
9. S. Robson Walton Walmart (Mercantile Capitalist)
10. Michael Bloomberg (Finance Capitalist)
What is interesting about the relationship of these three strains is the internal competition for surplus value which is quite remarkable and very vigorous. Most of the publicized argument for regulatory constraints against the Finance Capitalist for example, is not from consumers or citizens, but stems from Industrial Capitalists who are loathe to give up surplus value to rent-seekers, preferring instead to capture this surplus for their own uses.
To further set the stage for our discussion, we can examine briefly the extents of control on modern media and the political economy by these three strains. The Financial Capitalists dominate the levers of power through direct capture of government figures, usually by interchanging and exchanging employees back and forth through key positions, as well their highly documented financial contributions. The Mercantilists however, are dominant in the advertising media, preferring instead to take their case directly to the consumer, shaping and stimulating demand by convincing consumers to purchase products and services that they did not know they needed. The long standing and principal Industrial Capitalists of course use both media and government to advance their objectives, but they add another dimension to their ideological control by purchasing controlling stakes in free market think tanks, such as the Libertarian Cato Institute (Koch brothers), the Heritage Foundation, and many others. Most of the so called “free market” think tanks that are influential on public policy can be traced to a controlling interest from Industrial Capital.
So we can see that the three strains of capital have hegemony in their own unique portals, influencing public policy with free domain to the exchange of their out-sized surplus values into social power.
The end game of all this is for the furtherance of rent-seeking activities. This is done in many different ways, but the subject of this article is a focus on privatization, and specifically the behind-the-scenes activities that are imposed on small businesses as well as employees.
The top level observation regarding the push to privatization is that it simply allows capitalist enterprise, large and small, to subvert constitutional protections by engaging private citizens in superficially mutual contracts. Modern political philosophy has been co-opted to allow wide ranging civil rights abuses under the cover of “mutual consent” in the context of a contract between private parties.
Examples would be private party contracts between employees (employment agreements) and between large and small businesses (supply agreements) .
Once private citizens enter into so called mutual contracts, the court system provides wide latitude for enforcement of virtually any draconian measure, as long as two private parties ostensibly agree. In many cases, basic constitutional protections are circumvented, and the entire principle of political economy is upended in the favor of the author of the contract. In theory, the employee or small business has the “right” to not sign any agreement which runs roughshod over his best interests, but in practice, such options are not readily available, particularly for employment agreements, when a prospective employee may be in desperate need of a job, as he or she is forced to sell his labor power for sustenance wages. If there are insufficient offerings of competing private employment contracts (as is often the case) the prospective employee must take what he can get- however onerous and biased the contractual terms are.
This is of course the objective of the Capitalist economy, to 1.) insure a standing army of unemployed workers, at the ready, to fill on demand openings in the Capitalist mode of production, incurring no costs to the Capitalist until such time as this labor power is needed, and then when needed to hire only using draconian and highly biased employment agreements that transfer State-like control to a Capitalist entity that is much better positioned to provide enforcement. 2.) To externalize costs to the greatest degree possible, such as societal infrastructure costs, by creating a privatized, Capitalist entity to take over former State controlled functions and to apply the aforementioned labor principles to realize this new profit center, that can cater such services only to these that can afford them, while exploiting those that provide labor power to these privatized entities.
Once these externalized functions are brought under the umbrella of the Capitalist mode of production, the issue of mutually agreeable contract law can be brought to bear to strip these workers of their Constitutional rights, and further weaken any efforts to consolidate and resist.
The folks over at Crooked Timber have provided some particularly good examples and arguments around this notion of using contract law to subvert even basic liberties:
Life at Work
To understand the limitations of these …….. we have to understand how little freedom workers enjoy at work. Unfreedom in the workplace can be broken down into three categories.
1. Abridgments of freedom inside the workplace
On pain of being fired, workers in most parts of the United States can be commanded to pee or forbidden to pee. They can be watched on camera by their boss while they pee. They can be forbidden to wear what they want, say what they want (and at what decibel), and associate with whom they want. They can be punished for doing or not doing any of these things—punished legally or illegally (as many as 1 in 17 workers who try to join a union is illegally fired or suspended). But what’s remarkable is just how many of these punishments are legal, and even when they’re illegal, how toothless the law can be. Outside the usual protections (against race and gender discrimination, for example), employees can be fired for good reasons, bad reasons, or no reason at all. They can be fired for donating a kidney to their boss (fired by the same boss, that is), refusing to have their person and effects searched, calling the boss a “cheapskate” in a personal letter, and more. They have few rights on the job—certainly none of the First, Fourth, Fifth, Sixth, and Seventh Amendment liberties that constitute the bare minimum of a free society; thus, no free speech or assembly, no due process, no right to a fair hearing before a panel of their peers—and what rights they do have employers will fight tooth and nail to make sure aren’t made known to them or will simply require them to waive as a condition of employment. Outside the prison or the military—which actually provide, at least on paper, some guarantee of due process—it’s difficult to conceive of a less free institution for adults than the average workplace.
2. 2. Abridgements of freedom outside the workplace
In addition to abridging freedoms on the job, employers abridge their employees’ freedoms off the job. Employers invade employees’ privacy, demanding that they hand over passwords to their Facebook accounts, and fire them for resisting such invasions. Employers secretly film their employees at home. Workers are fired for supporting the wrong political candidates (“work for John Kerry or work for me”), failing to donate to employer-approved candidates, challenging government officials, writing critiques of religion on their personal blogs (IBM instructs employees to “show proper consideration…for topics that may be considered objectionable or inflammatory—such as politics and religion”), carrying on extramarital affairs, participating in group sex at home, cross-dressing, and more. Workers are punished for smoking or drinking in the privacy of their own homes. (How many nanny states have tried that?) They can be fired for merely thinking about having an abortion, for reporting information that might have averted the Challenger disaster, for being raped by an estranged husband. Again, this is all legal in many states, and in the states where it is illegal, the laws are often weak.
3. 3. Use of sanctions inside the workplace as a supplement to—or substitute for—political repression by the state
While employers often abridge workers’ liberty off the job, at certain moments, those abridgments assume a larger function for the state. Particularly in a liberal state constrained by constitutional protections such as the First Amendment, the instruments of coercion can be outsourced to—or shared with—the private sector. During the McCarthy period, for example, fewer than 200 men and women went to jail for their political beliefs, but as many as 40% of American workers—in both the public and private sectors—were investigated (and a smaller percentage punished) for their beliefs.
And, perhaps most succinctly:
What makes the private sector, especially the workplace, such an attractive instrument of repression is precisely that it can administer punishments without being subject to the constraints of the Bill of Rights. It is an archipelago of private governments, in which employers are free to do precisely what the state is forbidden to do: punish without process. Far from providing a check against the state, the private sector can easily become an adjutant of the state. Not through some process of liberal corporatism but simply because employers often share the goals of state officials and are better positioned to act upon them.
So this is the end state that the “free market” evangelists push for, this is the holy grail of privatization, externalized costs to a system that can act outside of the constraints of the Bill of Rights.
We can extend this discussion to the even further reaches of transparency, that of the nature of contracts between large and small businesses. In addition to the above noted employer/employee social relations enforced under a Capitalist entity governed by private contract, the same private contract modality has some startling repercussions for business:
1.) Mercantilists demand slotting fees to product producers for prominent product (shelf) placement at retail locations. They routinely create profit centers with draconian shipping requirements, for example, if a shipping label is off center from a specific location on a carton by even an inch, the producer is fined for each instance of this deviation. Missing or incorrectly filled out paperwork, spelling errors, any excuse for a “deviation” results in a back charge (fine) to the producers. It is not unusual to see small manufacturers shipping product to “big box” retailers, and to have so many back charges that their entire profit margin is consumed before the first unit is even sold. Which of course, is the goal.
2.) Small manufacturers are expected to honor dubious return policies, many large retailers force contract language on suppliers that require them to accept returns months, sometime years after shipment, often when the product was clearly misused. Replacement costs are often entirely pushed onto the supplier, yielding a system that is nearly impossible to accurately track inventory, when such products are never really sold, if they can be returned for full credit months later.
3.) Contract language for even small, non-mercantilist orders has escalated dramatically over the last few years. Consider:
a. Supply agreements can dictate and restrict any outspoken political dissent or endorsement.
b. You can be forced to decline sales within certain industries, to certain customers deemed competitive to the purchaser, or constrained to within certain geographic radii.
c. You can be prohibited from selling a certain product or service to anyone but the original purchaser.
d. You can be forced to accept liability for failures that have nothing to do with your product or service.
e. You can be forced to submit to a dress code for certain customer facing events, and translate this code internally to your own organization.
f. You are often forced to agree to all types of intrusive audits, in some cases unannounced, and can be forced to absorb any lost production costs or accounting support costs in support of these audits- regardless of their outcome.
4.) But perhaps most egregiously, it is now increasingly common to submit to mandatory electronic form of payment, wherein you provide your confidential banking account information, and payment is only made, and cannot be made any other way, by means of a wire transfer directly into your private business account. Reading of the small print in the contract yields an almost universal caveat, the payer can reverse any payment immediately and electronically, directly from your account, without notice and without permission; further, if there is any payment dispute, fines or penalties, or the occurrence of any perceived damages and liability that can result in charge backs to you, the supplier, these can be extracted without notice and without permission.
If you read the fine print on any recent home mortgage documentation you will see similar examples of this from our friends the Finance Capitalists, and if you are foolish enough to consider borrowing money for a business venture from a Finance Capitalist, you will get a first class education in exploitation via contract documents.
The sum total of all this, under the mantle of privatization, is the absolute and unchallenged control by the large scale Capitalist of both consumer and small business based endeavor, seeking to capitalize any surplus value that is achieved though small business or consumer debt onset, and to reduce this to rent-seeking in a fashion that would put Mussolini to shame.
Turns out the devil you don’t know is far worse than the devil you do know.
Collapse of Industrial Civilization 