Debt that Lasts Forever: Can't Cash in on Credit

Production or prediction? Healthy risk taking or dangerous betting? What are the implications of a society based along the lines of Wall Street? This week author, Ivan Ascher and Strike Debt activist Pam Brown join me, and we hear from Mandy Cabot on why she turned down a $100 million buyout deal for her company, Dansko Shoes. It's all coming up on The Laura Flanders Show, the place where the people who say it can't be done take a backseat to the people who are doing it.

Laura Flanders:When Marx looked out at what produced profit in his day, he saw grinding factories producing things. If he'd gone back further, he might have been struck most by agriculture. Today, what dominates is Wall Street, finance, and not just investing and trading, but betting. That is risk and credit. We call it playing the market, but it's not really playing when you're gambling with people's needs like college and housing and pensions. We discovered that in 2008 when the market crashed.

We have gone from a production-based economy to a prediction based one. It's affecting every aspect of our lives says today's guest. Ivan Ascher is the author of a new book called Portfolio Society, which looks at the 21st century risk-based economy. Joining him is Pam Brown, returning guest, writer and organizer with Rolling Jubilee that was born out of Occupy Student Debt. She's also a host on WBI Radio. Welcome both. Glad to have you. Obvious question, what is the Portfolio Society, Ivan?

Ivan Ascher:It's a phrase I actually borrow or lift from someone else, Gerald Davis, who is a sociologist at Michigan, who uses it to describe basically capitalist societies that are dominated by finance?

Laura Flanders:Is that new? There's always been markets or there have been for years.

Ivan Ascher:That part is not new. What I think is new is the fact that it's taken such a dominant place in organizing our lives and also as a source or a site of profit making. Not just profit making. As you said, a disproportionate amount of money now gets made in the financial world, but it also just governs our relations or shapes our relations in ways that it didn't before.

Laura Flanders:I'd love you to elaborate a little bit on that. In what ways does being a risk and credit-based society affect our relations with one another?

Ivan Ascher:In the 19th century, in the industrial area, people spoke of a Bourgeois society or a civil society. The Portfolio Society I understand to be the contemporary version of this. We're still organized around exchange and production, but on top of this we have these financial markets that increasingly encroach or shape the way in which we produce and buy and sell things. A simple example would be the use of credit cards when you go to the market. You no longer use cash, but certainly if you buy anything online, your transaction is mediated by credit cards, which means all kinds of things in the way that people have access to markets and the way in which we have to produce ourselves is a certain kind of subject. Somebody who is credit worthy, somebody whose probability of default can be measured.

Laura Flanders:This gets to some of the work that you do and have done over years, Pam. When you hear about a credit-relation-based society, what bells go off in your head?

 

 

Pam Brown:I was just thinking about the transition that happened earlier in the 1900s, really around 1934, with the Housing Act that did create kind of a debtor society because prior to that, when people bought property, the terms of a mortgage were very, very different. It was only in 1934 that you started to have longer mortgage terms. That allowed people to buy in a sense more property. There were lots of problems ... I don't want to state that there weren't before that of course, but that was a real turning point for the way that debt was conceived. That was a point literally where the banks and the government became partners.

Prior to that, there wasn't an explicit relationship at least between the banks and the government in terms of insuring people's debt, taking it off of the books. Banks didn't want to lend to people because they would assume all the risk. Once the government stepped in and said, "We want people buying houses, and we want to create this particular kind of subject." At the time, people were thinking along the lines of communism. They were not that excited by capitalism. They were coming out of the depression and people were pretty embittered. Giving them this opportunity, that really fostered and set this whole process that you're talking about into very clear motion.

Laura Flanders:That's when we saw Fannie Mae and Freddie Mac, all of those.

Pam Brown:Exactly.

Laura Flanders:But the idea was to make home ownership more accessible to more people.

Pam Brown:Actually, really the idea was to give people jobs, to create an industry around construction, which is really fascinating. Debt and labor were always really, really connected. Then cut too student debt, which is where I started thinking about this, and you had the creation of Sallie Mae in about 1968 with the Education Act. That mirrors the Housing Act. That was how I ended up seeing that there was a relationship between the two. It was very clear that the result of Sallie Mae encouraging student debt would be rising cost of college, increased debt, a totally different subject. Someone who is thinking all the time about what they owe to banks, not what they owe to other people in our society, what they owe to these financial corporations.

Laura Flanders:The labor piece of this equation has almost totally dropped out. Is that fair to say, Ivan?

Ivan Ascher:Yes and no. It's sadly dropped out of my analysis, but it hasn't dropped out of the overall picture. There's still labor involved. People are still working, but the thing that you mentioned earlier, the products are largely made beyond what is traditionally American capitalism. A lot of what we used to think of as labor no longer is visible to the eye. It's not that it drops out, but it is displaced as a central category of financial economics by these measures of risk and so forth.

Laura Flanders:In that place, at least if you go by your book, that prediction piece comes in. The productive economy, the predictive economy, as you write, has predictions, hedging and so on where production once was.

Ivan Ascher:I speak of prediction, obviously partly around this capitalist mode of production, but there's also protection. Finance is a way for people to protect themselves against adverse effects or to take risks, but it's a risk that not everybody bears in the same way. Certain people are taking risks and other people are at risk in a sense. Production isn't eclipsed entirely, but it's now mediated by these various forms of calculation of what are the odds that the currency will fluctuate in this way or that.

Laura Flanders:How are class relations changed? To use a good Marxist phrase, it used to have workers and bosses or peasants and feudal lords. What do we have now?

Ivan Ascher:Metaphorically, I would say, they're the people who are in a position to bet on the outcome of a race and then there are people who have to run the race. That's one way of putting it. Other people speak of a casino capitalism, which is not a bad analogy in the sense that everybody is gambling and betting, but there's really also a house. Neither metaphor really works in the sense that one of the things that's so pernicious about contemporary financialization is that as people make bets on other people's chances that they will say make good on their payments, they're also affecting the chances that these people will make good on their payments. There's a recursive or dynamic that ... If financial markets think that you're going to default, you're going to be given terms that will lead to your default.

Laura Flanders:That's where racism, sexism, homo everything, phobias of every kind-

Ivan Ascher:The things that you mentioned earlier. The '30s were one generation to the extent that we've tried to move past certain of the practices of segregation of the time. They're still lingering there even though they may not be easily grasped.

 

 


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