Nosiree. Things are too far gone for that. What we need is some Marxism.
Not the kind of doctrinaire, paint-by-the-numbers, holy-revealed-writ Marxism, but some Marxian understanding of where we are and how we got here, courtesy of a deeply contemplative economic mind.
So. How’d we get here?
Like this: some sharp operators believed they had come up with a novel way of answering Marx’s buddy Engel’s question:
How is it possible constantly to sell dearer than one has bought, even on the hypothesis that equal values are always exchanged for equal values?
Hmm, said Marx, lemme think a minute.
And then he came up with the notion of "surplus value," which is how in the olden days capitalists made their money. "Surplus value" can simplistically be said to be the amount of money your boss can pocket from selling the things you make, after he pays you off.
If your boss is sufficiently sneaky or unscrupulous (or you don’t belong to a union), he might increase his profits off your work by getting you to increase your productivity (work smarter or harder, or both) without increasing your wages. (This has been going on in the United States for some time, now).
Either way, the boss gets to keep the money you helped make for him. One thing he can do with all that scratch is to buy new machinery (which no matter how hard you work you don’t get to have any ownership in, noted Marx). New machinery could increase your productivity, and if the boss doesn’t raise your pay or cut the hours you have to come to work for your paycheck, he makes even more money.
Traditionally, capitalists defended this arrangement by variously worded appeals to the "God made it this way, and who are we to question?" argument—which is what winners in any contest use. (As racists used to put it, "If minorities are so equal, why do they have to sit at the back of the bus?") Or they trot out the "we generous capitalists make you miserable workers’ jobs possible," argument—asserting capital’s position as the privileged reference point in the economic universe. (And ignoring that it makes as much sense to say "Without workers there would be no capitalists" as the other way round.)
Regardless, they made good money, those capitalists.
But it wasn’t enough. Never is. "Enough is enough" is a phrase that will never soothe the brow of any true seeker after wealth. For wealth, as you must know, if you paid attention to A-Rod or Rush Limbaugh, is not absolute, but relative. What matters is not how much you make compared to what you need but how much you make compared to the other guy.
So the owners of capital, eternally lusting after Just Some More, came up with ways to multiply profit. Just making more things wouldn’t do the trick.
These methods were largely based on the innate human capacity towards abstraction—to code events, and then to code the code, and so on, and then, in the twinkling of an eye, to reverse the coding process so the assignment of a particular symbol seems to have been a necessary function of the real world.
After a while, the symbol and its referent become so intertwined that their places can be transposed. My mother-in-law used to call me from across the country to ask whether I watched channel 4 last night.
In entertainment you get Steven Wright: "I stayed up all night playing poker with tarot cards. I got a full house, and four people died."
In capitalism, you get first a system of credit, in which a bank issues loans in excess of its deposits. The bank pretends it has enough to cover every depositor, and then asks the depositors to pretend that bank checks are the same as the money they deposited. And the customers might make loan payments to the appliance company with checks that represent money the bank doesn’t have.
Everyone ends up depending heavily on only a few depositors ever wanting to see their money at any one time.
Marx called it "fictitious capital."
And he said it will work until times get tough. As they did during our first Great Depression. When people started feeling pinched and got to feeling, well, I would just like to take a look at my money, make sure I still have control over it.
When they all got to the bank, the bank said, no dice. We don’t have enough to cover everybody. Well, dammit, said folks, you better give me mine! Absent Jimmy Stewart, the banks went out of business, and nobody, not the depositors, or the bankers, or the appliance company got any money.
At that point, as Marx noted,
the capitalist class appears to have a choice between devaluing money or commodities, between inflation or depression. In the event that monetary policy is dedicated to avoiding both, it will merely end up incurring both.
Sound familiar?
Now, of course, we have fictitious money on steroids: derivatives. Which are valuable because something they stand for is valuable, or something that the thing they stand for stands for something valuable, or...well, it could go on forever, especially if you have a computer.
Bubble, anyone?
The value of pretend assets, as Marx pointed out, can be driven up by the forces of supply and demand, which because the assets are fictitious, are themselves imaginary constructs, and subject to manipulation.
Add to that the multiplying power of leverage. Which is what you did when you can bought that $500,000 house in 2002, for 5% down, waited for the price to double, and then sold and made a profit on the whole million, not just the $25K you had in the deal. For $25,000, you just made half a million!
Now, do the same thing, only with all the supercharging of pretend-values that modern ingenuity and virtualizing technology can come up with. Go get a variable rate loan, available because its rate rises to 5% over prime in two years, then swap that ARM to somebody who’s got a fixed rate loan he doesn’t mind getting rid of because he either thinks interest rates will fall or because he is planning to pay the loan off at the lower rate before the ARM readjusts.
With the money from that new loan, you buy for 50 basis points a credit default swap contract on General Motors, hoping GM will default on its loans, so you can make lots of dough!
And then you are in the happy position of watching GM die, blaming the workers who make cars (whose real wages have dropped as their productivity has risen and whose bosses’ pay rose 571% during the 90s) for its troubles, and clearing a tidy but fictitious profit, with which you can buy lots of not-so-fictitious cars, now much cheaper because of GM’s failure and because all those thrown out of work can’t buy cars anymore.
And you can holler "socialist" at anyone who thinks that government might want to take a hand in damping the excesses of such a system.
Ol' Karl must be spinning in his grave.