KEYNOTE – DOUGLAS RUSHKOFF
The End of the Story: How capitalism killed narrative, and how to grow new ones
The myth of infinite market expansion was supported, at least in part, by a story structure dependent on crisis, climax, and relief. Just as we are now demanding bankers give up their absolute control of our monetary system, must we as storytellers give up control of our narratives? And how can we make a living telling stories in a world where everyone now has a story to tell, and a means of telling it?
Change Observer just posted the first part of a conversation between me and Kurt Andersen, on the economy and just how big an opportunity this crisis might be affording us.
Andersen is smart – really smart – though a bit more sanguine about all that’s going on around us than I am. I think that might be, in part, because he has done so very well at everything he has tried. Maybe that’s a law of the universe, and one I should just follow (rather than letting my misgivings about “success” impede my own path toward it). But that’s a discussion for another day.
Some excerpts:
Andersen: I tend to agree with Doug’s major premises, such as the unsustainability of an economy dominated by financial speculators instead of “value creators,” and the fact that the particulars of our system are the result of human choices rather than immutable “conditions of nature.” And I see the gobsmacking crash and resulting flux as a rare limited-time-only opportunity to significantly update and reform the system and the habits of mind that are its cause and effect. Thus we now have a chance to remake our medical and energy and educational and urban planning systems along vastly more sensible lines. But for all my hopefulness about the possibilities of change — and my desire in some ways for radical reform — as a practical matter I do take as a given our basic market-driven political economy. The decline of manufacturing and the hypertrophied financial and marketing sectors notwithstanding, Doug’s assertion that “very few American businesses actually [do] anything, anymore” seems extreme to me.
Rushkoff: The reason I’m not as forgiving as Kurt, I suppose, is that I don’t see these cycles as weather or earthquakes. I see them as entirely predictable manifestations of the system we’ve adopted. People think they need cars because “how else would I get to work?” without understanding that they only need a car to get to work because the suburbs were zoned, in part, to promote car ownership (or, in most cases, promote real estate speculation). So we look at Europeans and think how lovely it is they get to walk home for lunch, and assume something about America’s geography made this impossible. Does this mean we can get rid of the car suburbs? Probably not. At least not in the short term.
And neither do we just retire the Fed and crash the banks. We can’t go back to the Middle Ages, and we don’t want to. What we can do is promote the development of complementary economic mechanisms. New ways (and old ways) of doing commerce.
Today’s generally accepted business headline, from the NYTimes: “Signs of Economic Growth Push Markets Up”
Just parsing that phrase pretty much says it all. Signs of economic growth can and will push markets up. This means, literally, that if the metrics we use to measure economic growth indicate a positive trend, more speculators will invest capital into the shares originally used to lend money to corporations.
Of course, the signs of economic growth – these metrics – are really just derivatives of the GNP. More-ness of output or consumption. The sign of economic growth leading to today’s market optimism was that manufacturing activity in Europe increased. Oil prices are going up again, as well – having nothing to do with actual demand, but speculators’ belief that demand may grow. Even if it doesn’t, they can make money by investing now, promoting the belief that demand will grow, and then selling to the next round of speculators who believe the story.
Meanwhile, the most worshipped indicator of economic growth – the stock indexes – aren’t really signs of economic growth at all. They’re just a measure of speculators’ belief in whether the bubble in that investment is inflating or deflating.
Most significantly for those of us living back in the real world, however, all these economic indicators inspiring confidence on Wall Street have little or nothing to do with the real economy of work, home, and basic security. Job losses continue to pile up – most likely to above 10% actual unemployment in the US (the figures come out lower because of those who have given up actively looking after losing unemployment benefits), credit card and mortgage defaults are only beginning to get registered, and prospective home sellers are only now realizing the painful truth that no one is interested in buying.
My point is not gloom and doom. Rather, it’s that the “signs of economic growth” stimulating the speculative economy and DowJones average have little or nothing to do with the prospects for real people to make ends meet, find gainful employment, or – more importantly – create and exchange value back here on earth.
In fact, the vital signs of the speculative economy might better be understood as the health points of the monster whose very purpose is to extract value from the real, and inject it into the virtual, derivative economy.
NYTimes today: “Big Banks Paid Billions in Bonuses Amid Wall St. Crisis”
Translation: Bankers pay themselves more when their banks are about to fail.
Regulators, such as New York Attorney General Andrew Cuomo, are shocked and dismayed that financial firms receiving the largest share of federal bailout money last year paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008.
In fact, for reasons regulators can’t seem to figure out, bank executive’s bonuses were much higher during the worst years of the crisis than they were during the boom years just before.
“At Morgan Stanley, for example, compensation last year was more than seven times as large as the bank’s profit,” according to the NYTimes. Of course, back in 2004 and 2005, during the bull market Morgan Stanley spent only two times its profits on compensation.
How could this be?
It’s called a pyramid scheme. Once the pyramid begins to crumble, the people at the top pay themselves whatever remains in the system. In fact, big bonuses to executives is a better leading indicator than insider stock sales. Once the bonuses increase from 2 times to 7 times earnings, it’s a good bet people at the firm are paying themselves money they know won’t be there for long – if ever.
If we come to understand the underlying assumptions of centralized monopoly corporatism for what they are (hint: read my book) none of this behavior remains so confusing, or even anger-producing. I understand why messages like mine may appear screechy or angry to people who can’t see me while I’m writing.
But I’m not mad or agitated. I’m not particularly angry at the people who are stealing your money right now (if you are invested in the stock market or banks). These folks are simply following the rules of the game that was set in place five centuries ago, and no longer happens to serve our interests as people, nations, or a civilization.
Banks, like any other corporation, are instruments for extracting value and wealth – not creating it. They are more like vacuum cleaners than factories. That’s what they were created for: to replace local banking and commerce with institutions that could extract wealth and value from the periphery and pay it back to the center.
The only thing surprising to me is that so many people should expect Morgan Stanley to act like anything other than the mob-front it was. Like some of those restaurants off Route One in South Jersey, the real business plan isn’t even on the menu.
What it means is that mortgage companies can often make more money when the homeowner goes into foreclosure than if the homeowner pays his bills. The longer a homeowner is delinquent, the more late fees and other penalties are accrued. Plus, there’s other fees the mortgage servicer gets if the homeowner goes belly up, once the bank sells the house.
So if a homeowner is beginning to miss payments, it is not to the mortgage lender’s benefit to help him refinance, work out a new payment schedule, or do anything else to keep the loan in place. The mortgage servicer is, as they put it in business, disincentivized to help. He will get paid the most if the borrower misses a lot of payments, and then goes into foreclosure.
This is the reason why so many people who have missed their payments aren’t able to get through to their lenders – why mortgage servicers don’t call back, or tell borrowers to hang on another couple of months. It’s not because they are so busy creating refinance packages for their customers – it’s because they’ll make much more money off our failing than our succeeding.
How could that be true? What sort of business model would be based on customer failure? The one devised – partly by accident – 400 years ago by a failing aristocracy. It set in place a class war – not between people so much as between people and the highly centralized, extractive institutions writing the rules of the economy.
These are the distorting rules we live under today. They quite predictably create situations where success is disincentivized, and bankruptcy for one party appears like a win for the other. Ultimately, we all lose.
Lately, the business headlines have been shocking and deceptive. Each day, I’m going to pick a few off the cover of the Wall Street Journal and Financial Times, and try to explain, briefly, what’s really going on.
The Goldman Sachs ultra-fast computer-transaction scandal: Big fast computers connected to the trading floor allow “connected” financial firms like Goldman Sachs to see our stock trades before they are actually executed. They can then take action based on our actions, by going back in time and buying what we want before we do, and selling to us at a higher price. By “regulating” this activity, the SEC simply perpetuates the illusion that this is a level playing field. It never was, it never will be. Retail traders are the patsies. This is just one of many methods used by a system that was not created to provide companies with investment capital, but rather the provide certain capitalists with the means to extract value from every transaction we make with each other.
Oil speculation blamed for high oil prices: Duh. We all knew this two years ago. That’s why filled tankers were sitting idly in New York Harbor during the height of last year’s energy crisis. The story here is that the speculative economy has been driving the prices of the things people really need for decades. Why admit this now? That’s the interesting part – they’re using it to explain why oil is so low now, rather than revealing that oil is low because demand has truly dried up: industry has stalled.
FDIC about to split banks into “good parts and bad parts”: The government split GM into an “old bad GM” and a “good new GM.” This left existing bondholders, shareholders, and employees owning the dreck, while favored investors got the new company. Now, in their ongoing effort to promote the interests of the biggest banking players, the government is helping them acquire more local banks by officially shifting the bad assets to existing shareholders, while letting the major banks buy the good ones. Incapable of learning the lesson that “too big to fail” means “too big,” we’re once again dismantling what is left of local banking in order to pump up the most truly failed financial institutions of our time.
For more information about Douglas Rushkoff’s book, “LIFE INC. How The World Became A Corporation And How To Take It Back” check out Life Inc. and the LIFE INC. 9min movie
The LIFE INC. Dispatch = Brief weekly videos encapsulating key concepts and ready strategies from Douglas Rushkoff’s LIFE INC. for de-corporatizing our lives, abandoning the speculative economy, and rebuilding both commerce and community from the bottom up.
You can also download an MP3 audio file of the Dispatch: Life Inc. Dispatch 08 – Audio
However comforting it might be to blame Southern California’s movie industry for unleashing Governor Terminator on the state’s economy, the real seeds of the current crisis were sewn further north, in the seemingly prosperous corporate parks of Silicon Valley. In fact, the dotcom boom and subsequent, inevitable bust are the real causes of our economic malaise. For while Californians were hit first, hardest and most directly by the rise of dotcom-style capitalism, the rest of us are soon to follow.
Put simply, California cannot afford to pay its bills because its tax base contracted at the same time as its investments tanked. Like any of us contending with the double-whammy of lower pay and shrinking portfolios, the state is getting slammed on both income and savings at the same time. Unable to secure credit, the state will instead be forced pay its bills to citizens and local governments with IOUs.
While the pundits point to real estate speculation and bank insolvencies as the chief cause of California–and the nation’s–financial distress, these are both direct results of the late 90’s explosion of computer innovation and Internet proliferation. That’s right: The Internet crashed the economy.
Just did this one on Tuesday evening, for the NY Tech Meet-Up. I was exhausted for this one, but it does manage to explain corporatism as an operating system gone awry.
January 21 - Brooklyn, NY. Talk for ETSY, 7p February 1 - The Webb School, Bell Buckle Tennessee. February 2 - Frontline Digital Nation premieres, 9pm PBS March 12 - SWSX, Austin TX more...
