The Long Crisis – Part IV – Productivity & The Internet

Posted on April 24, 2012 by Haley

This entry is part 4 of 4 in the series The Long Crisis

The single greatest driver of economic growth is an increase in the productivity of labor. Productivity is determined by the ratio between the cost of inputs to create a commodity or service and the profit realized by its sale. The rise of steam power, electricity, and assembly-line industrialization are hallmarks of the application of new technologies that

"Competition is the keen cutting edge of business, always shaving away at costs." Henry Ford

transformed manufacturing, dramatically increasing productivity in their era. The past revolutions in labor productivity, and the benefits they bring, are responsible for the high material living standards (primarily a function of the purchasing power of incomes) we associate with modern, Western societies.¹

Economist Tyler Cowen recently argued, and not without controversy, the “great stagnation” of the past 40 years is a result of a decline in productivity growth, whose golden age ended in 1973.² The most visible

“We are born into this time and must bravely follow the path to the destined end. There is no other way. Our duty is to hold on to the lost position, without hope, without rescue..." Oswald Spengler

symptom of this decline is the halting of median household income growth. In the 26 golden years between 1947 and 1973 median income doubled in the US, and then stumbled. Over the next 31 years between 1973 and 2004, median income in the US rose only 22 percent, which Cowen says “reflect[s] a paucity of broad-based productivity gains.” Even worse, since 2004, median income and net job-creation have flat-lined, and much of the gains up to that point were erased with the trillions lost in 2008.

Cowen argues the economic rise of the US over the past 300 years from backwater to global power was fueled by three trends, or what he terms the economy’s “low-hanging fruit”: educating the populace (compulsory, universal education has brought high school and college education levels up); free land (frontier growth has ended and arable land is under mechanized, intensive cultivation); and technology (all basic “modern conveniences” have been around for decades: planes, refrigerators, televisions, automobiles, furnaces, and so forth).³ In 1973, the historic productivity boom powering the US economy these trends enabled became more or less exhausted. Furthermore, as the US is the bellweather for advanced economies, declining GDP growth in the US has mirrored a global slowdown. Counter to Cowen’s claim, it seems beyond doubt over the past 40 years incredible developments in science and technology have emerged, transforming our lives: sequencing the human genome and advances in pharmaceuticals; containerization in shipping and the post-Fordist organization of production; and most

On the road to Hell

saliently, the rise of personal computing linked to the Internet. Over the past 15 years, the Internet revolution and related technologies in communication (cell phones, Skype, IM, and etc.) and social networks (Facebook, Twitter, and etc.), have become imbricated into the daily life of billions of people around the world. It seems implausible a technological revolution on the magnitude of the Internet has not terminated the great stagnation.

It has not, and Cowen argues we must distinguish between mere “innovation” and real “productivity gains,” for it is only the latter which cause a broad based rise in the material well being of a society. Indeed, Ipads, MRI, and smart phones are innovative technologies. Whether or not an innovation will transform productivity however, is a much more complex question, and historically innovations take decades before their full potential is actualized across society. Cowen argues the Internet and related technologies have not yet entailed a productivity gain of notable magnitude, adding perhaps 2% to the US GDP, according to a 2006 study he cites, but “not enough to salvage the productivity performance of the modern era.” Furthermore, what gains in productivity have occurred are mostly from the elimination

"The production of too many useful things results in too many useless people." Karl Marx

of low-productive jobs, bumping up the crucial metric of “per-hour labor productivity,” but not manifesting in what should be its consequence: a higher standard of living.

As many advanced “first world” economies are experiencing an aging workforce, leaving fewer working-age adults to provide taxable income to pay for the welfare of dependents in terms of medical expenses, social security, and so forth, the importance of productivity increases. Cowen is slightly bullish toward a new paradigm of productivity based around (now latent) possibilities of the Internet for economic growth, but it exists now only as a theoretical possibility awaiting.

"Goddamn matches"

Productivity’s historical gift of broad based material benefits is premised on a distribution of the surplus profit either in the form of lower costs of goods and services and/ or higher wages. The neoliberal era has been the political and economic response to the great stagnation, which in effect has been the renegotiation the share-deal of available surplus. With diminished productivity growth has come diminished surplus growth, and it is not surprising, those positioned to reap investment income, sought to protect their portion from tax appropriation and rising wage payouts, the two mechanisms of surplus (re)distribution elites have power to influence.⁴ Taxes were cut, Big Government rolled back, and Big Labor shut down in the face of off-shoring production.⁵ It is easier to be magnanimous when GDP is growing 5-6% per annum, “raising all boats” as it was during 1947-1973 in the US. Once it drops to a growth level barely sufficient (or not) to prop up a country’s growing population, such as China or the US, surplus profit is threatened and economic policy becomes highly politicized as the division of fewer spoils means less for somebody.⁶

The prospects for the Internet to revolutionize productivity, restart the growth of median income, and redress income inequality are unknown. The fundamental critique by Marxists, environmentalists, and other skeptical types is that Capitalism at some point will hit a barrier and no longer be able to grow. Productivity could be an insurmountable barrier, but Capitalism has proved adept at overcoming all constrictions on profit, finding cheap labor, employing new technologies, and servicing an increasingly integrated and expanding global consumer base with basic needs and wants for many (but not all) and extraordinary privilege and luxury for a few (alas, hierarchies are necessarily restrictive).

Cowen is not the first to theorize the great stagnation. The break in the early 1970s of steady growth has since been the central backdrop of all macroeconomic policy debates in advanced economies. Paul Krugman gives a thorough overview of the debates in his 1994 book, Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. According to Krugman the three most widespread explanations of the great productivity decline revolve around

Krugman's advocacy of Keynesism has angered some neoliberals.

technological, sociological, and political factors.⁷ Cowen focuses on the technological explanation that productivity dropped because the development of new production methods stalled. The sociological explanation has two main components: baby boomers entered the work force en massein the 1960s and 1970s thereby increasing the number of workers to available capital, while simultaneously the social base of advanced economies deteriorated as divorce and single parent families increased the number of households

"It's free-- swipe yo EBT"

and moral decay undermined the work ethic– both of which contributed to the drop in median income growth. The political explanation favored by neoliberals and fiscal conservatives proposes Big government suppressed productivity through intrusive regulatory constraints and demotivating progressive tax regimes.

The point behind these competing explanations is to find the ontological source (the causal mechanism in action) of declining GDP and median income and increasing inequality of wealth. We think these three trends are internally related as consequences of a central problematic

The happy median is less so

challenging the global economy. Rather than sociological or political reasons, we will argue there is a fourth explanation that provides the most comprehensive answer to economic decline. We think a slowdown in productivity growth due to dwindling technologies and methods of production is part of the answer, as Cowen argues, but it is not the central mechanism in operation behind deteriorating growth. The decline of wage and GDP growth as a function of declining productivity, is fundamentally a crisis of overaccumulation, the logic of which we will address in Part V of the Long Crisis.

1. For example, between 1919 and 1929, the hours required to build a car fell because of new production methods, making labor more productive. The cost of a car fell and car ownership rose from 6.7 million to 23.1 million.

2. Tyler Cowen’s Ebook: “The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better” was published in January 2011. I am drawing from a short statement of his general thesis from the website, “What Matters,” accessed January 23, 2012.

3. Cowen writes: ”We have been living off low-hanging fruit for at least three hundred years.” “We have built social and economic institutions on the expectation of a lot of low-hanging fruit, but that fruit is mostly gone.”

4. It should be stressed the foundation of Capitalism rests on profit seeking. Corporate and business earnings, stock values, and dividend payouts have priority over wages. It is an implicit if not explicit imperative of business owners/ managers to seek the lowest cost the labor market will bear.

5. On the other hand, “Capitalism” and the investment income and wage income earners who live off its productivity face the eternal threat of competition in the marketplace from other producers in their particular economic sector. Competition drives the pursuit of greater productivity and hence greater profits. But its advantage are only relative to all other producers, who inevitably catch up and fight for market share by lowering prices and profit– thus initiating the search to re-revolutionize production to gain a competitive edge. Competition is theoretically the healthy dynamic of capitalism being the mechanism ensuring efficiency, proper allocation of resources, and quality of the goods. The lack of competition

Another doomed voyage

in “command economies,” such as in the former USSR, is considered a primary source of their economic failings. Furthermore, as marketplaces are in principle open to all producer-sellers, whether in a local economy or within the global economic system, Elites have much less control over the process of declining profits from competitive pressures. However, there are many counter measures used to avoid competition: mafias, monopolies, price fixing schemes, and state support via favorable tariffs and currency exchange rates.

6. We see the the consequence of the neoliberal program the great stagnation engendered once again manifesting in the post recession recovery. 93% of the surplus generated in the 2010 recovery was gathered by the top 1% of income earners. Elite’s income grew 11.6% while the income of the bottom 99% grew by 0.2%. We would expect of the 7% remainder, the top 20% of earners gathered the bulk of its value.

7. See pages 59-65 of Peddling Prosperity.

The Long Crisis — Part III — China

Posted on April 19, 2012 by Haley

This entry is part 3 of 4 in the series The Long Crisis

No country has received as much attention as China over the past three decades as a model for poor and forceless nations to transform themselves through export-led growth. China’s rise has generated fear, awe, and many suppositions: China’s rise heralds a new world order and rewrites the rules of development. China’s waxing fortune vindicates

Freedom Crushed Under the Wheel of the Segway

“authoritarian” or “state capitalist” model of economic development.¹ China unglues the seeming mutual entailment of “free markets” and “liberal democracy,” and disquiets political moralists antithetical to totalitarianism. Moreover, China’s economic ascension signifies “the decline of the west” and has provoked a ballyhoo over the projected date China’s economy overtakes the United States’.

The narrative of Chinese ascension, however unpalatable to many Americans, has the virtue of supporting precepts of neoliberal globalization, namely that open markets and unrestricted capital flow can only bring forth goodness into the world. (“Shucks… The number one capitalists have been out-capitalized by communists!”) No doubt nation-states such as China, with its massive population, once incorporated into the global economy and open to foreign direct investment (FDI), could begin mastering its comparative advantages (cheap labor for manufacturing), and consequently develop and lift millions out from below

These young women, happily, are not bound by the feminine mystique.

the poverty line.² The rise of China, however, while a turning point in world history, has not solved the problem of the great stagnation. It is no accident that the rise of China corresponds in time with the 40-year flatlining of productivity and its consequences. With the opening of the Chinese economy to FDI and access to its labor pool, the global investment community began pouring billions into China, making it the second largest recipient of FDI behind the US in the world. The hydraulics of financial gain– capital flows from low profit arenas to high– has made China the tactical choice (and to a lesser extent, other developing countries), for investors faced with diminished profit. As we will argue, intrinsic contradictions in China’s geoeconomy will likely manifest in the near to medium term, rendering China’s flourish unsustainable, and thus stalling one of the crucial drivers of global economic growth.

The emergence of China as manufacturer for the world occurred when the CPC mustered millions of laborers from the interior of China to coastal “Special Economic Zones.” The former peasant farmers work for

"We were the backbone of the Nation"

bare minimum wages to manufacture consumables for the “first world” (primarily the EU and US). The rapidity and magnitude of China’s production development, from its insular and dysfunctional Maoist past, is remarkable. China’s 30 years of 10% GDP growth has transformed China, and placed the country first in many indices of economic activity: exports, oil, steel production, copper, and beer. In 2009, China overtook Germany as the world’s largest exporter at 1.2 trillion USD. In 2010, China surpassed Japan as the second largest economy at 6 trillion USD behind the United States.

A second glance at China’s world class growth, however, exposes fundamental weaknesses in the Chinese miracle, undermining the notion that China will become the world’s dominant economy in the next 5, 10, or 20 years. For 2012, the Communist Party of China (CPC) has set its

The CPC celebrates its 90th year.

target GDP growth at 7.5%, well below its recent average, but still apparently remarkable. While this heady growth appears enviable, the CPC faces an unrelenting structural pressure to maintain a minimum 7% annual growth rate just to keep job growth in pace with its mounting population. The CPC must also maintain a high rate of GDP expansion just to keep pace with the US, whose slower growing GDP still grows at a higher exponential rate because the US economy dwarfs China’s. The flipside of China’s stellar growth is the ever lurking menace of inflation, requiring heavy handed government

Inflation in China: 1980-2011

responses to contain. China’s economy is too often overheated, fueled both by rising costs of energy, food, and raw materials, and excessive, unmanaged fixed asset development. In 2011, inflation rose 5.4%, but is expected to fall to 4% in 2012 as China’s economy cools.

Much of China’s export manufacturing operates with razor thin profit margins, made viable only by its large scale, and expressed in the stupendous volume of containerized goods sailing away from the mainland toward foreign ports. More importantly, the CPC’s command capitalism is premised on providing employment for hundreds of millions in exchange for continued one-Party rule of the country. To meet this need, the CPC must constantly finesse economic growth through various mechanisms. The CPC maintains the value of Chinese yuan artificially low to ensure an irresistible exchange rate with foreign currencies, which enables China’s high volume of exports and attractive investment climate. The Chinese propensity for banking their income rather than shopping induces a national savings rate hovering around 40%. State-owned banks flush with massive reserves thus enables the CPC to finance China’s development as the groundwork for future economic growth, fulfill the absolute political imperative to create jobs, and act on the desire to

The Shi Lang. First sea trial completed August 2011.

expand Chinese national power. Over the past decades, the CPC has directed thousands of modernizing projects in defence and infrastructure, funding everything from urbanization, high speed rail lines, one aircraft carrier, and space exploration, to scouring the world for investment deals in much needed raw materials and energy.

China’s economy is predicated on export growth to the EU and US, which places China’s fate in the hands of others. World leaders dictate other’s fate, not the other way around. If Western consumers decide to save their money rather than buy cheap goods on credit at Wal-Mart; if

Walmart does provide a needed sanctuary for some, however.

economic downturns cause consumers to tighten the belt; if moral crusades against Chinese labor practices (among many other possible targets) evokes boycotts, or if US and/ or EU trade policy will no longer accept the artificial devaluation of the Chinese yuan vis-á-vis its trade partners, catastrophic damage to China’s economy is the consequence. China has no recourse but to spend its sovereign wealth to maintain demand, until that wealth runs dry.

Furthermore, the CPC is presently in a desperate struggle to rebalance China’s economy towards domestic consumption. The radical alterations necessary to move up hundreds of millions from rural farming culture to

Urban Inevitability

urban consumer culture with sufficient financial resources to buy endless amounts of commodities, “Made in China,” however, is a fantasy. Twenty-five percent of China’s GDP flows from export sales, and is the sole engine driving the Chinese economy. Additionally, almost 50% of China’s GDP is generated by “fixed-asset investment” (infrastructure, real estate, and industrial capacity) organized by a state-finance nexus, corrupted by cronyism and politicking. While the CPC allocates the national wealth to maintain employment, effectively “buying off” the population at large for continued political hegemony, China remains an extremely poor country. Per year, 600 million Chinese earn less than 1000 USD, and 440 million Chinese live on 1000-2000 USD. Only 5% of Chinese (60 million) earn over 20,000 USD. In no time soon will this social structural imbalance be redressed. Contrary to conventional wisdom, George Friedman of STRATFOR predicts Chinese growth will “collapse” in the coming decade or so for many of the reasons Japan faltered in the early 1990s,

The Rising Sun quickly set.

from which it has not recovered: politicized banking and finance, under-performing loans, and a housing bubble. Unlike Japan, however, China does not have a adequate social welfare net: if millions are thrown out of work, they will quickly become desperate and potentially unruly, undermining the legitimacy of the CPC and its centralized control of the country.

Geopolitical constraints constitute the broadest check on China’s growth within the global nation-state system.³ When China is politically consolidated, its size and resources make it a regional hegemon. For Chinese leaders to overcome China’s constraints, transcend its region, and able to project power and pursue their interests at the global level, qualitatively incomparable sources of power would have to be attained.

Geopolitical imperatives are formed in the interaction of geography and basic constitutive requirements for a bounded, sovereign polity: existential security, control of resources, and ability to pursue domestic and foreign policy objectives. Geography underlies these requirements, enabling and constraining the accumulation and exercise of political power. Regardless of the ideological framework chartering a nation’s

"We can't wait to rule the 'World-Island'"

statecraft (Communism, Democracy, Monarchy, and so on), the brute basis of political power is military strength and economic vitality.⁴ As the nation-state grid is the primary mode of constructing and organizing human differences in modernity, geopolitical advantages and liabilities largely determine the fate of countries and the history of their people.

Chinese geopolitics revolves around the interests of the Han Chinese. The Han form 92% of China’s population (and are the world’s largest ethnicity at 20%) and constitute the dominant cultural and ethnonational heartland of China. In the course of protecting the Han core, Chinese geopolitical strategy necessitates creating buffer zones of generally of non-Han ethnic groups which take advantage of natural geographical barriers to foreign invasion. Consequently, after the founding of the People’s Republic of China in 1949, the CPC quickly consolidated its

"Free Tibet!" "Sorry, no can do."

control of the country. By 1951, with the invasion of Tibet complete, all present-day buffer zones were under Han Chinese-CPC domination. Control of the Tibetan plateau ensures the Himalayan Mountains protect the Southwestern border from India; control of Inner Mongolia and Manchuria in the north dissuades Russian incursions and dangers emanating from the Korean Peninsula. Xinjiang province (home of Muslim Uighurs) protects the Han Chinese from the west, again, especially Russia.⁵ With the buffer zones in place, and the logistics of supplying invasionary forces made sufficiently nightmarish, a successful military foray into a country as large and populous as China is improbable. The insulative effect of vast distances coupled to mountain, desert, and waste land, however, also makes trade and intercourse with

Fair or Foul History: Chinese Ports

other nations difficult. The geopolitical consequence of these barricades is the importance maritime interconnections become for China with the outside world. China’s greatest vulnerability now lies along its porous eastern coastline. The singular military threat to China presently is the US Navy, who has the capability to blockade the coast, cutting China off. China has never been a naval power, and it would take decades and a huge investment in resources to create one ex nihilo, strong enough to challenge the US on its own terms. Instead, China has been seeking asymmetrical means to neutralize US naval superiority by developing anti-ship and anti-satellite ballistic missile systems.

Nonetheless, the possibility that US and Chinese militaries come to blows over world power supremacy or even regional domination in Asia is remote for the near and medium term (and long, considering). The greatest constraint on continued Chinese expansion is on the economic front, and one not from an external power, but rather obstacles that stem from China’s inescapable geopolitical problem: China must trade to grow its economy, necessitating China must ship its goods from coastal ports.

The world historical act of Deng Xiaoping, opening China to foreign investment, capitalizing on China’s massive proletariat, and focusing the economy on export-led growth cannot be over appreciated. Whereas the strategy of Mao Zedong was to keep China closed off from foreign

Life was good under Mao, except for that little genocide.

entanglements and markets to create a peasants’ paradise, Deng pragmatically optimised China’s economic policy to raise the standard of living via market-based reforms and international trade. The strategic importance of acquiring new technologies to redress China’s growing lag behind “bourgeoisie powers” and the USSR also provided impetus. Deng premised reforms on the ability of the CPC and Chinese military to safeguard China’s coastal region from foreign control, squash internal dissent, and ameliorate the inevitable social tensions of unequal regional development. The question remains open to whether or not Deng’s monumental venture will succeed. Indeed, China’s growth rate appears to vindicate Deng, but countervailing geopolitical currents and consideration of the long dureé of events bespeaks a different outcome.

The basic geopolitical problem dogging the CPC and Deng’s central wager is the inherent paradox between a poor and socially unified China and a prosperous and divided China. Prosperity and unification, surprisingly, work against each other. A politically and economically unified Han China with adequate buffer zones requires strong central

The Silk Road

control, whether by emperor or Party. Because of the large population and low ratio of arable land, a secluded China, however, is an impoverished country, and without trade, China remains so. Historically, the Silk Road provided a conduit for extensive trading with the outside world before its total collapse in the 1400s. Maritime trade picked up the slack, as Portuguese explorers reached China in 1511, and established a permanent trading post at Macao in 1557. Despite these early trade contacts, it was with the First and Second Opium Wars in the mid-1800s, when Western imperialists, England and France defeated the Qing Dynasty and forced

Fear when the pusher knocks on your door.

open China’s port cities to become unhindered access points for Western commercial interests. China presently does not face the possibility of losing sovereign control of its coastal region. Then as now, however, the geopolitical consequence of China’s openness to coastal trade is the emergence of different economic opportunities separating China’s hinterlands from its coastal regions.

The bulk of China’s international trade requires access to the world’s

"Where has all the job growth gone? Long time passing."

oceans, and consequently, the many ports along China’s east coast have become among the world’s busiest. Around these ports has clustered all the job growth in manufacturing and related services; the building booms and expansive urbanization; and amalgamation of wealth and power– in effect the entire engine of China’s GDP. This profound differential in wealth and economic prospect between the dynamic coast and poor rural majority is the central cleavage point running through Chinese society. What makes this cleavage point the essential political problem for the CPC are the staggering numbers of people. Presently, 900 million

Before it gets crowded.

Chinese reside in China’s interior, while 400 million live along the coast. Chinese leaders remain beholden to the legacy of Deng’s wager the CPC could use its central power to manage the inevitable sundering of China into vastly different economic worlds. Both the massive redistribution of wealth from coast to plain and pervasive internal state security apparatus operate as the countervailing force to disunion. The history of the future will tell of their virtue.

Two competing narratives thus vie to describe China’s material growth in the past 30 years: An isolated backwater of repression, red books, and poverty, transforms itself into a dynamic, industrial powerhouse with global aspirations, destined to take its place, first among all nations on earth. Or, the CPC wagers momentarily the productive capacity of its gigantic population in a bid to overcome China’s internal contradictions, before succumbing to the reality China has neither sufficient economic advantage nor geopolitical positioning to advance its interests unchecked in the world at large.

1. For a contrary view, see Niall Ferguson’s February 2012 essay “We’re All State Capitalists Now” in Foreign Affairs. Ferguson argues the role of the CPC in China’s economy is no more, and in fact, much less than many “Western” countries in terms of government expenditure as percentage of GDP, which thus complicates the dichotomy between

We have seen the face of state capitalism before.

market capitalism and state capitalism. This may be true, but whereas the state in Denmark or the United States (among the many countries with higher figures than China) may spend more than China, the point of delineating “state capitalism” is precisely its authoritarian command of the economy as part of larger totalitarian socio-political control. Incidentally, pundits worry that authoritarian capitalist states are on the rise, mounting a challenge to the ideal and inevitability of market capitalist states to win the world over.

2. In February 2012, The World Bank released its latest estimates of global poverty showing significant changes in the incomes of people in the developing world. The World Bank marks the income line of “extreme poverty” at daily earnings of 1.25 USD or less. The country with the most pronounced change is China. Between 1981 and 2008, 700 million people moved out of poverty, from 84% of the population to 13%. Sub-Saharan Africa also experienced income reduction. Between 2002 and 2008, the percentage of people in poverty dropped from 55.7% to 47.5%.

3. The following section dealing with the geopolitical context of China’s historical development and future prospects is indebted to STRATFOR’s geopolitical monograph: The Geopolitics of China: A Great Power Enclosed, published in 2008.

4. There is cause to add “soft power” as another important dimension to the basis of political power as formulated by Joseph Nye, but we should consider that many fewer have died in its service than in the pursuit of hard power policies.

5. The two land routes that provide corridors for invasion are the borders with Vietnam in the southeast and Siberia and Korea in Eastern Manchuria. As weak points in China’s existential security, over the past 60 years China has entered into three major military confrontations in their vicinity: the Korean War in 1950-53, the Sino-Soviet Border conflict in 1969, and the Sino-Vietnamese War in 1979.

The Long Crisis — Part II — Capital Stagnation

Posted on March 1, 2012 by Haley

This entry is part 2 of 4 in the series The Long Crisis

Five are in foreclosure

The world wide economic collapse in 2008-2009 was triggered by the US housing bubble, and exemplifies how what is “normal and rational” for the individual can become nonsense once collectivized. Whether homebuyer, home builder, real estate agent, mortgage broker, or high-finance banker, (to buy, construct, sell, or finance a house–usually with profit in mind), when aggregated into a larger whole, unintended consequences of individual behavior transform monadic activity into a collective fiasco. Nonetheless, we should not interpret this crisis as an aberration from the norm of healthy, expanding economic growth in the US and world over. At its core, the housing bubble should instead be seen as one more symptom of a more fundamental crisis of profitability and growth over the past 40 years. The story of how the bubble formed is well known, but worth repeating. The subprime mortgage crisis in the US was formed in the confluence of three trends:

Starting in the early 2000s, after the dot-com bubble burst, speculative capital moved across the world into real estate, initiating the housing bubble, and resulting in the massive increase of mortgage-backed securities issued by investment banks and Freddie Mac and Fannie Mae. These high-yielding securities–“sliced and diced”–contained mixtures of prime, Alt A, and subprime loans, and were sold to unwary investors across the globe after given high ratings by credit agencies such as Moody’s and Standard & Poor’s.¹ The AAA ratings given to many of these securities understated the inherent risk they posed. Between 2000 and 2005, the total of subprime loans embedded into mortgage securities rose from 56 billion USD to 506 billion USD.² Epic “bottom feeding” by mortgage brokers dramatically increased the
The ecological niche of the bottom feeder

proportion of subprime and Alt A loans in existence, while higher creditworthy speculators leveraged their assets to unsavory ratios.
Under the guidance of then Federal Reserve chief and self-proclaimed Ayn Rand disciple, Alan Greenspan, interest rates were brought to historic lows (the key rate sinking to 1% by July 2003) in line with his monetarist doctrine.³ Greenspan was responding to the implosion of the dot-com stock market in March 2001, and attempted to head off a recession by reducing the cost of borrowing. Consequently, over the next four years, low interest rates motivated millions of homeowners to refinance, buy second homes, and speculate. Furthermore, rising house prices created a sense of newfound wealth, and using their homes as “ATMs,” Americans cashed out equity and consumed. In 2005 alone, Americans spent 750 billion USD of this equity, equal to 4% of US GDP. The Federal Reserve, sensing inflation and an overheating economy, in mid-2004 began raising the key rate in small increments–16 times–before hitting 5.25% in July 2006, thus effectively definancing the housing bubble and triggering the massive devaluation we still contend with today.
Banks increased their offering of enticing financial instruments to promote the sale of houses: zero-down mortgages, adjustable rate mortgages (ARM loans), negative amortization loans, and one-year teaser interest rates. With the rapid rise of home prices, buyers piled in. The expectation of speculators seeking to “flip” houses and risky borrowers (often given so-called “liar loans” with low or no documentation required to prove income and personal assets) was that after the several years of low interest rates, higher property values would allow borrowers to sell at a profit or take out equity to refinance their loans. In 2004, The National Association of Realtors, reported that 23% of all houses sold were for investment, and 42% of first-time buyers paid no down-payment for their home.

The subprime meltdown and financial crisis of 2008-2009 capped a remarkable run for the financial industry, whose capitals in London, New York, Hong Kong, Singapore, Tokyo, et al manage trillions of dollars a year in the search for profit. The magnitude of the crisis remains shocking to the mind. The five largest investment banks in the US, either went bankrupt (Lehman Brothers), were taken over by other banks (Bear

Outraged Lehman Bros. employees stage a protest by blockading the entrance to the bank’s headquarters…

Stearns and Merrill Lynch), or were bailed-out by the US government (Goldman Sachs and Morgan Stanley). Smaller, regional banks also suffered–as of March 2012, 427 banks in the US have failed since 2008. The spectacular fall of the US banking sector contrasts the heady ascension of finance capitalism over the past 30 years to be one of the most lucrative sectors of the economy. In the US, between 1980 to 2009–the apex of the speculative bubble in the so-called FIRE economy (finance, insurance, and real estate)–“financialization” as the percentage of GDP in the US grew from approximately 15% to 21.5%. The trajectory of financial capital, however, was compromised when 50 trillion USD was lost in asset value globally. The crisis may have begun with the collapse of the housing bubble in the US, but quickly uncovered deep rot in many national economies around the world, and as a consequence, brought to the fore profound political and economic tensions, hitherto latent, but suddenly laid bare. National interests reappeared with vengeance in the EU; China’s phenomenal export economy showed to be highly vulnerable to external shock; the cheap and massive extension of credit in the US to fund various wars, home buying, and excessive consumerism proved unbearable.

While several major national economies recovered and showed growth rates in 2011, especially China, India, and Brazil, tepid recoveries in Japan, Europe, and the US remain their likely course in 2012. The unresolved problem facing the global economy is the possibility of a double dip recession in the next 36 months. Weak consumer demand, high unemployment, consumer and sovereign debt, and the catastrophe eurozone disunion would provoke, could interlock, leading to another massive devaluation in asset values. China’s economy is especially troubling. The fallout from China’s own real estate bubble and hundreds of billions of underperforming loans could destroy one of the few engines of global economic growth still firing.

Economic forecasts vary as to the probability of another recession. A group of economists polled in December 2011 predicted a 20% likelihood. Mark Zandi, chief economist for Moody’s Analytics, argued in September 2011 a second recession stands at 40%. While the Economic Cycle Research Institute issued a statement September 30, 2011, giving a 100% chance of a recession after what would be the current upturn (June 2009–March 2012, as of this writing) falters.

"Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better."

The 2007-2009 global economic downturn has been followed by a period of mild growth as governments reacted to the crisis with various fiscal and monetary measures. The Communist Party of China, in Keynesian fashion, spent 586 billion USD on infrastructure development. German leaders pushed for austerity measures to reduce sovereign debt and potential default by the troubled PIIGS (Portugal, Ireland, Italy, Greece, and Spain) of Europe. In addition, the European Central Bank (1 trillion EUR) and Bank of England (325 billion GBP) have employed “quantitative easing” (ie., firing up the printing presses, so they say) to inject money into their banking systems by purchasing government bonds and other securities from private institutions. US policy has been a mixture of fiscal, monetary, and austerity strategies: On the one hand, in February 2008, US Congress and President G. W. Bush passed the Economic Stimulus Act, which refunded 152 billion USD to taxpayers. Later, in October 2008, 700 billion USD was allocated to the US Treasury to oversee the Troubled Asset Relief Program (TARP) to unfreeze credit markets and finance a bridge loan to US automakers. In February 2009, the Democratic-controlled Congress passed The American Recovery and Reinvestment Act, a 819 billion USD stimulus package to offset weak consumer demand by additional government expenditures to promote economic activity and job-creation. In addition, in October 2007, the Federal Reserve began cutting the key rate, which stood at 5.25%, to promote borrowing and economic activity. By January 2009, after multiple

August 15, 1971 -- President Nixon "temporarily" ends US dollar-gold convertibility; fiat money reigns.

cuts, the key rate was set at 0.0%- 0.25%, where it stands now as of March 2012. The Federal Reserve also instituted two rounds of quantitative easing to promote economic activity: November 2008 “QE1” at 1.8 trillion USD and in November 2010 “QE2” at 600 billion USD. The Federal Reserve may roll out “QE3” depending on future economic growth. On the other hand, in October 2011, Republican Tea Party activists successfully scuttled President Obama’s 447 billion USD American Jobs Act out of a fear increased taxes on wealthy citizens to finance the American Jobs Act would harm economic growth. Fiscal conservatives have also pushed for long-term reductions in domestic spending (generally targeting social safety nets) in hope of reducing the national debt.

When economic crisis hits, governments can opt to intervene in the national economy using several well known mechanisms. Fiscal conservatives seek to shore up the economy by reducing debt and spending and promote growth by cutting taxes on profit, deregulating the business environment, or in other words, promoting austerity as a mechanism to spur growth. Keynesian demand management theory suggests governments ought to fill the void of diminished economic activity by borrowing and spending money, mixing short, medium, and long term investments (public goods, infrastructure, research and development, and etc.) until the economy revives. Monetarist policy focuses on the money supply and exhorts cutting the key interest rate or forms of “quantitative easing,” both of which, in theory, increase the availability of money to borrowers, thus “priming the pump” of the economy. These responses, however, are frequently subject to vehement political contestation.⁴

The continuing battle over which economic theory leads to growth will continue as none necessarily provides a silver bullet to end economic stagnation, but rather (if effective) only act as temporary alleviations, with the assumption that downward turns in the economy, while sometimes dangerous and destructive, can always be abated through a countermeasure or “fixing the fundamentals.”

The broader assumption is that business as usual will unavoidably reboot because the arrangement of the capitalist market system is not constituted by contingent practices expressed through emergent social structural powers, but instead, is determined by one or more of the following ideologies: human nature, God, and Reason. The assumption

"I believe in one God, the creator of the universe. I believe that renouncing capitalism is irrational and that to deny reason is to deny the existence of God." Katie Kieffer

holds the essential quality of free market capitalism is its ultimate stasis or “natural state of equilibrium” if only governments, cultural norms, legal frameworks, and/ or ethical injunctions do not interfere with its frictionless motion. The closer the legal, institutional, and cultural environment comes to freeing fully markets, labor, production, and capital, the closer “the end of history” becomes. The efficient allocation of scarce resources via supply and demand, the “price signal” effects on apt and competitive production, technological and organizational innovations, intra- and inter-national comparative advantages, private freedom, and steadily improving conditions for human flourishing all participate in the ideological matrix of a perfecting socio-economic system.

On the contrary, we must countenance the likelihood no “external grounding,” whether in the species being, the invisible hand, or in Natural Law, authenticates and justifies capitalism’s core logic. Rather than stasis at the heart of capitalism, resides an inherent and “irrational” tension–the pursuit of profit by individual economic agents (corporations are people too!) is overdetermined and pushed by a structural demand for 3% compounding rate of growth throughout the wider rings of economic integration and competition: local, national, and international. We find in the irrational dimension of capital its perpetual crisis of profitability in the short term, merely punctuated by moments when sufficient growth assuages the body politic and pundits proclaim the end of all depression. Once the compounding rate is threatened, as it has been for the past 40 years, strategies to overcome this barrier profoundly reshape our lives and, increasingly, across the world. Millions may lose their job as companies outsource, retool, and relocate to cheaper climes, and we call this “creative destruction” unleashed by globalization. Illegal aliens flood the border of the US and EU to enter the bottom of the workforce, and we call this “economic mobility.” Far more worrying, however, is the pressure behind individual profit seekers to take extraordinary risks– financially, legally, and inhumanely. Economists may herald the offshoring of production as rational and necessary. It is no small irony the conditions of production for labor in China are untolerated in Japan, EU, UK, and the US, and yet, how gladly we purchase Iphones, flat screens, and additional boatloads of future landfill. As a consequence, we must stay attuned to fundamental problems that might impair the profit imperative of capital, of which I will say more of below.

Nonetheless, the continuing effects of the rapid deflation of housing prices in the US in 2007, the Lehman Brothers bankruptcy in 2008, the far-from-resolved sovereign debt crisis in the EU in 2010-2012 has investors, economists, and politicians watching carefully the world’s largest economies. The prognosis for recovery of profitability in the EU and US economies is poor in the short term and uncertain in the long. The capacity of the emerging BRIC economies (Brazil, Russia, India, and

Brazil, Russia, India, and China do not appear mature enough to save us.

China) as well as economies in the Middle East, Africa, southeast Asia, or South America to offer investment havens of solid growth rates to prop the global economy has not actualized.

The unanswered question is whether or not economic growth, based on production of goods and services, and not speculative bubbles and debt fueled spending binges, will re-emerge, garnering enough surplus profit to pay reasonable wages, fund the requirements of government, and satisfy investors seeking returns. Such success is necessary to vindicate the accumulation of power, anarchical consumption, and creative destruction unleashed by economic freedom in the neoliberal era. Such success is also necessary to justify the continuance of neoliberal governmental policies supporting the political and economic interests of investment-income earners (as opposed to wage-income earners) and corporations by reducing taxes on high incomes, shutting down mechanisms of redistribution, and deregulating the business environment.

The deeper question is whether or not a significant portion of finance-industry profit over the past decades has been garnered through overly risky investments and unsustainable borrowing, whose ailing conditions could only be hidden for so long. If finance capitalism can no longer maintain profitability without resorting to excessive risk or fraudulent behavior, then we may be entering the endgame of a 40-year crisis of low growth since the boom days of the post-WWII era that lasted until the early 1970s. The compounding growth imperative of capital has hit a wall,

1973 AMC Gremlin. Harbinger of evil times

perhaps unassailable, of low demand (caused by excessive consumer and sovereign debt and high unemployment) and excessive liquidity (caused by fewer profitable and relatively secure investment venues). The rise of financialization has not solved the problem. Finance is not an end in itself; it is intrinsically related to production of goods and services and the labor of people. At some future point, somebody, somewhere, must work to create enough value sufficient to pay off preexisting debt obligations, taxes, wages, and material inputs. No matter how complex and flexible the financial architecture has become in the process of securing and allocating capital under conditions of risk, whatever financial machinations in play ultimately rest on a productive base. Even those who collect “rent” on the circulation of money: financial managers, investment banks, and individuals and institutions who have the capability to leverage money by multiple factors and transform it into investment capital– however celebrated for allocating capital to productive uses, are still beholden to an unbounded profit imperative driving the world before its unrelenting power, brokering no barrier and acknowledging no master.

Hope eternal continues to look toward the transformative potential for new sectors of economic activity to emerge–large enough and profitable enough–to jump-start the global economy in the face of the falling rate of profit. As “off-world” investment in space travel and related technologies

Virgin Galactic Going Round

appears to be a non-starter (well, except in Newt Gingrich stump speeches in his failed bid for the 2012 Republican presidential nomination), revolutionary developments in information and/ or green technology is sought to provide enough “value added” increases in productivity on the magnitude of another industrial revolution. The development of the Internet has not lifted the “online” world to some hyper-productive utopia, despite the seeming hour-by-hour expansion of its integration into daily life of billions of people. The “new economy” of symbolic labor⁵ has not risen to the occasion, enriching at most the top 20% of income earners, those best educated and most talented, contributing to widening income equality and its consequent political instability.⁶ Nor does an explosion of green jobs, such as ”The Third Industrial Revolution” envisioned by such thinkers as Jeremy Rifkin, appear imminent. What we see globally is the continuance of “old economy” dominance. In 2011, out of the 10

Walmarting of America

biggest corporations in the world in terms of gross revenue, seven produce energy, one produces cars, one is a Japanese conglomerate, and number one, of course, is Wal-Mart.

The fundamental problem plaguing the global economy is a crisis of profitability which is signaled by capital’s growing struggle to maintain sustainable, compounding economic growth. While a few national economies around the world have shown remarkable growth over the past decades (for instance, China and Brazil), taking up a portion of the slack, the fact remains the global economy remains tied to the fate of the world’s largest: the United States’ 14.7 trillion USD economy. And it is in the US we find an indication of the crisis, evidenced in the pattern of peaks and troughs of the business cycle in the US economy over the past decades, becoming more pronounced since the early 1970s. The amplitude of economic growth and contraction has decidedly narrowed, whereby each recession is followed by successively weaker recoveries. Meanwhile, the frequency of economic recessions in the US are increasing. The previous period of GDP growth, starting after the dot-com bubble in

Pets.com fail -- Too much pushed into the kitty

March 2001 and ending in 2007, saw the housing bubble grow, but it was the weakest recovery in the post-WWII era with 2.7% annualized growth rate, down from 3.4% in the pre-dot-com expansion in 1991-2001. These dwindling recoveries are connected to what is often overlooked in the economic debates of our times, namely, the historical backdrop of the so-called “great stagnation” of the past 40 years.

In the US, it is rarely mentioned in popular discourse (in the media, around election time, and etc.) that debates over the past four decades between advocates of supply side and demand side economic models is essentially a policy debate over the best response to a singular condition: how do we return to the economic growth of the 1950s and 1960s? Is

1950s -- Everything was right in America.

the great stagnation part of a long-duration cyclical depression or an indication of a more fundamental challenge facing free-market economies? If it is the latter, what is called into question is the theory of sustainable and unlimited growth, tied to the psychological and material advancement of humanity, both of which form the ethical horizon of lassiez-faire market capitalism.

The rise of the neoliberal era in the early 1980s was largely in reaction to the crisis of profitability of the early 1970s and the failure of Keynesian macroeconomic prescriptions to cope with stagflation, the unwelcome trifecta of high inflation, high unemployment, and low economic growth.⁷ With the goal in mind to revitalize the growth of productivity and profit, a fairly coherent and coordinated political response emerged under the political leadership of Ronald Reagan, Margaret Thatcher, and Deng Xiaoping, among others. These leaders

Time's "Man of the Year" -- 1978

instituted, what later was termed, “neoliberalism,” the principles of open markets, free movement of capital, and unhindered access to labor markets. The result was fundamental changes to all three of the elements of production: labor, taxes, and material inputs.

During the 1980s and 1990s, the capitalist world economy became global with the addition of two billion laborers from China, India, and the communist-Russian sphere. This massive, cheap, and docile labor pool transformed global production, shifting it to East Asia. Big labor, especially in the US and the UK, began its historic decline as the competitive advantage of nations with cheap labor, undermined the bargaining power of unions. Simultaneously, structural pressures to dismantle “first world” welfare states came into effect as economic growth faltered, and states were unable to collect enough tax revenue to fund redistribution mechanisms (social programs, infrastructure development, and etc.) without deficit spending. Taxes were cut or left to inflationary diminishment. The median income stagnated and began to drop as the smaller stream of profit remained in the hands of top earners: financiers, entrepreneurs, celebrities, investment-income earners, and etc.⁸ Finally, the rise of emerging nations, having repudiated inefficient command economics and

"The ecstasies of hyperreality pay very well, thank you."

autotarkic models of development, restructured their economies, and began consuming and urbanizing their way into industrial postmodernity. The first wave of “Asian Tigers” (Hong Kong, Singapore, South Korea, and Taiwan); the second wave of BRIC; and recent growth of Indonesia, Turkey, and South Africa has placed greater demand on ecological systems around the world as the costs of resource extraction and utilization of raw materials and energy continue to be externalized, multiplying and deepening the unintended consequences of production and consumption: pollution, global warming, water shortages, deforestation, loss of topsoil, over-fishing, and so on.

From “Deconstructing the Credit Bubble.” In the 3rd quarter 2007 investor report by Matterhorn Capital Management: http://www.matterhorncap.com/pdf/3q2007.pdf. Accessed December 27, 2011.
Ibid.
In 1996 Greenspan gave his infamous caution against “irrational exuberance” within the investment community, concerning the dangers of speculation in the stock market, which would lead up to the “Dot-com” stock market crash in in 2000. Eight years later, similar exuberance ended with the fall of the housing bubble. It should be noted that in the US, blame for the bubble (for example, as the Cato Institute argues) is given to the role of Federal mandates under the “Community Reinvestment Act” (CRA) whereby Fannie Mae and Freddie Mac “turbocharged” the housing bubble by “pressuring” lenders to give loans to risky home buyers (viz., black people), thereby distorting the housing market and creating a moral hazard to the effect lenders had guarantees of repayment by, ultimately, the American taxpayer. Nonetheless, this argument, made mostly by neoliberals, Ron Paulians, and other free-market ideologues, fails empirically in that a majority of subprime loans were made by lending institutions not beholden to the CRA, nor does it account for the high levels of commercial property loans underwater (Paul Krugman, writing in November 2009, noted 55% of commercial mortgages due before 2014 were in trouble), again having nothing to do with the CRA. Furthermore, and more important, focusing on the specific dynamic in play in the US, overlooks the fact simultaneous housing bubbles were occurring all over the world. In the UK, Dubai, Ireland, Spain, China, France, Norway, and on and on. In June 2005, The Economist reported that over the previous five years “the total value of residential property in developed economies rose by more than $30 trillion… to over $70 trillion, an increase equivalent to 100% of those countries’ combined GDPs. Not only does this dwarf any previous house-price boom, it is larger than the global stock market bubble in the late 1990s (an increase over five years of 80% of GDP) or America’s stock market bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history.” It is not surprising American neoliberals locate the cause of the housing bubble at the feet of Big government intervention in the “self-regulating” economy if all is lassiez-faire; however, the global nature of the housing bubble begs a more complex description, one that transcends national-local processes and finds its ground in the central matrix of capitalism: the impetus of profit seeking in an era of excessive liquidity and stagnant demand.
See my commentary, “Is Capitalism Doomed?” for an in-depth analysis of the logic of this contestation. http://onticwind.com/?p=185
“Symbolic labor” is a key concept in Robert Reich’s 1992 book, “The Work of Nations.” For a decent, short overview see http://www.scottlondon.com/reviews/reich.html.
In 2010, Apple Inc. employed 49,400 people (while approximately 700,000 work outside the US, as subcontractors and assembling products to take advantage of lower wages and lower regulatory regimes), while 32,647 worked for Google in 2011. Microsoft employed 55,002 US employees as of December 2011.
The beginning of the great stagnation must also include such aggravating factors as US involvement in the Vietnam war and the OPEC oil embargo (1973-74) in response to US support of Israel during the Yom Kippur war.
Exactly who has benefited from neoliberalism? The line is vague and shifting, but in terms of social structure, it is fair to say top earners as recorded by the IRS, reap a large share of the US national income. In 2010, the top 20% earned 49.4%, while the top 1% earned just under 25%. High income earners also pay more taxes to the effect that only the top 53% of earners paid any income tax in 2009–the 47% who paid none are “lucky duckies,” so they say. More poignant however, is the control of wealth– being the total value of all private property owned by an individual, including cash, assets, possessions, and properties, minus debt. As of 2011 in the US, the top 20% of income earners own almost 85% of total wealth, while the top 1% owns 40%. Concerns over rising inequality stem from a shift in the late 1970s, whereby the proportion of income and wealth flowing to the top of the income bracket began increasing. Edward N. Wolff, in a much discussed analysis, shows that between 1983 to 2007 the top 1% garnered 35.4% of the total share in marketable wealth (net worth or fungible assets). The next 4% garnered 32.3% of the total gain and the next 15% garnered 21.1%, funneling an impressive 88.8% of the wealth generated in the US to the richest 20% of Americans, leaving 11.2% for the bottom 80%.

The Long Crisis — Part I — Recounting Where We Are

Posted on March 1, 2012 by Haley

This entry is part 1 of 4 in the series The Long Crisis

[This series of essays lay out the global economic predicament that came to the surface with the financial collapse in 2008 and continues into 2012.]

On October 27, 2011, the US Commerce Department released its “advanced estimate for real GDP” for the third quarter of 2011. The news was good. The economy appeared to have grown 2.5%, up from 1.3% the previous quarter. The Wall Street Journal reported the next day such a jump in growth allays fear of recession. The cause of this growth was an increase in “nonresidential fixed investment” (factories, etc.) and “personal consumption expenditures” (goods and services), with the latter generating the bulk of growth. Consumer spending accounts for about 70% of the $14 trillion US economy, and hence is a primary driver

The Worship of Mammon. 1909. Evelyn De Morgan.

of global economic growth. Even slight increases or decreases in consumption reverberate strongly throughout the financial and industrial centers of the world. Nonetheless, the good news would not last. The Commerce Department’s final estimate for GDP, released December 22, 2011, showed third-quarter growth was actually 1.8%.

The signs of recovery or recession were mixed in the last three months of 2011. It is Christmas time, bringing forth the joy of holiday bonuses and the annual shopping binge. The consequences show up in the US Commerce Department’s second estimate of GDP growth for the fourth quarter of 2011, released February 29, 2012. The BEA estimated GDP to have grown by 3.0%, up from 2.8% reported in the advance estimate in January. Fourth quarter growth was driven predominantly by inventory investment and an increase in personal consumption (driven by car sales and the holiday shopping on durable goods: Ipads, TVs, computers, and

"You're Mine, Baby"

etc.). The composition of growth in the fourth quarter however, raises concern that retail sales over the holidays were weaker than anticipated, and the GDP growth from inventory build-up will not continue as consumer spending sags. The Commerce Department will release a third and final estimate at the end of March, which may change the scenario.

Haunting the uptick in GDP is evidence this minimal growth is being financed, yet again, by increases in credit card debt and reduced savings. Reuters reported January 17 on a cluster of indications that US economic growth at the end of 2011 appears unhealthy. On January 13, Chicago Federal Reserve President Charles Evans stated that growing numbers of Americans are reducing contributions to their children’s college funds and raiding their retirement savings accounts to cover expenses. Recent Commerce Department figures show US savings rates had fallen by November 2011 to 3.5%, down from 5.1% a year earlier. Meanwhile the Federal Reserve has stated “household borrowing on cards, car loans, student loans and other installment debt jumped

Student Debt Topped 1 Trillion USD in 2011

almost 10 percent from October to November…its biggest jump in a decade.”

Overall, GDP growth in 2011 now stands at 1.7%, down from 3.0% in 2010. Economists expect lower growth in the US over the course of 2012. The overall effects of low growth in the US however, intersects with other economies around the world. The political and economic precipice before the EU and the incapacity of other economies around the world to take up the slack for global economic growth spells trouble.

The Financial Times reported January 18, 2012, the World Bank has issued a warning to developing economies around the world to prepare for lower growth in 2012 than forecasted and to plan for another economic crisis equal to or worse than in 2008-9 if the European sovereign debt crisis takes a turn for the worse. The World Bank now assumes that the global economy will grow at 2.5% in 2012 and 3.1% in 2013, if no additional stresses occur, down from estimates of 3.6% for both years made in June 2011. On January 25, the US Federal Reserve announced it would hold the benchmark interest rate (key rate) at its

US Federal Reserve: QE2-- 600 Billion USD. Put that in your pipe and smoke it.

present 0–.25% until at least 2014, as projections for US economic growth were downgraded. The Fed also said it would push additional monetary levers if unemployment increases or inflation continues to drop.

These events signify continuing weaknesses in the global economy characterized by high levels of sovereign, corporate, and personal debt (the latter, especially in the US) and anemic economic growth. The problem is profits- where on earth can they be found?

54th Grammy Awards: A Curmudgeon’s View

Posted on February 13, 2012 by Haley

54th Grammy Awards, February 12, 2012

Popular music, at least in the English speaking world, is in a terminal crisis. The 54th Annual Grammy Awards last night proved again that most music circulating is derivative, played out, and a futile attempt to not suck. It manages to cough up a dime, apparently retains power to touch and move some of us, and shocks and titillates for notoriety and a few more months of media coverage. But what is the effect? What is contributed to history? Woody Gutherie, Bob Dylan, Billy

"If I wasn't Bob Dylan, I'd probably think that Bob Dylan has a lot of answers myself."

Holiday, Aretha Franklin, Charlie Parker are among the American Great, who have something to teach because they were profound, and whose music– and in many ways their lives– holds a surplus of possibilities that will remain touchstones for the musically curious and seekers of meaning. Over the year, billions (trillions?) of songs were played, listened too, purchased, stolen, studied, and replicated, but where is it going? The traditional genres of American music: Bluegrass, R&B, Country, Folk, Jazz, Gospel, and Blues are thoroughly mummified. So too for the categorical neologism, “Americana,”– downright obnoxious. Subaltern music: Reggae, Bossa Nova, and Afro Funk (and sadly in ways, New Orleans’ traditions) dissipated, and disappeared from the world, except from drinking joints catering to pale-faced adventurers, seeking the authentic, swarthy exotic/ erotic Other. Category Bjork…? Hipster micro-musicdoms..? Silence. And Big Capital sunk into hitmakers in Hip Hop, Techo-dance, Alternative, and Rock, channeled through commercial radio and cable TV, has created only dead ends for bored, witless wonders, and mediums whose message is uncool, annoying, and alienating. There is some irony and a great relief that in ten years, Fame Monster Lady Gaga will not warrant an end-note reference.

May we quibble over the awesomeness of Adele? Six grammys won is a fine night. Agreed, she is a great singer, has technical brilliance, sings from the heart, renders universal experience, and so on, but more neo-Soul? She is not profound, as Aretha Franklin was, breaking new ground, singing a way nobody

"I sing to the realists; people who accept it like it is."

had ever heard before. Aretha’s secularized gospel transposed the changing experiences of the post-Jim Crow/ Civil & Equal Rights era into the formation of a consolidated subjectivity. Her songs, voice, and ethic, thus became a model and inspiration for others (especially black women). Adele merely gets a parental “good job” for delivering another rendition of the same old Soul. Whether Adele-Soul, Rap, or Foo Fighter’s rocking out with “vintage” instruments, the cause and effect remain the same. The music of pop culture/ mass media no longer expresses anything in and of itself but an absence of something real, some animating principle that does not presently exist. The dominant music genres and the “lifestyles,” historic and present they emerge from, have become desiccated, and can only offer consumer-fans a vacuous presentism, not what is, nor what can be. Replicated re-singing of the oldies-but-goodies begs the question– why listen to a copy of a copy when the original was the moment of creation? The death of Whitney Houston is instructive because her work was only a derivation of masters she could emulate, but never transcend. Whitney may have inspired singers to sing, helped girls to feel better about themselves, and culled a fortune, but she was an empty conduit through which past creative moments were refashioned, but to which she could make no contribution. However much she was honored last night, fetishized as the be-all, Whitney, like most of her contemporaries, will settle into historical obscurity.

Signifiers Gone Awry

The last major event of interest in music was the emergence of rap and Hip Hop in the 1970s with Sugar Hill Gang, and moving to Eric B. & Rakim in the mid 1980s, the latter whom defined the genre and largely created the grammar of its style and behavior. But, after minor fusions with rock and jazz (De la Soul, etc.), West Coast Gangsters (however faked) ended the affair. Hip Hop was left as a nihilistic parody of itself, and only as the corportized rehash we find today, largely fueled by white, middle class, young men, experiencing neurotic anxiety over their masculinity. A sad ending indeed. Hip Hop was vaunted as an expression of the consequences of ghettoization, deindustrialization, urban decay, and the flight of white taxable income, and celebrated as the vindication of experiences of young black males (and a female occasionally) during the sunny years of the 1970s and 1980s. We may grant that Hip Hop articulated a subjectivity of this experience, (desires, joys, frustrations, dangers) but that moment of originality ended some 20 years ago, if not earlier; its “point of view” now, unheard and long forgotten.

It is hard to imagine any existing genre serving as a basis for, and transformed

"...the best the white world had offered was not enough ecstasy for me, not enough life, joy, kicks, darkness, music, not enough night." - Jack Kerouac, On the Road

into something profound. Nobody is going to create Folk music that has not been heard umpteen times already. Classical music ended with atonality. Jazz was last cool with Beats in the 1950s, grooving on Hard Bop. Jerry Garcia’s death in 1995 knelled whatever sad remnants of the 1960s anti-status quo, new awakening. Blues is played on Beale Street.

The deadlock or crisis of music I have been describing strikes me as having significance because of central role music plays in the self-definition of men and women coming of age. The crucial ten-years between approximately ages 16 and 26 is when basic sociological parameters of the individual begin to solidify. The confines of an individual’s identity, sexuality, education, and occupation take shape. Life-style choices, values, beliefs, and consumption patterns become established during the transmutation of dependent child to autonomous adult (the latter, less frequently it seems…). The meanings of music and social context of listening to music is internally related to this formative period of subjectivity. Consequently, we can begin determining the causal mechanisms at work and the larger frames of reference.

I think the crisis is symptomatic of– or linked– to a crisis of subjectivity. Much cultural criticism of

"The focus of subjectivity is a distorting mirror." Hans-Georg Gadamer

the past 30 years has spoken of our postmodern condition and associated subjectivities, characterized by pastiche, fragmentation, equivocation, relativism, and the post-Fordist mode of production– the usual theoretical suspects underpinning what we experience of popular culture and mass representation. It is also the case that moral and social orientations have become atomized and narcissistic in the neoliberal era. Nonetheless, the deadlock is ultimately tied to an exhaustion of ideas and viable alternative practices in the political and economic spheres of human relations. Liberal Democracy in the US (and in many other advanced economies) has become dominated, its process of deliberation compromised. Entrenched interests are vested in existing structural arrangements pertaining to the environment, economic policy,

US Navy: Global Force for Good

energy, defense, and the conditions of social reproduction. The political “third way,” third parties, multiculturalist, and assorted “liberal” attempts to soften the status quo have failed. As Zizek frequently points out, it is easier to conceive the end of the world by alien invasion or human induced catastrophe than the end of Capital’s pursuit of profit as driving logic supporting human reproduction on earth.

The production of music and the “practice of music in everyday life” has entered into a feedback loop with artists and consumers, each looking to the other for cues on what to wear, listen to, and how to act. “Cool hunters” and focus groups attempt to discern emerging trends to give pop culture producers competitive advantage. The cycle is continually pushed as trend setters attempt to break out, rejecting the goods of mass-production, to make an original statement in what they play. But as the possibilities for new “sources of the self” are fully exhausted, style has turned postmodern, resulting in pastiche, and the empty play of signifiers detached from their historical referents. Style consequently operates at a surface level, with no meaning but the degree of success it achieves finding its point of exceptionalism. Pop artistry has thus entered an autophagic stage. Failure to find inspiration and organizing principles outside of itself, pop music has turned on itself, recycling the past, sucking the soul of anything with enduring life. The Grammys and the pop music of our era can only provoke neurotic attachment or induce catatonic stupor.

Why Ontic, Why Wind?

Posted on January 12, 2012 by Haley

[this section will be permanently posted as a "page" under the header as it is an attempt to provide a sense of the mission behind the essaying in Ontic Wind]

Why Ontic?

The designation of “ontic” refers to the qualities of existence of all forms of Being, which largely, if not entirely, determines its causal power. Ontic qualities pertain to the basic conditions of human existence, of ourselves as human beings living on earth, at the edge of our solar system, located in some dark place in the universe. The ontics of human Being include our intrinsic connection to the foundations of a stratified reality we know in terms of biology, chemistry, and physics. Such reality forms the ground, presupposing the environmental, social, psychological, and bodily aspects of human existence.

The unique ontic quality of human Being, recognized by the German philosopher, Martin Heidegger, and what distinguishes it from other instances of Being (whether animate or inanimate), is the capability to reflect on our ontic conditions, to pierce the veil over our nature. Confronting the ontic, seeking to explain and understand its nature in terms of origin, powers, and meaning is to ask questions of ontology of ourselves and the world around us.

Nonetheless, despite Heidegger’s identification of human Being in its ontic state holding an intrinsic capability to inquire into its own constitution, he or she can only do so once in language and in time and place. Only by entering the symbolic field and socialized as a person can this ontic quality be activated and expressed.

Foremost, the experience of human Being–its practice and meaning–is derived from our “thrownness” into the world into place not of our choosing. We find ourselves at particular historical and geographical locations with an attendant social, cultural, and linguistic milieu. We encounter a legacy of past generations of human Being: the built environment, a language, discourses, categories of personhood, and cultural formations. This legacy is the social structure, and only by entering through the process of socialization in relation to a social structure do we become recognizable as human agents and realize our potential human powers, whether intellectual, physical, moral, or artistic.

Socialization, however, is not social determination. This ontic capacity is the basis of human reflexivity, intentionality, and the constitutive power of practice. It is the basis of free-will and historical change, and enables the possibility to transform existing legacies into the conditions of future possibilities. Human Being is consequently recursively (and increasingly) implicated in many of its own ontological conditions.

Thus we enter into place, and as agents come into dialectical interaction with a larger structure, one which forms the ground of meaningful human existence. The causal power of structure (one of its ontic qualities only in relation to human agents) lies in its ability to enable and constrain the causal power of agency. Dialectical relations hold among the “natural” environment, geography, and social structures and the intentionality and reflexivity of human agents. Through agental practice, we reproduce and transform structures through our intentions and actions.

The immanent and material conditions of human existence necessitates analysis of two key aspects of social structure which reflect the distribution of power of decision-making and command of violence (politics) and the distribution of goods and resources mediated by relations of exchange (economics). Globally this is manifest in geopolitical and geoeconomic struggles between nation-states over energy, markets, and hegemonic positioning, and complicated by various subnational and transnational actors (criminal networks, regional blocs, NGOs, and etc.) operating in and around the nation-state system.

The purpose of essaying Ontic Wind is to explicate more fully the themes and ramifications of the ontic qualities of agency and structure. It is an attempt to develop a realist social ontology to facilitate the discovery the causal mechanisms within the social and cultural domains that give rise to the shape and sturm und drang of the world. It is a response to the crisis of modernity, the crisis of a G-zero world, the crisis of compounding profit accumulation, and the crisis of energy and resource consumption.

Why Wind?

Human Being is most saliently expressed in its structures as they are our creation and give form and substance of our daily lives, and yet, once routinized and objectified in practice, their pathways entrenched, to alter course requires great will and acceptance of uncertainty. We recognize something greatly amiss in the world.

Great power politics operating in the nation-state system seeking existential, economic, and energy security.
Human differences predicated on contingent features of our personhood stand in hierarchies, enabling marginalization and exploitation.
The impetus to unhindered, unlimited, and indefinite compound growth of capital is under-theorized and appears logically untenable.
Rampant consumption of goods and mass media does not make us better or happier people.
Negative consequences flow from the industrial base and labor conditions required to service mass consumerism.
The benefits of increased productivity no longer serves the greater good, but accrue to a few.
Our economies have become structurally dependent on the financialization of increasing domains of human welfare, rapaciously leveraging expectations of future production to maintain profitability in our moment.
We lack an inclusive, totalizing narrative of why human Being exists and how we should be.

The foundation of our dwelling requires repair. How we respond to continuing challenges of human Being has always signified the extent of our knowledge, aspirations, and values. The ideologies of social Darwinism, theism, ethnonationalism, and totalitarianism lead to catastrophe; nihilism follows. This is the conjuncture for human Being to rethink itself.

Wind: warning, clue, report, movement, tempest, suggestion, a release of gas…

Fukuyama: The Future of History

Posted on December 20, 2011 by Haley

Francis Fukuyama argues in Foreign Affairs, (Jan/Feb 2012) “The Future of History,” while Liberal Democracy continues as the ”default ideology” to which

Fukuyama: The End of History

advanced economies generally adhere, structural challenges are diminishing its legitimacy. Fukuyama argues that Liberal Democracy is the political philosophy most in step with the outlook and requirements of the middle class. However, this link is under threat because of the stagnation of median income since the early 1970s, and the concomitant rise of income inequality. The origin of this shift in the distribution of wealth is the implementation of economic policies under the sway of Libertarian right ideology, whose prescriptions are known variously under the rubrics of “trickle down economics,” “Thatcherism,” “neoliberalism,” and “globalization.” These programs seek to dismantle barriers to the flow of capital and goods, defund Big government social programs by reducing the effect of progressive taxation on the wealthy, and eviscerate the power of Big labor. The consequences of growing inequality of outcomes among citizenry in these new and stronger, “winner take all” societies, has led to historically large and growing income disparities, especially within the US and UK, where neoliberalism has taken its greatest hold. This trend is aggravated by the disproportionate spread of economic benefits from recent technological developments (Facebook, computer and software engineering, and so on) accruing to a small elite of the gifted and highly educated. Occupy Wall Street, while explicitly addressing this issue (advocating for the 99% etc.), is hobbled by a lack of a coherent alternative political program. Fukuyama argues that this lack reflects a more general intellectual exhaustion of ideas by the left, cast adrift with the complete failure of universal class mobilization under communism, and holding to an untenable, outmoded vision of social democracy. Fukuyama foresees danger in advanced Liberal democracies if alternatives to the current trajectory are not articulated and the middle class mobilized to protect its interests. Fukuyama writes: “That mobilization will not happen, however, as long as the middle classes of the developed world remain enthralled by the narrative of the past generation: that their interests will be best served by ever-freer markets and smaller states. The alternative narrative is out there, waiting to be born.”

Is capitalism doomed?

Posted on December 15, 2011 by Haley

Economist Nouriel Roubini raises the question in Project Syndicate on August 15, 2011, whether or not the global recession vindicates Karl Marx’s forecast that inherent contradictions in capitalism would lead to its collapse. In 2008, the global economy suffered a $50 trillion reduction in financial assets, including: stocks, bonds, and currencies. The global economic crisis, sparked by the subprime mortgage crisis in the US, uncovered deep rot throughout the global financial system: unmanageable levels of debt by individuals and nation-states, fraud, corruption, and poor management of financial risk. Witness the catastrophe of devalued property in the US, Ireland, and China et al; the downfall of Lehman Brothers, Fannie Mae, and Freddie Mac; the banking crisis in Iceland; the Bernie Madoff ponzi scheme; the sovereign debt crisis in Europe; 412 bank failures in the US (2008-2011); and triptych of high unemployment, production overcapacity, and excess liquidity. Meanwhile, consumer demand fell as shrinking rates of profit and tax revenue pushed private enterprise to cut jobs and governments to cut services. Unemployed and unserviced middle and lower classes spent less, further reducing demand, creating the conditions for deflation and economic contraction. The question now in December 2011, is whether or not the world will experience a second recession on the heels of the 2008-2009 downturn. Roubini argues despite the continuing structural contradictions in the global economy, capitalism will not fail if certain adjustments are made by governments around the world:

“The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts. Over time, advanced economies will need to invest in human capital, skills, and social safety nets to increase productivity and enable workers to compete, be flexible, and thrive in a globalized economy.”

However, Roubini warns us to be pessimistic about our leaders cooperating to develop a fair and effective response, and to prepare for the double dip. He argues we live in a “G-Zero World,” in which no dominant country or

Multipolar World

transnational actor has the power, resources, or moral authority to lead. National governments and international financial institutions (World Bank, IMF, WTO, and etc.), while fully aware of the dangers and difficulties presently confronting the world economy, have yet to determine a long-term solution. And it is unlikely they will. Instead, political gridlock between conservative and liberal parties in the US is postponing a determinate and coherent course of action in the wake of the subprime mortgage crisis and its widespread consequences. While the US Congress passed the Troubled Asset Relief Program (TARP) in October 2008 under the stewardship of President G. W. Bush to promote borrowing and stabilize the financial system, President B. Obama has not succeeded in securing his 2011 “American Jobs Act,” a $447 billion spur to the economy primarily through tax breaks (cutting the payroll tax) and infrastructure development. In the EU, German and French leaders, responding to their EU-weary electorate, enabled by their economic hegemony, and in service to their banks, are responding to the European sovereign debt crisis by choosing to protect their national interest.¹ The watchword is “austerity,” pushing the cost of bailouts and lost profit onto borrowers, either as individuals or entire nation-states. Joe Nocera in a November 28, 2011, NY Times op-ed has pointed out however, German (primarily) moral repugnance over bailing out “club-med countries,” the so-called PIIGS of Europe: Portugal, Italy, Ireland,

"Retiring at 26 with a fabulous Greek pension has done wonders for my Ch'i."

Greece, and Spain, appears to be leading towards the catastrophe of Greek default and exit from the Eurozone, if not other PIIGS later in secession. PIIGS owe hundreds of billions of euros, and the prognosis for their future economic growth is dim. Nocera argues that while that Germans are reluctant to swallow such a bitter pill, the long-term implications of Greek pullout will be worse. In lieu of bailouts, the mechanism to coerce fiscal responsibility by profligate countries is the imposition of acceptance of austerity by indebted economies.² A program of austerity entails cutting social programs, pensions, and salaries of state employees to balance the national budget. The obstacle confronting world leaders and their constituents is ultimately political in nature (and hence concerns the distribution of power and financial resources in and between nation-states), and follows from the inevitable consequence that at some point in time, certain individuals will suffer economic hardship or even permanent decline. The question is which group will be handed this burden. In the EU, the question resides at the level of the nation-state system, pitting investors in French and German banks against the Greek government (and ultimately Greek citizens) over who will take the financial hit. In the US, the tension exists between home-owners and the private investors (regional banks, municipal governments, pension funds, and so forth) who purchased mortgage backed securities from investment banks. These investment banks made the initial loans and subsequently sold the repackaged and highly rated securities, later found to be “toxic.” When the housing bubble began to burst, many home owners found themselves paying mortgages on houses worth far less than they paid, or unable to continue paying their loans, leading to default and ruin. In both the US and EU, who will suffer the consequences runs like a fault line, with either loss of profit and (likely higher taxes) by investors or loss of livelihood and living conditions by wage-earners. The political response to the problem has been haphazard and conflicted, and has brought to light, once again, the recurring struggle between the two dominant schools of macroeconomic policy. The essence of the tension between so-called “supply side” and “demand side” economic policy reflects the philosophical differences between Friedrich Hayek and John Maynard Keynes over how best to manage national economies. Roubini, as seen in the quote above, is making a Keynesian argument in his call for government-funded investment in infrastructure, education, and human welfare. Likewise, Obama’s Job’s Act is a classic Keynesian response to an economic slump. The problem the Keynes-Hayek debate raises is that both philosophies have “natural” beneficiaries, which, in the theoretical rendering of cause and effect within the economy, grants either the capitalist “investor” class or the wage earning “consumer” class as the locus point, upon which economic growth fundamentally depends. In general terms, Hayek is the economist of neoliberals, while Keynes is the economist of progressives, social democrats, and supporters of Big labor. The economic theories of Keynes and Hayek are both presumably “objective” understandings of macroeconomics, and provide axioms for economic policy enacted by the state. Consequently, depending on which philosophy is politically ascendent, state policy appears to benefit one group at the expense of another, and as a deliberate offering by a political party to its supporters. In the US, this logic manifests in political discourse, with incendiary expressions used to cast political opponents as ideologues with covert agendas. Neoliberals pronounce “class warfare,” when taxes on high incomes are proposed, connoting a “Marxist” orientation underlying schemes to redistribute wealth. While the political left declares the US is transforming into an “oligarchy,” castigating the increasing proportion of wealth and power accruing to economic elites in the neoliberal era (1980-present), as the subversion of democracy and equal opportunity. The Keynes-Hayek debate over macroeconomics has not been resolved, and yet the impulse towards neoliberal laissez-faire is continually subordinated to the interests of the nation-state. States support indigenous economic actors through subsides and protection. In the US, tax deductions written into Internal Revenue Code, are the primary method the State guides the economy. Energy companies, agriculture, defense, finance—the “commanding heights” of the economy—all receive support as a mechanism to advance US geopolitical objectives: national security and maintenance of its global power position.

1) Whereby national banks in the EU’s dominant economies loaned billions to lesser developed economies.

2) Using “austerity” to promote growth and fiscal responsibility in Europe is programmatic of neoliberalism, and the latest example of a trend, last brought to attention with the controversy over “Structural Adjustment Programs” used by the IMF to promote economic growth in the developing world, thus ensuring repayment of their loans to Western banks.

Part VIII: The Agent Structure Problem: Human Being as Causation

Posted on December 14, 2011 by Haley

This entry is part 8 of 8 in the series Social Ontology

The concept of agency, in its dictionary definition, is the ability to act and/ or ability to exert power. This definition works well in the natural sciences (the intransitive domain), whereby agency refers to mechanisms and entities that exhibit force or effects on matter, such as gravity, magnetism and chemical agents (acids, bases, and so forth). The dictionary is less helpful, nonetheless, in consideration of the nature of agency as it relates to human

Agents can be badass

beings. Any sort of analogy between human beings and the forms of agental power attached to non-human entities in the world, fails to capture the profound differences between the social and intransitive domains. What distinguishes human agency from the type of agency associated with the mechanical laws of nature are the interlocking faculties of intentionality, reflexivity, and meaning.

Intentionality, reflexivity, and meaning as we will argue, are the crucial features of human agental power, providing the basis for an ontology of the subject.¹ However, just as human agency must be distinguished from forms of causal power found in the intransitive domain, human agency must also differentiate itself from the causal powers associated with structures. As Wight (2008) notes, agency in the social world, if defined broadly as “the ability to exert power” would also include social structures and cultural formations, which, as having emergent causal powers to enable and constrain individual agents, and hence “exerting power,” would eliminate the ontological distinction between agents and structures.² On the contrary, agents and structures exist on different strata and hence, hold different causal powers. Accounting for this difference confronts the analyst of human affairs with these requirements: how to discern the nature and causal powers associated with both agents and structures, and how do these entities interact?

Human agency, as we have argued, is a unique quality of being human, and, in terms of delineating a human agent,

The Monstrosity of Being

the human body provides a preliminary site for its criterion of identity.³ While bodies have a discreet existence, being positioned in time and space, it is the unique evolutionary characteristic of human kind that the unthinking, rote behaviors associated with animal instinct have fallen away, and replaced by the process of socialization (or enculturation). What we know, how we live, the values we hold, and so forth come by way of education (formal and informal), experience, and reflection on our state of being in the world. The crucial element in this process of human maturation is the various modes of intentionality (viz., the states of awareness that include desires, beliefs, perceptions, and so on), which concern both the relationship we have with ourselves in terms of self-awareness and personal circumstances (intra-subjectivity) and the relationship we have to the wider social milieu (inter-subjectivity).⁴Both relationships are predicated on our capacity for symbolic exchange made possible through language. Nonetheless, language acquisition is the primary point of connection, circumscribing specific cultural and

The Tower of Babel had detractors from the get-go

social practices, and linking human being (for individuals and families, communities, polities, and etc.) to its place in time and space.⁵ The socialization of human being, consequently, materializes this “being” in relation to a set of structures, which form the historical-world moment of an individual’s life.⁶

1. The crucial “move” here, is the argument that intentionality precedes language. This only is to say intentional states are those moments of consciousness when the mind is directed towards, perceiving the world (including reflexively about its train of thought, behaviors, feelings

2. Colin Wight. Agents, Structures, and International Relations: Politics as Ontology. 2006. Cambridge University Press.

3. The body as the criterion of identity of a human agent, is relatively unproblematic and explains the attraction of methodological and ontological individualism. The body used for identity, however, faces interesting questions once cross-cultural material is examined, lessening the universality of such identity. Relationships of patronage and encapsulation whereby, for example, “the family” is encapsulated by the borders that frame the space of authority and personal prestige of the father/ husband. The cultural codes of obligations and duties maintain all actions by the wife and children are fully the father’s responsibility (and under his authority), and in a sense part and parcel of his “agency.” Nonetheless, there remains a brute sense even in the above example, that despite whomever holds ultimate responsibility for actions within a familial or clan structure, the children and wife(s) of a male are capable of initiating actions, and consequently exercising agency. As we will be arguing, this causal capacity is ontological in its practice.

4. The importance of intra- and inter-subjectivity will be further developed below in an attempt to find an ontology of the subject. Our thesis will claim that intentionality has emergent properties, and hence holds causal powers, which grant it an ontological status. The ontological “output” is the meaning of intentional states as they manifest into practice. Reflexivity, a particular mode of intentionality, is the site of mediation between agents and structures.

5. We are using “time and space” as shorthand to indicate how historical, geographical, social, and cultural factors (and there are arguably more) are responsible for the disunity of experience of all human beings. Differential social milieus emerge from how human beings respond to differences in climate, environment, and access to natural resources. Human beings also find themselves born into pre-existing social systems, almost always characterized by political, economic, and symbolic hierarchies. The human agent is thus positioned dialectically to these structural formations, which we will explicate below.

6. I take this point to be fully in line with Heidegger’s notion of Dasein, that human kind is always recursively implicated in the formulation of its ontological conditions. We find this in thesis a great deal of hope, but in our darker, misanthropic moments, much despair.

Structure Part VII: Introduction to Agency

Posted on September 26, 2011 by Haley

This entry is part 7 of 8 in the series Social Ontology

Within the tripartite theory of agency of critical realism, noted at the end of the previous posting, the essential point of any theory of agency is to locate and delineate a “prime mover” causal power that is intrinsic to agency. This power, what we are terming human agency,¹forms the basis of the philosophical anthropology we are attempting to build.

Raphael, Prime Mover 1509-11

To be successful, we need to show this power is intrinsic to the agent-subject, or, in other words, is an ontological feature of human being. The response to this challenge we find most satisfying has been developed by Margaret Archer, whose account centers on a model of reflexivity she calls the “interior conversation.” Reflexivity, in Archer’s estimation, is a mechanism through which the qualities of a robust human agency include autonomy, self-awareness and intentionality.

Before we address what we mean by human agency in more detail, let us first locate the concept of agency in relation to the larger thrust of this essay, namely that of coming to terms with the agent-structure problem and how it addresses the question of social ontology. The problem of agents and structures concerns the foundational ontological commitment of all conceptual inquiry into the nature of human beings and societies in which they exist. It concerns what powers and capabilities are intrinsic to human kind and how extrinsic circumstances come to influence their behavior. It seeks to understand if and how components of the “external world” are internally related to the formation of mature, socially inscribed individual agents. Consequently, any answer to the agent structure problem and concomitant social ontological axioms will operate as a metatheory concerning the relationship between agents and structures and what causal powers can be assigned to them. It is important to note however, while we are developing a critical realist framework to understand the agent structure problem, simultaneously, this project critiques various social theoretical orientations: liberal, empiricist, postmodernist and structurationist, that either implicitly or explicitly hold answers to the agent structure problematic.

The critical realist answer rejects the three dominant theories of agents and structures and their relationship: ontological individualism (that society and culture are only epiphenomena of individual monadic behavior as the aggregate effect of this behavior and forms discernible patterns), ontological structuralism (that individual subjectivity is constituted fully by its internal relations to language, socio-cultural and/ or geo-historical location) and praxis ontology (also known as structuration theory, propounded by Anthony Giddens and Pierre Bourdieu, whereby agency and structure are mutually constitutive, what Archer calls theories of “elisionism” in that agents and structures are analytically distinct, but not ontologically).

Countering these three, Critical Realism conceives both agents and structures as ontologically real and argues that each holds causal powers. Two questions follow from this conception: 1) what powers do agents hold to act independently and sometimes creatively in relation to the objective structures they reside within (social and cultural formations)? 2) How do social and cultural powers, the objective conditions of a given geo-historical milieu affect agents? In the following sections on agency, we will answer these questions.

1. Human agency is distinguished from the other two facets of the tripartite conception we will discuss below—socio-cultural and occupational agency.