Smashing Capitalism

Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys. The American poor, who are usually tactful enough to remain invisible to the multi-millionaire class, suddenly leaped onto the scene and started smashing the global financial system. Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.

First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were “NINJA” loans, for example, awarded to people with “no income, no job or assets.” Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?

Then, in a diabolically clever move, the poor – a category which now roughly coincides with the working class – stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown.  H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that “it’s no secret that many customers are running out of money at the end of the month.”

I wish I could report that the current attack on capitalism represents a deliberate strategy on the part of the poor, that there have been secret meetings in break rooms and parking lots around the country, where cell leaders issued instructions like, “You, Vinny – don’t make any mortgage payment this month. And Caroline, forget that back-to-school shopping, OK?” But all the evidence suggests that the current crisis is something the high-rollers brought down on themselves.

When, for example, the largest private employer in America, which is Wal-Mart, starts experiencing a shortage of customers, it needs to take a long, hard look in the mirror. About a century ago, Henry Ford realized that his company would only prosper if his own workers earned enough to buy Fords. Wal-Mart, on the other hand, never seemed to figure out that its cruelly low wages would eventually curtail its own growth, even at the company’s famously discounted prices.

The sad truth is that people earning Wal-Mart-level wages tend to favor the fashions available at the Salvation Army. Nor do they have much use for Wal-Mart’s other departments, such as Electronics, Lawn and Garden, and Pharmacy.

It gets worse though. While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker’s wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages. Once you worked for your money, but now you were supposed to pay for it. Once you could count on earning enough to save for a home. Now you’ll never earn that much, but, as the lenders were saying – heh, heh—do we have a mortgage for you!

Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May 21^st cover story on “The Poverty Business,” Business Week documented the stampede, in the just the last few years, to lend money to the people who could least afford to pay the interest: Buy your dream home! Refinance your house! Take on a car loan even if your credit rating sucks! Financiamos a Todos! Somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were being offered.

Personally, I prefer my revolutions to be a little more pro-active. There should be marches and rallies, banners and sit-ins, possibly a nice color theme like red or orange. Certainly, there should be a vision of what you intend to replace the bad old system with—European-style social democracy, Latin American-style socialism, or how about just American capitalism with some regulation thrown in?

Global capitalism will survive the current credit crisis; already, the government has rushed in to soothe the feverish markets. But in the long term, a system that depends on extracting every last cent from the poor cannot hope for a healthy prognosis. Who would have thought that foreclosures in Stockton and Cleveland would roil the markets of London and Shanghai? The poor have risen up and spoken; only it sounds less like a shout of protest than a low, strangled, cry of pain.

Comments

[Chickensh*tEagle]

"Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?"

Come to think of it, why hadn't those people the bridge collapsed under in Minneapolis had their private road engineering consultants go over their commuting route? Or those miners (and the dead rescuers) have their own mine safety experts thoroughly inspect that mine in Utah?

Not only that, but those unappreciative people in other countries no longer show the proper respect for America's superpowerhood:

http://www.truthout.org/docs_2006/082007F.shtml

[Larry in Lethbridge]

"Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning".

Isn't this the truth. Just watching those ads for Payday loans make me wanna heave. And it will get worse, as many of these sub prime and NINJA loans will mean sub average prices at auction.
Barbara,thanks for pointing out it's not a crime to be "poor" or make minimal wages.

I think it is time we show some compassion here.Our society needs an overhaul and the greed we have had for the past 50 years has worn us all out.Maybe it might become cool to not oppress the poor. Sounds good to me.

[Chris S.]

You can't have it both ways that is an old saying and a ever true one. Why are today's greedheads too pig ignorant to figure this out? People making livng wages tend to be the ones most likely to buy things. The poorly paid pile up debt, get in line for rent subsidies and food stamps. Well I guess bankruptcy lawyers have job security in this wonderful new economy.

[roger]

are we certain that dispatching capitalism would allow retail workers to earn higher wages and would prevent working class folk from being frauded at the mortgage company and title loan office. which model of socialism do we examine to find this miracle. surely that solution to class division, acrimony and asperity is not this simple. otherwise the german democratic republic would have survived and would have become the egalitarian european utopia as advertised.

[Sophie]

"While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker’s wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages."

It's so true it's almost poetry. I have never understood why the CEOs despise the very people that work to make them rich.

[Monica]

The socialist model did not work because it was applied in poor countries. In some cases, such as in Romania, things got so bad that there was virtually no food. But since the American economy has some fat cats who have lots of money, it could certainly afford some like the leaders of the former Communist regimes, who earned or stole less than the rich American businessmen. The resources to feed the population and keep it content exist in the rich capitalist countries, so if only a socialist or communist regime came to power, the serious economic problems that lead to the demise of most Communist regimes would not be an issue.

I can see other problems at the beginning, such as the fact that the current ruling classes and their equals in other countries would not like the new regime. On the other hand, the class system that exists in the States is largely based on people's actual situation rather than on a sense of class superiority that existed in some Communist countries despite their egalitarian ideology. Some people there seemed to think that being educated professionals made them the modern equivalent of nobility, or something like that.

Some typically American traits such as being selfish and caring less about one's family, as well as the American work ethics and professionalism, would facilitate the dismantling of the old structure. Close-knit families, bribery and doing a bad job made life more bearable in those countries. And despite its best efforts, the State simply did not have the technology to spy on people the way it is done nowadays in America. Ceausescu would have cameras in all the stores and apartment buildings. With the technology, the work ethics and their lack of concern for others, Americans working for the new regime would be able to control the society more matter-of-factly, with less cruelty but more efficiently (like in the military or in a large bureaucratic institution), and with fewer opportunities for human alliances against the system.

As for mortgage under socialism, the State would control it and establish prices, of course.

[gaby]

There are rich and poor in socialist countries as well, however, the rich and middle class understand that they can become poor at any time and therefore support a social safety net. Unlike here, when tragedy strikes it is your own damn fault. You are supposed to draw on family and friends during hard times, but frequently they can't help or don't want to, because they don't want to become impoverished themselves by supporting another person(s).

[Inna]

I think we need to ask this question "If the capitalism does is not good for most people, how come all these people try to come here ?" People vote with their feet and the vote is overwhelming.
As a person who spent first 19 years in ex Sviet Union while it was still a socialist country , I REALLY appreciate capitalism and while it is not perfect , it is the best around here.

[Monica]

People who "vote with their feet" by immigrating don't really know the real situation and are attracted by the affluence they hear about and compare that to the poverty, or even relative poverty, they see at home. They don't realize that many people are simply excluded from the American dream. But if things are really bad where they come from, that's because the country is poor, not because capitalism is good. A communist regime would do great in a rich country where people do not have to wait in line for hours at the store to get a package of chicken legs and heads or to wake up at 5 AM if they want to find milk and yogurt. And as some say here, the workplace is not a democracy. Well, in socialist countries, it is, or it was.

[Maya's Granny]

I have always wondered where the customers for the products that we have outsourced to slave labor countries were supposed to come from. If Americans can't earn good money, the day will come when even easy credit will not work.

[WereBear]

Well, what they have been doing is bad business.

Impoverishing one's consumer base to get another nickel on the quarterly.

There's nothing wrong with properly regulated capitalism with socialism thrown in for things everyone needs.

That's how we build a strong consumer base.

We have regulation because, without it... we have what we have now.

And everyone suffers.

[Anarcissie]

I believe there has already been a lot of government intervention in the form of credit inflation in the last several years. Since the inflation doesn't apply to the price of labor and the things that labor produces (e.g. manufactured goods), when the poor encounter this system, as in the case of buying and selling real estate, they can't deal with it effectively -- they don't have the money (real or credit-generated). I would guess that some kind of breakdown is not far off, but I'm not sure when and where it will occur. We know in the case of the stock markets that the government will simply create as much (credit) money as necessary to keep prices inflated, so we will not see a 1929-style crash again.

[lc2]

I had a deep sense of foreboding last summer when I saw those signs in storefronts: "No assets, no income? No problem!"

What has our world come to?

I am of the opinion that the working poor, w/out access to easy credit, serve as somewhat of a "grounding force" in our society's obsessive materialism. Yes I realize this is an overly romantic view. But I'm talking about a family like mine (main breadwinner works in retail): we do have health insurance, but for many years, had one car, a small apartment, discount or salvation army clothes only, cheapo pop-up strollers for tots, etc, etc. ... and relying heavily on libraries for entertainment. In short, we prided ourselves somewhat on getting by w/what we could afford. We did have credit cards and occasionally ran up balances we needed to devote our entire tax refunds to pay down, but we lived much simpler lives than what most people would call "middle class." We were also at least as happy as we are now w/a lot more trappings of middle class life ... but money wasn't a constant, crushing pressure on us. The big diff? We did own our own home ... but it was a small condominium, not a single-fam home.

What do we lose when such families are coaxed into the suburbs, into mortgages they'll never be able to afford if the wage-earners are struck w/any illness more serious than bronchitis (esp. if health insurance is inadequate ... btw, ours is now despite higher premiums)?

I think we lose a visible reminder of concepts like "starter homes" or even (gasp!) apartment living ... we lose the fantasy that we can all live like the people on tv. In fact I blame tv more than anything else for this predicament ... sorry to sound paranoid, but I think it's about two clicks above evil. And I probably only think that b'c to save money all those years ago, we got rid of tv and never signed on again.

[roger]

i see regulation as a leavening agent to capitalism however i do not see socialism as an effective nor desirable alternative. we do not want the state to own the major production industries. safety would not improve. production would not increase. income would not be redistributed. we need to find the path which harnesses the driving force of capitalism and yet preserves the dignity and security of the working class. socialism has failed the experiment time and again. the german democratic republic was a wealthy european country prior to its annexation by the russians and later by the soviets.

[Justin K.]

It was said:
"I think we need to ask this question "If the capitalism is not good for most people, how come all these people try to come here ?" People vote with their feet and the vote is overwhelming. As a person who spent first 19 years in ex Sviet Union while it was still a socialist country , I REALLY appreciate capitalism and while it is not perfect , it is the best around here."

"While it is not perfect , it is the best around here."
There it is! Thats what's wrong with the world. Just because something's the best does not mean it can't be better. It's said alot with the justice system. "It's the best system in the world!" As innocent people are arrested, imprisoned, and even executed for crimes they did NOT commit. Okay yah, the way of life in the U.S. is the best. But it's not the best that it can be! Are Americans really content with a marriage built on a foundation of "good enough?"

[chris]

Barb writes:

"Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys."

In other words, every syllable that followed this opening sentence tells a fantasy tale.

A story that begins with "Somewhere..." is always a dream story. It is extended wishfulness delivering its catharthis through the misfortunes and comeuppance of some pseudo-villains.

Of course Barb's scenario is total fiction. Never happened. But some people feel better believing it did.

[lc2]

Let's not forget that we have such a thing as American ex-pats, some of whom have even renounced their citizenship. Some were featured in the movie "Sicko."

[Justin K.]

Just because Barbara did not list an exact time and date, along with names and location does not mean it dose not happen Chris. In fact it happens every day. If you don't see it it's because you choose not to see it.

[chris]

lc2 writes:

"In fact I blame tv more than anything else for this predicament ... sorry to sound paranoid, but I think it's about two clicks above evil."

TV. The New Prometheus. Ha ha.

TV. According to you, the airwaves regulated by the government are the agent of our destruction.

Therefore, you think our government is the enemy of the people. To remedy this, you seem to be suggesting vast restrictions on the use of the airwaves. Much like those freedom-loving countries in the middle east and every dictatorship throughout history. Nice.

[roger]

justin, the first hand accounts that i read written by folks who have lived in the soviet union depict a society which is woefully inadequate to secure stability for the population. and this in a european country. there are accounts of waiting years to receive an apartment. and years more for a refrigerator. the apartment you have waited for for years is poorly constructed and poorly maintained. the quality of food for the masses is inadequate and there is rationing. those with political connections and foreigners fare much better as they have hard currency. it is quite common for the crops to rot in fields while the population in the cities are starving. this is because there is no incentive for the population to harvest the crops. there is no profit incentive. yes extractive capitalism has it many faults. on the otherhand we are quite living well by comparison and to ask the government to deliver the best of the best to a population of 300 million people is a fairly tall order.

[lc2]

Yes let's just all decide right now that we're not going to engage chris. I will tell you now the essence of what he'll say: everything is great, there are no problems, anyone who goes broke has only themselves to blame, our health-care-delivery system is the envy of the rest of the world, and again, anything that happens to anyone is by their merits or faults alone and bully for them.

Since we all know that sums up his sensibilities and we're all here to explore the nuances of the situation and move away from a "victim and victimizer" mentality in our discussion ... let's just leave him out of it. I'm sure he'll cut and paste several sections of these comments and goad me into responding but I won't do it.

[chris]

Barb throws out this lunatic statement:

"Then, in a diabolically clever move, the poor – a category which now roughly coincides with the working class – stopped shopping."

Yeah. Sure. No food for the kids. No gas in the car. Not a dime for anything. Yeah. That's close.

She obfuscates:

"Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown."

Yeah, Wal-Mart and Home Depot earned less in the second quarter. Guess what? Target and Lowes earned more. Target and Lowes took some business from WalMart and Home Depot. I guess that means consumers are smart enough to shop where they find the best values.

[chris]

Barb condescends:

"Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?"

In other words, the sarcastic irony of the preceding is not driven by the fact that the "poor" have little money. It is driven by the notion that to be poor is to be stupid.

In Barb's view, the "poor" saps are actually stupid dupes who are too dumb to know anything about anything and must rely on a paternalistic government to save them from their own stupidity.

Barb has such a touching way of insulting the people she purports to champion.

By the way, who buys her books? In the poor sections of New York City there are no Barnes & Nobles. Bookstores are almost non-existent in many black and hispanic neighborhoods.

However, the best prices on used books are found in thrift stores -- Good Will, Salvation Army and other local thrift operations.

Paperbacks are often 50 cents. Hardcover books are usually a dollar. But the selection is limited and I don't believe I've ever seen any of her titles on thrift store shelves.

[Justin K.]

well said Lc2

[Tysyacha]

I do not find communism, as practiced in the former USSR and countries such as China and Cuba, to be an ideal solution to the "extractive capitalism" problem. As roger clearly pointed out, people need an incentive to work, and the abstract concept of "the common good" is not enough for most people, even me, to work their tails off day after day. Money, private property, and private ownership are fantastic!

What I dislike is when people take arch-advantage of the capitalist system through such phenomena as payday loans and exorbitant credit card interest rates in order to try and satisfy their desire for profit. There's a definite difference between true capitalism and just plain greed. Ford had the wisdom and the foresight to make sure his employees could afford to buy Fords. Nowadays, some people (though I believe not most) who work at big-box stores can't afford to buy big-box store items. Strange, this is, and counterintuitive.

I'm proud to say that I'm an Orwellian. Orwell hated that both the communists and the capitalists were playing the old "both sides against the middle" game. In my opinion, most of us in America ARE the middle, and we need to watch out for greed and exploitation on both sides of the proverbial coin.