Diminishing ourselves to suit the crisis

The economic crisis has been a disaster for recent college graduates. Of course it's been a bigger disaster for young people who have not graduated from college, but that demographic for some reason consistently draws less interest from the media. Still, the collapse in life chances for the college-educated is remarkable. As The New York Times reports, 

The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008 . . . Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted. That compares with 90 percent of graduates from the classes of 2006 and 2007.

As the so-called recovery continues to peter out, those prospects aren't going to get any better. What we're seeing here is the advent of a lost generation.

These people are the innocent victims of a systematic global crisis of capitalism. Yet the letters published in response to this article betrayed no sympathy. The director of one college career counseling office condemned any recognition of the job market’s caprice: “We know how people get jobs, and luck rarely has anything to do with it.” How do people get good jobs? “The hard work of networking early on in a college career, wisely chosen internships, using summers well (which too few students do) and other positioning activities greatly enhance the chance of a good job after graduation.”

A Chicago career counselor advised recent grads to abandon their complacent belief that a degree entitles them to a job – what matters is "how directed candidates are and how they present themselves". Ultimately, "[s]tudents have to prove why they should be hired over others".

A final letter-writer counseled cold realism in response to the new normal: “Engineers, accountants, health care workers, computer scientists and highly skilled craftsmen will have a chance to achieve the American dream, but students double majoring in French and Spanish will be living in Mom’s basement.” “In a just world,” he admonished, “degrees in humanities would carry a warning on the diploma: ‘Earning this degree, while intellectually stimulating, may increase your chances of lifelong poverty and disillusionment.’”

A truly grim vision of “a just world”, this. Rather than demanding a world in which each individual is free to develop his or her potentials and find fulfillment, justice demands that we all succumb to that brutal force beyond our control, “the economy”?

The economy is not a force of nature, but an entity constituted by human beings. Still, the letter writer is right to recognize that it stands above us, outside us. It constrains our potential, fatally restricts our freedom, arbitrarily extinguishes the future of some, the very lives of others, while equally arbitrarily raising some of us – an increasingly small number – to unimaginable heights of wealth and power. What he fails to see is that a just world lies not in diminishing and deforming human beings to serve the needs of the economy, but in finally claiming control over the economy so that it serves human beings.

Yet the experience of neoliberalism seems to have made it nearly impossible for most people to locate our problems in the nature of the economy. Instead we have seen two broad responses to the crisis: first, a determination to adapt to the “new normal” – to discover those strategies of personal conduct (seen, eg, in these letters, and more broadly in the debate over whether a college education is “worth it”) or of public policy (most prominently, by slashing government budgets) that seem to offer efficacy under newly straightened circumstances. There are even those who openly embrace the shrinking possibilities of human society, like those who hope for a purification of society thru austerity. And this is by no means solely a syndrome of the right.

The other response has been resignation or despair. Unlike in the Arab world, where dissatisfied youth have fastened on their authoritarian governments as the source of their troubles, the dysfunctions of neoliberalism are in some ways less mystified in the United States. There is no convenient scapegoat to mobilize against; here we are confronted directly with the arbitrary nature of capitalism. Finding a decent job is “more about luck than anything else”, as one recent college graduate put it.

Yet fewer obstacles to seeing the real problem has not translated into a better understanding of it. Most kinds of subjectivity produced by neoliberalism seem incapable of grasping the social totality, and even less are they able to imagine a world organized on different principles. Incredibly, the crisis of neoliberalism seems to have actually further impoverished the social imaginary. When wealth was expanding, if only for the well-off, it seemed possible to make a better world by redistributing it. With stagnation that possibility is gone. When everyone’s labor was being exploited, renouncing work seemed like a way out. Now that it’s become clear that, under capitalism, the only thing worse than being exploited is not being exploited, what path is left? (This is a point made nicely by Crimethinc, once one of the worst offenders in the anarchist dissent against neoliberalism, tho they remain somewhat naïve of history.) Hence the paradox that, tho the left critique of neoliberalism has been vindicated with a vengeance, the left seems more helpless than ever.

If there is to be any hope of escaping the crisis, much less of attaining that just world of true freedom in which we control our own fate, we must reject both the narrow immediacy of falsely “realistic” approaches as well as the temptation of despair. But hope cannot be based solely on a negation; it requires an analysis to justify the idea that something different is possible, and it requires the direction provided by concrete steps that hold out the promise of fulfilling that hope. The absence of these is perhaps the left’s greatest failure.

Dread at the CFA

Last week the CFA institute held its annual gathering in Edinburgh (see above) to discuss the future of investment. The CFA is a global organization of investment professionals that bestows credentials and disseminates analysis through the world of investors and investing firms. It's kind of like the global bar association for financial analysts, and it's surprising that there aren't more cooky conspiracy theories about it.

I haven't dug into what happened at the conference yet, but it looks pretty grim. I'll try to see what I can but I wanted to post the Financial Times's video, which gives a gloss on the mood. In short: we're screwed. But the reasons why warrant further analysis:



One of the most interesting comments is regarding the possible changing relationship between monetary policy and emerging markets. Code for US-China economic relations. The claim is that emerging markets have been making their policy based on the US Fed to ensure stable exports to the US. Whereas the US controls inflation through interest rates at the Fed (which in turn control bank lending and thus access to capital), China has controlled inflation through their interest rates but also through artificially devaluing their currency, pegging it to the US dollar. In order to do this it has needed to buy US Treasury bonds and thus has supported the growing US debt in such a way as to keep neoliberal American hegemony alive.

But the crisis has put pressure on this approach. A shock to commodity prices has come as investors bail out of currencies and bonds over fears of sovereign debt. This impacts Western economies but it impacts emerging economies all the more because of two things. First staple commodities, basic food and fuel, are a much greater part of overall consumption. This means that increases in staple commodity prices get passed on to consumer prices much faster. The second reason is that these economies have begun to reach the limits of their seemingly endless labor markets and as a result wages are rising, which in turn allows merchants to raise prices both because labor costs have risen but also because purchasing power is rising. This becomes a positive feedback loop and woosh! Food prices in Brazil go up by 10%.

Emerging economies need to do something about this, or they'll be in a host of trouble. The way they have been doing this seems to have bottomed out, buying US Treasury bonds is not going to stop this cycle. What this means is new ways to control inflation, possible currency valuation. This however would mean the end to China's strategic subservience to the Fed. In fact the Fed seems to have bottomed out itself in its ability to control the economy. Its last ditch effort, Quantitative Easing (effectively arbitrarily raising the money supply) has failed to create lasting effects and was only a band-aid over a wound that will not heal itself.

A transition of monetary leadership on its own does not amount to a structural reconfiguration of capitalism of the kind this crisis calls for. But it surely will not come on its own, and will provide crucial constraints on what the new system looks like. For all its decentralizing effects, neoliberalism ultimately rested on American and Western hegemony. What will an overcoming of neoliberalism be that is either more diffuse or in the hands of openly authoritarian regimes like China or Singapore?