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 21st cover story on "The Poverty Business," BusinessWeek 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

[GreedyOldPsychopaths]

Ms Ehrenreich,

Great blog! Plutocracy alive and doing well, at least for a few for a spell. Can we anticipate China's credit call anytime in the near future?

[CSE]

Unplugging from the matrix - or being involuntarily disconnected - is an interesting vision of revolution. It is only when the ruling class is adversely affected that substantive change occurs - and in our history it was many times accompanied by violence.

Increasing violence is on the horizon as the have-nots reach critical mass.

Added to those have-nots who have never known otherwise, (the nation's poverty rate rose to 12.7 percent of the population in 2004. This figure represents 37 million people and a third of those are children), are those who were not necessarily uneducated but made some seriously bad choices. By not having experienced recession or hard economic times, many eager young workers fell for the notion that real estate appreciation alone would create wealth while they were only paying interest. When they were smiling in their new, over-priced cars, the idea that they might lose their jobs never occurred to them. Savings, what's that? How can I save when I must "update" to keep up with what I'm seeing on reality TV?

And when these middle achievers get the new lesson - they will be pitted against those less fortunate as a buffer for the wealthy to figure out the next great move, if history is any indication.

It seems to me that our self-imposed segregation by political party is an aid in the larger game of smoke and mirrors. I say self-imposed because their are more than two choices to any given issue or need...but that is another story

[klmebane]

It seems to me that our self-imposed segregation by political party is an aid in the larger game of smoke and mirrors



thank you! somebody needed to say it! at this point the parties are virtually the same. they represent the rich .2% of the country. fuck everybody else.

[CharlesMac]

What a great perspective. Unfortunately sad in its reality... but thinking about the agita these latest financial machinations caused some of the always-do-wells is a tiny guilty pleasure.

Before the vultures swoop down on the title, I think it would be fair to point out that pure capitalism has not been around for over 100 years. Our "free market" is actually stacks of government regulations, special interest corporate goodies, and populist demands. All balancing and counterbalancing to approximate some bizarre version of a level playing field.

When small and medium businesses get the same government gifts and tax breaks as huge multi-national corporations, then we can say there is fair competition.

When an individual of modest means can loophole and shelter their income taxes down to 5%, then everybody has equal opportunity.

These are just small examples.

Rest assured any time somebody is screaming "free market" there is something needed to be eliminated or added, which will tip the scales in favor of their advantageous bevy of breaks.

Some day the big money and corporate juggernauts will realize their fortunes rest upon the common wealth of the nation. The "common wealth" is you and I going to work, earning incomes, buying cars, going to the doctor, paying our school taxes, buying a few shares of stock... and all the ways we participate in the economy. Each day there is a little bit of our efforts that adds to the economy. Whenever we take a licking as a result of their obsession with "more", our tragedy makes their fortunes wobble.

I think the "capitalism" in the title describes the impostor we have, peddled to us 24/7 as the real thing.

When in fact it represents the excess and largess of the powerful, and their greed.

To borrow a thought, imagine "A Day Without the Common Wealth".

[nippersdad]

"Some day the big money and corporate juggernauts will realize their fortunes rest upon the common wealth of the nation."

Unfortunately, globalization is going to put that realization off for a long time. There is a world community to exploit now, not just a national one.

[nyboomer]

My over privileged acquaintances seem to consider $600 for a pair of bleached torn jeans to be a bargain. They don't agree that it is overpriced crap. Maybe I'm wrong. Maybe it is proper and fitting that some children get to throw away the labor product of the less fortunate who must live on next to nothing so that parties can be attended by rich drones.

[philistine]

I think you're right. My jeans get worn and torn because I work in them. I don't need to buy them pre-worn. Your over-privileged acquaintances need a reality check.

[Gangbuster]

Oh please, my supposedly poor students comein with $600 jeans. I have never paid $600 for any item of clothing and never will. So how can someone supposedly so poor that I am paying for his housing, breakfast, lunch, food, utilities, phone, etc. afford $600 jeans/

You are ONLY entitled to what you work for and govenrment has no right to take it from you and even less to give it to someone else. If you develop your skills to the point where you can afford $600 jeans and want to spend your money on that, that is your right and privilege.

You should take a course called, Is Capitalism Good for the Poor? It is offered through the Foundation for Economic Education. www.fte.org

It's very good. To prosper, people need to beleft alone by their government so they can freely do what they need to do and take advantageof opportunities. They also need absolute stable property rights---no one develops if what he works for can be taken away by force of his neighbors who don't work or by government who takes it primarily for themselces and dispenses a pittance to those who won't work.

[kasa5400]

You need to go join a major Christian denomination. They talk about all this charity towrds the poor stuff and camels going through the eye of a needle before the rich man gets into heaven.

If nothing else, it is embarrassing to have one's employees until to afford basic necessities - creates such a bad impression of how the business is doing finanially.

May a restauraant cook with a contagious illness that is untreated because he doesn't have $500 for the office visit, test and drugs cough on your food.

[AntonRobb]

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy: that is the search for a superior moral justification for selfishnes­s."

-John Kenneth Galbraith, American Economist and two time winner of the Presidential Medal of Freedom

[ManhattanMC]

Amen-and religion is America has been reduced to justifying that selfishness.

[charlesmartel1]

Galbraith is the guy who praised the Soviet economic system in the mid 1980's as being vibrant. He has no credibility when it comes to passing judgment on moral justification of anything.

[MajorKong]

It wasn't just Galbraith. The whole defense sector and their supporters in the government spent the 1980's screaming "The Soviets are coming and they're 10 feet tall!" When in fact their economy was collapsing and their military was nowhere near the collosus we were pretending it was.

[TorpedoTommy]

Well in 1990 I would have agreed that Galbraith' statement is wrong, but then came the fucked-up nineties, which have in russia and the other soviet-republics been the time of the great expropriation of the people. Life expectancy went down (for male russians from 64 in 1989 to 56 in 1994) and the rulers which were before hindered by an ideology could then go from being privileged to being super- privileged. The same is true in eastern- european societies.
Looks as if after 150 years of workers movement and 70 years of socialism, which admittedly was carried out badly, Marx is in the end proven right. The problem of capitalism never was free competition, but that it structured the society into classes. Only the strong challenge by the people created chances at least for some. In the time of peoples weakness, the capitalists think they can do what they want, in order to make profits; we'll see how long that era lasts.

[ChristianEcon.com]

The posted quote is dead-on in my opinion, regardless of your perception of Galbraith's credibility. You shouldn't need to employ ad hominem fallacies.

[Schallvain]

I feel that part of this problem is that we have become an "entitlement" society. We no longer have the right to pursue happiness, we believe we have the right TO happiness. We need to consider that we are not all equal. Some people have been dealt a better hand at life than others. Some people will need to work harder for their happiness, and sometimes, their living.

[BillZBubb]

What utter nonsense. You "feel", "we believe", blah, blah.

Do you even know any poor people? Working poor? Before you continue making dumb, ignorant generalizations about what "we" believe, why don't you talk to some poor people?

The people I know want to do better, they want opportunity and a fair shake. They are getting neither from corporate dominated America. They don't believe in any right to happiness.

[Gangbuster]

If you want to have less corporate domination, you have to loosen government control an regulations so small businessmen can expand into the field and compete successfully.

Again, you have to give individuals the freedom to innovate.

[Tommymac]

Most peope just need the chance. Seen the unemployme­nt/underem­ployment numbers lately?

We have become a "ME" society, rather than a "WE" society. That is the problem...­rampant selfishness, the enshrinement of the rugged individual over the nurturing village...­bah.

[Gangbuster]

You make yourself worth more by the skills and leadership you exhibit. IF all you can do is sweep a floor, you are not going to make much because anyone can do that. If you can fly a jet, you will make a lot more because the skill set is much more rare.

Forget the nurturing village, it has never led to prosoperty anywhere in history because it suppresses the differnces that lead to innovation. Villages require strict conformity. You nurutre your family and allow people to develop the unique capacities and talents that they have. When you have someone unique and innovative, you can prosper with it AND raise the standard of living of everyone aroun you. If there were no individuals you'd have what you have here---a lot of people whining and complaining, but never actually producing anything new or of value.

[Gangbuster]

You cannot do anything for someone else until you have first taken care of yourelf. If you can't read, you cannnot teach someone else to read. If you can't drive a car, you cannot teach someone else.

The more an individual develops his unique capacities, the more he can contribute first to those he is responsible for, family, etc, and then to his community overall.

It is where the individual rights are sacred that man has developed the most. Where individual rights are not priotized, men simply become slaves or cannnon fodder.

[Gangbuster]

In the US everyone has multiple chances. It starts with the over 13 years of free education and free public libraries which you can use to learn just about anything. You can move freely from areas where jobs are limiited to where they are unlimited.

But you have to make opporunities too---develop a skill and even if you have no experience you can get it by offering to work for a company for a week for free. Usually that gets you a job, and if not, you now have a reference and experience to tout.

[jlxn]

I think you have things a bit confused.

What we have here in the United States is a "Privileged Society" not an "Entitlement Society." What I mean by that is there is a small group who feel they are privileged and it is their right to reap the majority of benefits offered by the world at the expense of those you rightly state must work harder for their living.

The phrase "Entitlement Society" is used primarily by those who are members of the privileged class, or at least who think themselves members, to inflict guilt in the rest of the population for expecting such extravagances as an affordable and safe place to live, health care and safe and reasonable working conditions.

My experience, in my 50 long years, has been that these people who are paid so little, work very very hard for every penny they earn and deserve our respect.

[TeddySalad]

Hooray! Someone with a brain. You are sooo right on.

[klmebane]

why do republicans read barbara ehrenreich?? i mean, the way they think as far as their concerned she's the equivelant of the devil, right?

[theyak]

buddycor,
your suggestion to get a teachers certificate is almost ludicrous. teachers don't get paid squat, compared to the value of the service they perform. certainly not enough to pay a mortgage as a single income in America today. especially not on top of the student loans.

[philistine]

It struck me as a little "let them eat cake"-ish too.

[CookieWrites]

And with the expansion of NAFTA (thanks to the Republicans AND Democrats in Congress) the number of the poor will grow dramatically as the middle class slides downhill in a world that the rich rejoice as flat.

[Susannah111]

Anticipating the subprime crisis and how many Americans would be unable to pay for their homes and their overextended credit cards, the government toughened the bankruptcy laws. Talk about "evil-doers!"

[TeddySalad]

1% in Foreclosure on Sub Prime loans. Not real bad. Blame people who take the fall, not the people that offer the goods. No personal responsibility in this world anymore.

[klmebane]

people can't make a responsible decision about investments and what the fine print means if they don't get an education that teaches them how to interpret it.

[kasa5400]

Where do you get that number from?

For example,In CLeveland, Ohio it is 30% of subprimes now in default and forelosure with more to come.

Do check RealtyTrac - much more accurate.

[Bladernr1001]

Spoken like a true victicrat.

Easy money (low interest rates) was the biggest contributor to all this. I think you can blame the fed mostly. Not the free market.

[apogee2perogee]

If it was truly low interest money, and not variable interest money, then the problem would be much smaller. 'Easy money' isn't so easy when the interest rate takes the payment up 30%.

Come to think of it, you are exactly wrong, and preening over a diametrica­lly-opposi­ng contradiction between truth and words. You must be a neocon.

[Independent voter]

I believe that there is a horrible cyle at play here. It has taken years to come full circle, but it goes as follows:

People buy cheap crap made in Communist China from Wal-mart.

Wal-mart family makes a huge fortune pimping for Communist China.

American jobs are lost to China where the average manufacturing wage is $0.65 per hour. The average US manufacturing was $20.00 per hour.

Wal-mart family, while raking in the dough, treats it workers like dirt and pays a pittance without benefits to most workers who are 'part time'.

American's who lost their jobs or who work at Wal-mart can no longer afford to shop at all, much less afford to buy more cheap crap from Communist China.

Wal-mart can't figure out where the customers went.


When Sam opened his first Wal-mart, he proudly proclaimed that everything was made in the USA. Sam subsequently sold out. Hope Sam burns in hell.

[philistine]

Sam is dead. "Sons of Sam" seem to be less interested in promoting U.S. goods.

[yellowdogSC]

phil,

Didja see "The High Cost of Low Price" by Robert Greenwald? (May God bless his name.)

We all know the "Sons, etc." are all in the 10 richest humans in the solar system (and beyond.)

The "Sons, etc." have a huge underground bunker in Arkansas, already stocked for generations, complete with armed guards. (Waiting for rapture, I’d guess.)

Wal-Mart has a fund for employees in dire need. (No, REALLY!) Employees have donated hundreds of thousands, if memory serves. The "Sons, etc." have donated...­..$6,000.

I'm just kidding! They've donated BILLIONS and BILLIONS!

[WmC]

'Conservative columnist Niall Fergusen laments the low levels of "economic literacy" that allowed people to be exploited by sub-prime loans.'

I wonder if Fergusen had any insight into the "economic literacy" of all those savvy investors who picked up those sub-prime mortgages on the secondary market? Or how about the "economic literacy" of the sub-prime lenders, for that matter?

[kellygrrrl]

If any of you watched the miniseries "The Company"
did you feel the same at the very end last night when Alfred Molina said "We won, didn't we."
He was referring to the victory of Capitalism over Communism. As he said the line, I believe it was supposed to be the early 90's at this time, hard to tell as the story went all over the place from the 30s to the 90's, but I just kept thinking, hmmm, we'll see. I am not so sure our society, culture and economy can ever again reflect those years. I imagine right now the battle is between the high-power high-wealth minority who would prefer a Class System Dictatorship vs. the masses who envision a *slightly* socialistic situation wherein all Americans are at least afforded the right to health care and a safe work environment. Just wait, the Repubs are going to be calling us Commies in no time.

[jlxn]

Enjoyed reading your post, just as I enjoyed reading Nickel and Dimed, On (Not) Getting by in America and Bait and Switch. Insightful writing, you have a knack for hitting the nail on the head.

Thank you.

[Kakistocrat]

We really do not matter. As an indication of how the "haves" view the rest of us, remember the life insurance that big companies took out on their employees, with the companies named as the beneficiaries? The companies called it "dead peasant" insurance. That is what we are. Peasants. We exist only to line the pockets of the wealthy.

As such, it does not matter to the corporations if we dry up as a source of money, so long as there is another source, like India or China, whose populations are far greater than ours. Wal-Mart is helping to create a spending class in the largest population on earth, along with the cheapest sources of labor, which must drive down the costs of labor here just so we can survive economically. The end result will be a universal cheap labor pool who can spend just enough to survive (maybe), but whose breadth will insure the continuation of tremendous wealth to those who already possess it. This is the Republican wet dream.

Welcome to the third world, USA.