The Economist on Unrest in China

A dangerous (but exciting) year

Economic conditions and social media are making protests more common in China—at a delicate time for the country’s rulers

Jan 28th 2012 | CHENGDU, DONGGUAN AND WUKAN VILLAGE | from the print edition

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IN AN industrial zone near Chengdu, the capital of Sichuan province in south-west China, a sign colourfully proclaims the sprawl of factories to be a “delightful, harmonious and happy district”. Angry steelworkers must have winced as they marched past the slogan in their thousands in early January, demanding higher wages. Their three-day strike was unusually large for an enterprise owned by the central government. But, as China’s economy begins to grow more sedately, more such unrest is looming.

China’s state-controlled media kept quiet about the protest that began on January 4th in Qingbaijiang District, a 40-minute drive north-east of Chengdu on an expressway that crosses a patchwork of vegetable fields and bamboo thickets. But news of the strike quickly broke on the internet. Photographs circulated on microblogs of a large crowd of workers from Pangang Group Chengdu Steel and Vanadium being kept away from a slip road to the expressway by a phalanx of police. Word spread that police had tried to disperse the workers with tear gas. In the end, as they tend to—and undoubtedly acting on government orders—factory officials backed down, partially at least. The workers got a raise, albeit a smaller one than they wanted. Managers’ wages were frozen.

Strikes have become increasingly frequent at privately owned factories in recent years, often involving workers demanding higher wages or better conditions. Private firms, like state ones, are usually strong-armed by officials into buying off strikers. The thinking is that capitulating keeps a lid on news coverage and helps to prevent unrest from spreading. Yet the explosive growth in the use of home-grown versions of Twitter has made it easy for protesters to convey instant reports and images to huge audiences. The Communist Party’s capacity to stop ripples of unease from widening is waning—just as economic conditions are making trouble more likely.

Anger at the bottom

At a cheap restaurant in Qingbaijiang, opposite a dormitory compound for Pangang employees, grimy steelworkers complain that the government’s promise of an extra 260 yuan ($41) a month is hardly enough. Many of the lowest-paid earn as little as $190 monthly. But the workers know that the steel industry is struggling—and that vengeance on persistent troublemakers can be fierce. A police notice warns of legal action, including imprisonment, against any strikers who continue “disrupting public order”. Security agents follow your correspondent in an unmarked car.

All this is partly a result of the curb on China’s stimulus spending and carefree (reckless, many would say) bank lending in the wake of the global financial crisis of 2008. There are fewer new construction projects; demand for steel has flattened. Pangang’s plant in Qingbaijiang is running at a loss. The number of steel firms in the red rose from nine in September to 25 a month later. Even though the government is less worried about inflation now than it was a few months ago, and is releasing the economic brakes a little, the steel industry is expecting a lean period. Some firms might have to close.

Overall economic growth is still looking robust. In the final three months of 2011 China’s economy grew by 8.9% compared with the same period a year earlier—enviable by almost anyone else’s standards, though still the slowest since the second quarter of 2009. The slowdown has so far been gentle, and in line with government efforts to prevent overheating. But this does not stop officials worrying that the coming year could be unusually difficult.

Europe is the biggest buyer of Chinese products—and the euro zone’s travails have plunged many manufacturers into despair. Depressed demand in both Europe and America has taken its toll on factories. The steelworkers’ strike was one of many in recent months, most of them in China’s export-manufacturing heartlands near the coast (see map).

Chinese exporters do not face as big a shock now as they did in late 2008, when the financial crisis caused a sudden collapse in demand and the loss of as many as 20m migrant-labour jobs. But that time China’s recovery was rapid, helped by stimulus spending of 4 trillion yuan (more than $630 billion at today’s exchange rate), as well as developed economies’ own stimulus projects. The impact on migrant workers was further mitigated by the coincidence of the worst of the downturn with the lunar new-year holiday, when most migrants go home for lengthy periods.

This time exporters face protracted slow growth in developed economies, and the risk that the euro zone’s difficulties might worsen. China’s policymakers do not want another lending spree that might burden the financial system with more bad debt, on top of the borrowing accumulated during the previous binge. The country’s relatively low budget deficit (about 2.5% of GDP in 2010) gives it room to spend more on social housing, social security, tax cuts for small firms and consumer subsidies. These could help promote private consumption—eventually.

Nerves at the top

The long-term plan is for China to wean itself off its reliance on exports and investment projects such as roads, railways and overpriced property developments, and for domestic consumption of goods and services to play a much bigger role in fuelling growth. But this rebalancing will be a long, hard slog. Officials do not want shock therapy because it could threaten the jobs of many of the 160m migrants who come from the countryside to provide the cheap labour behind China’s exports.

This economic quandary has become more acute at what is a delicate political moment for the Communist Party. Later this year (probably in October or November), the party will hold its five-yearly Congress, the 18th since its founding in 1921, at which sweeping changes in the country’s top leadership will begin to unfold.

The Congress will “elect” a new 300-member central committee (in fact it will be hand-picked by senior leaders). This will immediately meet to rubber-stamp the appointment of a new Politburo, a body that currently has 25 members. All but two of the Politburo’s nine-member inner circle, the Politburo Standing Committee, will be replaced. Two appointments are all but certain: Vice-president Xi Jinping to take over from President Hu Jintao (as party chief after the Congress and as president next March); and Li Keqiang to replace his boss, the prime minister, Wen Jiabao, also next March. There will be much jockeying for the other slots.

It is a decade since China experienced a leadership changeover on this scale—and the first time since the late 1980s that the advent of a new generation of leaders has coincided with such a troubled patch for the economy. The previous time, in 1988, an outbreak of inflation threw Deng Xiaoping’s succession plans into disarray, giving conservatives ammunition with which to attack his liberal protégés. The party’s strife erupted into the open the following year as students demanding greater freedom gathered in Tiananmen Square.

The threats to the party today are very different, but fear of large-scale unrest still haunts the leadership. The past decade has seen the emergence of a big middle class—nearly 40% of the urban population, as some Chinese scholars define it—and a huge migration from the countryside into the cities. The party takes no chances. Large numbers of plainclothes police are on permanent watch in and around Tiananmen Square. (Since 2008, visitors to the vast plaza have had to undergo airport-type scanning and searches.) Early last year, when anonymous calls began circulating on the internet for citizens to gather in central Beijing in sympathy with the uprisings that were breaking out in the Arab world, the location specified was not Tiananmen but Wangfujing, a shopping street nearby. The police responded by flooding that area with officers too.

In the Pearl River Delta, which produces about a third of China’s exports, there are plenty of signs of malaise. Outside a Taiwanese-owned factory in Dongguan, a dozen or so police officers wearing helmets and carrying clubs watch a small group of angry workers complain that the owner has run away. The factory (which makes massage seats) is unable to pay its debts. They are afraid that, this time, after the lunar new year break they will have no jobs to come back to. A plainclothes policeman tries to silence them. Then a uniformed officer moves in with a video camera, and most of the workers retreat, keeping a prudent silence.

Others in the delta have been less reticent. In November thousands of employees at a Taiwanese shoe factory in Dongguan took to the streets in protest against salary cuts and sackings, purportedly caused by declining orders. Protesters overturned cars and clashed with police. Photographs of bloodied workers circulated on the internet. There have been further protests in recent weeks.

Guangdong province also saw a wave of strikes in 2010. At that time workers—mainly in factories supplying the car industry—were demanding only higher pay and improved conditions. Most of those disputes were quickly and peacefully settled, and rarely involved action on the streets. The latest spate of confrontations looks different. The steelworkers at the state-owned factory near Chengdu wanted a raise; but, these days, rather than bidding to improve their lots, workers are mostly complaining about wages and jobs being cut. The strikers seem more militant.

A report published this month by the Chinese Academy of Social Sciences (CASS) says that, compared with those in 2010, the strikes of 2011 were better organised, more confrontational and more likely to trigger copycat action. “Workers are not willing this time to accept that they have to make sacrifices for the national good because firstly they have already made enough sacrifices, and secondly, fewer are willing to just pack up and go home,” says Geoff Crothall of China Labour Bulletin, an NGO in nearby Hong Kong.

Where the heart is

The government hopes that jobless migrants will return to their home villages, where they or their families still enjoy a tiny land entitlement on which they can subsist, or find work closer to their hometowns. Many will: job opportunities in the interior have grown in the past few years, thanks to a surge of government investment in central and western areas, aimed at evening out economic growth.

Last year Chongqing, a region in south-west China which had long exported large numbers of workers to the coast, for the first time employed more of its surplus rural workforce locally than it sent to other areas. Chongqing’s party chief, Bo Xilai, is believed to be a contender for the Politburo Standing Committee. He has been trying to turn Chongqing into a model for the absorption of rural labour into cities, a project that has involved vast spending on low-cost housing to accommodate the region’s migrants.

But rising numbers of migrant workers in big cities—more than 60% according to the National Bureau of Statistics in 2010—are themselves the offspring of migrants and have no experience of agricultural life. They regard themselves as urbanites, even if they are excluded from many of the welfare benefits to which city-dwellers are entitled. They are better educated than their parents’ generation, and more assertive. A riot by migrants last June in Dadun, another factory town in Guangdong where many of the country’s jeans are produced, hinted at the problems China could face if second-generation migrants lose hope. The manhandling of a pregnant woman by security guards prompted two days of violence, with thousands of migrants setting fire to vehicles and government buildings. Strikes in coastal factories now mainly involve second-generation migrants, according to the report by CASS.

Such unrest is not about to topple the party. As Chinese officials nervously digest the implications of unrest in the Arab world, demonstrations in Russia and an easing of repression in Myanmar, they draw comfort from the consistency of Chinese opinion polls. These appear to show high levels of trust in the central leadership and of optimism about the future under party rule. Many ordinary Chinese are contemptuous of local authorities, but still believe that leaders in Beijing are benign.

The power of weibo

But according to Victor Yuan of Horizon, a polling company in Beijing, citizens’ satisfaction with their own lives and confidence in the government, though high, experienced a “big drop” in 2010 and didn’t recover last year. Confidence in the government has fallen by about 10 percentage points, to around 60%.

Mr Yuan says the rapid spread of microblogs has contributed to this decline. By the end of last year, weibo, as Chinese versions of Twitter (itself blocked in China) are known, were used by nearly half of the 513m Chinese who had accessed the internet in the previous six months (see chart). This was slightly more than the number who used e-mail and a rise of nearly fourfold over the year before, according to the government-affiliated China Internet Network Information Centre. Li Chunling of CASS estimates that 90% of urban internet users under 30 are microbloggers.

Weibo have transformed public discourse in China. News that three or four years ago would have been relatively easy for local officials to suppress, downplay or ignore is now instantly transmitted across the nation. Local protests or scandals to which few would once have paid attention are now avidly discussed by weibo users. The government tries hard, but largely ineffectively, to control this debate by blocking key words and cancelling the accounts of muckraking users. Circumventions are easily found. Since December the government has been rolling out a new rule that people must use their real names to open accounts. So far, users seem undeterred.

In the build-up to the 18th Congress, China’s leaders will become especially anxious to prevent embarrassment to the party. Weibo are likely to make their lives a lot more difficult—at least that was the lesson from a ten-day stand-off in December between police and residents of the coastal village of Wukan in Guangdong.

The villagers’ protest was typical of thousands that roil the Chinese countryside every year: a complaint about the seizure of agricultural land by local officials for private redevelopment. Unusually, however, in Wukan citizens took control of their village and drove out party hacks and police. Officials were alarmed by images that circulated onweibo of triumphant residents rallying in the centre of their village, like students in Tiananmen Square 22 years ago (see the picture at the start of this piece). They tried, unsuccessfully, to stop news spreading by ordering a block on the village’s name and location.

The villagers gave up their protest on December 21st after a rare, high-profile intervention by the Guangdong party leadership, which promised to look into their complaints. Remarkably, on January 15th the protest leader, Lin Zuluan, was appointed as the village’s new party chief (the previous one having disappeared, it is thought into custody). Even the party’s main mouthpiece in Beijing broke its silence on the issue, saying it showed that local officials should stop treating citizens as adversaries. Wang Yang, Guangdong’s party chief, who is believed to be a contender for a senior Politburo position this year, said the incident demonstrated how people’s “democratic consciousness” was getting stronger. He called on officials not to ignore citizens’ concerns.

Few regard the Wukan episode as a turning point for the party. At least one protester on Tiananmen Square has since been seen being dragged away by police in the usual fashion. But it has stirred debate, online at least, about how the party should respond to protests and other forms of public pressure. And villagers in Wukan warn that they will not be satisfied until they have reclaimed their land. One protest leader says there could be another, “even bigger” uprising.

Not everyone has a home to go to

The new leadership that will take over after the upcoming Congress will quickly face tests of its ability to handle social unrest. Even if the country does not appear on the brink of an Arab-style upheaval, many Chinese academics say the next few years could see burgeoning instability, exacerbated by slower economic growth and a widening gap between rich and poor. China’s outgoing leaders have tried to suppress debate about ways of reforming the political system to allow the public to voice their grievances more freely. But many analysts believe there is a pressing need for such reform. Today’s “China model”, as some in China and abroad were tempted to call it after Western economies fell into disarray three years ago, appears increasingly unsustainable.

Chinese roulette

An intriguing glimpse of how at least some in the party elite might see things was offered last April when Zhang Musheng, a prominent intellectual, published a book calling for a revival of the one-time Maoist goal of building a “new democracy”. General Liu Yuan, the son of Liu Shaoqi who was China’s president during the Mao era, openly backed the idea. Mr Zhang (himself the son of a late senior official, as are several of the new leaders-to-be) said a new democracy would involve continued party rule but with much greater freedom.

Few of China’s liberals believe there is much chance of any leader pursuing this idea in the near future. But Mr Zhang’s description of China today has struck a chord (and has been circulated widely by weibo users). A well-known economist, Wu Jinglian, picked up a phrase of Mr Zhang’s in an essay in Caijing, a Beijing magazine, in which he attacked the notion of a “China model” and called for political reform. The phrase of Mr Zhang’s that made an impression was one describing China as “playing pass the parcel with a time bomb.”

Financial Times on Gramsci + American politics

January 9, 2012 7:21 pm
Why I’m feeling strangely Austrian

By Gideon Rachman

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The old is dying and the new cannot be born: in the interregnum a great variety of morbid symptoms will appear.” That statement from the Prison Notebooks of the Italian communist Antonio Gramsci was a favourite of student Marxists when I was at university in the 1980s. Back then it struck me as portentous nonsense. But Gramsci’s observation does resonate now – in an age of ideological confusion.

Old certainties about the onward march of the markets are collapsing. But no new theory has established ideological “hegemony”, to use the concept that Gramsci made famous. Some ideas are, however, gathering new strength. The four strongest emerging trends that I can spot are, in very broad terms: rightwing populist, social democratic-Keynesian, libertarian-Hayekian and anti-capitalist/socialist.

Each of these new trends is a reaction against the dominant ideas of 1978-2008. Back then, for all the nominal differences between communists in China, capitalists in New York and the soft left in Europe, their agreements were more striking than their arguments. Political leaders from all over the world talked the same language about encouraging free trade and globalisation. Increasing inequality was embraced as a price worth paying for faster growth. Deng Xiaoping set the tone when he declared: “To get rich is glorious.” Ronald Reagan or Margaret Thatcher could not have put it better.

In post-crisis Europe, however, rightwing populism is on the rise – from the Freedom party in the Netherlands to the National Front in France and the Northern League in Italy. The populists are anti-globalisation, anti-EU and anti-immigration – the common thread being that all these forces are felt to be hostile to the interests of the nation. Hostility to Islam links Europe’s populist right to parts of the Tea Party movement in the US.

There is some overlap between the populists and the libertarian Hayekians – but the two movements have different obsessions. In the US, Ron Paul, the maverick Republican, carries the banner for libertarianism. He fondly recalls dining with Friedrich Hayek himself and watching an inspiring denunciation of socialism by Ludwig von Mises, another economist of the Austrian school. That explains Mr Paul’s otherwise baffling remark, after last week’s Iowa caucus, in which he said: “I’m waiting for the day when we can say we’re all Austrians now.”

The libertarians are unusual because they argue that the current crisis is caused not by an excess of capitalism, but by too much state intervention. As far as the Austrian school is concerned, the Keynesian “cure” for the crisis of capitalism is worse than the disease.

Mr Paul is the purest advocate of a powerful conviction on the American right that the US is afflicted by an over-mighty state. The urge to slash the government back into the 18th century is not a common one in Europe. But Paulite suspicion of central banks that threaten to debase the currency is powerfully echoed in Germany – where the Hayekian right is horrified by the operations of the European Central Bank, and by bail-outs for bankrupt nations. This ideological trend is not confined to the west. In a recent article, Simon Cox of The Economist argued that policy debates in China about the state’s role in reflating the economy also pit Hayekians against Keynesians.

In the west, the fiercest opponents of the Hayekians are the Keynesian-social democrats. Their belief in deficit spending as the key to stimulating the economy often goes hand in hand with a call for a more active and expansive state. In Europe, where there is little scope for more state spending, the social democrats are arguing for much tougher regulation of high finance, a revival of industrial policy – and a renewed stress on tackling inequality. While efforts to label Barack Obama a “socialist” are silly, it is fair to label him a social democrat. The US president does not reject capitalism, but he does seek to soften its edges through a more active state that promises universal healthcare and redistributive taxation. The fact that inequality has become a global concern from China to Chile, and from India to Egypt, suggests that this is another trend that has gone global.

The failure of the hard left to capitalise on the economic crisis testifies to how profoundly communism was discredited by the collapse of the Soviet system. But mass unemployment in Europe might yet produce the conditions for the revival of an anti-capitalist movement. Greece’s two far-left parties are currently at about 18 per cent in the polls. The diverse groups that campaign under the banner of Occupy Wall Street contain some genuine socialists. And China has a powerful “new left” movement that pays lip-service to Maoism.

Events will determine which of these ideological trends sets the tone for the new age. Most people will be buffeted by personal circumstances, and by the news.

Under normal conditions I would probably sign up with the social democratic tendency. The Tea Party is not my cup of tea. But I spent the weekend reading newspaper accounts of the ever more incredible figures that may have to be poured into the bail-outs for banks and countries in Europe. Then I turned the page to read of demands for more protectionism and regulation in the EU. For light relief, I then went to see The Iron Lady – the new film about Margaret Thatcher. The whole experience has left me feeling strangely Austrian.

Financial Times on Capitalism in crisis: The code that forms a bar to harmony

By John Plender
The enrichment of bankers, corporate chiefs, flash traders and their cronies is testing tolerance of inequality, argues John Plender in the first part of an FT series
January 8, 2012 9:15 pm
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Greedy bankers, overpaid executives, anaemic growth, stubbornly high unemployment – these are just a few of the things that have lately driven protesters on to the streets and caused the wider public in the developed world to become disgruntled about capitalism. The system, in all its different varieties, is widely perceived to be failing to deliver.

Business in the leading English-speaking countries attracts misgivings. Fewer than half of the American and British people sampled in the 2011 Edelman Trust Barometer have faith in business to do what is right. The survey rates the US and the UK only marginally ahead of Russia on this score. So there is talk of a crisis of legitimacy and an erosion of business’s “licence to operate”


This article, the first in a series on rethinking capitalism after the financial crisis that began in 2007, argues that popular acceptance – which is a basic condition for business success – has waned in the Anglosphere for good reason. At the heart of the problem is widening inequality. In a recent study, the Paris-based Organisation for Economic Co-operation and Development, the club of developed nations, declared that the wealthiest Americans “have collected the bulk of the past three decades’ income gains”. Much the same is true of the UK. In both cases, most of the spoils have gone to finance professionals and top executives.

As Stewart Lansley, author of a recent book on inequality*, puts it, the modern economy appears to consist of two tracks: a fast one for the super-rich and a stalled one for everyone else. Those in the slow lane enjoyed rising living standards before 2007, despite stagnant real incomes, thanks to increased borrowing on the security of their homes. Since the crisis, however, American and British homeowners have faced a long and deep squeeze on real living standards, while struggling to service an unprecedented level of indebtedness. At the same time, says Mr Lansley, finance has come to play a new role as “a cash cow for a global super-rich elite”.

In continental Europe, the increase in inequality is less pronounced and the legitimacy problem has more to do with the way imbalances in the eurozone are being addressed. Northern Europeans resent a monetary union that has permitted southern Europe to engage in what they see as fiscally profligate behaviour, while southern Europeans and the Irish are required to submit to extreme austerity programmes that exacerbate their sovereign debt problems.

As the German-led policy elite inches towards “more Europe” as a solution to the fissures in the eurozone, it is far from clear that more Europe is what the citizens of Europe want. Democratic legitimacy has been largely lacking from the outset of this gigantic monetary experiment. On both sides of the Atlantic there is now a risk that reasonable aspirations to equality of opportunity are being undermined, accompanied by a growing threat of political instability. Support for open trade and free markets is also being adversely affected.

Misery and money motive

The problem of consent in relation to capitalism is nothing new. In fact, it returns with nagging frequency. In the early years of the industrial revolution, average per capita incomes were slow to rise and the contrast between the plight of the working population and the lifestyle of rich manufacturers prompted savage diatribes such as that of Charles Dickens in Hard Times. Even when living standards did rise, David Ricardo and Karl Marx worried whether the free markets trumpeted by Adam Smith could produce an income distribution that was politically tolerable.

By the late 19th century the debate turned more heavily on the moral question posed by the unedifying behaviour of the American robber barons at a time of spectacular economic growth. The centrality of the money motive in wealth creation appeared to detract from capitalism’s legitimacy unless there was an implicit social contract between the rich and the rest of society, whereby the wealthy tempered ostentation and engaged in philanthropy.

Then, in the unstable 1920s and the Depression of the 1930s, the efficacy as well as the moral basis of capitalism was once again called into question. While F. Scott Fitzgerald chronicled the moral vacuity of jazz age capitalism in The Great Gatsby, John Maynard Keynes, who provided a theoretical basis for the mixed economy and a more humane form of capitalism, was notably acerbic on what he called “individualist capitalism” and the money motive. Such questioning was sharpened by the existence for the first time of a seemingly successful alternative to capitalism in the Soviet Union; also of competing models, such as the corporatist approaches developed in Germany and Italy.

What, then, is different about today’s outbreak of disaffection? Perhaps the most important difference is that it is not the product of despair. The people in Manhattan’s Zuccotti Park and on the steps of St Paul’s Cathedral in London had no need of soup kitchens and took to their tents out of choice, unlike many in the 1930s US who slept in cardboard box colonies – Hoovervilles – out of necessity.

If there is no proliferation of soup queues, it is because in all the economies of the developed world capitalism has been humanised to a greater or lesser degree by forms of social democracy and by bank bail-outs. Unemployment in the US has gone nowhere near the 25 per cent rate that prevailed in 1933. While there are exceptionally high rates of youth unemployment, especially in southern Europe, there is more of a safety net for the victims than in the Depression. And if today’s protesters articulate no coherent programme, it seems clear that underlying frustrations are to do with perceptions of unfairness, not immiseration.

Much of that frustration relates to the banks. In contrast to the 1930s, when banking was about deposit-taking and lending, modern bankers engage in complex trading that they themselves do not always understand and whose social utility is not apparent to ordinary mortals – or even to the likes of Lord Turner, head of the UK Financial Services Authority, who famously declared that many parts of the banking business had “grown beyond a socially reasonable size”. Many have shown a disregard for their customers, while fiduciary obligation has become a casualty of deregulation and the shareholder value revolution. There is a widespread conviction that these bankers constitute a protected class who enjoy bonuses regardless of performance, while relying on the taxpayer to socialise their losses when they have taken excessive risks. At the same time, the public is aware that top executive rewards more generally are poorly related to performance and tend to go up even when profits fall.

Human capital or ‘hand’

Such resentment is not completely new. It bears some resemblance to the hostility towards profiteers after the first world war, which prompted Keynes to remark: “To convert the business man into the profiteer is to strike a blow at capitalism, because it destroys the psychological equilibrium which permits the perpetuance of unequal rewards. The businessman is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society.”** On that basis, no one can be surprised that the legitimacy of capitalism is currently in question. And it would be wrong to call it a “winner takes all” form of capitalism, because privileged losers appear to be making off with the prizes too.

What is unquestionably novel is the ferocity with which US business sheds labour now that executive pay and incentive schemes are more closely linked to short-term performance targets. In effect, the American worker has gone from being regarded as human capital to a mere cost, or what was known in the 19th century as a “hand”. Yet this pursuit of a narrowly financial conception of shareholder value may destroy value for the ultimate pension beneficiaries – because of the disruption that slashing and burning causes, and the cost and time involved in hiring and retraining when conditions improve.

That underlines the “agency problem” at the heart of the banking and boardroom pay sagas. The accountability of management – the agent acting on behalf of the highly dispersed beneficiaries of equity ownership – is fundamentally flawed. While the public may not be aware of the details of the weak chain of accountability, or the growing number of investors such as high-frequency traders or hedge funds that have no interest in playing a stewardship role, it sees the outcome, which contributes to the wider inequality story.

So what to do? It is not as if there are attractive alternative models. While the west is chastened by the rise of Asia, few would wish to adopt the communist Chinese mixture of state ownership, red-in-tooth-and-claw private markets, wholesale corruption and even greater inequality than the US. As for the cleaner authoritarian approach of Singapore, despite delivering high economic growth, it has started to lose its appeal with the island’s electorate. Nor would many in the west find free-market Hong Kong a comfortable environment.

The real question, as Keynes argued in the 1930s, is therefore how to improve the existing model of capitalism. The snag is that there is minimal flexibility in macro policy after the crisis, especially in the US where broadly centrist politics have been replaced by a polarised, stalemated debate. And in both the US and UK there is a greater mistrust of big government, according to the Edelman Trust Barometer, than of business. Efforts to re-regulate the banking system, meantime, have failed to convince many experts that an even larger financial crisis can be avoided.

From distribution to decline

If Hyman Minsky, the expert on financial market fragility, provided the best route map for understanding events before the crisis, and Keynes offered the best guide to crisis management, Mancur Olson, a theorist on institutional economics, could now be a posthumous beacon on how to manage the aftermath. Olson argued that nations decline because of the lobbying power of distributional coalitions, or special-interest groups, whose growing influence fosters economic inefficiency and inequality.***

When he was writing, the main interest groups were trade unions and business cartels. Today, the pre-eminent interest group consists of finance professionals on Wall Street and in London. Through campaign finance and political donations, they have bought themselves protection from proper societal accountability. And they pose a continuing obstacle to the de-risking of banking of the kind recommended by the Vickers commission in the UK.

Tackling such interest groups both in the US and Europe is one of the biggest post-crisis tasks for policymakers and a key to addressing concerns about systemic legitimacy. The inchoate nature of the public’s complaints is another. Not the least of the difficulties, to reformulate Winston Churchill’s famous remark on democracy, is that capitalism is the worst form of economic management except for all those other forms that have been tried from time to time. The public relations problem implicit in that pale endorsement is an underlying reason why legitimacy crises recur.

* The Cost of Inequality, Gibson Square, 2011
** Quoted in Keynes and Capitalism, Roger E. Backhouse and Bradley W. Bateman, History of Political Economy, 2009
*** The Rise and Decline of Nations, Yale University Press, 1982

Zizek on OWS: The Violent Silence of a New Beginning

October 26, 2011
The Occupy protests are important, but soon the difficult question must be answered: What social organization can replace capitalism?
BY SLAVOJ ŽIŽEK

What to do after the Wall Street occupation, after the protests that started far away (Middle East, Greece, Spain, UK) reached the center, and now, reinforced, roll back around the world? One of the great dangers the protesters face is that they will fall in love with themselves, with the nice time they are having in the “occupied” places. In a San Francisco echo of the Wall Street occupation on October 16, a guy invited the crowd to participate as if it was a hippy-style happening in the 1960s: “They are asking us what is our program. We have no program. We are here to have a good time.”

Carnivals come cheap–the test of their worth is what remains the day after, and how they change our normal daily life. The protesters should fall in love with hard and patient work – they are the beginning, not the end. Their basic message should be: The taboo is broken. We do not live in the best possible world. We are obliged to think about alternatives.

The Western Left has come full circle: After abandoning the so-called “class struggle essentialism” for the plurality of anti-racist, feminist, gay rights etc., struggles, “capitalism” is now re-emerging as the name of THE problem. So the first lesson to be learned is: Do not blame people and their attitudes. The problem is not corruption or greed, the problem is the system that pushes you to be corrupt. The solution is not found in the slogan “Main Street, not Wall Street,” but to change the system in which Main Street cannot function without Wall Street.

There is a long road ahead, and soon we will have to address the truly difficult questions–questions not about what we do not want, but rather about what we DO want. What social organization can replace the existing capitalism? What type of new leaders do we need? What new institutions, including those of control, should we shape? The 20th century alternatives obviously did not work.

It is thrilling to enjoy the pleasures of the “horizontal organization” of protesting crowds with egalitarian solidarity and open-ended free debates, but as we do so we should bear in mind the words of Gilbert Keith Chesterton: “Merely having an open mind is nothing; the object of opening the mind, as of opening the mouth, is to shut it again on something solid.”

This holds also for politics in times of uncertainty: The open-ended debates will have to coalesce not only in some new Master-Signifiers, but also in concrete answers to the old question: “What is to be done?”

What the protesters are not

The direct conservative attacks are easy to answer.

Are the protests un-American? When conservative fundamentalists claim that America is a Christian nation, one should remember what Christianity is: the Holy Spirit, the free egalitarian community of believers united by love. It is the protesters who are the Holy Spirit, while on Wall Street pagans worship false idols.

Are the protesters violent? True, their very language may appear violent (occupation, and so on), but they are violent in the sense in which Mahatma Gandhi was violent. They are violent because they want to put a stop to the way things are done – –but what is this violence compared to the violence needed to sustain the smooth functioning of the global capitalist system?

The protesters are called “losers” – but the true losers are on Wall Street, bailed out by hundreds of billions of our money.

They are called socialists. But in the United States, there already is socialism for the rich.

They are accused of not respecting private property – but the Wall Street speculations that led to the crash of 2008 erased more hard-earned private property than if the protesters were to be destroying it night and day. Think of the tens of thousands of homes foreclosed.

They are not communists, if communism means the system that deservedly collapsed in 1990. The communists who are still in power run the world’s most ruthless capitalist system (China). The success of Chinese Communist-run capitalism is a sign that the marriage between capitalism and democracy is approaching a divorce.

The only sense in which the protesters are communists is that they care for the commons–the commons of nature, of knowledge–that are threatened by the system.

The protesters are dismissed as dreamers, but the true dreamers are those who think that things can go on indefinitely the way they are, just with some cosmetic changes.

The protesters are the awakening from a dream that is turning into a nightmare. They are not destroying anything. They are reacting to a system that is gradually destroying itself.

We all know the classic scene from cartoons: The cat reaches a precipice, but it goes on walking, ignoring the fact that there is no ground under its feet; it starts to fall only when it looks down and notices the abyss. What the protesters are doing is reminding those in power to look down.

Beware false friends

Refuting such falsehoods is the easy part. The protesters should beware not only of enemies, but also of false friends already working hard to dilute the protest. In the same way we get coffee without caffeine, beer without alcohol, ice cream without fat, those in power will try to make the protests into a harmless moralistic gesture.

In boxing, to “clinch” means to hold the opponent’s body with one or both arms in order to prevent or hinder punches. Bill Clinton’s reaction to the Wall Street protests is a perfect case of political clinching; Clinton thinks that the protests are “on balance…a positive thing,” but on October 12 he worried about the nebulousness of the cause: “They need to be for something specific, and not just against something, because if you’re just against something, someone else will fill the vacuum you create.” Clinton suggested the protesters get behind President Obama’s jobs plan, which he claimed would create “a couple million jobs in the next year and a half.”

What one should resist at this stage is precisely such a quick translation of the energy of the protest into a set of “concrete” pragmatic demands. Yes, the protests did create a vacuum – a vacuum in the field of hegemonic ideology, and time is needed to fill this vacuum in a proper way, since it is a pregnant vacuum, an opening for the truly New.

The protesters are occupying streets and parks because they have had enough of a world where recycling Coke cans, giving a couple of dollars for charity, or buying a Starbucks cappuccino where 1 percent goes for the Third World troubles is enough to make them feel good. After seeing work and torture outsourced, after matchmaking agencies even started to outsource dating, they realized they had been allowing their political engagement to also be outsourced – and they want it back.

The art of politics is to insist on a particular demand that while thoroughly “realistic” also disturbs the very core of the hegemonic ideology, i.e. which, while definitely feasible and legitimate, is de facto impossible (universal healthcare in the United States was such a case). As the Wall Street protests continue, we should mobilize people around such demands.

At the same time it is important to simultaneously remain subtracted from the pragmatic field of negotiations and “realist” proposals. Everything we say now can be taken (recuperated) from us – everything except our silence. This silence, this rejection of dialogue, of all forms of clinching, is ominous and threatening to the establishment, as it should be.

Wall Street protests are a beginning, and one has to begin like that. A formal gesture of rejection is more important than positive content, because only such a gesture opens up the space for a new content. So we should not be terrorized by the perennial question: “But what do they want?” After all, this is the archetypal question addressed by a male master to a hysterical woman: “You whine and you complain, but do you know at all what you really want?” In the psychoanalytic sense, the protests effectively are a hysterical act, provoking the master, undermining his authority. And the question “But what do you want?” aims precisely to preclude the true answer – its real purpose is: “Tell it in my terms or shut up!”

Finding the right questions

This, of course, does not mean that the protesters should be pampered and flattered. Today, more than ever, intellectuals should combine their full support of the protesters with a non-patronizing cold analytic distance, beginning with the probe into the protesters’ self-designation as 99 percent against the greedy 1 percent: How many of the 99 percent are ready to accept the protesters as their voice, and to what extent?

We should avoid the temptation of the narcissism of the lost cause, of admiring the sublime beauty of uprisings doomed to fail. What new positive order should replace the old one the day after, when the sublime enthusiasm of the uprising is over?

If we take a closer look at the well-known manifesto of Spain’s original indignados (the angry ones), published this past spring, we are in for a surprise. The first thing that strikes the eye is the pointedly apolitical tone:

Some of us consider ourselves progressive, others conservative. Some of us are believers, some not. Some of us have clearly defined ideologies, others are apolitical, but we are all concerned and angry about the political, economic, and social outlook which we see around us: corruption among politicians, businessmen, bankers, leaving us helpless, without a voice.

They voice their protest on behalf of the “inalienable truths that we should abide by in our society: the right to housing, employment, culture, health, education, political participation, free personal development, and consumer rights for a healthy and happy life.” Rejecting violence, they call for an “ethical revolution. Instead of placing money above human beings, we shall put it back to our service. We are people, not products. I am not a product of what I buy, why I buy and who I buy from.”

Who will be the agent of such a revolution? The entire political class, Right and Left, is dismissed as corrupted and controlled by the lust for power, but the manifesto nonetheless consists of a series of demands addressed to–whom? Not the people themselves: the indignados do not (yet) claim that no one will do it for them, that (to paraphrase Gandhi) they themselves have to be the change they want to see.

Who, then, does know what to do? Faced with the demands of the protesters, intellectuals are definitely not in the position of the subjects supposed to know: They cannot operationalize these demands and translate them into proposals for precise and detailed realistic measures. With the fall of the 20th century Communism, intellectuals forever forfeited the role of the vanguard that knows the laws of history and can guide the innocents along its path.

So is this not a deadlock: a blind man leading a blind man, or, more precisely, each of them presupposing the other is not blind? No, because their respective ignorance is not symmetrical: It is the people who have the answers, they just don’t know the questions to which they have (or, rather, are) the answer.

In Hold Everything Dear: Dispatches on Survival and Resistance, John Berger wrote about the “multitudes” of those who found themselves on the wrong side of the Wall (which divides those who are in from those who are out):

The multitudes have answers to questions which have not yet been posed, and they have the capacity to outlive the walls.

The questions are not yet asked because to do so requires words and concepts which ring true, and those currently being used to name events have been rendered meaningless: Democracy, Liberty, Productivity, etc.

With new concepts the questions will soon be posed, for history involves precisely such a process of questioning. Soon? Within a generation.

The situation is like that of psychoanalysis, where the patient knows the answer (his symptoms are such answers) but doesn’t know what they are answers to, and it is up to the analyst to formulate the appropriate questions. We should treat the demands of the Wall Street protests in a similar way: Instead of wondering “What are they asking for? What are their demands and what are their proposed programs?”, intellectuals should see the Occupy protests as the answers for which we are not yet asking the right questions.

Only through such patient work will a program emerge.

Portions of this article are drawn from a speech to Occupy Wall Street protesters at Zuccotti Park in Manhattan on October 10.

ABOUT THIS AUTHOR

Slavoj Žižek, a Slovenian philosopher and psychoanalyst, is a senior researcher at the Institute for Advanced Study in the Humanities, in Essen, Germany. He has also been a visiting professor at more than 10 universities around the world. Žižek is the author of many other books, including Living in the End Times, First As Tragedy, Then As Farce, The Fragile Absolute and Did Somebody Say Totalitarianism? He lives in London.

David Graeber: anthropologist, anarchist, financial analyst*

By gregdowney
Posted: October 15, 2011

Source Link.

Wall Street is in the grips of an ‘occupation,’ and activist and anthropologist,David Graeber, now at Goldsmiths, University of London, is in the centre of the action. Graeber has been doing a few television and radio interviews of late (check here for his interview on ABC Radio National, Australia), talking about the organization of the Wall Street occupation as well as his new book,Debt: The First 5,000 Years (Melville House).

The juxtaposition of Florida Governor Rick Scott’s recent comments about anthropology and the fact that Graeber is offering what may be among the most penetrating and accessible analyses of an important dimension of the current global debt crisis is striking.Of course, maybe clear-eyed analysis of our current economic situation, and the ability to point out that other societies do perfectly well with other sorts of economic and political systems, is precisely the sort of academic work that Gov. Rick Scott thinks universities should give up. After all, no one needs to understand why US firms are shedding jobs, or take a sober look at the current financial regime in the light of the 5,000-year history of debt. Students should just put their heads down and do the sorts of degrees that will give them technical jobs. Pay no attention to The Man behind the curtain!

Graeber is doing exactly what many of us want university-based social and cultural anthropologists to do more of: not just doing outstanding, useful applied work (which is bloody brilliant, of course), but also showing how our distinctive intellectual perspectives – comparative, evolutionary, cross-cultural, critical, even deconstructive (and ‘post-modern’) – provide academic analyses with important, ‘real world’ implications. After all, part of the current problem in the global economy is not just that we have bad applications of economic theory—we have blinkered economic theory in ascendance, including a profound limit on our understanding of debt, as Graeber points out.

More importantly, Graeber underlines that Reaganite-Thatcherist triumphalism — ‘There Is No Alternative!’ (to our own peculiar form of capitalism) — is a lie that denies human creativity, and freedom. The creative inspiration of anthropology, the potential for cross-cultural, historical and evolutionary research to show us constantly that other ways of being human are possible, is central in my own teaching and research, so I especially appreciate that Graeber is so strong and clear on this point in public. But I’ll stop introducing it and post one of Graeber’s many interviews available online:

David Graeber on Democracy Now!

* I’m well aware that Graeber has resisted these sorts of labels in the past (for example, in an interview with Stir Magazine). However, it’s our blog, and I get to write my own headlines.

A brief note on Graeber’s academic career

The Occupy Wall Street protest was triggered by a call from Adbusters. In an interview with Ezra Klein, Graeber specifically discusses how the protest came together, including problems with the original idea (like, who cares if you shut down Wall Street on a Saturday?). Graeber’s a great spokesman for OWS and for anthropology, even if we all don’t agree with his political perspectives (I think non-activist anthropologists should be less stressed out by activists for reasons I explained here).

In spite of the fact that he’s sometimes controversial as a theorist—he was notoriously denied tenure at Yale University in circumstances that led to widespread outrage and student protest (Wikipedia covers that particular chapter in David’s life as does an interview with David on ZNet)—Graeber is widely recognized among young(ish) anthropologists. Maurice Bloch, of the LSE and College de France, has written that he considers Graeber ‘the best anthropological theorist of his generation from anywhere in the world.’

What’s even better is that much of Graeber’s work in economic anthropology is surprisingly accessible. Although he’s copped some flack online for writing like an academic, I think his work is surprisingly accessible given how original, intriguing and sophisticated he is. And Graeber hasn’t been afraid to give interviews, write accessible summaries of his academic pubications (see the list below), and generally do some sophisticated forms of public anthropology, including vigorously defending his ideas online.

I have to admit a bit of bias: I knew David when he was a graduate student at the University of Chicago. He was a few years ahead of me. We only did one seminar at the same time (on ‘professionalization’ or how to get a job in a tough academic job market), and his work was already really impressive. His early publications on his field research in Madagascar were getting published in high visibility anthropology journals—well, ‘high visibility’ for anthropology. But he’s hardly a close friend. Most of my admiration for Graeber has come as a result of reading his publications.

One reason that he has been so controversial is Graeber’s active involvement in the ‘alter-‘ or ‘anti-globalization’ movement, his presence at protests and his participation in their organization. But Graeber is also likely controversial for what he says about other academics’ ‘radical’ scholarship.

A few years back, for example, he argued that many academic responses to violence during anti-WTO and –IMF protests revealed that the authors like to talk the talk, but were likely to criticize anyone walking the walk (or running the run, for that matter). Or, as David put it, scholars who have for years written articles that ‘sound like position papers for vast social movements that do not in fact exist seem seized with confusion or worse, dismissive contempt, now that real ones are everywhere emerging’ (From ‘The New Anarchists,’ 2002).

He offered some advice for tenured ‘radicals’ faced with the existence of movements like the Black Bloc and more confrontational forms of protest, including from their own students:

As an anthropologist and active participant—particularly in the more radical, direct-action end of the movement—I may be able to clear up some common points of misunderstanding; but the news may not be gratefully received [by academics]. Much of the hesitation, I suspect, lies in the reluctance of those who have long fancied themselves radicals of some sort to come to terms with the fact that they are really liberals: interested in expanding individual freedoms and pursuing social justice, but not in ways that would seriously challenge the existence of reigning institutions like capital or state. And even many of those who would like to see revolutionary change might not feel entirely happy about having to accept that most of the creative energy for radical politics is now coming from anarchism—a tradition that they have hitherto mostly dismissed—and that taking this movement seriously will necessarily also mean a respectful engagement with it. (From ‘The New Anarchists,’ 2002)

Yeah, that’s probably not going to win you a lot of new friends in academe (‘Who you callin’ a “librul”?!’). Graeber was never given an official reason why he was denied tenure, but he has suggested in interviews that problems arose when he began to present his anarchist scholarship and activism.

(Before anyone ill informed gets all wound up, thinking that by ‘anarchism’ I mean the celebration of rock throwing or balaclava-wearing or punk rock, please take the time to acquaint yourself with the political movement, if you don’t know what anarchism actually is. Go ahead. Look it up on Wikipedia if you want. Go ahead. We’ll wait. Or check out Graeber’s pamphlet, Fragments of an Anarchist Anthropology; it’s a free download which is simultaneously kind of anarchist and just plain generous at the same time.)

Anarchism from induction

In an interview, I’ve heard Graeber explain his anarchism as, at least in part, informed by what he saw in Madagascar. In villages where the state had retreated and pulled out its resources almost completely, communities were basically left to govern and provide for themselves. It was anarchism by state neglect. They did surprisingly well.

I saw something very similar in camps of the Movimento Sem Terra (the MST or ‘Landless Movement’) in Brazil (if you’re interested, the English-language website for the Friends of the MST is here). Roadside shanty camps attracted former sharecroppers, poor farmers whose small plots were drowned out by hydroelectric projects, and other refugees from severe restructuring in agriculture toward large-scale corporate farming. Activists and religious leaders were helping these communities to set up their own governments, make collective decisions, and eventually occupy sprawling ranches that had been defrauded with generations of state collusion. The MST leveraged the land occupations to demand that the Brazilian government adhere to the country’s constitution, which called for agrarian reform, especially of large holdings that were the fruits of fraud.

I found these Brazilian communities is situations similar to those in Madagascar that Graeber observed: community-based groups, even cooperatives formes by people with very little education, developed greater and greater ability to run their own lives when the state was not around. They elected their own officials, held marathon community meetings in which every member voted (even children), and, when they eventually gained land, often became thriving, tight-knit communities, especially when the shared struggle had steeled their solidarity.

I won’t go into the whole story, because it is a much longer post, but I talked for a long time in rural São Paulo state about the movement with a veteran agitator. He had been dispatched to a camp under extreme pressure from a local rancher; the rancher’s hired gunmen routinely held target practice near the camp, rifle shots echoing through the 400 corrugated steel sheds. A veteran from union struggles, anti-dictatorial resistance, and a host of other movements, this particular activist was placed in the camp so that someone there was armed; organizers hoped to give the gunmen cause to pause in their bare-faced intimidation.

Over a meal of camp-butchered beef, the activist told me that the MST was like nothing he had seen before. The only movement he could think to compare it to were the Italian anarchists that his immigrant grandfather had told him about, the reason his family originally fled to Brazil.

In other words, anthropological research like Graeber’s can offer a kind of evidence-based idealism, a utopianism that’s hard headed and founded firmly in observations of diverse communities, not contrived in a sheltered cloister or from untested principles.When apologists for our own current situation offer excuses or tell us that we shouldn’t seek greater justice, equity or governance, because ‘It can’t be any other way but the way it is,’ anthropological research can show that this is not the case. Perhaps few other areas of contemporary life beg for this reality-based imagination more than economic activity.

Graeber on banks, money, crashes and imagination

According to Graeber, the crisis of 2008—the crash of financial markets and the bailout by the US and UK governments of major banks—revealed two key principles about the current economic system were myths: 1) that markets can take care of themselves, and 2) that debts are inviolable and have to be paid. Not only did deregulated markets get themselves in serious trouble, but, when push came to shove, the state stepped in to save key institutions by absolving them of their debts. In reality, the bailouts simply transferred the debts from private institutions to the state itself, in essence, nationalizing debt, a kind of reverse, negative form of socialism, where the populace owns, not the assets of the banks, but only their debts.

The problem is that, because our leaders cannot conceive any other way to organize our economic system, we are artificially trapped by self-imposed limits. From Graeber’s piece in The Guardian:

But the ultimate failure here is of imagination. What we are witnessing can also be seen as a demand to finally have a conversation we were all supposed to have back in 2008. There was a moment, after the near-collapse of the world’s financial architecture, when anything seemed possible.

Everything we’d been told for the last decade turned out to be a lie. Markets did not run themselves; creators of financial instruments were not infallible geniuses; and debts did not really need to be repaid – in fact, money itself was revealed to be a political instrument, trillions of dollars of which could be whisked in or out of existence overnight if governments or central banks required it. Even the Economist was running headlines like “Capitalism: Was it a Good Idea?”

Graeber’s piece harkens back to the discussion of money that runs through several of his publications and in his interviews. Although anthropologists commonly argue that money is a social convention, as much a product of trust and social convention as any inherent value, Graeber has provided a remarkable excavation of the history of money in Debt: The First 5,000 Years that builds this basic insight into a critique of economic common sense that is much more far-reaching.

Money as social convention

In his historical research, Graeber ran up against the fact that the documented history of money did not match the hypothetical history posited by economists. By itself, this gap is hardly a fatal flaw. Virtually every neo-classical theorist and Marx and Engels’ account of the emergence of economic activity from ‘primitive communism’ were also based upon evolutionary accounts of civilization that are no longer tenable given what we know about the past 10,000 years.

Specifically, Graeber shows that the typical developmental sequence posited by economists—barter leads to money leads to credit—is not only more variable, but is sometimes precisely reversed. The first ‘money’ of which we have definitive proof is credit-based money in Mesopotamia; currency shows up much later, and many of the most successful trading states throughout history were deeply suspicious of bullion as a means of exchange. Credit precedes money historically. It’s a fascinating argument, but you’re going to have to go check out David’s book or any one of the versions I link to below if you want more than this thumbnail sketch.

The problem isn’t just a flawed origin myth, however, or an empirical difficulty, but the ways in which this flawed origin myth bolstered economists’ insistence that alternative economic arrangements were simply not possible, based upon their understanding of ‘human nature.’ The economists’ origin myths assume that a very specific form of human actor—an actor deeply conditioned by life in market capitalism with debt-based money—exists in all societies and situations. For example, in what he calls the ‘myth of barter,’ economists assume that economic calculation and market-like transactions could have preceded both the existence of markets and money. As Graeber writes on the website Naked Capitalism:

Economists always ask us to ‘imagine’ how things must have worked before the advent of money. What such examples bring home more than anything else is just how limited their imaginations really are. When one is dealing with a world unfamiliar with money and markets, even on those rare occasions when strangers did meet explicitly in order to exchange goods, they are rarely thinking exclusively about the value of the goods. This not only demonstrates that the Homo Oeconomicus which lies at the basis of all the theorems and equations that purports to render economics a science, is not only an almost impossibly boring person—basically, a monomaniacal sociopath who can wander through an orgy thinking only about marginal rates of return—but that what economists are basically doing in telling the myth of barter, is taking a kind of behavior that is only really possible after the invention of money and markets and then projecting it backwards as the purported reason for the invention of money and markets themselves. Logically, this makes about as much sense as saying that the game of chess was invented to allow people to fulfill a pre-existing desire to checkmate their opponent’s king. (from On the invention of money)

Moreover, as Graeber points out, in fact, we don’t have to imagine what life would be like without money; we have a large number of ethnographic examples from around the world that offer concrete, empirical evidence that the human situation might be far stranger than we can imagine.

When Graeber has talked publicly about his research into the history of money and debt, however, he has sometimes encountered stiff resistance from some economists, even from economists who concede his historical work is impeccable. For example, since September, Graeber has had a kind of running online argument with a number of individuals from a particular stream of economic thought that they call ‘the Austrians.’ (If you really want to follow the argument, I’ve linked to a number of their posts below.)

Suffice to say that some of the arguments are not mutually exclusive (the origin story is not necessary for the economic theory, really). But Graeber explores why some economists feel compelled to defend an origin story for money in barter—the Myth of Barter—that they know is not supported by the evidence. Graeber argues that ultimately the compulsion to defend these myths comes from insecurity in the face of the constructedness of culture, a need to deny that both the object of study and the means of study are intertwined (a criticism that anthropologists have leveled against themselves, sometimes excessively, so at least it’s a familiar discomfort):

At this point, it’s easier to understand why economists feel so defensive about challenges to the Myth of Barter, and why they keep telling the same old story even though most of them know it isn’t true. If what they are really describing is not how we ‘naturally’ behave but rather how we are taught to behave by the market—well who, nowadays, is doing most of the actual teaching? Primarily, economists. The question of barter cuts to the heart of not only what an economy is—most economists still insist that an economy is essentially a vast barter system, with money a mere tool (a position all the more peculiar now that the majority of economic transactions in the world have come to consist of playing around with money in one form or another)…—but also, the very status of economics: is it a science that describes of how humans actually behave, or prescriptive, a way of informing them how they should? (Remember, sciences generate hypothesis about the world that can be tested against the evidence and changed or abandoned if they don’t prove to predict what’s empirically there.)

Or is economics instead a technique of operating within a world that economists themselves have largely created? Or is it, as it appears for so many of the Austrians, a kind of faith, a revealed Truth embodied in the words of great prophets (such as Von Mises) who must, by definition be correct, and whose theories must be defended whatever empirical reality throws at them—even to the extent of generating imaginary unknown periods of history where something like what was originally described ‘must have’ taken place? (from On the invention of money)

Again, I’m only grazing the tip of the iceberg here, but what I mean to suggest is that the critique that Graeber’s leveling against certain forms of economic thought is hardly unusual; anthropologists do it to ourselves all the time. I just don’t think economists are used to it being done quite so well to them, especially not by someone who has taken the time to do the empirical work that makes the construction of economic reality over five millennia so clear.

The recent history of debt

Perhaps the most important area currently where culture and economics are fused in the Western imagination is the concept of ‘debt.’ As Graeber makes clear, ‘debt’ is a social promise perverted into an institution by power, mathematics and violence. Repeatedly in interviews, Graeber has highlighted how our current understanding of debt treats it as an unbreakable promise —the only unbreakable promise—such that individuals and states must sacrifice every other social contract, goal and obligation, to their people and to posterity, in order to honour their promises to bankers.

Reverse engineered mortgage for the Ekstrom family, by Dan Edstrom

This situation is not new historically, but this cultural understanding of debt leads to peculiar contemporary forms of cruelty and rigid thinking. AsDavid told Alex Bradshaw in an interview:

I was involved in “drop the debt” campaigns of various sorts since at least 2000. What got me interested in some of the philosophical issues I ended up exploring in the book was the peculiar moral power of the notion of debts. So many otherwise sympathetic people, even when told of the terrible, almost unimaginably inhuman suffering inflicted on people in the global South because of the depredations of the IMF, would still respond, “well, that’s terrible that so many children died slow and painful deaths, but still—surely one has to pay one’s debts! They borrowed the money! You couldn’t possibly be suggesting they not pay it…” How is it that the morality of debt can trump any other recognizable form of morality, and make things that no one would ever, possibly agree with in any other context seem suddenly acceptable?

As Graeber clarified with Jamie Stern-Weiner in an interview posted on ZNet:

But there is an irony in thinking of a promise made by a state to pay a debt as something absolutely sacred. After all, a debt is just a promise, and politicians make all sorts of different promises. They break most of them. So why are these promises the only ones that they can’t break? It is considered completely normal for someone like Nick Clegg [in the UK] to say, ‘well of course we promised not to raise school fees. But that’s unrealistic.’ ‘Unrealistic’ here means ‘obviously there’s no possibility of breaking my promises to bankers, even those linked to banks we bailed out and in some cases effectively own’. It’s striking that no-one ever points that out. Why is a promise made by a politician to the people who elected him considered made to be broken – it isn’t “sacred” in any way – whereas a promise the same politician makes to a financier is considered the “honour of our nation”? Why isn’t the “honour of our nation” in any way entailed in keeping our promises to people to provide healthcare and education? And why does everyone just seem to accept that, that this is just “reality”?

Graeber suggests that the ‘language of debt’ is a ‘moral’ one, not just an economic one. I would also add that we are told that debt default is an apocalyptic scenario, more dangerous than gutting social programs, disinvesting in infrastructure, making health care inaccessible, and bringing about all the slow moving catastrophes that often accompany austerity programs designed to increase states’ ability to pay their debts.

What makes Graeber’s analysis so interesting is that, because of his extensive historical research, he can actually trace how the current economic cosmology of debt arose, and point to periods when debt threatened to cause similar crises. Specifically, he argues that the fluctuation historically back and forth between debt-backed or credit money (as we’ve essentially had since 1971) and bullion or commodity-backed money, is accompanied by larger shifts in patterns of warfare, slavery and debt bondage. Specifically, Graeber suggests that the expansion of debt is part and parcel of a virtual money system, one that has been dealt with before in human history. The debt has not gone away, it’s just been moved around:

What we’ve learned now is that the economic crisis of the 1970s never really went away. It was fobbed off by cheap credit at home and massive plunder abroad – the latter, in the name of the “third world debt crisis”. But the global south fought back. The “alter-globalisation movement”, was in the end, successful: the IMF has been driven out of East Asia and Latin America, just as it is now being driven from the Middle East. As a result, the debt crisis has come home to Europe and North America, replete with the exact same approach: declare a financial crisis, appoint supposedly neutral technocrats to manage it, and then engage in an orgy of plunder in the name of “austerity”.

If the current situation seems demoralizing, Graeber suggests that we might look to other time periods to see how people before us have dealt with the seemingly inexorable increase in debt that accompanies the shift from commodity-backed currency to credit-backed currency. From his interview on ZNet (Part 2):

The shift to credit tends to prompt two questions: 1) what’s to stop people just going crazy with it and creating new forms of money with reckless abandon? 2) What is to stop people from thereby falling into debt traps and becoming enslaved? The usual solution is to create some kind of control, which is why you had periodic debt cancellations in Mesopotamia; jubilees, bans on usury, and various other mechanisms that appeared in the Middle Ages; and so on. This makes sense, because if money is just a social construct, and is recognised as such, then people will be more open to changing the rules that govern it. And in fact in the Middle Ages this was completely recognised. Aristotle’s position that money is an agreement we make with each other, which was very much a minority view in antiquity, got widely adopted in Europe. If it’s an agreement, we can renegotiate it at any time, and people did. They would cry out and cry down the value of money, and shift it around all the time.

So the question becomes: why didn’t that happen this time? Why have they not, since 1971, set up these overarching institutions to protect debtors, which is what they’ve always done in the past? Why did they not create controls so that money couldn’t just be created with reckless abandon by those in power as a way of enslaving everybody else? In fact, what’s happened is exactly the opposite of that. They’ve created overarching institutions, like the IMF, to protect creditors. That essentially is what the IMF is: it is part of a huge financial global bureaucracy developed gradually over the past 30-50 years, dedicated to the principle that no-one is ever allowed to default on a loan. Which is crazy – even according to standard economic theory the profits from a loan are supposed to be a reward for taking a risk. This leads to insane speculative bubbles, a situation in which 90-95 percent of all money is actually speculative with no connection to production or trade, and people becoming effectively enserfed.

In America, for instance, pretty much everybody is in debt. The great social evil in antiquity, the thing that Sharia law and medieval canon law were trying to ensure never happened again, was the scenario in which a family gets so deep in debt that they are forced to sell themselves, or sell their children, into slavery. What do you have here today? You have a population all of whom are in debt, and who are essentially renting themselves to employers to do jobs that they almost certainly wouldn’t want to do otherwise, to be able to pay those debts. If Aristotle were magically transported to the U.S. he would conclude that most of the American population is enslaved, because for him the distinction between selling yourself and renting yourself is at best a legalism.

Of course, slavery, like money, is a social institution. But like all social facts, it can appear to those who believe in it that it has an independent existence over and above the communities in which it shapes our interactions. Butwhen we stare this social fact in the face, try to wrap our heads around this immense growth in debt, it can seem like there is no escaping from the institutions that we ourselves have created.

The financialisation of capital has lead to a situation where something like 97 to 98 percent of the money in the total ‘economy’ of wealthy countries like the US or UK is debt…. ‘Abstract’ money is not an idea, it’s a promise — a promise of something concrete that will exist at some time in the future, future profits extracted from future resources, future labour of miners, artists, fruit-pickers, web designers, not yet born. At the point where the imaginary future economy is 50 to 100 times larger than the current ‘real’ one, something has got to give. But the bursting of bubbles often leaves no future to imagine at all, except of catastrophe, because the creation of bubbles is made possible by the destruction of any ability to imagine alternative futures. It’s only once one cannot imagine that we are moving towards any sort of new future society, that the world will never be fundamentally different, that there’s nothing left to imagine but more and more future money. (Graeber 2009: 7)

I’ll admit, it’s a harrowing reality to imagine, but even realizing that another world is possible is part of the battle to get there.

Anthropology and the economic imagination

Graeber’s vision of anthropology—that the study of diversity around the globe and across evolutionary time helps us to see what is possible, especially when our social facts are so intimidating that we cannot imagine life without them, however they cause us suffering—is one that I think needs to be shared more often. Certainly, this exploration of human potential is a hallmark of neuroanthropology, in which the variety of the human condition continually challenges our understandings of what the nervous system might be able to do.

Graeber doesn’t just offer us critique or the threat of chaos; his work shows how anarchism and alternative systems, not only can be imagined, but in fact exist around us, in distant times and places but sometimes quite close to home. This hard-headed, evidence-based idealism is a crucial resource in anthropology and an essential foil to our critical mission. Graeber and other commentators close to social movements like the Wall Street Occupation aren’t just arguing from a basis of vague principles; they are often presenting alternative models, some of which anthropologists know well through the kind of wide-ranging, first-hand field research that is a hallmark of our field.

Part of creativity and problem solving is not constantly needing to re-invent the wheel but opening our eyes to the versatility and ingenuity of many sorts of people, one thing that makes anthropologists like David Graeber pretty useful. It’s not that anthropologists are so smart (although some of us are); it’s that we’re out there in the wild, actually paying attention to some of the crazy things people can do.

When people argue that ‘There is no alternative,’ it’s because they cannot imagine a life without scarcity, debt, and the familiar social facts that so torment us. Maybe that’s one reason that folks like Governor Scott don’t think we need imagination, or anthropology, for that matter. Of course the person without an imagination can’t imagine the use of having one.

Links

The first edition of The Occupied Wall Street Journal (link and post at Naked Capitalist).

Lorenz at anthropologi.info gives us a hyper-hyperlinked text, “Similar to the Third World debt crisis” – David Graeber on ‘Occupy Wall Street’, which has more resources than I have time to read. If you want to know more about the situation, or about David Graeber, I suggest starting with Lorenz.

David Graeber’s piece, Occupy Wall Street rediscovers the radical imagination in The Guardian (25 September 2011).

An interview with Graeber at The Washington Post website, on columnist Ezra Klein’s blog, Wonkblog, ‘You’re creating a vision of the sort of society you want to have in miniature.’ See also Klein’s ‘primer’ on the Occupy Wall Street protest for many more links and resources.

Interview with David Graeber at Democracy Now: David Graeber: The Debt of the American Poor Should Be Forgiven.

Jubilee Year – Cancel Our Debt, a weblog specifically dedicated to discussions of debt cancellation.

Where did money come from?, Left Outside weblog.

David Graeber on debt

David Graeber, Debt: The first five thousand years (short version) on Eurozine

A bit longer version at The Anarchist Library. Also downloadable as a pdf, ePub and in other formats.

The Anarchist Library has a number of other pieces by Graeber as well.

An illustrated version: ‘To Have Is To Owe’, in Triple Canopy.

Two part interview with Jamie Stern-Weiner on ZNet: Debt, Slavery and our Idea of Freedom (Part 1) and (Part 2).

Alex Bradshaw of No Borders, ‘An Interview With David Graeber: Debt’s History, Implications, and Critical Perspective.’

Doug Henwood (whose work is also great) interviews David on C-Span’s video library here.

Another interview by Philip Pilkington with Graeber at Naked Capitalism:What is Debt? – An Interview with Economic Anthropologist David Graeber.

And if you’re not already worn out from all the links, there’s a few more over at the Melville House website for Graeber.

Other material

‘Bursting capitalism’s bubble,’ at Adbusters, a recent piece by David Graeber.

‘On the Moral Grounds of Economic Relations: A Maussian Approach.’ Open Anthropology Cooperative Press, 2010.

A 2002 piece by Graeber in The New Left Review, ‘The New Anarchists.’

2004 Prickly Paradigm pamphlet, Fragments of an Anarchist Anthropology. (downloadable pdf available at this link)

Great exchange:

By the way, Graeber’s discussion of his research and theoretical work on the history of debt sparked a really interesting online exchange:

Robert Murphy, who runs the blog Free Advice (you know what they say about free advice) took on Graeber’s account of the origin of money on the Ludwig Van Mises Institute website: Have Anthropologists Overturned Menger?

Graeber responded in the comments to Murphy’s original post (which Murphy, to his credit, compiled into a stand-alone post): David Graeber’s Response to My Article.

Admitting he had not read Graeber’s book, Murphy Replies to David Graeber on Menger and Money.

Finally, the last part of the exchange the I followed is Graeber’s response on Naked Capitalism, David Graeber: On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics.

And then there’s a libertarian response here: On the Austrian Theory of Money, a Reply to David Graeber that especially takes issue with the use of ‘primitive’ economic systems, in part because the author argues that the Austrian stream of economics represented by Menger and Mises (and Murphy) applies primarily to complex economies (personally, I don’t find this distinction persuasive for a number of anthropological reasons, including the existence of large areas of non-market-based economic activity even within Western economies, but that’s a different subject).

One of the ironies is that both sides (well, there’s actually probably at least three sides to these debates, especially if you include the commentary) accuse the other of being ideological committed prior to evidence and of attacking strawmen that collapse important distinctions within the two fields (for example, pointing out diversity in economic thought or the fact that Graeber’s historical work is not the same as some other recent anthropological theory).

There’s plenty of examples of people with ideological commitments accusing other people of having ideological commitments (as if it were truly possible to be any other way), but I have to admit that I laughed out loud in my overly-long, procrastinating web search on the topic when I found one of the participants in the discussion outed as the person behind a ‘Jesus-woulda-hated-taxes’ website (to which I won’t link).

h/t to Decline of the Logos for the last one.

Credits for graphics:

Diagram of reverse engineered mortgage for the Ekstrom family from Zero Hedge, by Dan Edstrom (Just When You Thought You Knew Something About Mortgage Securitizations h/t: Reposted on Huffington Post).

David Graeber’s photo from Wikimedia Commons.