Financial Crisis part 1

I’ve been trying to write about the financial crisis for roughly eight months at this point, but each moment seems to require a new text. Marx was a good beginning, then David Harvey, then Naomi Klein and Glenn Greenwald, and before you know it, you’re stuck within a grand network of theories and facts that always needs more and more connections to make sense. Next it’s Wallerstein’s three volume work or Braudel’s or maybe Adorno or etc… Rather than take a stab at writing some all-encompassing tract then, let me try and say a few small things.

The problem, as I’ve seen it, hasn’t been just the corrupt and contemptible policies of the Bush administration, nor simply the timid, corporate-deferent policies of the Obama administration thus far (though there are signs that he is beginning to realize the magnitude of exactly what we’re experiencing and is, at least, beginning to act – tentatively – to remedy the absolute destruction wrought by the neoliberal policies of the last thirty years). Nor is it merely the fact that we’ve just gone through one of the most devastating periods of unrestrained capitalism in the history of the economic form, a period of Chicago School dominance and collusion between government and corporate factions. All of this is important, of course, of utmost importance for understanding the policy, for understanding the immediate, local problems and how those problems are amplified by certain global structures until you get a crisis like this. For that, scholars like Harvey and Wallerstein are invaluable, especially Harvey’s speech here and the last chapter in Wallerstein’s short book World-Systems Analysis: An Introduction. In essence, the central contradictions of capitalism are all conflicts between the belief that there is infinite capital and infinite markets to exploit and the real, material finiteness of the existing, economic world. There’s a touch of devout religiosity inherent there, and this is mainly what I’d like to talk about here in this first post.

As I started to mention above, the problem isn’t simply the economic policies of the last thirty years, though they are directly and counterfactually the cause of the crisis, that is, if conditions had been different then, they would be different now. Perhaps. It’s obviously more complex than that, and as the problem is global and structural as well as local, the question of whether this was an inevitable outcome is surely a live and fruitful question. How the structures of unrestrained capitalism structure other economic and existential structures and are themselves structured by other structures and local-level actions has been the subject of the most worthwhile Marxian theory. To bring this up is just to quickly nod to the ridiculous complexity of examining a world-systems economy, let alone a singular nation-state’s. Securitized mortgages and CDOs look relatively benign by comparison.

Which is why in the background, the most damaging aspect of this fiasco has been the theoretical one. That is to say, if there had been a different theoretical understanding in the background – not just a different economic structure, but rather a real understanding of the contradictions, of the non-linearities of the system – then perhaps this wouldn’t be as bad as it is or is going to become. Let’s look at one aspect here – there are more to discuss later, such as the belief that our economy is in equilibrium or the mischaracterization of and misunderstanding of how wealth is created or the misappropriation of blame (predatory lending! people taking out mortgages they couldn’t pay back! Wall Street’s chicanery! deregulation! ) . A lot of this has a lot of local elements as well: vicious stupidity and voracious greed, and I think here I’d like to look at how one belief in particular that at one point in time maybe have simply had local, ground-level significance was amplified over time until it was a major contributor to the current crisis, mostly by being a foundational aspect of neo-liberal economic practice and Chicago School theory – the direct progenitors of the crisis itself.

(As a side note, one question I’ve repeatedly asked, yet have never had time to research, is the question of evidence, that is, what evidence was there ever for Chicago School style theory besides abstract models? I realize I’m not indoctrinated with Friedmanite beliefs or anything like that, and that the political realm is indeed the place of praxis, where these things get tested, but how insane is neoliberal theory just on its face? How were the original models created? Was Freidman just insane? A dishonest and terrible economist? A sociopath? Where was the evidence that these were intelligent courses of action and not simply guesses based on oblique, abstract models with no relation to reality? I realize that we’ve crossed the threshold of a paradigm, and that this has all been re-conceptualized such that the Chicago School just seems ill-advised at best and brainless at worst – at least to anyone with the sense to really logically question the underlying assumptions – but internally, within the former paradigm – what were the battles that played out? Who called for evidence?)

Regardless, one of the things I want to look at is the belief in a tabula rasa. This is something that is, on its face, biblical, but is also a major component of linear, Western rationalism. Noah, of course, is the epitome. The belief that one can wash away the world, start over fresh without the hindrance of the past is a notion that carries a lot of weight in our culture, and though it’s far from true, the fact that people act as if it were true gives it symbolic density, and there of course is how the dynamics of this belief are primordially set up. History – the history of the world, of a nation, a people, a single person – is dialectical in the utmost sense of the word: a roiling sea of contradictions that rhythmically plays out in time. Sometimes the contradictions are benign, sometimes they become exacerbated by circumstances or by their own logical friction. However, acting like this is not the case, that it is linear is a contradiction in and of itself. How that plays out for different people is a matter of empirical study. One old friend of mine was convinced that whatever malaise she was feeling was tied to the house she was living in, that if she just changed apartments, things would be better. She did, and perhaps things were indeed better for a time, a placebo effect or perhaps willing a certain feeling into existence ex nihilo, but it soon passed as the past erupted into that cocoon.

For whatever failings Joss Whedon’s new show Dollhouse has (and there are innumerable), to its credit, the theme that the past can’t simply be plastered over is the central tenet of the show, and it plays out in interesting ways. In fact, this theme is so prevalent in fiction that it’s cliché. A History of Violence. Battlestar Galactica (the new one). Most serial fiction with real dramatic weight or any film that deals with generations or the past. And the moral is always the same. History is a palimpsest that never settles. It peels and leaks and bursts through and becomes the present and future in surprising and incalculable ways that surpass our best expectations. Yet the Western scientific paradigm that bases its successes on (the fictional standard of) perfect predictions ad infinitum is at odds with this. The real world progresses dialectically, while Western scientific rationalism understands existence as a linear movement. Like Freudianism, the weight of these beliefs gives it heft and mass and semblance, and in that there is indeed a second contradiction, related to the first one I mentioned.

So, besides the numerous conceptual, theoretical and material contradictions that come out of the structures of capitalism (again, the major one being that it calls for the endless accumulation of capital in a world of real, existing limits), there are also a number of concurrent theoretical concerns that are connected to these through the co-evolution of the ideas within Western, and later, global culture. If we look at how ideas are organized, how they are connected, how they evolve and change and how they change each other, we can begin to get a sense of just why this idea of the tabula rasa is so ludicrous, and if so, then why the political elite are so ignorant and cruel.

The first metaphor I always grasp for to explain the past is that of a blob: some blobby, jelly-like mass that moves, and as it moves, it reconfigures itself. Parts of the mass that were inner move to the outside and other parts shift back and forth. And it changes shape and transforms, yet is still made up of the same constituent parts it began with – though some are invariably left behind  in its wake, bits that broke off and such, and all that remains of the detritus is a residue. Another thought that recently came to me is a network of nodes connected to each other in perhaps a scale-free network, but perhaps that doesn’t matter. What does matter is that the nodes also double as joints, so in effect this historical model is a giant articulated mass. When you push on one of the nodes that affects other ones, but not all of them. Remove a node or a link and the same things happens, parts are affected others are left the same. Change the shape by pushing or pulling the nodes. Each new stage retains parts of the former stage, but again, nothing truly ever goes away, it’s just therein a different form.

Thinking of Foucault, I wonder in what way referring to a financial institution as a “house” is a monarchic echo?

Regardless of either the blob or articulated network of interconnected lines model of history, there can be no such thing as a tabula rasa because there is no ground zero blank state. There is just history and its transformations. One of the most important recognitions in evolutionary theory was the acknowledgment that contingencies play the largest part in the narrative. Simply winding the clock back on a complex system doesn’t mean it will play out in the same way again. History isn’t a succession. However, the political elite and their academic sycophants have a different model in mind, one where history is like an onion, and all one has to do is peel back the layers to arrive at some virgin territory.

Naomi Klein documents this in her book The Shock Doctrine. Using the analogy of shock therapy for mental patients, she explains how the same tactics were used on whole societies. And of course, when neither resulted in a tabula rasa – since it’s a myth borne of a faulty model – the only way to try and things together was through massive violence. Violence to generate the blank slate and then violence to try and put things back together when that didn’t work. Klein writes early on about the sociopathic psychologist Ewen Cameron. “According to his published papers from the time, he believed that the only way to teach his patients healthy new behaviors was to get inside their minds and ‘break up old pathological patterns’. The first step was ‘depatterning’, which had a stunning goal: to return the mind to a state when it was, as Aristotle claimed, ‘a writing tablet on which as yet nothing actually stands written’, a tabula rasa. Cameron believed he could reach that state by attacking the brain with everything known to interfere with its normal functioning – all at once. It was ‘shock and awe’ warfare on the mind” (31).

Later, she writes about the invasion of Iraq, beginning with a quote of one of Cameron’s colleagues: “The Freudians had developed all these subtle methods of peeling the onion to get at the heart of the problem. Cameron wanted to drill right through and to hell with the layers. But, as we later discovered, that layers are all there is.” In the next paragraph, she writes, “Iraq’s shock therapists blasted away at the layers too, seeking that elusive blank slate on which to create their new model country. They found only piles of rubble that they themselves had created, and millions of psychologically and physically shattered people – shattered by Saddam, shattered by war, shattered by one another. Bush’s in-house disaster capitalists didn’t wipe Iraq clean, they just stirred it up. Rather than a tabula rasa, purified of history, they found ancient feuds brought to the surface to merge with fresh vendetta from each new attack. – on a mosque in Karbala, in Samarra, on a market, a ministry, a hospital. Countries, like people, don’t reboot to zero with a good shock; they just break and keep on breaking” (372).

In this, Klein gets at the central, unsophisticated mistake of the ruling elite. I wrote about this idea in a earlier post that I think is worth taking a look at, but if you have families, cities, societies, cultures and subcultures arranged around certain organizing principles – attractors that they circle around in a basin of attraction – not strict rules, but rather a habitus, and you go in and disrupt those relations, all you have left are a lot of free floating agents looking for a new attractor – a new habitus. The transient paths they take in the search for this new attractor are extremely chaotic and always will be. You can’t predict the path the chaos will take, but what you can predict is that it the chaos itself will exist. Anyone with a modicum of intelligence – and there were many, many people who warned of the crisis (going back to Marx himself – not this specific one, but of the way capitalism breeds them – or again, in abstract, Wallerstein’s explanation of Kondratiev A and B phases.) – but anyone with any kind of intelligence could have predicted the current financial crisis without knowing the exact form it would have taken: as Richard Walker points out in an interview on Pacifica Radio for a series called Capitalism and Its Discontents, mainstream economists hem and haw about not having enough data points to accurately predict the exact length of the phases, but the exact length doesn’t matter; what does matter are the dynamics that drive the phases in the first place and that create an eminently predictable pattern – the limitless accumulation of capital (:30).

Filed by andyb at March 6th, 2009 under Uncategorized