Work on the Alley continues the next stage of resurfacing giving us a new sand coloured “beach” outside just in time for summer fun! Come and enjoy the new seaside and even buy a book too.
need to read this later
Yves here. This post by Kervick is LONG, but that’s because he unpacks the “creation” of money in a step-by-step manner. Your patience will be rewarded.
By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives
It is sometimes said that commercial banks in our modern monetary system create money “from thin air”. While there is truth in this metaphorical claim, the metaphor can also be seriously misleading, and leads some to attribute powers to commercial banks that are actually retained by the government alone under our system. It is worth trying to get clear about all this.
Suppose you have some debt to pay; or suppose that there is some good or service that you wish to purchase on the spot. How can you make the payment? Clearly you are going to have to hand over something of positive value. In order to pay off a debt you will have to possess some asset that you can transfer to your creditor in a way that discharges your obligation. Similarly, in order to purchase some good or service on the spot, you will need to possess some asset that the seller is willing to accept in exchange for the good or service that is sold to you. The asset you use might be a very specific, unique and particularized kind of thing, depending on the nature of whatever implicit or explicit contract you have with the creditor or seller. But more often than not, you will pay with a generic and widely accepted type of asset, once which in used routinely to buy things and discharge debts, and that seems to exist mainly or solely for those very purposes. Such payment assets have existed in many different forms historically, along with different kinds systems for generating, storing, transferring and regulating these assets. We customarily call these assets “money”.
Payment assets obviously possess value, for if they didn’t they would not be accepted in exchange for other things of value. As a result, it is rare that one can acquire these payment assets for nothing. Usually you need to give something up in return. The money you use to buy a car was most likely obtained either in exchange for some good you traded for the money, or for some labor service you provided to an employer. You can also obtain payment assets in exchange for promises – even for promises to hand over an even greater quantity of the very same kind of asset as some point in the future.
Among the most common ways of paying one’s own debts or paying for goods and services is to pay with the debt of a third party. For example, suppose I give a signed note to Pat Brown that says, “I agree to pay Pat Brown, or the bearer of this note, $100 on demand.” And suppose Pat has a $100 debt to the corner grocer. Pat might attempt to pay the grocery tab with that IOU. If the grocer accepts the note, then Pat has paid a debt with a debt.
Once I have issued and signed the note, and Pat has accepted it, I have a liability. And if that liability is of a kind that Pat is legally permitted to sign over or otherwise transfer to a third party, it is said to be “negotiable”. If Pat does whatever is legally required to convey the IOU to the grocer to pay the grocery tab, the grocer becomes a “holder in due course” of the negotiable liability. At that point, Pat no longer has a debt to the grocer. But I still have a debt. I previously had a debt to Pat; but now I have a debt to the grocer. That’s what it means for a debt liability to be negotiable: the creditor who holds that debt as an asset can transfer it to a third party, so that the debtor ends up owing the same debt to a new creditor.
Where did the IOU come from? Was it created from thin air? More or less. Yes, a certain amount of paper and ink and work might have been involved in producing it, so its production didn’t come with zero cost. But typically the cost of making the promise will be so low in proportion to the amount promised, that we don’t go far wrong in thinking of the promise as having been produced from thin air, created ex nihilo as it were. And it is not as though to make a promise I have to pull the promise out of my pre-existing promise stash. The promise doesn’t really come from anywhere. There is no effective limit on my ability to make promises beyond the length of my lifespan, and the number of people in the world to whom I might make them. But the fact that my ability to make promises is virtually unlimited does not mean that my ability to get my promises accepted is virtually unlimited. Some people and some commercial entities have a much easier time getting their promises accepted than do others. Making promises is a lot easier than making credible promises; and accepting a promise that you personally find credible might be a lot easier than trading such a promise to someone else. To trade away any promises you possess, you must be able to convince others that they should find the promise just as credible as you did when you first acquired it. Also, once I have made a promise and had it accepted, I am bound in a way I wasn’t before. The holder of the promise possesses a legally binding claim on my assets.
A bank deposit account is such a promise, and it therefore represents a debt or liability of a bank to the account holder. If you have a bank deposit account then you are in possession of a promise by the bank to pay you a defined amount. If it is a demand deposit account, then the promise is to pay on demand. The agreement you have made with the bank specifies the conditions under which you can demand payment on the debt or make use of that debt – and those specified conditions usually include the right to transfer part or all of that debt to a third party. Most banks have a good track record in paying the debts represented by their deposit accounts, and there are also reliable government guarantees in place to pay most of the deposit account debts that insolvent banks find themselves unable to pay. Thus bank debt functions as a fairly reliable and very widely accepted payment asset. Bank deposit liabilities are a form of money.
Of course, when you transfer the bank’s debt to a third party, you don’t literally transfer your bank account to that party. Instead you give the party some financial instrument, or send some electronic payment instruction, that ultimately results in your bank having a smaller debt to you, but a correspondingly larger debt to the payee. For example, you might have a demand deposit account with $10,000 in it and give someone a check drawn on that account for $1000. If the recipient has an account at that bank, they can present the check – your payment order – to the bank, following which your bank reduces the amount in your account by $1000 and increases the amount in the recipient’s account by $1000. In other words, the bank’s debt to you has been reduced by $1000 and its debt to the recipient has been increased by $1000. You have paid the recipient with a debt. However the debt you paid with was not your debt. Rather the debt you paid with was the debt of some other debtor – the bank – and is a debt obligation of which you were the initial creditor, not the debtor.
Note that the person who took your check to the bank might not have been willing to accept payment from the bank in the form of further bank debt, that is, in the form of an amount credited to their account at that bank. Instead they might have demanded cash. Generally speaking, that’s up to them. If they accept a deposit balance, then the bank still has a debt to them. If they are paid in cash, then the bank’s debt has been discharged, but the bank has had to surrender a payment asset in order to discharge it – in this case money from its vault.
Now this raises a question. As we have already seen, one way to pay a debt is with another debt – more specifically with a negotiable liability. But if I pay a debt with my bank’s debt, how does my bank pay that debt when they are required to pay it off? Or looked at slightly differently, given that my bank’s debt to me can serve as my payment asset, what kind of thing can serve as my bank’s payment asset? And when do banks pay the debts represented by their depositors’ account balances?
For most banks in the US banking system there are two fundamental types of payment assets banks use to pay their debts. But perhaps another way of putting it is that there are two main forms of one fundamental type of payment asset. That payment asset consists in the negotiable liabilities of the central bank, i.e. the Fed. These liabilities come in two forms: the deposit balances that commercial banks in the Fed system hold at the twelve Federal Reserve Banks, and the paper currency notes that the Fed also issues. Just as you and I possess payment assets in the form of commercial bank account balances, commercial banks possess payment assets in the form of central bank account balances. In each case, that balance is an asset of the holder of the account and a liability of the depository institution at which the account it is held. You and I can pay our debts with commercial bank debt; commercial banks pay their debts with central bank debt. Note, however, that one form of central bank debt is widely held by both commercial banks and the non-bank public: the currency notes that banks hold in their vaults and that you and I hold in our wallets.
But when do banks pay the debts represented by their depositors’ accounts? We have already considered one occasion: someone presents a check at a bank and receives either cash or a positive increment to their account balance at that bank. Another way in which bank’s pay their debts is by rolling them over into debts of the same kind or a different kind, as when the promise represented by a certificate of deposit is redeemed in the form of an increment of dollars to some demand account balance.
But banks also pay their debts when they are ordered by their depositors to pay someone who does not have an account at the same bank. Suppose you pay $300 to Bob’s Propane with a check or electronic check card, and Bob’s Propane holds its accounts at Maple Valley Bank, while your account is held at Ridge Bank. While the exact procedures for clearing and settling this payment differ according to the mechanisms used, the end result is the same. Bob will end up with $300 more in his Maple Valley Bank account, and you will end up with $300 less in your Ridge Bank account. But banks are not in the habit of giving away money for free, and Maple Valley Bank is not going to increase its deposit account liability to Bob’s Propane $300 without getting something in return. In addition, Ridge Bank does not receive the benefit of reducing its liability to you by $300 without giving something up in return. What Maple Valley Bank receives and Ridge Bank gives up is a $300 balance in their own deposit accounts at the Fed. You paid Bob with Ridge Bank’s negotiable liability; Maple Valley Bank then gave Bob its liability in the form of a deposit balance in exchange for Ridge Bank’s liability, and demanded payment from Ridge Bank. Finally, Ridge Bank paid by directing its bank, the Fed, to reduce its own account balance by $300 and increase Maple Valley Bank’s account balance by $300.
But we often hear that banks create money “from thin air”. Doesn’t that mean that a bank never has to obtain payment assets from some external source in order to pay its debts? Can’t the bank simply create its own payment assets out of the thinness of air, so to speak, and pay its debts with those newly-created assets? Aren’t banks in this sense self-funding?
No, banks are not self-funding, either individually or in the aggregate. The “out of thin air” language, while containing elements of truth, can be extremely misleading, and people using this language sometimes woefully under-represent the significance of central bank liabilities and the government in the US financial system. Banks can indeed create deposit account liabilities from thin air, just as you and I can create liabilities from thin air when we issue IOU’s and someone accepts them. But those deposit liabilities are debts of the bank, just as the IOUs that you and I issue are our debts. And these bank debts are not just so-called debts or pro forma debts. They are real debts which banks must and do routinely pay off in the course of doing everyday business; and the assets a bank uses to pay these debts come from sources external to the bank. A bank cannot simply manufacture its own payment assets from thin air.
Suppose our old friend Ridge Bank, for example, wishes to purchase a fleet of company cars. It might be able to pay for the cars by creating a deposit account for a car company and crediting that account with the total purchase price for the fleet. But that account balance is itself a debt of the bank. Yes, the bank can pay for the cars with this debt, but that is no different in principle than the fact that you and I can pay for a car with an IOU. These debts are liabilities that can and will be extinguished over time by surrendering assets that the issuer of the liability doesn’t create or control. It’s always possible that the car company will just allow the balance to sit in its account indefinitely. But more likely, the company will begin to spend the money. Some of the expenditures might be to people or companies who have accounts at the same bank, which means balances just move from one Ridge Bank account to another Ridge Bank account, without the deposit liability being discharged. But over time a large proportion of that balance will either be withdrawn in the form of cash or used to pay people who bank elsewhere, and in each case the bank will have to surrender some externally created asset to meet its obligation. And note that even if the liability just sits unredeemed in the car company’s account for an extended period of time, the existence of those liabilities reduces the bank’s equity, and thus reduces the degree to which the bank’s owners profit from the bank’s operations.
People who are fond of saying the banks create money “from thin air” often seem to suggest that banks are no different than the government in that regard, and can thus obtain valuable monetary assets simply by manufacturing them ex nihilo, in effect profiting from pure seigniorage in the way a currency-issuing government can. But this picture is wildly inadequate. If banks could simply summon their assets into existence out of the aether, then every bank in the country could be as rich as an Arabian Gulf emir, manufacturing money at will to purchase solid gold chandeliers, 100-story luxury high rises, Olympic swimming pools, indoor ski slopes, and a personal entourage of world-renowned chefs, attendants and masseuses. The sky would be the limit. But clearly this is clearly not the case. There is a lot to complain about with regard to banking; lots of people in the banking system are making completely unwarranted profits from a massively bloated and exploitative financial system. But the wrongness here comes from the banking system’s ability to suck, squeeze and swindle assets from others; not from its simply conjuring these assets out of nothing.
There are several features of the existing banking system that sometimes lead to confusion about the role of commercial banks liabilities in our existing system, and about their dependence on central bank liabilities. We have space to consider just two of them: netting and government deposits at commercial banks.
Netting. Suppose Cogswell Cogs owes $50,000 to Slate Quarry for a delivery of gravel, and Slate Quarry owes Cogswell Cogs $60,000 for a delivery of cogs. The two companies might each issue separate payments of $50,000 and $60,000 respectively to settle their obligations. A more efficient method of settling the obligations, however, would be for both companies to agree to use the Cogswell Cogs debt to reduce the Slate Quarry debt by $50,000. Slate then pays Cogswell the net $10,000 balance and their business is terminated.
Banks can do the same thing. In the US, registered banks can make use of CHIPS, the Clearing House Interbank Payment System. CHIPS has its own account at the Fed, which participating banks pre-fund at the beginning of every business day by transferring money from their own Fed account to the CHIPS account. Net daily payment balances are calculated as the resultant of all of the payment obligations the participating institutions owe to one another, and payments are made by CHIPS by the end of the day to banks that end up with a net positive closing position. If a bank has a negative closing position – that is, if the amount pre-funded is insufficient to cover that days payments – then the bank pays CHIPS what it owes by making another Fedwire transfer from its Fed account to the CHIPS Fed account. Because multiple payment obligations are incurred among those participating banks throughout the day, then just as in the case of Cogswell Cogs and Slate Quarry, the actual amount that needs to change hands in a given day is much less than it would be if each payment were processed separately by the gross settlement system Fedwire.
Notice, however, that the system is ultimately dependent on the Fedwire system, and CHIPS just inserts an efficiency-enhancing intermediary between the Fed and the banking system. Participating banks can settle some of their less time sensitive interbank payments on the books of CHIPS, but they have to settle with CHIPS via the Fed. And larger, more time-sensitive payments are still settled directly via Fedwire.
Also notice that even in the case of a netting system, financial debts are still settled with assets that are not internally manufactured from thin air by the debtor. Consider, once again, Cogswell Cogs and Slate Quarry. To settle their business, Slate paid Cogswell $10,000 and Cogswell paid nothing. But Cogswell began by owing $50,000. So does that mean that Cogswell somehow manufactured a $50,000 benefit out of nowhere? Of course not. Before they settled, Cogswell held a $60,000 debt from Slate, but at the end of the day it received only $10,000. Cogswell received a cancellation of its own $50,000 debt in exchange for cancelling $50,000 of Slate’s debt. In other words, it had to relinquish an asset.
Government deposits at commercial banks. It is sometimes argued that the US government must be dependent on commercial bank money to fund its various activities and public enterprises, because the US Treasury holds some deposit balances at commercial banks. But I believe this is a seriously misleading claim. The government is certainly dependent on private sector economic activity and finance in a more general sense: if there were less private sector economic activity, there would be correspondingly fewer goods and services produced by our society, and thus fewer real assets that the government could make obtain and make use of to carry out its own activities. But the government is not financially dependent in any fundamental way on commercial bank deposit liabilities to carry out government spending.
To see this, let’s first look at a simplified picture of Treasury taxing and spending, before moving to the more detailed and accurate picture. The US Treasury has an account at the Fed called the “general account,” and that is the account from which it spends. Suppose I have an account at Maple Valley Bank from which I pay a $2000 tax obligation to the US government. Here’s the simplified picture: I send a check to the government, and as a result of the check being cleared $2000 is transferred from Maple Valley Bank’s Fed account to the Treasury general account. At the same time, my deposit account balance at Maple Valley Bank is reduced by $2000 and so Maple Valley Bank’s debt to me is reduced by $2000. Thus, Maple Valley Bank has lost both a $2000 asset and a $2000 liability, and experiences no net loss or gain. But the US Treasury now has $2000 more and I have $2000 less. The Treasury then spends that $2000 by buying $2000 worth of sticky note pads from Acme Office Supplies, a company which banks at Old Union Bank. After the various payment operations are completed, Acme’s account at Old Union has $2000 more in it, and $2000 has been transferred from the Treasury general account to Old Union’s reserve account at the Fed.
Now here’s the more accurate picture: In practice it has been found that conducting government operations in the way just described results in undesirable volatility in bank reserve balances, which interferes with the central bank’s ability to implement its target rate for interbank lending: So the government has introduced Treasury Tax and Loan (TT&L) accounts. TT&L accounts are US Treasury accounts at commercial banks designated as TT&L depositories. Suppose Ridge Bank is such a depository. Then when I send my $2000 check to the government, it may deposit it in its TT&L account at Ridge Bank. As a result, $2000 is transferred from Maple Valley Bank’s Fed account to Ridge Bank’s Fed account. At that point, no reserves have left the banking system. But as the Treasury spends over time, it continually transfers money from its TT&L accounts to the general account, and then spends from the general account. As that happens, central bank liabilities first leave commercial bank reserve accounts and then go back into those accounts after the Treasury spends.
Clearly there is no fundamental difference between the simplified system and the more complex system that uses the TT&L accounts as monetary way stations. The TT&L accounts exist solely to smooth out the flow of central bank liabilities to and from the Treasury general account and commercial bank reserve accounts. There is no sense in which the Treasury needs the commercial banks to “create” money in those accounts to carry out its taxing and spending operations.
In a broader sense it should be clear that, far from needing to acquire commercial bank liabilities in order to spend, the government doesn’t even need to obtain Federal Reserve liabilities from commercial bank reserve accounts in order to spend, and could alter the existing system if it so chose. The central bank is itself an arm of the US government and thus liabilities of the Fed held as assets by the Treasury are just amounts owed by one government account to another government account. That the US government chooses to operate in such a way that payments from one arm of the government are processed on the books of another arm of the government is an administrative and policy choice, not a deep feature of the monetary system.
What is true in the “from thin air” metaphor is that commercial banks are able to initiate the process of expanding deposit balances via lending without first obtaining any additional assets that might be needed to handle the added payment obligations and withdrawal claims that the additional deposit liabilities might impose on the bank. It can expand the deposits first and acquire the additional assets, if necessary, afterwards. And, of course, if the bank already possesses excess payment assets, it might not be able to expand its deposit liabilities without acquiring any more payment assets. It is also important to recognize that while banks obtain some reserve payment assets by borrowing them – either from other banks or directly from the Fed – some of those reserve assets are acquired for “free”: as interest on loans the banks make to the Treasury and as interest on reserve balances they already hold.
But it is crucial to recognize that banks do not and cannot simply manufacture their own assets – whether from thin air or otherwise. What they manufacture are liabilities; that is, debts. And they obtain assets from external sources, mainly by trading debts for debts.
I should watch this film. I have been meaning to for a while.
The Classics are must-see, must-read, must-play works revered by The Verge staff. They offer glimpses of the future, glimpses of humanity, and a glimpse of our very souls. You should check them out.
There aren't many good movies about surveillance. It's not photogenic, for one thing — just a bunch of guys with nice headphones in a smelly van. Most of the action happens inside the machines, and even then it’s just mixing, tweaking, and the drudgery of managing a video feed. It takes a great story to make it interesting, and a near-miracle to convince a studio to bankroll it.
"He'd kill us if he got the chance."
In 1974, Francis Ford Coppola had both. He was just two years removed from The Godfather, then the highest-grossing film of all time, and before he started on the sequel, he convinced Paramount to bankroll a movie about the seedy world of wiretapping, newly relevant in the aftermath of Watergate. The setup is simple: Surveillance man Harry Caul is hired to listen in on a young couple as they walk through a public park. As he cleans up the audio, Caul thinks he hears the words, "He'd kill us if he got the chance." What does he do?
Suddenly, cleaning up audio is a matter of life and death, and because this is 1974, it all happens on gloriously analog machinery. One of the more involved scenes shows Harry panning between three reel-to-reel tape decks, splicing the different source recordings to create a master. It's technical but gripping, tied together with brilliant film editing. Like Harry, we want to know what they're saying, and we feel his frustration when he can't quite get there. He's bumping up against the limits of the tech — a familiar feeling.
A cyberpunk hero, a company man
The biggest anachronism is Harry himself. He's intensely private, fiercely guarding something as simple as his telephone number, and flying into a rage whenever someone veers too close. He prefigures many of cyberpunk's off-the-grid fantasies, working for powerful, faceless companies while holding himself just out of their reach. But unlike the cyberpunk heroes, Harry still acts like a company man. Amidst a rising counterculture, he wears white shirts and ties, firmly on the establishment’s side. He's breaking the rules, listening in where he shouldn't be, but there's nothing swashbuckling about it.
Instead, there's the tape, played over and over, unspooling a little differently each time. Can Harry piece together the snippets to discover the truth? For all his work, he never seems to get any closer. Like all data, Harry's tape has its limits, and they're not limits he can work around with electronics. Forty years later, with parabolic mics and digital filters, we're no better at separating the signal from the noise. There are still bad assumptions and bad informants, lies and misunderstandings. The information pours in, and we struggle to make sense of it. The closer we listen, the harder it seems.
and the first thing I noticed is she's covering her wedding ring
this is why you are anxious and I am Alone
Is Financial Innovation the Space Race of the current era?
Karl Marx believed, optimistically, that capitalism was creating the conditions of its own socialist successor, through bringing an emergent class together in cities and factories, where they would inevitably discover their shared interest and the superiority of common ownership. Optimistic Marxists, such as Hardt and Negri, continue to believe that something like this is true, on the basis that value is dematerialising, making it eventually impossible to privatise. There are even business gurus who preach something similar.
Wandering around Stratford Westfield the other day, I had a similar but more pessimistic thought: maybe capitalism is gradually morphing into the 'actually existing' state socialism of the old Eastern Bloc. (For international readers, Stratford Westfield is a vast shopping centre that was strategically located between the 2012 Olympic Park and the nearest train station, in the hope of rinsing unfortunate athletics fans for some cash en route to the games.) British capitalism already has many of the hallmarks of Brezhnev-era socialist decline: macroeconomic stagnation, a population as much too bored as scared to protest about very much, a state that performs tongue-in-cheek legitimacy, politicians playing with statistics to try and delay the moment of economic reckoning. But it was this glimpse of Bucharest-style architecture, while crossing one of the Westfield walkways, that really brought this home:
A whole area of Hackney and Newham, that used to be a wasteland of scrap metal and ex-industrial equipment, was bulldozed, concreted over and then built on at vast scale, as part of London's unnecessary Olympic modernisation project. Only a very carefully planned alliance of state and corporate actors could have made this happen, with the principle goals being 'security' and 'delivery'. But even these apparently neoliberal ideals were becoming mired in comedy by the time of the games themselves. The 'security' threat was so vaguely defined, that battleships were located in the Thames and rocket-launchers placed on top of people's homes, like those laughable Red Square muscle parades of yore. Meanwhile, the 'delivery' was spoken of as 'on budget', but on the comical principle that 'budget' meant whatever the spokespersons needed it to.
Travelling around the area, you get a very clear sense that you are no longer in an unplanned, emergent or liberal urban space. Both aesthetically and politically, this is the nightmare that everyone from Jane Jacobs to Friedrich Hayek was warning us against: the quest for complete control of an economy or a space will result in a uniformity that is at best very dull and at worst very frightening. Examples of 'actually existing' state socialism tended to sit at various points on a spectrum between the two. For a British example of something that is a tad scary and more than a tad depressing, here is another shot of post-Olympian London:
The absurd sculpture that nobody asked for, the CCTV, the barbed wire, the bland greyness; I was probably breaking the law by taking this photo, but the security guards had probably given up caring. In any case, I might have bought them off with the offer of a pack of Marlboro reds or an Eagles LP.
Earlier this week, I happened to hear an old NYLON friend, Suzi Hall, speaking about her work on the LSE Ordinary Streets project, which is carrying out a close ethnographic and economic analysis of the Peckham Rye Lane area of London, including interviews with hundreds of shopkeepers. The work sounds like a brilliant example of what an anthropological sensibility can bring to the understanding of urban economic life.
She compared Peckham Rye to Stratford Westfield, in terms of numbers of businesses and the employment generated. While Westfield was sold as a local regenerator and job creator, Peckham Rye Lane's economy of ethnically diverse small-holders is eyed suspiciously by policy-makers as an apparent blockage to economic development. Plans are afoot to help chains move into the street as a step towards 'regeneration'. Yet Suzi reported that, while Westfield Stratford had duly delivered its promised 8,000 jobs, Peckham Rye Lane's local market was already a source of 13,000, via a far greater number of businesses. This is aside from the webs of social networks that accompany an 'embedded' market economy, in contrast to identikit businesses that are taking over most highstreets.
The notion that in an age of shrinking social security, policy-makers might view such a street as anything other than an irreplaceable socio-economic benefit is just bizarre. Why such government suspicion of the market? In contrast to the known quantity of WH Smiths, it probably appears dangerously opaque to the local council, but only because of the myopic tools of transparency and surveillance that are in use. A different gaze, such as that practiced by Suzi and her colleagues, would reveal things differently. The blind fear of the migrant (or even second or third generation migrant) converts economic liberty from the asset that Adam Smith portrayed it as, to a risk that requires costly management. And when it comes to mitigting the risks associated with individual freedom, the Chinese political model will always 'out-perform' ours...
In his recent On Critique, Luc Boltanski argues that repetition becomes the key trope of political actors who seek to avoid moments of critical or objective judgement. Words are recited, truths are repeatedly affirmed, routines are performed repeatedly, for fear that otherwise questions might be asked. This is different from, say, a company audit or an evaluation, in which there is a ritualistic element to it, but the outcome is unknown, unless it has become corrupted in some way. My feeling is (and I discuss this in a book I'm just finishing) that neoliberalism has entered a post-critical, repetitive phase, in which certain things have to be spoken - delivery, efficiency, security, competitiveness - but in order to hold the edifice together, rather than to reveal anything as objectively 'delivered', 'efficient', 'secure' or 'competitive. Political systems which do not create space for critique encounter this need for mandatory repetition immediately, as occurred to state socialism.
Neoliberalism was a political system in which the world was put to the test in some way, it was simply that the tests employed were those which privileged price and entrepreneurial energy. I don't want to defend this form of testing, which is often cynical, bullying and depressingly unsympathetic to other valuation systems. But there was often some consistency about it and the capacity for an unexpected outcome (for instance, that local economic diversity might be revealed to be more fiscally efficient). Look at Westfield today, however, and you see an economic culture being repeated, without any sincere sense that this represents 'choice', 'efficiency' or 'regeneration', nor any sense that things might have turned out differently even if this had been known. The point becomes to name this as 'efficient' and that (e.g. Peckham Rye Lane) as 'inefficient', and try and avoid or suppress evidence to the contrary. The fear arises that provable efficiency might involve abandoning one set of power structures in favour of another. And so economics becomes a naming ceremony, not a test.
Eastern bloc socialism had to keep going through the 1970s and 80s, inspite of lagging growth and failed ideological hegemony, because nobody knew what else to do. This is the stage neoliberal policy-making has now reached. The difference is that there is still one area of our economy that is still moving and changing, namely the money economy, with corporate profits high and financial innovation ongoing. What seems to have changed, post-2008, is that the price paid for this monetary dynamism is that the rest of us all have to stand completely still. In order that 'they' in the banks can cling on to their modernity of liquidity and ultra-fast turnover, 'we' outside have to relinquish our modernity, of a future that is any different from the present. Finance is to our stagnant societies what the space race and the Cold War were to the Eastern Bloc countries of the 1970s and 80s - a huge cost that the state imposes on its public, with the result that cities and economies start to become tedious processions of the same.
Responsible for bands like The Rapture, LCD Soundsystem and Holy Ghost, DFA Records have released 141 singles, 24 albums and six compilations in its 12 years of operation — and defined itself as one of the most forward-thinking and well-loved labels of our generation.
Directed, written and filmed by Max Joseph, one of the dudes/geniuses behind Catfish, this short documentary — released overnight by The Redbull Academy — chronicles the method behind the madness, painting James Murphy (LCD Soundsystem) as the absent father of the label, and his co-founder, John Galkin, as the mother left behind to look after the kids.
1. To run an international indie music label, you only need two full-time staff:
2. One of them should look like Michael Cera, and be prepared to work for free in exchange for sleeping in the office:
3. To save on costs, have a complex, start-of the art in-house studio in your office:
4. To create a unique and interesting new sound, tape mouse pads onto drums:
5. Peanut butter is the greatest American flavour:
6. Throw mad parties, and serve your guests donuts:
7. Come up with a brilliant motto:
8. Release your mission statement as a song:
by Evan Kindley
Image: Patrick Martinez, "Keep It Real."
Timothy D. Taylor. The Sounds of Capitalism: Advertising, Music, and the Conquest of Culture. University of Chicago Press, July 2012.
Jonathan Sterne. MP3: The Meaning of a Format. Duke University Press, July 2012.
Chris Ruen. Freeloading: How Our Insatiable Hunger for Free Content Starves Creativity. O/R Books, December 2012.
In 2006, the popular indie rock band of Montreal allowed the restaurant chain Outback Steakhouse to use a version of their song “Wraith Pinned to the Mist (and Other Games)” in a thirty-second television commercial. While such a business decision was hardly unprecedented, the brazenness of the usage — the original chorus lyrics “Let’s pretend we don’t exist / Let’s pretend we’re in Antarctica” were replaced with a more on-message variant: “Let’s go Outback tonight / Life will still be there tomorrow” — led to a number of denunciations, particularly on the internet. (The exact details of the band’s deal with Outback are unclear, but of Montreal front man Kevin Barnes has claimed that he was unaware the lyrics would be changed.) It probably didn’t help that the advertised product involved meat and had absolutely zero existing cultural cachet, or that the remake “Australianized” of Montreal’s arrangement by making prominent use of didgeridoo.
In February 2007, attendees of an of Montreal show at Emo’s in Austin, Texas held up a homemade Outback banner and chanted “SELL OUT” at the band. (According to one online report, Barnes had security throw the troublemakers out of the club; others claim he merely lectured them from the stage.) In November of the same year, of Montreal participated in another commercial, this time for T-Mobile, providing the occasion for a manifesto written by Barnes for the website Stereogum, with the Baudrillardian title “Selling Out Isn’t Possible.” “The pseudo-nihilistic punk rockers of the ’70s created an impossible code . . . which no one can actually live by,” Barnes wrote. “The idea that anyone who attempts to do anything commercial is a sell out is completely out of touch with reality. . . . I think it is important to face reality.” Facing reality, for Barnes, meant accepting that, “[a]s sad as it may seem, one of the few ways most indie bands can make any money whatsoever is by selling a song to a commercial. Very very few bands make enough money from album sales or tour revenue to enable themselves to quit their day job.”
Next time you see a commercial with one of your favorite bands' songs in it, just tell yourself, “cool, a band I really like made some money and now I can probably look forward to a few more records from them.” It’s as simple as that.
In 2007, this line of reasoning still came off as slightly cagey and defensive, but it has rapidly become the party line for musicians, fans, and advertising executives alike, all of them looking for somewhere to stand in the rapidly shifting post-Internet economic landscape of the 21st-century music industry. Barnes’s screed can be read as a founding document of a new pop era, in which it’s the musicians who get righteously angry at the fans on the subject of commercialism. The old complaint, in which artists are scorned for abandoning the communities that nurtured them and ascending into the corporate empyrean, has been replaced by a new one, in which artists rage at those same communities for not lifting them up high enough to keep body and soul together.+ + +
It’s in this confused, poisonous atmosphere that the stigma against the advertising industry has begun to break down. The taboo itself isn’t ancient (though it’s certainly older than “the pseudo-nihilistic punk rockers of the ’70s” that Barnes scapegoats); as the musicologist Timothy D. Taylor shows in The Sounds of Capitalism, the links between American popular music and advertising are longstanding. While he briefly covers the “prehistory” of the phenomenon in the cries of 13th-century street hawkers recorded in the Montpellier Codex, Taylor’s real starting place is radio, which, he argues, is where the marriage between music and advertising was first truly consummated. Radio stations needed content to fill time and keep people listening (this is where the musicians came in) and capital to keep themselves afloat (enter the advertisers). For a while radio producers were reluctant to merge art and commerce too brazenly: a “good-will strategy” prevailed, in which companies like Lucky Strike, the Dixie Cup Company, and Fleischmann’s Yeast would “present” popular musicians. (The link between musical content and product was often pretty strained; the Clicquot Club Eskimos, a banjo orchestra subsidized by a soft-drink manufacturer, were described as “play[ing] ‘sparkling’ music because their ginger ale sparkles.”) This soon evolved, in part due to pressure to keep consumption up during the Depression, into a “hard-sell strategy,” in which musicians and composers shilled much more directly for various products. Taylor places “the heyday of the jingle” in the late 1940s, the period that gave us classics like the Chiquita Banana jingle, which debuted in late 1944 and by 1945 was being played an estimated 376 times a day.
In many ways, the increased involvement of rock musicians in the commercial industry follows an old pattern: a similar thing happened in the 1950s, when formerly contemptuous Broadway composers moved into advertising en masse when rock and roll began to cut into their profits. (Frank Loesser, of Guys and Dolls fame, even started his own jingle publishing company in 1957, producing songs for Sunkist, Sanka, Newport, and others.) Taylor also points out that the shift to digital music production in the 1980s incentivized ad agencies to hire cheap, nonunionized young rock musicians and producers in lieu of high-priced industry professionals.
Still, the concept of “selling out” had plenty of cultural currency well into the early 2000s, and not only in the nascent “indie” world. (As Taylor reports, high-profile licensing deals like Nike’s infamous use of the Beatles’ “Revolution” in 1987 stirred up plenty of righteous anger among baby boomers.) If anything, this critical discourse was overdeveloped in the post-Sixties counterculture, whose members had a tendency to act as if the real problem with capitalism was that it worked too well (insidiously controlling hapless consumers, and corrupting the purity of producers) rather than not working well enough (failing to provide an equal distribution of wealth and other goods). The preoccupation with “selling out,” in other words, played into the larger dynamic of what Luc Boltanski and Ève Chiapello have described as the “artistic critique” of capitalism, which focuses on the evils of commodification and inauthenticity at the expense of those of inequality and atomization.
Today, though, Taylor argues, the concept of “sell-out” may be losing its validity — and, oddly, it is the ascension to power of the same generations that refined the “artistic critique,” the boomers and Generation X, that is leading to its demise. “[B]y the 1950s, advertising music had begun to become closely intertwined with the production of popular music generally,” he writes:
The rise of the baby boomers and postboomers to power in the advertising industry and the increased flexibility of workers in the realm of commercial music has meant that there is no popular music that is not, to varying degrees, commercial music, whether or not listeners hear it as such. The long-standing distinction between art and commerce much debated by advertising industry workers and those who study them has become moot: the sounds of capitalism are everywhere.
The Sounds of Capitalism includes some especially vexing recent examples of the integration of the music and advertising industries: McDonald’s 2005 deal with marketing company Maven Strategies to seed references to Big Macs into rap lyrics, for instance, or the machinations behind the singer Chris Brown’s song “Forever,” whose hook “Double your pleasure, double your fun” was bought and paid for by Wrigley, though the corporation strategically waited to unveil their campaign until the song had been released and become a hit in its own right. On the whole, though, Taylor’s claim that “in the new millennium . . . there is no counterculture anymore; there is only culture, and it is made by commercial interests” seems overstated. Cultural resistance to the influence of advertising on popular music may be at a forty-year low, but there is still plenty of music that remains practically if not ideologically detached from “commercial interests.” Mashing up the arguments of The Conquest of Cool and Distinction, with the occasional uncleared Adorno sample thrown in, Taylor strains to impart a sense of implacable historical logic to what is, in fact, a very chaotic state of affairs.
Still, Taylor is certainly right to observe that the relationship between the advertising and music industries matters today in a new way. Let’s leave aside the actual influence corporate advertising has on today’s musicians or music culture; its status in the arguments we have about music has certainly changed. In recent years the pendulum of shame has begun to swing back the other way: where once fans routinely accused greedy musicians of selling out (or each other of enjoying “sell-out” music), now musicians counter-accuse consumers of abandoning the market economy, forcing them into the arms of corporate benefactors. In such a scenario, Taylor points out, cultural intermediaries like “advertising agency creative workers appear to be heroes of a sort.” They have the melancholy Protestant commitment to “creativity” that Max Weber thought 19th-century Americans had toward production per se: “Theirs is a way of attempting to survive the unprecedented voracity of capitalism and the iron cage of rationalization that accompanies it, even as they serve capitalism.” The hip young sophisticates who work at advertising today have not given up the basic countercultural faith that commerce and art are incompatible, but they have tempered it with the realist proviso that artists, like everybody else, need to get paid somehow. In Taylor’s words, they “still have no tolerance for what they view as commercial music . . . . At the same time, however, they have no compunction about using this music for commercial purposes.” Advertising, then, is not an illicit way for musicians to enrich themselves but one of the few viable ways for them to secure support: not a ladder on the rung to transcendence but the only port in a storm.+ + +
That storm, of course, is the internet, which most accounts hold responsible for the music industry’s decline. Though Taylor’s book makes surprisingly little reference to file sharing or other technological developments of the past few decades, other writers have not been shy about opening fire on the elephant in the room. Chris Ruen’s recital of the litany, at the opening of his new book FreeLoading: How Our Insatiable Hunger for Free Content Starves Creativity, is familiarly bleak:
After only ten years, US music industry revenues shriveled from over $14 billion a year to less than $7 billion. From 2000 to 2009, total US album sales (physical and digital) plummeted by fifty-two percent, from 785 million to 374 million units . . . Per capita, Americans in 2009 spent just one third of the amount of money they devoted to recorded music in 2000, from an all-time high of $71 per consumer to a modern-era low of $26 . . . The total number of people employed as professional musicians in the United States fell by seventeen percent from 1999 to 2009 as piracy migrated from the margins and into the mainstream.
As Ruen’s reference to “piracy” suggests, blame for the collapse of the music industry is often placed on peer-to-peer networking and file sharing. This is a considerable oversimplification; Taylor points out, for instance, that many of artists’ current financial woes can be traced back to the Telecommunications Act of 1996, which deregulated the radio industry, paving the way for the rise of the Clear Channel empire and a consolidation of playlists that disproportionately affected mid-level artists on independent labels (another force behind the easement of the advertising taboo).
Nonetheless, the culture of peer-to-peer file sharing and piracy makes an irresistible polemical target, not only because of its obvious effect on profits but also because of the superstructure of philosophical discourse that has grown up around it over the past decade. Ruen identifies three primary ideologies to rail against, a rogues’ gallery of high-toned intellectual apologists for “FreeLoading.” First, there is the anti-copyright Free Culture movement, led and exemplified by Lawrence Lessig, who advocates for a “read-write” as opposed to a “read-only” culture and the promotion of increased collective creativity through loosened intellectual property laws. Then there are the “digital determinists,” represented by BoingBoing’s Cory Doctorow, who hold that “you can’t fight technology”: “Armed with techno-utopian assumptions, a file sharer had a new way to understand their choice to not pay for their digital content: they were only doing what the computers ‘wanted.’” Finally, there are new media boosters like Wired’s Chris Anderson and Mike Masnick of the blog Techdirt, who propose that musicians need to adapt to the realities of the new market by providing incentives for their fans to pay for otherwise free content (the best known example of this being the much-discussed crowd-funding site Kickstarter).
To Ruen, all three of these positions look like little more than justifications for the hedonistic selfishness of “a generation of spoiled, entitled children.” Unfortunately, Ruen offers little to counter these positions other than eye-rolling; the book is a bit of a hodgepodge held together by its moralistic, sanctimonious tone, which occasionally scales the heights of theoretical pretension (“At issue today is whether we see ourselves existing within the construct of philosopher Immanuel Kant”—oh, really?). Still, Ruen does make some sound and valuable points, particularly about the inadequacies of claims by people like Lessig and Anderson that our current climate is healthy for the production of culture. “The wisdom of copyright,” Ruen writes, “is to focus the incentives, like a laser, upon the creative work itself. If our shared interest is the creation of more or better art, then why take away the fundamental right that incentivizes it, while setting artists off on a wild goose chase to find the best marketing scheme rather than to write the best song?” He also asks some provocative questions about the cozy relationship between the music website Pitchfork, the FADER Magazine, and Cornerstone Promotion (a New York-based lifestyle marketing agency), and about the January 2012 protests of the Stop Online Piracy Act (SOPA) by high-traffic websites like Wikipedia, Reddit, Google, and Mozilla.
Though Ruen seems to align himself with the libertarian left, FreeLoading is a helplessly conservative book, standing athwart our collective browser history yelling Stop. Countering what he sees as an excessive prejudice against record labels stirred up by the Recording Industry Association of America’s mass lawsuits against P2P users beginning in September 2003, Ruen idealizes the stringently ethical business practices of indie rock labels like Dischord (who made a point of never charging more than $10 for a CD and splitting profits equally with artists; and were, even in the indie community, much more the exception than the rule). Ironically, the adversarial counter-public sphere of indie rock—which emerged, of course, out of the same punk moment that Barnes accused of setting impossible expectations for artists to live up to—appears, to Ruen, as the only portal back to a healthy market economy. Not only is punk not dead: it’s the only thing that can save capitalism.+ + +
Where Taylor sees no daylight between contemporary music culture and the market, Ruen worries that what he calls “the Decade of Dysfunction” has permanently obliterated the relationship between the two. A useful corrective to both concerns is Jonathan Sterne’s MP3: The Meaning of a Format. For one thing, Sterne’s book underscores a point to which Taylor and Ruen only allude, which is that our current culture of “piracy” should not be understood as a real alternative or viable threat to capitalism—a notion that both its promoters and its detractors have cherished.
To begin with, Sterne shows that the MP3—that technological Trojan horse which has laid waste to the music industry—was the product of decades of corporate-funded research intended to increase profits. “Telephonic transmission drove research into hearing for much of the century,” Sterne writes; companies like AT&T were concerned to maximize their existing infrastructure, using the available bandwidth to carry as many calls as possible without going beyond the threshold of intelligibility. This led them to finance research in the fledgling field of “psychoacoustics” (part of a general trend toward corporate research and development in the early part of the 20th century, as Sterne notes). “The more AT&T knew about human hearing, the more income it could extract from its infrastructure,” Sterne writes. By 1924 it had quadrupled its system’s capacity, “with minimal modifications of infrastructure and no price increase.” The company’s basic research into human hearing led to innovations in the technology of “compression”: i.e., the simplification and reduction of an audio signal to its most essential elements. On the very first page of MP3: The Meaning of a Format, Sterne offers an admirably lucid description of the way MP3s work:
To make an MP3, a program called an encoder takes a .wav file (or some other audio format) and compares it to a mathematical model of the gaps in human hearing. Based on a number of factors—some chosen by the user, some set in the code—it discards the parts of the audio signal that are unlikely to be audible. It then reorganizes repetitive and redundant data in the recording, and produces a much smaller file—often as small as 12 percent of the original file size.
These smaller, simpler files are much easier to distribute via “end-to-end networks” like the internet, in which “the vast middle of the network does relatively little to its traffic . . . while devices at the ends of the network do the important work.” MPEG (the acronym stands for “Motion Picture Experts Group,” the name of the organization that originally set the standard for the format in the late 1980s and early ’90s) files were meant to be unobtrusive, unheralded players on the global field of multinational corporate synergy: “Like a person who slips into a crowd, the MPEG audio was designed to disappear into the global network of communication technologies.”
But they were not designed initially to be traded by consumers. Sterne points out that “at the time that MPEG came together, there was no world wide web, no internet as we know it today.” In a diagram of “Digital Audio Distribution Modes (Current and Proposed)” created by the National Association of Broadcasters in 1990, “there is no slot . . . for lateral exchange of recordings, nor even an inkling that it might be an issue, no discussion of mass customization, and little discussion of portable media beyond car radios.” The NAB had their eyes on digital broadcast and cable, not file sharing; the extreme ease with which MP3 files can be copied and played on a range of devices was the end result of a concern for “interoperability” across different industrial platforms.
Thus, Sterne argues, “the MP3’s rise to global preeminence was a product of contingency, accident, and opportunity”: it was not an inevitable logical step in the forward march of technological progress or late capitalism, but a fluke, an accidental collision of mutually conflicting corporate interests. It is important to remember, too, that while major record companies were wrong-footed by file sharing, corporations (and often the same ones that owned the record companies) did profit enormously from the rise of the MP3. Internet service providers and cable companies offering broadband internet access, for instance, did exceptionally well during Ruen’s “Decade of Dysfunction,” as did manufacturers of CD burners and blank recordable media. (A company like Sony, for instance, has interests in all four.) For Sterne, the lesson here is that “alternative, non-market economies within capitalism may not themselves be anticapitalist. It may appear that file-sharing and sampling challenge particular market economies, but that does not necessarily mean that they challenge the broader capitalist condition of music.” After all, he sensibly reminds us, “to threaten an industry’s incumbents is not to threaten the economy itself, despite incumbents’ protestations to the contrary and their critics’ glee at the prospect.”
This longer historical view certainly undercuts the insurrectionary rhetoric of anarchists like the operators of Sweden’s Pirate Bay, and even, to some extent, the “read-write” pieties of a digital communist like Lessig. But it also suggests that we who are living through this moment of confusion across industries should use it to our advantage, and the advantage of future generations—that we have “an opportunity to rethink the social organization of music,” as Sterne puts it. While it may seem to critics like Ruen that the social ties between musician and fan are being frayed, one could just as well argue that the current difficulty of seeing music in transactional terms is broadening our awareness of the social aspect of music. What remains to be done is a broadening of awareness of the technological platforms that make this socialization possible. It appears likely that the next phase of mass music listening—in some ways, and in some quarters, it’s already begun—will involve what Sterne calls the “utility model” (others have given it the groovier appellation of “celestial jukebox”). In this model, “music companies would become more like phone, electrical, cable, or satellite companies. The service, not the recording, becomes the commodity form.” Given the MP3’s roots in telephony and digital broadcasting, this scenario seems highly plausible.
But giving up the old commodity model means giving up, to some extent at least, the principle of mutual exchange, which, for better or worse, has provided our primary model for ethical relations per se, as David Graeber has recently emphasized. Clearly many artists do feel, today, that a social contract has been broken, and they have a tendency to blame the fans for this. A recent public example of this came in June 2012, when David Lowery, the singer for the bands Camper Van Beethoven and Cracker who now teaches at the University of Georgia, responded to a blog post by a 20-year-old NPR intern named Emily White. In her post White admitted that, while she had over 11,000 tracks on her iTunes, she had purchased only 15 CDs in her life. “My intention here is not to shame you or embarrass you,” Lowery writes in the preamble to his open letter to White, before going on to do essentially that for some 4,000 words, even implying that illegal file sharing was indirectly responsible for the suicides of the musicians Vic Chesnutt and Mark Linkous. “The existential questions that your generation gets to answer are these,” Lowery wrote, in a frequently quoted passage:
Why do we value the network and hardware that delivers music but not the music itself?
Why are we willing to pay for computers, iPods, smartphones, data plans, and high speed internet access but not the music itself?
Why do we gladly give our money to some of the largest richest corporations in the world but not the companies and individuals who create and sell music?
From one perspective, encounters like these are a welcome reminder of the fact that music, as anthropologists like the late Christopher Small have been insisting for decades, is always a communal undertaking, as dependent on the affective and economic investment of listeners as it ever has been on the exceptional abilities of the genius composer or virtuoso. And it’s never a bad thing for professionals, of any kind, to insist publicly that the work they do is valuable and that they deserve to be adequately compensated for it.
From another point of view, however, musicians attacking the listening public for its selfishness is neither a good look nor a viable strategy for changing people’s behavior. It’s as understandable that musicians would want to cling to the old forms of commodity capitalism as it is that eager, open-minded listeners would want to destroy it. But for people who care about how music is going to be made, heard, and paid for (or not) in the 21st century, the current debate over the ethics of exchange may have to give way, and soon, to the Realpolitik of standard-setting. The epochal MP3, after all, was neither an epiphenomenon of late capitalism nor a pure product of anarchist hacker culture: it was a compromise hammered out by representatives of industrial interests. Like most technological standards, this one had virtually no input from states: “because standards usually apply to international industries, governments have not been heavily involved in their regulation. . . . When companies or industries set standards, there is not even a possibility of public debate.” Sterne persuasively argues that “the MPEG story points to the need for better governance of audiovisual standards and formats, one guided by a notion of collective good.” If music is reconceived as a utility, after all, don’t we all have a legitimate right to it? Shouldn’t the state take an interest in its regulation?
The music industry as we knew it, with its shaky ad hoc compromises between art and commerce, is never coming back, but that’s no reason to resign ourselves to resentment or bad faith: we may yet look back on this time as the era of the emergence of a new politics of music. “The story of MPEG,” Sterne writes, “poses standards as an as-yet-unresolved issue of political representation in the development of new communications technologies.” The standards for the technologies that will shape music listening for the next fifty years are being set today; if we want them to represent us, we will have to find ways to make our presence and interests known to the people who write code and broker distribution deals as well as those who produce and consume music. (Who knows what form this might take? Occupy Spotify has a ring to it.) Lowery is certainly right to point out that Emily White’s generation—and not hers alone—has “value[d] the network and hardware that delivers music but not the music itself.” But perhaps the two are no longer extricable, if they ever were. And we have no reason not to hear ourselves in all of them.
Picture the scene: a lover of humanity or “philanthropist” who regularly makes large donations to charity has just been told about the Conservative proposals to limit the tax “relief” he will “enjoy” on such contributions. “Wait a minute!” the philanthropist splutters. “You mean that, in order to get the warm glow of having given a million quid to charity, I will actually have to spend a million quid?” His butler regretfully informs him that yes, this is indeed the case. “Well then, fuhggedaboudit!” the “philanthropist” expostulates in fury. “I’ll spend it all on crack cocaine instead! FUCK YOU, CHARITABLE CAUSES!”
Such is the “philanthropic” calculation recognized as entirely natural and not worthy of moral comment by both sides in the “debate”. The Labour party in particular, desperate to avoid such comment, has simply decided to eliminate any mention of the moral agency of rich individuals by describing the proposals as something they are not, in an outrage-generating slogan of cynical Unspeak: so let’s all oppose the… CHARITIES TAX!
Now, any level of tax “relief” on charitable donations is effectively a form of voluntary hypothecation that undermines the justice of the tax system as a whole, as even its defenders recognize. ((Witness Dominic Lawson’s weird column in the Independent today, where he “explains” support for the plans as based on class envy: “It causes such people almost physical pain to think of the possible pleasure it gives to the rich when they tithe their income to charities of their choice, rather than in taxes to fund the state’s own choice.”)) The Conservative MP Richard Harrington put the issue with admirable clarity: “Is it acceptable, under any circumstances, for people obeying the law and earning money – a lot of money – to say ‘I’m opting out of paying tax on my income’ because they are giving to charity? Should people be able to choose to support, say, the National Theatre, the opera and Christian Aid, while choosing not to support the National Health Service, education and social services?”
This sounds like a respectable Labour position, doesn’t it? Yet under its current leader, the gorm-challenged ((This is a kinder way, I think, to say “gormless”.)) Ed Miliband, Labour has opportunistically branded the proposals as the CHARITIES TAX, even though what is proposed is not any extra tax on charities, but rather a reduction in the money handed back to the rich as a reward for demonstrating their “philanthropy”. It is risibly inconsistent of Labour to oppose this while also opposing the Conservatives’ tax cut for the rich from 50% to 45%. To cover up the inconsistency, they simply slap a shiny new Unspeak label over what they are opposing this time, and hope no one will notice.
CHARITIES TAX is certainly a colourful specimen in its headline-chasing hucksterism, but we should also be careful about the use of the term “philanthropist” itself in such arguments. It implies that only those who have acquired lots of wealth and then disgorge it to carefully selected institutions can truly love their fellow humans, and it further implies that actually paying tax so that all members of your society might benefit is not philanthropic (or even charitable) at all. If some people are happy to describe themselves as “philanthropists” in this sense, media reports probably shouldn’t endorse the connotation of purchased virtue.
Is anyone using The Old Reader?
In Sunday’s New York Times, conservative columnist Ross Douthat invokes the utopian dream of “a society rich enough that fewer and fewer people need to work—a society where leisure becomes universally accessible, where part-time jobs replace the regimented workweek, and where living standards keep rising even though more people have left the work force altogether.” This “post-work” politics may be unfamiliar to many readers of the Times, but it won’t be new to readers of Jacobin.
Post-work socialism has a proud, if dissident tradition, from Paul Lafargue to Oscar Wilde to Bertrand Russell to André Gorz. It’s a vision that animates my writing on topics ranging across the contradictions of the work ethic, the possibilities of a post-scarcity society, the politics of sex work, and the connection between post-work politics and feminism. Others have addressed related themes, like Chris Maisano on shorter working hours as both a response to unemployment and a step forward for human freedom, and Sarah Leonard on the pro-work corporate feminism of Marissa Mayer.
The basic vision of the post-work Left, then, is one of fewer jobs, and shorter hours at the jobs we do have. Douthat suggests, however, that this vision is already becoming a reality, and he warns that it is not a result we should welcome.
It’s something of a victory that a New York Times columnist is even acknowledging the post-work perspective on labor politics, rather than ignoring it completely. Hopefully he’s been taking his own advice, and reading about it in Jacobin. But Douthat’s take is a rather peculiar one. To begin with, he claims that we have entered an era of “post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job”. But it’s not clear what he bases this claim on. It’s true that labor force participation rates—the percentage of the working-age population that is employed or looking for work—has declined in recent years. From a high of around 67 percent in the late 1990′s, it declined to around 66 percent before the beginning of the last recession. The recession itself then produced another sharp decline, and the rate now stands below 64 percent.
Unfortunately, it’s unlikely that this reflects masses of people taking advantage of our material abundance to increase their leisure time. As those numbers show, most of the decline in the participation rate was due to the recession (and some of the rest is probably due to demographic shifts). If the economy returned to full employment—that is, if everyone who wanted a job could actually find one—the participation rate would probably rise again. For how else are people supposed to “find ways to live . . . without a steady job”, when incomes have stayed flat for decades despite great increases in productivity?
The post-work landscape that Douthat discovers is therefore very different than the one you’ll find surveyed in the pages of Jacobin. An economy in which people must get by on some combination of scant public benefits, charity, and hustling—because they are unable to find a job—is very different from a world where people are able to make a real choice to either cut back their hours or drop out of paid work entirely for a period of time. That’s why, in different ways, Maisano, myself, and Seth Ackerman have all emphasized that full employment is central to the project of work reduction, because tight labor markets give workers the bargaining power to demand shorter hours even without cuts in pay. And it’s why I have especially emphasized the demand for a Universal Basic Income, which would make it possible to survive outside of paid labor for a much larger segment of the population.
If Douthat’s account of labor force participation is misleading, his account of working time is equally incomplete. “Long hours”, he claims, “are increasingly the province of the rich.” While this claim isn’t precisely wrong, at least within certain narrow parameters, it obscures much more than it reveals. Douthat links to an economic study that finds longer average weekly hours among those at the top of the wage distribution, relative to those at the bottom. This is not a unique finding; the sociologists Jerry Jacobs and Kathleen Gerson found something similar in their study The Time Divide. And as it happens, I have some published academic research on the topic as well. In many rich countries, including the United States, highly educated workers (e.g., those with college degrees) report longer average work weeks than the less educated (who also tend to be lower waged, of course).
This finding is often deployed to dismiss the significance of long hours, much the way Douthat does here. If the longest hours are being worked by those who presumably have the most power and leverage in the labor market, the argument goes, then long hours shouldn’t be such a concern. But this is wrong for several reasons.
First, just because hours are longest at the top end of the wage distribution doesn’t mean they aren’t long elsewhere as well—in my research, I found that reported average hours among men were above 40 hours per week across all educational categories. And hours on the job doesn’t cover all the other time people spend working: time spent commuting to work, time spent performing unpaid household and care work (which those on low wages often can’t buy paid replacements for), and what the sociologist Guy Standing calls “work-for-labor”: the work of looking for jobs, navigating state and private bureaucracies, networking, and other things that are preconditions for getting work but are themselves unpaid.
Second, working time is characterized by pervasive mismatches between hours and preferences, which are more complicated than just hours that are “too long”. Jeremy Reynolds has found that a majority of workers say that they would like to work a different schedule than they do, but that these preferences are split between those who would like to work less and those who would like more hours—overemployment alongside underemployment.
The finding that many people report working fewer hours than they would like reflects an economy in which many low-wage workers face uncertain schedules and enforced part-time hours that exclude them from benefits. These workers would clearly benefit from predictable hours, higher wages, and recourse to good health care benefits that aren’t tied to employment, but it’s far from clear that they would benefit from more work, as such.
And Douthat would almost seem to agree. In a passage I could have written myself, he says:
There is a certain air of irresponsibility to giving up on employment altogether, of course. But while pundits who tap on keyboards for a living like to extol the inherent dignity of labor, we aren’t the ones stocking shelves at Walmart or hunting wearily, week after week, for a job that probably pays less than our last one did. One could make the case that the right to not have a boss is actually the hardest won of modern freedoms: should it really trouble us if more people in a rich society end up exercising it?
Amazingly, he follows this up by answering that last question with a resounding yes. And I might almost be inclined to follow him, if he based his conclusion on the argument I’ve just presented: that in an environment of pervasive unemployment, high costs of living, and a meager and narrowly targeted welfare state, the loss of work isn’t exactly something to celebrate.
Perhaps realizing, however, that this austere vision is hardly a compelling case for the conservative worldview, Douthat tries a different tack. Having acknowledged the implausibility of the “dignity of labor” case for much actually-existing work, he neverthelsss moves right on to the claim that “even a grinding job tends to be an important source of social capital, providing everyday structure for people who live alone, a place to meet friends and kindle romances for people who lack other forms of community, a path away from crime and prison for young men, an example to children and a source of self-respect for parents.” He concludes with an appeal to the importance of “human flourishing”, but it’s hard to see much social capital, lasting interpersonal connection, or human flourishing going on in the Amazon warehouse—or for that matter, at Pret a Manger.
Although it’s pitched in a kindlier, New York Times-friendly tone, Douthat’s argument is reminiscent of Charles Murray’s argument that the working class needs the discipline and control provided by working for the boss, lest they come socially unglued altogether. Good moralistic scold that he is, Douthat sees the decline of work as part of “the broader turn away from community in America—from family breakdown and declining churchgoing to the retreat into the virtual forms of sport and sex and friendship.” It seems more plausible that it is neoliberal economic conditions themselves—a scaled back social safety net, precarious employment, rising, debts and uncertain incomes—that has produced whatever increase in anomie and isolation we experience. The answer to that is not more work but more protection from the life’s unpredictable risks, more income, more equality, more democracy—and more time beyond work to take advantage of all of it.