A sudden blow: the great wings beating still
Above the staggering girl, her thighs caressed
By the dark webs, her nape caught in his bill,
He holds her helpless breast upon his breast.
-- William Butler Yeats, "Leda and the Swan" --
Blood is thicker than ideology.
When push comes to shove, family ties trump not only political beliefs but also immediate economic self-interest. Sometimes, even physical survival.
There is something out there, though, that is thicker than blood. Deeper than deep.
An involuntary reflex? Genetic? The mechanism behind genetics?
The unconscious? Could the unconscious have an unconscious? As we will show, that nec plus ultra cannot be the unconscious unless birds have an unconscious. Do birds dream?
Whatever it is, that something is preventing us from seeing crucial differences two feet in front of us.
This year´s Greek crisis, as well as Greek resistance, were climaxed on July 5 in the national referendum in which Greek voters resoundingly rejected their country´s existing bailout conditions imposed by creditors.
The crisis brought capitalism to an historic crossroad.
Nobody anywhere is talking about it.
This post breaks the taboo.
The power to impose taboos is where the real power lies.
* * *
Transcendent: 1. Surpassing the ordinary; exceptional.
2. In Kantian philosophy, not realizable in experience.
Hurriedly hushed up by all sides, the July 5 Greek referendum was transcendent in both senses.
1. Surpassing the ordinary; exceptional.
To understand what is new, exceptional, about July 5 we start with what is old -- the tendency of the rate of profit to fall as capitalism matures.
The theory of the falling profit rate is controversial because it is associated with Karl Marx. However, its initial formulation was made by Adam Smith, the intellectual patron saint of capitalism.
42 years before Marx was born, Smith famously wrote that the "diminution of profit is the natural effect of its prosperity." He explained in common sense terms:
"As capitals increase in any country, the profits which can be made by employing them necessarily diminish. It becomes gradually more and more difficult to find within that country a profitable method of employing any new capital. There arises in consequence a competition between different capitals, the owner of one endeavoring to get possession of that employment which is occupied by another. But upon most occasions he can hope to jostle that other out of this employment by no other means but by dealing upon more reasonable terms. He must not only sell what he deals in somewhat cheaper, but in order to get it to sell, he must sometimes, too, buy it dearer."*
The long-term tendency of the rate of profit to fall is not linear but cyclical. William Greider noted its presence in today´s globalized world.
"The relentless pressure on profits was a recurring lament among multinational managers and a central paradox of the industrial revolution. In an era of declining labor wages, proliferating billionaires and awesome global enterprises, many people would intuitively reject the complaint as fraudulent. Nevertheless, the corporate anxieties were quite real, especially for manufacturing firms. The basic dynamics of technological innovation -- more from less -- had the perverse effect of depressing returns per unit of production while simultaneously increasing the new capital required to invest in the next round of innovation. This squeeze left even the largest companies exposed to the threat of weak profits and capital shortages.
Across the last thirty years of globalization and technological change, corporate profits in the United States suffered almost in direct relation to the pace of revolution. In the booming 1960s, profits were typically 11 or 12 percent of U.S. national income and peaked at 14 percent. By the 1980s and early 1990s, they had declined to around 8 or 9 percent and fell as low as 6 percent. Manufacturing, in particular, used to be much more profitable than service industries, but was now less so. The wave of corporate restructurings that shed workers and factories in the first half of the 1990s succeeded in reversing the trend -- after-tax profit rates were booming again and reached a twenty-five-year peak in 1994 -- but it was not yet clear if this turnaround was permanent."
A deadly menace to capitalism accompanies the falling profit rate:
"The capital insecurities ... were deeply embedded in corporate balance sheets: U.S. companies had become much more dependent as borrowers...Corporate profits were 34 percent of corporate debt in 1960; by 1990, profits were only 15 percent of debt..."**
Much more dependent as borrowers. Since Greider´s book came out in 1997, that dependency has ballooned. In 2014, corporate debt hit a record.
Increasing corporate debt is inextricably related to the declining profit rate. The reason is debt payments as well as the profits of a productive capitalist come out of the same place: the economic surplus created by his farm, factory, etc.
The world saw a basic truth played out in the Greek crisis. No economic surplus, no debt service. Sure, it is possible to pay off old debts by obtaining new ones -- which is exactly what Greece was doing -- but not indefinitely. Sooner or later, a creditor has doubts and wants his money, and the house of cards -- walls too -- come tumbling down.
If productive capitalists are debtors, who are the creditors?
Answer: nonproductive capitalists, i.e., finance capitalists.
Banks are their core. Finance capitalists are comparable to policemen in that they are necessary -- loans are basic to capitalism -- but not productive. In case you are wondering, dear reader, if they are unproductive, how do they survive? Answer: the same way as high school teachers, accountants, firemen, doctors, and other people who are in unproductive but necessary occupations survive. Finance capitalists live off the economic surplus, the fat of the land.
The growth of debt rates over profit rates portends the rise of financial capitalists over productive capitalists. Hypothesis: the growing power of financial capitalists is both cause and effect of the worldwide tendency*** toward economic polarization -- the rich are becoming richer, the poor poorer, and the middle class smaller.
The biggest chunk of the Greek debt -- 46% -- is held by financial capital in Germany, France and Italy. Viewing the lenders in national terms is of course more politically acceptable than identifying them either indirectly or directly as private bankers. To view lenders in the latter terms casts an entirely different light on the Greek crisis -- which is why nobody in government or the mainstream press is doing it. It is also why the subject of this post -- financial versus productive capitalists -- is taboo.
For a starter list of private banks holding Greek debt in 2011, click here. In case you are wondering what happened to most of those holdings, we will provide the answer shortly.
Today, private bankers directly hold 17% of Greece´s debt. The remaining creditors are European governments (62%), the International Monetary Fund (10%), European Central Bank (8%), and the Greek Central Bank (3%). That relatively low number for private bankers doesn´t tell the whole story, however.
While working as a private political consultant to all three branches of government, I witnessed year after year how the influence of bankers went far beyond their percentage financial stake in a given issue. That stake is only the beginning, not the end, of where the action is for them.
Illustration: Commerzbank AG is a private German Bank holding 4.1 billion euros of the Greek debt. If its chairman Martin Blessing calls, you had better believe German Chancellor Angela Merkel picks up -- and fast. In maintaining Germany´s intransigent position throughout the 2015 negotiations with Greece, do you think Merkel did not hear Martin´s blessing in her ears?
The proof of private lenders´ decisive influence is in the pudding of July 12th. The agreement signed that day between Greece and its creditors includes the forced privatization of Greek public assets, e.g., its electricity network, to the tune of 50 billion euros. Assuming history repeats itself and a huge write-down of those assets will allow private enterprise to acquire them at fire-sale prices, Creditors & Friends won the lottery.
To underscore the sine qua non of Greek privatizations:
Yanis Faroufakis noted after he resigned as Greek Minister of Finances that the creditors had two priorities during the negotiations: "They would say we need all your data on the fiscal path on which Greece finds itself. We [also] need all the data on state-owned enterprises [my emphasis]." The data are now in and the race is on among German, Russian and Chinese companies to scoop up Greece´s family jewels.
Today, the pillage and plunder -- rape -- of a country can be conducted without firing a shot, without brandishing a single sword. The forthcoming forced privatizations answer the big mystery enveloping the Greek crisis from the very beginning: why would anybody lend money to somebody who obviously cannot pay it back? The giveaway is literally in the giveaway.
Something else is being conveniently passed over and around. Most of the Greek debt in private hands moved to public ones after the 2010 bailout. When governments pick up the tab for loser capitalists it means profits remain private; loses, on the other hand, are socialized.
Heads we win; tails you lose: it´s the oligarchy´s favorite game.
Sidebar: in America that game has been successfully sold to the public under the euphemism "Too Big To Fail." Socialism for the rich is the hallmark of the oligarchic political system that in 2008-2009 replaced the polity, i.e., the oligarchy/democracy hybrid system created by The Founding Fathers in 1789.**** With that second American Revolution, the ancient wisdom "You can´t have your cake and eat it too" went the way of the Edsel, Metrecal, clackers.
In saying "no" to the bailout terms Greece was living under, the Greek referendum of July 5 directly challenged the unchallenged reign of finance capital. 323 billion euros were in play. It is that behemoth-sized sum that made the referendum out of the ordinary, exceptional, that is to say, transcendent.
The Greek crisis brought capitalism and all of us with it to an historic fork in the road. Either (i) we continue in the direction in which finance capitalists grow at the expense of productive capitalists, or (ii) the reign of finance capital is recognized, reined in.
Option (i) requires only inertia, viz., that prevailing taboos and perceptions -- make that, misperceptions -- persist. Option (ii) on the other hand requires new initiative, energy. The spark needed to set it in motion: the simple awareness that financial and productive capitalists are different.
We will return later to our historic choice.
The July 5 referendum tested the waters. They were too hot for Greece to handle.
We come to the second reason why the Greek referendum was transcendent.
2. Not Realizable.
Without the two-pronged strategy outlined in our prior post -- a war on corruption plus a Greek Government declaration of its foreign debt as illegal, odious -- Greece could not possibly have put into practice what its people voiced on July 5.
And so, the occasion for a showdown with financial capital came ... and went. What Greece should have done it simply could not do. There would be no rendezvous with destiny.
The subsequent July 12 agreement between the creditors and Greece demonstrated the uncontested supremacy of finance capital. When the negotiations ended, Greece was left playing the role of The Grand Inquisitor who is conveniently out to lunch.
Before, during, and after the talks, there was no awareness anywhere that finance capital is strangling the goose that laid the golden egg. Or, if such awareness existed, it was of no consequence where it counts: behavior.
That lack of awareness is counter-intuitive...
You would think productive capitalists -- notably small farm and factory owners -- would look at their monthly bank loan payments and wonder. Some of them do. Others wake up when it is too late -- when a sheriff nails a foreclosure notice on the door.
What prevents productive capitalists, as well as the rest of us, from seeing what is obvious? Financial capitalists and productive capitalists are of different orders.
To bring the issue home, I want to address directly our productive capitalist readers:
I can understand why you would tend to believe that finance capitalists are capitalists just like you. After all, you grew up together; many of you even came from the same nest. You belong to the same country clubs. Your sons and their daughters intermarry (and divorce).
But let´s go ahead and personalize the issue further:
Look at the image at the top of this post of Christine Lagarde, director of the IMF. She looks like you. She went to an exclusive private school (Holton-Arms) like you and to a prestigious university (Sciences Po Aix) like you. She dresses like you: in the image she shows off her Louis Vuitton bag, Lockit Collection (starting price: 2750 euros). She goes to the same shows and eats in the same restaurants -- La Tour d´Argent, Masa, Lorenz Adlon Esszimmer -- as you. She talks like you. She tells the same jokes as you. She holds a champagne glass like you.
But she isn´t like you. One thing differentiates her from you: she never had to make a payroll. A mere detail? Of course, but that is the point. The devil is in the details.
If productive capitalists followed their own immediate economic self-interest, they would applaud Greek resistance to the bailout terms. A constructive renegotiation for Greece could have set a precedent to the advantage of borrowers everywhere. A new fire could have been lit. Instead, productive capitalists are inclined to sit back and write off Greeks as deadbeats, lazy liars, untrustworthy. That is the subtext -- see our prior post -- imposed by finance capitalists.
In addition to productive capitalists, governments are being roundly taken in.
Spain, Portugal and Ireland are major debtors. If they were to follow their economic interests, they would form a caucus to pressure the IMF and other creditors to lend on more reasonable terms. In the European Union, those three nations should have been the most ardent supporters of Greece.
The opposite happened.
* * *
What is the source of the confusion of financial with productive capitalists? Of the mistaken identity?
You won´t find that question asked in any text on money, banking, and income. Economists from Adam Smith to Marx to Keynes to Samuelson to Friedman to Piketty did not address it. The answer to our economic question is found outside economics.
Early in the Greek crisis, I noticed something. There is a whole area of inquiry that is studiously avoided by private bankers and the directors and staffs of the World Bank, IMF, European Central Bank. etc.:
The country Greece has an unconscious meaning to Greece´s creditors that goes far beyond purely financial considerations.
That meaning is manifest in Greek mythology. An ancient story constellated something, a complex, that is deeper than deep. The creditors are doing whatever it takes to stop that complex from being brought to the surface, openly discussed, analyzed. They sense intuitively it threatens their control of the world´s financial agenda.
That unconscious complex explains why Greece´s creditors are taking extreme, totally uncalled-for measures. They resorted to mobbing -- see our prior post -- and are about to take a meat ax to Greece.
Ssshhh... Here is the complex that Greek mythology reveals:
Our prior post mentioned that to understand what Greece´s creditors are doing and why, we need to visit the first port of call upstream from Castor and Pollux:
The supreme god Zeus coveted Leda, the mortal wife of Tyndareus, King of Sparta. Leda was heavily guarded by an entourage which Zeus circumvented by assuming the guise of a swan in need of protection.
After the seduction -- rape? -- of Leda, two eggs were produced. From one egg were born Castor and Clytemnestra; from the other, Pollux and Helen of Troy. Castor and Clytemnestra were fathered by Tyndareus with whom Leda slept the night of her encounter with Zeus; as a result, those twins were mortals. Pollux and Helen, on the other hand, were fathered by Zeus; consequently, they were divine.
Beware: with one exception, not all accounts agree about who was fathered by whom or who was born from which egg, or even if there was more than one egg. Confusing? Indeed.
We are looking at ambiguous parentage -- the original, primordial source of confusion. Of being unable to differentiate. Deeper than deep. It should come as no surprise that for two thousand years, artists have been inspired by the Leda myth. Among them: Leonardo da Vinci, Michelangelo, Rubens, Raphael, William Butler Yeats.
We will pass over the parallel narrative that later became the cornerstone of Christianity. We are delving into the primordial source of the inability to tell things apart which are different.
The psychoanalyst C.G. Jung noted that the human psyche functions in four different ways: thinking, intuition, feeling, and sensation. In the case at hand, all four functions are alike in one respect: none of them alone distinguishes our two subjects, finance capitalists and productive capitalists. Again, it is that inability to know, sense, or feel that this post investigates.
Parentage confusion is not limited to novels, lawsuits over inheritances, or town gossip. It occurs in the animal kingdom. Ornithologists know where I am headed ...
For an introduction to parentage confusion among birds, I invite you, dear reader, to see this short but astonishing documentary on youtube about the common cuckoo and the reed warbler. To wit:
The cuckoo does not build its own nest; it does not know how. Instead, it lays a single egg in the nest of another species, the reed warbler. The cuckoo hatches first and pushes the other eggs out of the nest. The warbler parents, unaware that the cuckoo is not their chick and that it destroyed their eggs, proceed to feed the cuckoo anyway.
The cuckoo chick eats and eats. The warblers fly back and forth all day procuring food for it. The chick becomes larger than the hosts put together.
Eventually, the cuckoo chick presents the absurd spectacle seen in the above image: it is too big for the warbler nest. Still, the host parents suspect nothing and continue to supply it with food. If, as a result of its weight, the cuckoo breaks the nest, the warblers will continue to feed it on the ground.
On maturity, the cuckoo flies off to repeat the pattern elsewhere.
What you just saw and read is a case of brood parasitism. One animal depends on another to raise its young and to continue its species survival. The amazing point is, the hosts are unable to distinguish the parasite from their own flesh and blood. There it is -- something is thicker than blood. I will amend that statement shortly.
Sidebar: insects, fish, and types of birds other than the common cuckoo practice brood parasitism. For an introduction, click here.
Watching the documentary, a hundred questions emerge. How does the cuckoo hatchling "know" to push the host bird´s eggs out of the nest? When did the common cuckoo "discover" brood parasitism, and how was it passed on to future generations? Why do some types of cuckoos and not others build their own nests? Why do some birds which practice brood parasitism only lay eggs in nests containing host eggs that are similar in appearance to their own, whereas others will lay eggs in nests with dissimilar eggs? Finally, and most important for our discussion, why can´t reed warblers differentiate cuckoos from their own brood?
A review of the literature reveals all sorts of theories and speculations -- for an enlightening presentation, click here. At the end of the day, we are only left with more questions.
Whoever created the Leda and the swan story was an astute observer of nature. Swans do not practice brood parasitism; nevertheless, there is no doubt about the myth´s foundation. In another adventure, Zeus pretended to be a helpless cuckoo and gained entrance to the abode of Hera. He revealed himself and raped her.
* * *
One thing is known with scientific certainty.
The cuckoo is not always successful. Some host birds recognize the parasite egg for what it is and either destroy it or abandon the nest. Other hosts seem to recognize the egg is not theirs, but incubate and feed the intruder chick anyway because otherwise the parasitic bird parent will take revenge and destroy the nest. That behavior, which has been labelled "mafioso," has been studied in depth at the Max Planck Institute.
Why do some host birds apparently recognize fundamental differences and others do not? We are at a loss for answers. The more one reads, the more obvious it becomes that, at present, we lack the vocabulary to explain brood parasitism.
Thinking, intuition, feeling and sensation: if none of Jung´s four functions alone suffices to understand brood parasitism, it suggests that all four have to be exercised to grasp the source of the primordial confusion. Articles like this one can at best only furnish a single grain.
As a field of academic inquiry, brood parasitism opens up heretofore closed doors to understanding numerous facets of human behavior. For obvious reasons, oligarchs everywhere will fight such studies with everything at their disposal. In so doing, a potentially fruitful exchange will be squashed. That is to say: if brood parasitism provides insights into vital differences and dynamic relationships between financial and productive capitalists, the reverse is also true.
For now, we are left to understand certain things by way of allegory...
We noted above that with one exception parentage confusion reigned in the myth of Leda and the swan.
That exception was Pollux. Pollux somehow knew his origin and who was what. When his brother Castor was killed, Pollux entreated his father Zeus to make Castor immortal so that the brothers could be together. His wish was granted; Zeus transformed them into the Gemini constellation.
Why are the brothers relevant? Castor and Pollux helped shipwrecked sailors and created favorable winds to those who made sacrifices to them. They also were the patrons of horses -- the symbol of nobility, heroism, war, the drive for freedom.
We return to the historic choice noted above, but in new, restated terms. Either we
(A) fail to recognize a parasite as a parasite -- as an intruder that kills one´s own brood (read: kills one´s own future). We can work to the point of exhaustion feeding and protecting the parasite, and, as a result of the weight it gains through our toil, risk having it destroy our nest; or
(B) recognize the parasite for what it is. With that recognition comes the choice of (i) out of fear, incubating and feeding it, or (ii) be like Pollux.
Pollux was an expert boxer.
The Greek crisis is far from over. Its full repercussions have yet to be worked out. The transcendent occasion presented on July 5 -- round 1 -- was indisputably won by finance capital. However, there will be more rounds. New opportunities. One after another after another.
The reason why the fight will continue: no cuckoo can stop being a cuckoo. A host, on the other hand, can stop being a host.
A host can stop being cuckold.
Coming soon: "Henery" Kissinger Debunked.
*Adam Smith, The Wealth of Nations, Penguin Books, London, 1997, pp. 194, 453.
**William Greider, One World, Ready or Not, Simon and Schuster, New York, 1998, pp. 83, 184.
***Click here for the most recent report on the world economy of the Organization for Economic Cooperation and Development. Its central conclusion:
"The gap between rich and poor keeps widening. Growth, if any, has disproportionally benefited higher income groups while lower income households have been left behind. This long-run increase in income inequality not only raises social and political concerns, but also economic ones. It tends to drag down GDP growth, due to the rising distance of the lower 40% from the rest of society. Lower income people have been prevented from realising their human capital potential, which is bad for the economy as a whole."
One of the OECD authors elaborated:
"It's not just income that we're seeing being very concentrated - you look at wealth and you find that the bottom 40% of the population in rich countries have only 3% of household wealth whereas the top 10% have over half of household wealth."
Recent data on income trends in the United States are especially disturbing. They show galloping polarization took place under the Obama Administration. Between 2009-2012, income rose 31% for the top 1%; income shrank for the bottom 90%. The Economist (2013):
"The recovery belongs to the rich. It seemed ominous in 2007 when the share of national income flowing to America's top 1% of earners reached 18.3%: the highest since just before the crash of 1929. But whereas the Depression kicked off a long era of even income growth the rich have done much better this time round.
New data assembled by Emmanuel Saez, of the University of California, Berkeley, and Thomas Piketty, of the Paris School of Economics, reveal that the top 1% enjoyed real income growth of 31% between 2009 and 2012, compared with growth of less than 1% for the bottom 99%. Income actually shrank for the bottom 90% of earners. After the Depression households across the income spectrum enjoyed income growth roughly commensurate with losses during the downturn. As a result the top 1% only captured about 28% of total income growth from 1933 to 1936. This time around 95% of the increase in American income since 2009 has gone to the top 1%. No wonder, then, that the share of national income flowing to the rich is at a record high of 19.3%, ahead of both 2007 and 1929."
Obama, whose net worth is $6.9 million and counting, advocates the opposite approach from the one we take. 100% ideological in nature, his technique is standard fare among oligarchs. To wit:
He seeks to replace otherness with sameness. His most recent example of plastering over fundamental distinctions was proffered recently in Kenya: "In the end, we are all a part of one tribe, the human tribe."
Obama´s words are psychologically poetic, i.e., he and his listeners wish they were true. In truth, his statement is hollow phraseology. Tribes only exist in relation to other tribes. If we are all members of the same tribe, then there are no tribes.
****For more on this subject, see this site, The Big Movida: The Third American Revolution. The Second American Revolution of 2008-9 was both cause and effect of the Emergency Economic Stabilization Act of 2008, in which a trillion public dollars -- out of a 14-trillion dollar economy -- was committed to private interests.