The Collapse of the Great American Scam Economy of the 2010s

by Alex Knepper

There has been renewed talk of the hypocrisy of the Republican Party with regard to its relationship toward so-called ‘socialism.’ The general thrust of Republican rhetoric in recent decades tends toward a loose definition of socialism being something like: ‘When the government does something.’ Yet whenever crisis, which is intrinsic to capitalism, comes cycling back around, every budget-chickenhawk suddenly pulls out the Keynesian heavy artillery. Emergencies have a way of clarifying and concentrating the mind and forcing us to throw off whatever ballast is unnecessary. In crisis, the capitalists always manage to come to grips with that which they always understand about political economy yet usually decide to hide from themselves.

There is in fact no such hypocrisy present at all. The capitalist ethos has remained the same throughout the duration of its existence: ‘capitalism’ and ‘socialism’ are defined however they need to be defined to keep the gravy train going at a given moment for the winners of the actually-existing economic arrangement.

During boom-time, when speculations tend to pay off and a sort of collective mania (‘animal spirits’) spins fresh new capital into being ex nihilo, the capitalists rally the faithful against even the faintest whiff of regulation or redistribution; during crisis-time, like clockwork, they insist that every possible tool in the American economic, political, and social toolbox must be used to save the system from itself (again). Rinse and repeat. If we assume that those who benefit from the existing arrangement simply spout like incantations whatever they think is necessary to perpetuate the arrangement whenever it is under pressure, much about our politics makes a lot more sense.

The Obama-Trump back-to-back personality cults have done a masterful job at hypnotizing first Democrats and then Republicans into accepting the post-financial-crisis ‘new normal’: unaffordable essentials — healthcare, education, housing, and child care — coupled with a bonanza of cheap consumer goods and dizzying technological shiny objects, anemic wage growth and declining purchasing power, the hollowing out of our towns and the collapse of the families that live there, extraordinarily easy credit leading to record or near-record levels of household debt, credit card debt, student debt, and corporate debt; loose monetary policy, extreme and obscene inequalities of wealth and property, the death of corporate responsibility, and the rise of ‘experts’ who expertly use their expertise to exploit, enable, and manipulate.

Obama and Trump together represent a sort of two-pronged capitalist counterattack against mass disillusionment in the wake of the 2008 financial crisis, which revealed predatory criminality to be a common business model among our finance sector. Please note that I am not referring to any sort of organized conspiracy but rather look at politicians as avatars of prevailing tendencies, since certain occasions call for certain personalities and ideas.

Barack Obama signifies the tantalizing possibility that maybe, just maybe the system is able to actualize social equality within its confines. Inequality reigns, yes, but certain groups are no longer categorically disqualified from producing winning members. Yes, the president is still necessarily an elite, but that elite ruler might be a black man, or a woman, or gay; ‘it could be you’. This isn’t irrelevant or unimportant; it is not mere distraction, and critics of capitalism delude themselves if they think people rally around this banner merely because they are brainwashed.

Trump, as the ‘bad cop’ to Obama’s ‘good cop’, signifies a fascinating new capitalist strategy: to blatantly own capitalism’s insatiable addictions to power, fame, money, property, sex, and pleasure, and ask ‘What of it?’ The GOP has essentially gone Full Gordon Gecko: Greed is good. Greed makes the world go round. Greed is the reason our people are more likely to die from being too fat than being malnourished, unlike during most of human history. Greed is the reason hundreds of millions of Chinese and Indian people now have a stake in material progress. And so on.

These are not obviously wrong or bad approaches, and we must reiterate that the left only deludes itself when it refuses to believe that these messages do not really have any appeal to human nature or to the mass-human-being as-such. Regular people are not necessarily opposed to hierarchy and inequality within limits, and it is easier than one might imagine to convince people that what surrounds them and animates their daily activity is in fact good and just; that there are compelling reasons for things being ordered the way they are, and that, moreover, things are only going to get better as long as we resist the temptation to break anything. In fact, there’s something that feels seductively mature and sophisticated about such an outlook.

But things are not getting better. And the coronavirus has exposed the repulsive rot underneath the shimmering surface of the American economy.

Obviously, things are fine for the wealthy and well-connected; we need not waste any time reviewing the litany of privileges of the so-called one percent. There is also the group I call the ‘fortunate fifth’ for whom American life essentially functions as-advertised. Such people work hard but not to exhaustion, they are not flush with cash but can easily meet their obligations and have plenty left over to enjoy a large variety of life’s pleasures, they are generally happy with their education and upbringing, they have access to all of life’s essentials, and their burdens rarely become overwhelming or dominant. They have overwhelmingly been the beneficiaries of free trade and the global-technological reordering of the economy. These are the people most likely to intuitively leap to the defense of companies like Amazon and Uber, to express a positive opinion of our institutions, to trust the mainstream press. According to the Federal Reserve, this fortunate fifth possesses 88% of the wealth in this country. The stories of these people’s lives are mostly happy stories.

There is another story: the story of the 80% of Americans who fight over the 12% of the remaining wealth, the bottom 50% who collectively have a negative net worth, the 44% who work jobs paying under $15/hr, the story of a country whose economic innovations include such beauties as ‘medical debt‘ and ‘student debt’, the story of businesses who fled American towns in pursuit of foreign slave-labor — including in American territories — onto whom they can impose 1800s-style labor conditions in lieu of paying American wages to American workers despite millions of Americans desperate for meaningful and rewarding work, and a federal minimum wage that remains $7.25, the pathetic benchmark against which state minimums are judged. It’s the story of a country in which life expectancy is actually declining, in which suicides of despair have spiked, in which people are so desperate to feel something, anything, that more of us are killing ourselves trying to get high every year than died in the entire Vietnam War. It’s the story of the richest country in the history of the planet which yet has a population in which a majority of people cannot come up with $500 to cover an emergency expense and a supermajority of people live paycheck-to-paycheck. It’s the story of a country where people report being as stressed out and anxious as people in developing countries. It’s the story of a country in which millions of decent jobs have been transformed into ‘gig economy’ scams and ordinary workers are increasingly expected to match the output of literal robots just to earn enough money to survive. It’s the story of a country that works more hours than any in the world and has little to show for it, even after all the debt — credit card debt, medical debt, student debt, car debt, mortgages, corporate debt, national debt, debt, debt, debt, debt, debt. Let me ask it again: what is it that we have to show for all this debt?

Fingers Crossed | Ikon Images

The Potemkin Village gambit refers to an apocryphal tale of a Russian official who snookered the empress with a facade of beautiful houses which were totally hollow and empty on the inside. Presumably it assuaged her conscience and made her feel good about her country.

The American economy is thriving for the fortunate fifth and exists as a Potemkin Village for just about everyone else. The more apparent this becomes — and it cannot escape the attention of mass consciousness forever — the more delusional, hollow, and manic America’s self-referential boasting becomes, with the president constantly bragging about how we are #1 at winning at succeeding at being the best.

We are not the best, and we have little to show for all of the above. The coronavirus crisis has slammed the brakes on the Great American Scam Economy of the 2010s, and everything in the car just flew all over the place. Surprise!: we have discovered that the entire American economy exists on a paycheck-to-paycheck basis. This might be confusing to those who still have somehow managed to retain a basic level of trust in the instincts, motives, and tactics of the sphere of American ‘big business’ and elite finance, for whom long-term planning would seem to be in their obvious self-interest. Yet while this is obviously in their self-interest on a macro scale, it is seldom in the interests of any particular individual to do anything but try to profit as much as possible at everyone else’s expense, to whatever extent he or she can get away with. For year after year until the coronavirus hit, American corporations were reporting record profits for executives and shareholders. Record CEO bonuses, record stock buybacks, record investor payouts. This fact seemed peculiarly incongruous with the fact that wages for ordinary workers barely budged during this time, even with record-low unemployment rates, or the fact that corporations were also taking out record levels of debt, climbing by early 2020 to levels horrifyingly close to 2006-2007. On the surface, things looked peculiarly like a scam was taking place. Yet legions of financial esotericists insisted that Americans simply ‘didn’t understand economics’ and were too stupid to understand why all of this was actually in their interests.

Why are so many top corporations — from Southwest Airlines to Hilton Hotels to Uber — asking the government for bailout money? What happened to those record profits? What happened to the money from those big tax cuts? Where did the money go?

It turns out the money is all gone! The money is all gone because the executives and shareholders already took it all for themselves. They took out as much debt as possible for the purpose of buying back more stock to further manipulate prices upward so as to further cash out (stock buyback was an illegal form of stock manipulation until President Ronald Reagan decided it was okay after all). Once you’ve cashed out, you can hit the road and toss the flaming-hot potato to whatever sucker comes after you. The ethos of corporate responsibility is dead; it is now commonplace for executives and shareholders to treat companies like their personal sandboxes, there exclusively for the sake of enriching them. Former Disney CEO Michael Eisner once said that Disney exists to deliver profit to its shareholders, not to create art; that good art might be a byproduct of their essential goal of financial profit, since good art can be popular, but if something that isn’t art is more profitable, that’s what they will pursue. The Eisner Principle reigns supreme in the overwhelming majority of American corporations now: the goal is not to build a great place to work, to take care of our people, to consider the humanity of everyday laborers — the goal is to deliver profit to the owners of the company. If that happens to coincide with building a great place to work, great. If it doesn’t — so be it.

It is more common for a concern with ethics to function as a smokescreen for sociopathy than out of a legitimate concern with doing the right thing as business leaders. Senator Kelly Loeffler (R-GA), someone with no apparent political talent but half a billion dollars that she isn’t afraid to give to Republicans, was recently revealed to have sold off millions of dollars worth of stock in key industries hit by the coronavirus crisis on the very day she received her very first confidential briefing on the matter, and invested in a telecommunications company. Rather than ‘fessing up, she had the audacity to go on Fox News, mutter something about her history of commitment to ethics in business and how this has been one of the causes of her career, and promise to take the matter to the Senate Ethics Committee. In other words: ‘Yeah, I did it. You’ll never prove it because the laws and committees are rigged to make it impossible to prosecute me as long as I continue to spout the right words like magic incantations, like a spell to make the issue go away: ‘My financial advisor does all of this for me! I would never communicate confidential information to him; that’s against the law!’ Just say the words and eventually people will move on and forget about it.” She is almost certainly correct. Sen. Richard Burr (R-NC) was even more shameless, telling wealthy donors that the coronavirus would be the worst viral outbreak since the Spanish flu, then personally selling off stock — not even with the facade of an advisor doing it — even as he was assuring the public, like Loeffler, that America was completely prepared for the coronavirus and that Donald Trump was ensuring that this would not be a major crisis for America. Not one Republican senator has called for their resignation.

There is no sense of ethics for a scam company like Uber, whose brilliant model of innovation consists of exporting all labor costs onto employees and proceeding to fraudulently misclassify them as independent subcontractors. Uber does not provide benefits, does not provide a cent of reimbursement for wear-and-tear issues, has already cut wages, has never been profitable, has no path to profitability. Yet Uber, which is still sitting on ten billion dollars of cash, is trying to convince the federal government to hand out bailout money to them that they can use to pay their ‘independent subcontractors.’

But at least Uber has cash on hand. The major airlines asking for bailouts have been revealed to have spent almost all of their recent free cash flow on stock buyback. The Big Four airlines initially asked for $50 billion in bailout money after having spent over $40 billion in stock buybacks over the last five years — but it is more incredible than that: this $40 billion is larger than the nearly $30 billion in free cash flow during that same time period, because the airlines deliberately took out billions of dollars in debt for the sole purpose of buying back more stock.

Gary Rivlin reports: “Between 2003 and 2012, companies in the S&P 500 devoted 54 percent of their earnings to buying their own shares (and an additional 37 percent to paying out dividends), according to a study by William Lazonick, an economist at the University of Massachusetts at Lowell. That left less than 10 percent for research and development, plant modernization, raises for workers, and other more productive uses of profits.”

Marquee American companies McDonald’s and Wal-Mart together spent over fifty billion dollars on stock buyback in the last five years, while claiming that it was economically not viable to raise wages to $15/hr, even as the company produced pamphlets for their workers explaining how to get on taxpayer-funded programs, since the companies know their wages are unable to provide a full-time worker with a legitimate, independent living.

The Potemkin Village has collapsed — at least temporarily. The $2 trillion stimulus/keep-the-economy-from-collapsing bill prohibits the use of taxpayer funds for stock buyback. McDonald’s, in response to widespread public outrage, has announced it is suspending its stock buyback program. So did CitiGroup, JPMorgan, and AT&T. It took an external, out-of-nowhere catastrophe to make this happen. (Who says God doesn’t know how to bring great good out of great evil?)

But they aren’t sorry. They’re sorry they got caught. They’re sorry they were left without a chair when the music abruptly stopped. They’re sorry the jig is up. They will go right back to business as usual without appropriate democratic vigilance. After the last financial crisis, business as usual resumed with shocking swiftness, and leaders in business and finance have been unleashing every propaganda tool known to man to condition regular American workers to accept this as the ‘new normal’ and to judge the state of the economy through a lens of dramatically diminished expectations and extraordinary cynicism toward what to expect from corporations — coupled with a doubling-down on the ongoing swindle of the arcanization of the financial sector; the conscious strategy to make its methods and language impenetrable even to well-educated outsiders. If they can’t convince Americans that they are looking out for their interests, they can sure try to confuse them into believing that it’s all too complicated for regular people to understand and that such matters are best left to ‘the experts’ who ‘understand economics.’

Funnily enough, the entrepreneurial magic of ‘job creators’ — itself a recently-manufactured propaganda term that was unheard of in economics until the rise of Reaganism-Thatcherism — has been unable to overcome the glaring absence of ordinary laborers and ordinary consumers during the coronavirus crisis. It turns out that it takes two to tango after all; that capital is impotent without labor, that money is just green pieces of paper if regular people’s labor isn’t perpetually instilling it with real value, that even many of the biggest corporations on the planet are living paycheck to paycheck and cannot of their own devices perpetuate themselves for even two weeks when one of the bottom rungs of their Jenga towers gets removed.

Maybe it wasn’t a good idea to redistribute wealth upward after all — just like it maybe was not a good idea after all to make ourselves dependent on frenemies six thousand miles away for the production of vital medical supplies, including drugs, ventilators, and face masks, especially when there are millions of Americans here at home desperate for useful and rewarding work to do.

Maybe we’ll be able to have a conversation about these topics that isn’t completely mystified by ideology when the coronavirus crisis passes and we try to figure out how we can stop this manufactured calamity of choice from happening again.

Maybe the spell of Reaganism will wear off for millions more, just like it did for millions after the 2008 financial crisis, such to the extent that at one point in 2019, over two-thirds of would-be primary voters said they would be voting either for Donald Trump, Bernie Sanders, or Elizabeth Warren.

Maybe the capitalists will have an emergency-induced epiphany that they have been living on borrowed time for far too long not to make new, substantive concessions to labor on wages, healthcare and education access, and the foundational issue of basic dignity — the right to be treated by your countrymen as something other than a disposable cog in a profiteering machine.

Maybe.

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