Sunday, February 24, 2008

we are what we spend?

a rant in response to the latest cameo of the Feds in the NYT
their article available here
by qms 2/2008

“Up above, all respected theory must fulfill a double function: on one hand: to displace responsibility with an argument, and, on the other, to hide reality, which is to say, guarantee impunity... It is here where the distance between theory and reality not only becomes an abyss, but we are presented with the sad spectacle of self-described social scientists throwing themselves with singular happiness into conceptual emptiness.” -Subcommandante Marcos

Perhaps these thoughts can shed some light on the decidedly shady work of W. Michael Cox and Richard Alm in their recent New York Times propaganda piece: “You Are What You Spend” (February 10, 2008). The theoretical and ideological argumentation employed by Cox and Alm conform with remarkable precision to the trends that Marcos describes.

Confronted with the radical volatility of international and domestic financial markets and widely diverging income inequality in the US, the response of the chief economist and senior economics writer at the Federal Reserve Bank in Dallas is revealing on a variety of levels.

The immediate reaction is not to explain or condemn inequality, or even to understand its causes or consequences. The operating questions are not “What can we do to help?” or even “What analysis explains this situation best?” but “How can we reframe the inequality and manipulate the statistical data in ways that will make us less implicated?” Reality is hidden, impunity is guaranteed.

The principal argument of Cox and Alm is that the prevailing statistics on economic inequality in the US are flawed because consumption is a better indicator of wealth than income. Let’s bear with them briefly. The wealthiest fifth has on average an income 15 times larger than the poorest fifth. But the wealthiest fifth consume only 4 times more than the poorest fifth. Aha!

Furthermore, Cox and Alm argue, richer households are larger (“3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth”), so if we look at consumption per person, “the difference between the richest and the poorest households falls to just 2:1.” And so, in a remarkable display of theoretical smoke and mirrors, inequality in the United States between the richest and poorest fifths of the population has suddenly declined from a ratio of 15 to 1 to 2 to 1. Should we applaud?

If the role of theory up above is to hide reality and guarantee impunity, it is a necessity that theory from below, in the service and defense of the oppressed majorities, reveal reality and demand accountability.

So first of all, how is it possible that the poorest fifth consumes a fourth as much as the wealthiest fifth despite being 15 times poorer? In 2006, “The bottom fifth earned just $9,974, but spent nearly twice that — an average of $18,153 a year.” In other words, the poorest fifth can only maintain this level of consumption by spending almost 100% beyond their means.

It doesn’t require a great familiarity with predatory lending or the mechanisms of debt peonage to understand that what we are observing here is not convergence but the deepening of structural inequalities. We are what we don’t spend; financially at least, we are what we have saved. And when we spend more than we have, it means not only that we have nothing left, but that we are debtors.

And what are we to make of the per capita argument? At most, it is a brilliant example of how statistical data can be conflated to demonstrate almost any desired argument. Never mind the homeless family living on the street outside Rockefeller center, just look at the numbers. There is not even any pretense at addressing the moral, political or even economic implications of inequality. A few rates and percentages are brewed up in a few graphs and figures and voila! we get convergence. Econometric alchemy. (Meanwhile, their model demonstrates that if the poorest fifth of the population is exterminated, we’ll see even more equality!)

Taking consumption as an absolute measure of economic well-being, Cox and Alm finally turn their article into an ideological propaganda piece for the promotion of neoliberal globalization. 80% of households, Cox and Alm tell us, now enjoy the benefits of a whole slew of commodities that are produced overseas; refrigerators, stoves, color TVs, telephones, radios, air-conditioners, cars, VCRs, DVD players, microwave ovens, washing machines, clothes dryers and cellphones. Thanks to globalization and the international assembly line, US consumers enjoy lower prices on all these commodities. “Nations do what they do best and trade for the rest.” Unemployed rust belt workers get credit cards and shop at Wal Mart.

Cox and Alm: “Globalization extends and deepens a capitalist system that has for generations been lifting American living standards”. At the climax of their conceptual vacuity, here they are really making a double argument: Not only is “American” society increasingly equitable because of the widespread availability of commodities, but this equity is predicated on the contemporary capitalist world-system. Having finished their first sophistry (a fictional increase in equity in the US) they use this as a foundation to legitimize US economic imperialism. The second fiction is posed as both benevolent and as a threat: If you oppose the Washington Consensus you oppose equality. “Perverse”, they call you.

It’s a logically masterful articulation of an argument utterly bereft of either compassion or reality:

Consumption = well-being
Economic imperialism = increased, cheaper consumption
Economic imperialism = increased well-being, increased equality

But while this article should anger us, it should not confuse us. Cox is the senior vice president and chief economist and Alm is the senior economics writer at the Federal Reserve Bank of Dallas. Their political and economic interests and motivations are unspoken but clear. They are not interested in income convergence or even in the promotion of an equitable society. On the contrary, they are heavily invested in the maintenance of an economic order that privileges their positions as powerful elites.

“If the new paradigm is the market and the idyllic image of modernity is the mall or the commercial center, we then imagine a succession of shelves full of ideas, or better still, a department store with theories for every occasion. It will not be hard to imagine the big capitalist or governor browsing the aisles, comparing prices and qualities of different thoughts, acquiring those that best adapt to their necessities.” -Subcommandante Marcos

For the Feds there is no respect for methodology, for theoretical coherence or explanatory power. Cox and Alm throw themselves assuredly into conceptual emptiness. In this case economic theory is just another tool to legitimize a system of exploitation, and where this is not possible, to camouflage it, in this case with consumption. This article is exemplary of the kind of theory and analysis that it is our responsibility to discredit and mock.

The timing of the article is very relevant. As financial markets teeter on the brink of cavernous recessions, as public, private, internal and external debts grow at unprecedented rates to unprecedented magnitudes, the Feds are kind enough to let us know publicly in an op ed that actually things are better than ever before. Make of it what you will.

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