In defense of the administrative state


Artwork by Hernán Iacovino @

A few weeks back Steve Bannon, Trump’s Rasputin-like chief strategists, while in a panel discussion at CPAC laid out the agenda for the new administration. According to Bannon that agenda consisted of three parts re- establishing national security and sovereignty, economic nationalism, and what he called “the deconstruction of the administrative state.” It was the latter which Bannon’s comments suggested was behind Trump’s otherwise Bizzaro cabinet appointments where, for instance, a raging opponent of environmental protections- Scott Pruitt, could be named head of the EPA, and promoter of the privatization of education, or Betty Davos, could be put in charge of the Department of Education. You only put the fox in charge of watching the hen house if you want the hens dead.

Back in 2016 Newt Gingrich had gleefully predicted something like this, arguing that the first term of the Trump administration would be years of vicious conflict between the new administration and the federal bureaucracy.  The first month of the administration appear to be proving correct as Trump’s rage over leaks shows an administration unprecedentedly at war with its own intelligence agencies.

A person brought from say the 1930’s into 2017 might find it unfathomable to see the political right which at that time worshiped the power of the state to today be so obsessed with the state’s deconstruction. It would seem as if fascist confused themselves with anarchist, one of the groups the police state of fascism set out to crush.

This move by the right from being the party representing the power of the state to being its most vociferous opponent has been a long time in coming, and one can see it developing by looking at the history of the best film on the dystopian aspects of bureaucracy ever made, Terry Gilliam’s dark comedy Brazil. When Gilliam directed Brazil he was tapping into a long tradition in the left of rebellion against the soulless machine of government, 19th century anarchists yes, but especially the individualistic left of the 1960’s who protested wearing mock computer punch cards mocking the bureaucratic society in which they were trapped that read “do not fold spindle or mutilate.”

Brazil depicts a world suffocating in tubes, the plumbing of a bizarre, ubiquitous air-conditioning system but also pneumatic cords of surveillance and control run by incompetent bureaucrats whose only job seems to be to prevent the independent action of everyone locked in the system’s iron cage. (Strangely we ourselves live precisely in such a world, though ours tubes are ones we cannot see.) It’s a word so drowning in paperwork that people can be intimidated by pointing out that they need to fill out a form.

In the film a typing error caused by a fly leads to the accidental arrest, and death under interrogation of Archibald Buttle instead of a renegade air-conditioning repair man Archibald Tuttle- played by Robert De Niro.  The core of the story is a romance between Jill Layton who is struggling against the labyrinthine bureaucracy to gain restitution for the widowed Mrs Buttle and Sam Lowry a low level bureaucrat sent to rectify the error that led to Buttle’s death. After Sam destroys government records in order to prevent Jill’s arrest, he himself is arrested by the Ministry of Information. He is about to be tortured into confession by a man who is his friend when it appears Sam is rescued by Tuttle and the resistance who blow up the Ministry of Defense and allow him to reunite with Jill. It is only an appearance, for in reality he has been tortured to the point of insanity.

Gilliam had set out to make a film critical of bureaucracy in the tradition of the romantic strain of the left. Yet the movie’s most notorious fan turned out to be Timothy McVeigh who was known at the gun-shows he frequented as Tuttle or Buttle and like the film’s characters of the resistance who blew up the Ministry of Information set off a truck full of explosives that destroyed the Alfred P. Murrah Federal Building in Oklahoma City. An act which killed 168 people including children. The unstable characters perfected by De Niro seem to have an uncanny ability to inspire unstable people in real life.

Of course, hatred of government bureaucracy and the attempt to unwind it was a large component of the neo-liberal agenda. Ronald Reagan with his gift for memorable quips expressed the sentiment best when he said: “The most terrifying words in the English language are: I’m from the government and I’m here to help.”

Yet even if the anti-government hysteria of the far-right has been used as a tool by neo-liberals to try to mantle regulatory protections and redistributive taxation which threaten their interests, the far-right remains different.

Driven by the conspiracy theories that center around the fear of a world government, the far-right sees not only the instruments of hard-power which the progressive right correctly rails against as well, but any facility of state power as uniquely aimed at crushing the “real” citizenry and their way of life.

The far-right’s perspective is, for all its ugliness, not completely irrational. From the very beginning of its settlement wealthy elites had considered the interior of the American continent a dumping ground for what they considered the refuse of Europe- the origins of the phrase “white trash”. The American west was settled as an imperial project by a federal government newly empowered after the Civil War and continues to this day to have land ownership patterns that reflect that fact and which might make an easterner flinch-  84 percent of the land in Nevada– the site of the recent Bundy Standoff is owned by the federal government, 61 percent of Idaho– where the deadly Ruby Ridge confrontation of the early 90’s occurred is likewise owned by the federal government.

The costs of desegregation was largely born by lower class whites rather than their richer compatriots, as was the cost in blood (if not treasure) of the poor and lower middle class of all races who died in the failed wars- Vietnam, Afghanistan and The Second Gulf War,  initiated and supported by elites until their costs became unbearable and their stupidity impossible to deny. As many left- wing writers willingly admit, the boogie man of the far-right- globalism- is not a mere fantasy. Globalism began the process of eroding the the livelihood of the working class, which automation now promises to kill.

Still, if the nightmare of the libertarian far-right is the all powerful state that crushes all opposition with an iron heel, what they now have in the form of the Trump is an administration that makes these fears far more likely. Impregnable borders can be used just as much to lock people in than to keep people out. Extensive government powers to hunt down “Islamic terrorist”, criminals, or illegal immigrants can just as easily be turned on any political enemy. An even larger military and engorged police forces are but more of precisely the kind of “standing army” the Founders warned threatened the survival of the Republic.

In addition to all of this, the right lives under the delusion that by deconstructing the state they will be restoring freedom rather than, what actually will happen, which is that public bureaucracies will be replaced by private ones, for bureaucracy, rather than being a consequence of government interference, is simply the way modern organizations in complex societies are run.

The deconstruction of state bureaucracies would leave us in a bifurcated world of private entities where the rich will be able to shop in a competitive marketplace for services while the poor and middle class are locked into labyrinthine organizations now impossible to influence through democratic means, and whose primary purpose will be the extraction of rents. Exchanging public bureaucracies for private ones will have meant giving up the public control that comes from politics for the rule of money only the very few have.

Yet it’s not the right alone that lives in the fantasy that we can live in a world where the administrative state is no more, many on the left share a similar dream. The key for the left is to find a way to restore freedom, which the bureaucratic tubes of the state certainly strangle, with the needs of complex societies for precisely such entities in order to function at all.

Utopia Now!


Given all the chaos and pessimism lately and in light of the fact that with the inauguration of Trump we will be walking into very dangerous times, it’s perhaps a good moment for a little bit of hope, though the progressive rallies over the last few days certainly make me feel hopeful.

As his inauguration speech made clear, Trump’s victory signals the end of the liberal order that has defined the world since the end of the Second World War. An order based on the twin pillars of American hegemony and capitalist economics, a transformation that presents both grave dangers and opportunities to think the world anew.

David Graber managed to articulate what this opportunity means in a recent issue of The Baffler though here he was talking about similar political upheavals in the United Kingdom post-Brexit. According to Graber, what marks the teen years of the 21st century is that we’re starting to finally imagine genuinely radical alternatives to the world we currently live in. He writes:

It’s not just the predictable arrival of the economic luminaries to hold court with the new shadow chancellor—everyone from Joseph Stiglitz and Ann Pettifor, to Yanis Varoufakis and Thomas Piketty. Genuinely radical ideas are being debated and proposed. Should the left be pursuing accelerationism, pushing the contradictions of capitalism forward with rapid growth and development, or should it aim toward a total shift of values and radical de-growth? Or should we be moving toward what Novara, the media initiative that emerged from the 2010 student movement, began cheerfully referring to as FALC—or Fully Automated Luxury Communism—encouraging technologies like 3-D printing to aim for a world of Star Trek–style replicators where everything is free? Should the central bank enact “quantitative easing for the people,” or a universal citizen’s income policy, or should we go the way of Modern Money Theory and universal jobs guarantees?

The question remains of how to give any such new progressive order(s) the light and air they need to survive given the fact that reactionary forces are now in control of all the  suffocating powers of the deep state.

One idea making the rounds, and one potential source of hope, is the federal system of US politics itself, which has previously been the purview of the right.  Instead, of conservative defenders of state’s rights progressives might be able to pursue their agenda and protect their populations at the state and local level. Indeed, a movement advocating secession by greens and the left has been slowly growing for at least a decade.

None of which is a bad idea in so far as such initiatives also have a national, and even global, component which succeeds in establishing alliances across civil society to oppose and thwart any component of the Trump administration’s policies that threaten to unravel political, social, and economic protections. Combined with such alliances small areas could be used as staging grounds for progressive experiments  (such as universal basic income) and examples of truly just and sustainable forms of society.

The danger here is that sovereignty continues to be located in the federal government and the Trump administration may use this power to aggressively pursue, under the concealment of nationalism, the same kinds of neo-liberal deconstruction of state protections the US has pushed on less developed countries since the end of the cold war and strangle such experiments in the crib.

More on that another time. What’s important for my purposes now is how the very loss of national control by the progressive movement, for what may prove a very extended period, offers up an opportunity for experimentation on the level of cities and regions that hasn’t existed since the New Deal.

One place I think we might look for model of how we could approach this period  should be early 19th century utopianism. Like most of us, though for much different reasons, these utopians wanted nothing to do with the violence required by revolution. The reason in their case being that they had just come through the bloodletting of the French Revolution and had no stomach for a repeat of the Terror, which ultimately ended up in the victory of the right (Napoleon) anyway.

Our own squeamishness to violence might have to do with the profound change in norms that has occurred since the 19th century, but it’s just as likely a consequence of the fact that to engage in violence, by which I don’t mean punching neo-Nazis in the face but going toe-to-toe with the power apparatus of the security state, is to oppose the state where it is at its strongest, and therefore merely ends up bolstering what Nietzsche so brilliantly called “that coldest of all cold monsters” along with elites dependent on the power of the state who use revolutionary violence, or even the mere hint of it, as a justification for further oppression.

Violence may have lost it’s effectiveness as a means of propelling political change because, having lost all of its authority, the state rests on little but the threat of even greater levels of violence, a form of power which has now been largely mechanized. The key towards the future is thus not revolution but lies in establishing new sources of real authority assuming, that is, one has given up on saving the Republic itself.

Also like the 19th century utopians we find ourselves at the very beginning of a technological and social transformation which potentially could make real the dream of utopians from time immemorial, that is, the dream of a world free of scarcity, poverty and the necessity that most of adult life be consumed by work.

The fact that automation and resource constraints present both utopian and dystopian possibilities which are matters of political choice and therefore our capacity to ultimately decide the type of society in which we want to live is the subject of another popular book Four Futures: Life After Capitalism by Jacobin editor Peter Frase.

Even when acknowledging the degree of hype around today’s artificial intelligence and its threat to employment along with its often overly optimistic or pessimistic timeline (depending on one’s perspective) it’s clear that the need for human labor to achieve current levels of production and services is either declining or on is the verge of a sharp decline.

While looking to the future is surely among the best thing we can do in our circumstance it is always helpful to explore the space of possibilities open to us by reflecting on the past,   for we have been in quite a similar situation before. As early as 1802, as seen in  James Reynolds’ utopian novel Equality, it was recognized that the application of machine power when combined with new ways to organize labor were going to usher in an unprecedented period of abundance with the question being how the proceeds of such a leap in productivity were to be distributed.

Reynolds was only among the first in what would be a golden age of utopianism much of which tried to establish a balance between the traditional needs and aspirations found in society and the new age of the machine. Because of its status as a frontier and the birthplace of the democratic age in the early 19th century the US became the staging ground for a number of these utopian experiments many of which had originated in Europe. No book is perhaps better at giving us a tour of this utopian landscape than the recent Paradise Now: the story of American Utopianism by Chris Jennings.

In part the upsurge in utopian experiments in the early 19th century was driven by renewed millenarian expectations as seen in groups such as the Mormons and especially the Shakers whose austere aesthetic makes them appear almost modern. Yet experiments in religious utopianism had been tried before. What made the 19th century truly different was that it was the first time utopias based on solely secular ideas were attempted and thus anticipated the way in which the 20th century would be defined in terms of rival secular ideologies rather than religious tensions and conflict.

The most widely known of these early 19th century utopians was of course the British industrialist and reformer, Robert Owen. The son of a saddler, Owen moved to Manchester when he was seventeen- in 1788. It was the equivalent of moving to Silicon Valley in 1970, for Manchester was among the first places on earth to feel the effects of the industrial revolution:

The new textile machines churned out unprecedented profits and material abundance but they did so by eroding traditional economies, squeezing out the artisan class, and forcing everyone into the factories. (89)

Owen respond very differently to the social effects of industrial technologies than his contemporaries the Luddites who chose to smash the machines as a tool of immiseration. Instead, Owen saw in technology the beginnings of a new type of abundance if only human beings could get the political and social questions right.

By 1799, by then a budding industrialist, Owen bought a massive textile mill in New Lanark Scotland. It became his vehicle for social experiments and transformation, a first step in creating what Owen called The New Moral World.  At New Lanark Owen halted the employment of orphans, sold coal and fuel to the workers at cost rather than for profit. He established a worker’s savings bank along with a free medical clinic. He planted community gardens and provided an insurance fund. He also paid wages even during crises when the factory was idle.

The price for all this, for the workers, was a loss of privacy and self-direction. Owen policed worker behavior- and was especially keen on preventing drunkenness and adultery by his employees- with a degree of paternalism only utopians are capable of. Yet in spite of these social obligations Owen’s operation was extremely profitable. This divergence from other factory owners who treated their workers as disposable talking animals employing children, paying subsistence wages and failing to provide any insurance, or other form of social support was just the beginning.

In 1816 Owen established The Institute for the Formation of Character in New Lanark which educated children of the community as young as two, and offered enrichment courses to adults during the evenings. In the school Owen banned religious instruction, rote learning, and corporal punishment, and aimed to foster what the Rousseau inspired Owen believed were the natural virtues of the individual- virtues which he believed had been crushed by the form of civilization his experiments aimed at finding an alternative to. (91- 92)

In 1825 Owen began an even more ambitious project to test his ideas, this time in New Harmony Indiana. His settlement attracted intellectuals and reformers who hoped to realize his dream of a society founded on equality and shared prosperity. Owen a communist reformer who publicly denounced organized religion visited sitting and ex-presidents and spoke before a Congress that was at least politely open-minded in the face of his radical views. Jennings reflects that:

The fact that Owen’s ideas were given a civil hearing suggest that in 1825, American capitalism had not yet secured itself as a sacrosanct national ideology. (110)

In this respect, in  terms of openness to alternative socio-economic models to our own, we’ve only gone backwards since the founding. Though in terms of racial inclusion (New Harmony excluded non-whites), we are light years ahead of the 19th century.

Yet, despite Owen’s renown New Harmony proved extremely short lived, the experiment having ended by 1827 largely due to its failure to attract and retain the kinds of skilled laborers that might have made the community viable.

Fourierism is yet another early 19th century utopian movement Jennings helps uncover. It was a movement based on the ideas of Charles Fourier, the French thinker who was both a genius and very much a loon who famously imagined a “lemonade sea”. Despite, perhaps because of, his weirdness Fourier managed to get much about the future strangely right, such as his idea that individuals should pursue employment in those tasks they believed emotionally resonated with their character, that human sexuality was nothing to be ashamed of, that destructive instincts, rather than be suppressed, should be harnessed for the good of society, and that human happiness and the full expression of human capabilities is the very purpose of society. All these ideas which were radical in the 19th century have become common to the point of being cliches.

Eventually, Fouriest ideas for individual utopian communities which he call phalanxes would spread into prominent groups of American utopians including the artistic and intellectual commune of Brook Farm, which became a sort of temporary home and mecca for Transcendentalists like Nathaniel Hawthorne who even wrote a satire on its utopia’s pleasures and folly.

In addition to these Jennings informs us about the Icarian movement founder by another French philosopher Étienne Cabet. It’s a movement which more than any of the other mention above Jennings thinks did indeed have many of the pro-totalitarian flaws liberals normally associate with the word Utopia. Icarian communities based on Cabet’s novel Voyage et aventures de lord William Carisdall en Icarie were not only among the first stirrings of communism, Cabet even gave the movement its name. Lewis Mumford would find more similarities between Icarians and Soviet communists than anything he found in Marx. (259)

Still, it is how Jennings understands the decline of the utopian movement in America during the latter half of the 19th century that I think has the most relevance for us today. Utopianism declined not so much because the hope for a more just social order declined (indeed, the American Civil War even in light of its carnage became a war for a more just order), but because the locus of reform shifted from the local level to that of the national state. Rising middle class prosperity (created through both rapid growth and the labor movement) likewise diminished the desire for utopian experiments because American society had succeeded in achieving many of its dreams. One should include here the fact that the kinds of sexual equality imagined by many of the utopians was also achieved through the movement for suffrage combined with social change.

For Jennings no utopian moment in America has come close to that of the early 19th century, and he sees the communalism of the 1960’s as an attempt at escape from technological society rather than create a different, better, and more human future.

The alternative to not seeing the human world as something constructed by our choices is to either succumb to fatalism or to misconceive our moral project as the construction of a never existent past. Without any possible knowledge of Trump and his voters Jennings foresaw our year of “Make America Great Again”:

Instead of articulating extravagant dreams about the future, let alone experimenting with those dreams, we have made our past into a sort of utopia: a high white wall onto which we project our collective longings and anxieties. (382)

We’ve been drawing the wrong lessons from the wrong past all along.

Pandemonium, Kingdom of the Quants 3


Back in the stone age, when I was a teenager, I had the good fortune of hanging out with a pretty eclectic group of people. Among this group were a certain subset who might be called spell- casters. These were individuals who, quite literally, cast spells to deal with the problems of everyday life: to get the girl, the promotion, or even just pay the bills.  Hanging out with this crew didn’t score many points with the authorities at the conservative Catholic school I attended.  Some, no doubt well meaning, busybody actually informed my parents that my soul was in danger. Had this person , or the school priests, who wished to save my soul, actually been able to step inside my mind, they wouldn’t have sought to sever my ties to the “devil worshipers”; they would have confiscated my copies of Carl Sagan’s Dragons of Eden and Cosmos, they would have burned my worn out paperback of Nietzsche’s Beyond Good and Evil, and forced me to read the Christian heavy hitters of Kierkegaard  and Dostoevsky, the latter who I especially adored.

I was not a member of the spell- casters, I was more like their sceptic mascot. I really enjoyed sparring with them, and it may seem odd, but I think they felt the same. For both me, and for them our arguments were ways to clarify our own thinking, to chart our divergent spiritual paths. I don’t remember much of anything but the tenor of these discussions except for one, and it has stuck with me all of these years.

Once, I was asking one of the spell- casters to explain to me the physical mechanism for how they were supposedly able to influence others with their ritual mumbo-jumbo. Was it brain waves? Pheromones? What?

Without really hesitating he responded that“it was like money”.


He continued that “money was a talisman, that grants its holder power because others believe in its power” that he, as a spell-caster, really only had power over those who already believed he had power to begin with, that I, as a sceptic, was largely untouchable, in a way that those, such as the Church who believed in his magic, but just thought it came from a place of darkness, were not.

The idea stuck in my head… money was a talisman.

Years later I encountered this same idea in a totally different context in William Greider’s conspiratorial sounding: Secrets of the Temple, How the Federal Reserve Runs the Country. I have not been able to locate my old, no doubt, dust covered copy of Greider’s excellent book, and have not read it for perhaps a decade, but I will try to remember as best as I can, and will turn to Greider when I come to the issue of the Federal Reserve.

As far as money being a talisman, Greider, from what can I recall, repeated the same point as my spellcaster friend. Money had something of our primitive magical thinking behind it, we had to believe in it to make it real.

I came back to this idea in the context of this series of posts because it seemed to suggest something about the connection between our current economy and idolatry. I thought for sure I would be able to find all sorts of evidence for money having originated as a talisman- which, by the way, is different than what we would call a charm- say your lucky rabbit’s foot. A talisman is an amulet that covers certain powers, such as powers of seduction, or the power to attract wealth etc.

I was able to find anecdotal evidence that money came into the world as a talisman. Take the picture above. On the left is a picture of traditional Chinese coin (Tang Dynasty 7th and 8th centuries AD), and on the right is a traditional Chinese talisman. (Shang Dynasty 16th- 11th centuries BC).  I, for one can’t tell the difference, but such does not an argument make.

Instead of finding surefire evidence that money had originated as a talisman, in my search, I discovered a fascinating story about the origins of money and debt themselves: David Graeber’s Debt the First 5,000 years, and it is from there that I think this inquiry should continue.

Graeber sets out to tell the history of debt, but this seems to require that he provide a history of money, for the two are inseparably combined. Like many other people, I had always imagined that money had emerged as an advance over systems of barter.
But, as long as we take the findings of economic anthropologists and economic historians into account, this idea appears to be a myth. According to Graeber not one anthropological or historical example of money emerging spontaneously from barter has been observed.

Historically, money seems to have first appeared in Ancient Sumer as a form of temple credit, allowing priests to keep accounts with the local population, and then evolved into a more general system of credit-money.  Niall Ferguson, in his documentary, The Ascent of Money, has a cool scene (@9 min) in which he is holding one of these clay credit-money pieces in his hand. It’s inscription reads that the possessor of the tablet is owed so much grain by such-and-such. That “possessor” part is important because it implies that these tablets were transferable.

In Graeber’s tale, this credit money was supplanted by coinage with the rise of empires. He sees the dual-evolution of coinage and the state this way: the state needed to pay its new professional soldiers in some way, and money was an ingenious way they could do so.  The state created coins, gave them to its soldiers, and then asked for them “back”, not from the soldiers, but as a tax on its merchants and farmers. These merchants and farmers were thus compelled to accept payment for their goods from soldiers in the the form of the state’s coins. The state had created its own perpetual motion machine- for war.

Many people on the right today, at least in America, seem to associate “hard-money”, that is money backed by gold, with a weak state. Graeber thinks the relationship actually worked the other way around. Hard- money is the surest sign of a strong state, and the vector through which the state imposes taxes. Eras of hard-money are also incredibly violent, after all, they signal that large armies are marching around. They tend as well to be eras of mass slavery- classical, African. The two major hard-money eras, in the West, Graeber thinks, were those between the birth and fall of the Roman Empire, and the period from the early 1400s to the mid-20th century.

Hard-money has a rival in the form of credit-money, and the two tend to oscillate over great arcs of history and over a very wide historical expanse. The great period of credit-money was from the fall of the Roman Empire until the early 1400s, and its most important developments took place outside of the West. Both China, and the Islamic World, had thriving, credit-based economies for much of this era. The Islamic World, especially, developed a rich market-based economy that was largely free from government interference, and many of the financial innovations that later made their way to Europe were begun here.

Periods of credit-money have a tendency to also become eras of debt, and this debt can sometimes be horribly de-humanizing. As the father of two daughters, the idea of the “bride-price” struck me on a particularly visceral level. In certain eras and places daughters became “collateral” for loans. This was actually the standard by which the dark age Irish judged something’s worth, by the abstract value of not just another human being, but your very own child.

The answer that credit-based societies have come up with for the problem of debt is essentially to ban interest on loans, especially high rates of interest, or usury.  Graeber sees no anti-commerce logic to these bans on charging interest. Muslim society, for instance, has been, and is, an extremely commerce based society that, even to this day, largely looks askance at interest bearing loans.

The Catholic Church, having taken Aristotle seriously, held that interests bearing loans had something unnatural about them.  Money, in ages where it is based on credit and not coin, was seen as a social convention, nothing more, and nothing less. Charging interest on a “mere idea” seemed to the Medievals to be asking something lifeless to generate itself, to have “money beget money” in the same way life begat life.

The credit-money era of the Middle Ages did not so much end as became a hybrid-era of both credit-money and cold hard cash, and it was this hybrid quality which I think Graeber is suggesting helped give rise to capitalism, which really was something new under the sun.

A barbarian like Hernando Cortez was literally insatiable for the gold of the Americas, and it’s this insatiable quality which was somewhat new. Why did Cortez not rest free and easy on a caribbean island after he had won the lion’s share of the biggest of the biggest gold booty in history- the riches of Tenochtitlan?  Graeber suggest it was because he was in debt up to his eyeballs with interest bearing loans he could never hope to repay- even though he had conquered one of the greatest empires on the globe.

It was this idea of being designed for limitless growth that was new, something that came into being most clearly a half a century after the death of Cortez with the creation of the Dutch East India Company. This company was a public-private partnership whose mission was the domination of the spice trade, which paid its soldiers in gold coins, and was built from loans- in the form of shares- that could never be repaid but required the outlay of “dividends” to the stockholders. Issuing more stock for supplies for imperial expeditions, meant more dividends would have to be paid,  and therefore the gain of more control over the spice trade secured- a control that was largely “bought” by the force of arms.

Here I am going to step aside from Graeber, and lean on what I can remember from William Greider’s Secrets of the Temple, for while Graeber is great on economic history up until the slave trade, his take on contemporary history is a little thin and I think Greider can fill in that gap.

Since the 1700s, we seem to have been slowly moving back towards the idea that money is a social convention. Since then we have oscillated between hard-money (paper backed by gold) and soft-money (paper based on credit) with every era of hard-money seeming to end in a deflationary crisis as money dries up, goods plummet in value, and loans become unbearable, followed by an era of soft- money, in which credit chases its’ own tail, goods become too expensive to buy, and manic asset bubbles emerge, some large enough to take down whole economies.

The problem is simple to state, and incredibly hard to solve. If money is a convention then we can make as little of it or as much of it as we want, but neither choice is without huge consequences. Print too little, and the economy literally seizes up, like a car engine running without oil. Print too much, and everything rises in value, people find themselves drunk on inflating asset prices, and the whole balloon eventually bursts.

Governments tried to control the inflationary potential of paper money by pegging it to a high level of gold. The problem here is that this money was often way too hard, especially for debt holding farmers. William Jennings Bryan’s “Cross of Gold” speech was essentially a cry to east coast bankers to soften the value of the dollar and therefore ease the debt burden of Midwestern farmers.

After the Great Depression, capitalist countries tried to steer a middle course with the value of the new global currency- the dollar- pegged to gold under the Bretton Woods system, but with governments following an inflationary policy of high spending even in good times. In the early 1970s this system blew apart: Nixon abandoned the gold peg, and inflation took off like a rocket. This only ended when the central banks, most notably the US Federal Reserve was given real control over the value of the currency, and they took the side of hard-money, only this time it wasn’t based on gold, but on strictly limiting the supply of money itself.

In 1980-81 the chairman of the Federal Reserve, Paul Volcker, essentially convinced the markets that their inflationary expectations regarding the US currency were no longer true, by hanging a sword of Damocles over the American economy’s head. Whenever the American economy grew so fast as to cause inflation the FED would slam on the brakes of money creation and raise interests rates as high as they needed to go to constrict the money supply and squeeze out inflation- even if this lead to rates of unemployment touching 8 percent.

In terms of taming inflation, this certainly worked. In terms of American living standards- not so much. The strong dollar helped push high paying factory jobs overseas. Volcker, and his successor Alan Greenspan effectively ended the rise in American wages by keeping wage inflation, which had previously ran ahead of price inflation being linked to COLAS in labor contracts, under strict control.

Greider’s work leaves us off in the 1990s, but it is easy to pick up the story from there.

During the same time American wages stagnated, the financial innovations and speculation that were discussed in my post on the quants proceeded apace. The “net-worth” of the middle class became tied not to income, which was frozen in time, but to assets- the value of their homes, and their stock-portfolios, both of which seemed to expand towards the stars. Eventually the staid deposit-banks themselves wanted in on the action- the road to systemic collapse. For many, including the quants, the best way to make money, it seemed, was to have “money beget money”, in the Medieval phrasing, or, to use our modern flavorless terminology-  “financialization.”

The graph below captures the transformation:

We know where that led.

Whether or not it needed to be done to save the economy, it makes perfect sense that the FED, which had spent a generation fighting for hard-money despite its costs on the working class and poor, would totally reverse course and move towards soft money; it was saving itself. Opponents of the FED on the right have it only half correct- the problem with the FED isn’t that it aims at weakening the currency, the problem, it seems, is that the FED will only definitively do this when the interests of its primary constituency- the financial sector itself- is at stake, and not, it seems, for any broader public interest.

All this, by the most circuitous route imaginable leads me back to the spell-casters with whom I began this post. These were working class kids, and they really were just kids, even if they were living independently, who were living near Bethlehem, Pennsylvania- a place that a generation before had possessed one of the most vibrant steel industries in the world.  By the early 1990s the industry and its hard- but- certain road to the middle class was gone. These kids had no hope of college and made their living working in warehouses moving around goods made overseas, or in malls selling the same, both bought with strong American dollars.

How surprising is it then, that with a hard- but- certain road closed, they would turn to a seemingly easy, yet probabilistic one? The worldview of the spell-casters seems to resemble the fantasies and nightmares of the quants, in the same way Graeber writes of tribal peoples who projected the world of their Western conquerors into strange nightmares of warlocks and zombies. The spell-casters had their Aleister Crowley, and the quants had their Alpha. Both were trying to load the dice in their favor, for to not win the game was to look out onto a future of bleakness.