Extend and Pretend: The Fictions of Capitalism

Posted: February 16, 2016 in Uncategorized

Once upon a time . . . I decided to write about fictitious capital and the term ‘extend and pretend’.

At a friend’s NYE party he voiced confusion about the way capitalism values things. I replied that this meant he had a good grasp of the current situation. For those at the party concerned about their house prices, superannuation, pensions, investments, etc., our conversation wasn’t very reassuring. They preferred the story where you work hard, save, invest and can rely on the system to reward you. Yet, like many, they worry this is a fading illusion. Nevertheless, what choice do they have, but to keep going and imagine things will be OK?

‘Extend and pretend’ has become a popular way to describe the current situation in Greece, where the nation’s debts cannot be repaid, so their lenders extend loans, provide  more loans, and pretend they’ll get their money back later. This popular fiction is supposed to defer greater economic crisis and collapse, by putting off dealing with reality until sometime in the future. More generally ‘extend and pretend’ is the motto of ‘late capitalism’ in the face of a growing range of existential crises.

The ‘extend and pretend’ story of Greece is a tale of democracy. You know the one – people vote in elections, they’re represented by politicians, and citizens get a say in  government policies. Most likely, since you’re reading this blog, you also understand there’s a ruling class and corporate power is greater than that of any parliament. This was clearly demonstrated last year, when the hope and disappointment of the Syriza government revealed how state forms, elections, and popular votes can be subordinated to finance capital and ‘market forces’.

A popular tale of capitalist institutions is that economic decision making is ‘technical’ or ‘administrative’, rather than political, as if class struggle wasn’t at the heart of social history. In the ‘birthplace of democracy’, we saw how a nation’s future rests on the country’s credit rating and the demands of financial managers. The façade of democracy was exposed, as the impossibility of national governments deciding economic policies without the consent of ‘the market’ became clear.

Whose script . . ?

In 2008, the near-collapse of the global financial system was overcome through the conversion of bank debts into government debts and the implementation of austerity policies in many parts of the world. After being rescued with taxpayer’s money, the banking bosses voted that financial discipline was now required from the governments and people who’d saved them. This tragedy saw Greece in the spotlight, as a series of austerity measures was enforced, so new loans could be provided to ‘keep the country afloat’, even though there’s no way the mounting debts can ever be paid back. Austerity shrunk the Greek economy dramatically. Tens of thousands of businesses closed down. More than a million people lost their jobs and half of all young people are unemployed. Welfare benefits and government services have been slashed – poverty is widespread.

Last year, when Syriza won the national elections and formed a new anti-austerity government, it was made clear that their election wouldn’t be allowed to interfere with the economic policies being prescribed by the European Central Bank and the International Monetary Fund. Instead they were commanded to execute further cuts – in order to get more loans, just to make the nation’s debt repayments. Then, in a national referendum, Greek voters rejected austerity. But in a vicious plot twist the financial institutions forced the closer of Greek banks and created a more severe economic and social crisis. The government’s resistance was broken and they agreed to deeper budget cuts, continued privatisation of government assets, more job losses, and an ongoing social disaster.

For many parts of the world this is a familiar story. When ‘the market’ decides that discipline is required, we witness the structural adjustment programs or ‘shock therapy’ prescriptions of the IMF, World Bank, ECB, etc. Again and again, people and governments are called on to demonstrate their subservience to capital, or face the consequences.

greece demo

Fictitious capital

Like the fables of capitalist democracy, I have long found it annoying how those who write economic theory tell stories about ‘fantasy scenarios’ to explain the unreal worlds they describe. However, when we explore fictitious capital; ‘all that is solid melts into air’. Fictitious capital includes credit, shares, bonds, speculation and various forms of money, whose value is based on imagined future earnings. Banks and other financial institutions sell these claims to future profits, generating and accumulating more fictitious capital. When banks loan out more money than they possess, they create fictitious capital. Most of the lending done by banks is to other banks and financial institutions, buying and selling fictitious capital to each other – making bets with each other about whether the price of this capital will rise or fall in the coming days. The narrative of this fiction is constructed by means of a balancing act performed by the most powerful governments and banks, as fictitious capital is continually invented as a symbol of confidence in the future of capitalism.

There’s no clear distinction between capital which is ‘real’ and capital which is fictitious. As this becomes more widely understood, capitalism appears as precarious and crisis ridden to governments, banks, and corporate bosses as it does to us. Because people around the world have resisted paying for the current crises and have intensified their struggles against capital, the imagined gains from fictitious capital must be postponed for longer and longer and the promise of future profits must be renewed again and again. With little belief in the long-term viability of their accumulated wealth, capitalist gangs fight each other in destructive turf wars, intensifying the crises of capitalism and destroying the basis for continuing expansion and growth. As crisis intensifies, the main source of new capital is the continued fiction conjured up in the finance sector. Today, global trade in actual goods is only a tiny fraction of the trade in various forms of finance capital and the mass of fictitious capital circulating in the money markets, futures exchanges, and so on, is far greater than ever before. The market value of such capital is a creation of supply and demand factors which are manipulated for profit in a global story-telling contest. As fictitious capital has become the engine of production and capital accumulation, the whole system is increasingly precarious, reliant on continuing confidence in a concocted system, tottering from crisis to crisis.

Money talks . . . shit

There remains a popular fable that money has to be earned, even though the rich tend to be born with their wealth and/or steal it. The value of money is another fiction, fabricated by the world’s central banks and commercial financial institutions. A central bank introduces new money into the economy by purchasing bank deposits, bonds or stocks or by lending money to other financial bodies. Commercial banks borrow money and then multiply this money by creating interest bearing loans (most of this money exists only as a book-keeping entry). These loans are then considered to be among the bank’s assets. Since the GFC, China, USA, Britain, Japan and the Eurozone have created an estimated $12 trillion of money which didn’t previously exist. This money may appear to offer a reliable measure of wealth, yet many of us are familiar with how the value of money can fall (like the Australian dollar) or totally disintegrate (e.g. in Germany during the 1920s or Zimbabwe in 2008 when the inflation rate was estimated at 231,000,000% – yes 231 million) and how access to your money can disappear overnight (e.g. in Argentina 2001, Iceland 2008, Cyprus 2013).

zimbabwe

Last year, annual inflation in Venezuela hit over 140 percent. According to the country’s Central Bank, the lion’s share of this was caused by currency manipulation (deliberate attacks on the value of Venezuelan money) as part of an ‘economic war’ to bring down the country’s socialist government. Currency manipulation and speculation, rigging and betting on the ‘value’ of money, is the largest market/scam in history, estimated at a couple of quadrillion dollars per year (that’s two million billion dollars). As discussed below, the institutions dominating this multi-trillion-dollar-a-day trade are able to stage-manage the way they play with money as a form of sophisticated criminal theatre. Yet, in his latest book, Seventeen Contradictions and the End of Capitalism, Professor David Harvey sounds a warning about the growing destabilisation of money,  arguing that; “The rise of cyber moneys, like Bitcoin, in some instances seemingly constructed for purposes of money-laundering around illegal activities, is just the beginning of an inexorable descent of the monetary system into chaos.”

Harvey details a range of illegal activities that are crucial to capitalist appropriation, including robbery, cheating, and swindling, along with a range of ‘shady practices’ such as price fixing, Ponzi schemes, falsification of asset valuations, interest rate manipulation and money laundering, while arguing; “it is stupid to seek to understand the world of capital without engaging with the drug cartels, traffickers in arms and the various mafias and other criminal forms of organisation that play such a significant role in world trade.” Yet, if we are to explore and try to understand the lawless underworld, we shouldn’t neglect how the global finance industry is constructed by and for criminal activities, and what this could mean when considering the potential collapse of the monetary system.

My favourite TV show last year was the second season of Fargo. This fiction revolved around a criminal gang war in the 1970s, and its impact on two families and two communities. The final episode opens with a roll call of all the bodies that have piled up around Fargo and Dakota over the previous episodes. The big city crime ‘Syndicate’ has come out on top and their hitman, Mike Milligan, has seemingly made every correct step in advancing through the bloodshed. He avoids the slaughters and takes out those who stand in his way, but when he gets back to base, hoping to become the new territory’s top dog, he’s instead promoted to the accounting department. “This is the future,” his crime boss tells him. “The sooner you realise there’s only one business left in the world, the money business, just ones and zeroes, the better off you’re gonna be.”

There once lived some . . . banksters

Many people have a traditional view of banks – we deposit money, they loan money, and make investments. Yet, when we get angry about their fees, charges, and obscene profits, we often complain ‘they’re robbing us’. This criticism is fairly accurate – commercial banks are corporations that steal money. Their theft is part of the more widespread ‘legal crimes’ of robbery and exploitation at the core of capitalism. As well, banks and bankers are often involved in a whole range of illegal criminal undertakings.

From popular fiction we know Swiss banks have long been a favoured repository of capital from illicit activities. The role of these banks in laundering Nazi loot and their complicity with the holocaust is legendary. More recently, banks in so-called ‘tax havens’ or ‘countries of financial secrecy’, such as the Canary Islands or the Bahamas, are regularly reproached for hiding away ill-gotten gains. Some readers may also recall the Bank of Credit and Commerce International (BCCI) which collapsed in the early 1990s. BCCI was the seventh largest private bank in the world and a nest of corruption, money laundering and other secretive activities. In a report on the bank’s failure, John Kerry (at the time US Vice President and currently Secretary of State) explained; “BCCI’s criminality included fraud by BCCI and BCCI customers involving billions of dollars; money laundering in Europe, Africa, Asia, and the Americas; BCCI’s bribery of officials in most of those locations; support of terrorism, arms trafficking, and the sale of nuclear technologies; management of prostitution; the commission and facilitation of income tax evasion, smuggling, and illegal immigration; illicit purchases of banks and real estate; and a panoply of financial crimes limited only by the imagination of its officers and customers.”

bcci

A long, long, time ago . . .

The collapse of BCCI was much like the fall of Australia’s legendary Nugan Hand bank in the 1970s. After this bank’s collapse, a Royal Commission found it was involved in money laundering, illegal tax avoidance schemes, and widespread violations of banking laws. The bank was also implicated in drug smuggling, illegal weapons deals, and providing a front for the criminal activities of the US Central Intelligence Agency.

Before the GFC, the US Savings and Loans (S&Ls) crisis of the 1980s and 1990s was the greatest bank collapse (described by many as a ‘robbery’) since the Great Depression. By 1989, more than one thousand S&Ls had failed, effectively ending what had once been a secure source of home mortgages. Many S&Ls were engaged in criminal practices, fraud, false accounting, forgery, and dishonest conduct as deliberate commercial policy. In 1996, the US General Accounting Office estimated the total cost of the S&Ls collapse to taxpayers at more than $132 billion.

The regular exposure of bank criminality includes the recent guilty pleas by four major global banks to manipulating the foreign money exchange market. They joined three other major banks shown to be involved in the same crime. These charges stem from an agreement by the banks not to commit more offences, after the ‘Libor scandal’ of 2012, involving the fraudulent manipulation of interest rates by a whole range of prominent financial institutions. Meanwhile, those who’ve closely followed the GFC and its aftermath will appreciate that the above examples are just the tip of an unfathomable criminal-banking iceberg.

The GFC also made clear that corporate criminals usually have the power to avoid charges and convictions. While the myth of a fair legal system, where law enforcement ensures goodness prevails, still holds some currency – it’s also commonly understood that the wealthy are protected and there’s ‘one law for them and another one for us’. The stories of ‘equality before the law’ and ‘criminal justice’ are now worn-out deceptions, evidenced by popular culture, where police, politicians, judges, and corporate bosses are regularly portrayed as crooked characters up to their necks in crime & corruption. Even though the poor are still more likely to be considered a ‘criminal class’, the fact that the most serious crimes are committed by the rich and powerful is increasingly understood. Yet, banksters don’t go to prison; instead the cells are reserved for their victims.

A factory of broken dreams . . .

Since the GFC and global recession began, there’s been a series of movies about the banking and finance industries (e.g. Wolf of Wall Street, Margin Call, Wall Street – Money Never Sleeps, The Big Short), often highlighting the crimes of banksters. In January, I went to see the latest of these – The Big Short, which is based on a ‘true story’ about the GFC.

 

Part of the film is set in a financial traders convention, appropriately held in Las Vegas, where the financial market is compared to a casino. Yet, what the movie could have made clearer was that for the major players, just like in a casino, ‘the bank always wins’ – for those deemed ‘too big to fail’ there was no serious risk of losing. These ‘players’ can gamble on almost anything, including betting on the failure of loans, the collapse of currencies, countries, other financial institutions, and even the bankruptcy of their own client’s. Major finance corporations like Goldman Sachs, Morgan Stanley and JP Morgan Chase, created fraudulent pyramid schemes, sold them to investors, and bet they would fail.

I used to be a keen punter and with some knowledge of how the gambling industry was used to swindle people and launder the proceeds of crime. So I based my selections on various theories about how racing was corrupt and the races rigged. Today, the revenue from the ‘legal’ gambling industry is estimated to be around $US500 billion per year. Illegal gambling turnover is believed to run into the trillions of dollars. Yet, this is nothing compared to the hundreds of trillions of dollars’ worth of bets on various fictional accounts of the future and the assorted ways of measuring these fictions. Despite its weaknesses, The Big Short was disturbing, especially if you have a lot of money in a bank, financial institution, pension fund, etc., since it made a strong case that these were all on the gambling table and at any moment you could lose everything to the villains who run the game.

Another disturbing movie, from 2010, is the academy award winning documentary Inside Job. This film centres on the systemic corruption of the United States by the finance industry and what the filmmakers term the ‘biggest bank heist in world history’ – the theft of trillions of dollars, leading up to and during the GFC, by those in charge of the major financial institutions. As the film makes clear, this robbery was facilitated by a revolving door between the banks and the higher reaches of government, where bank/financial corporation CEOs become government officials, creating laws convenient for their past/future employers. To indicate how pervasive this revolving door is, we only need to consider the involvement of banking, securities and investment firm Goldman Sachs in the governments of USA, Nigeria, Egypt, Spain, Czech republic, Italy, Sweden, and the appointment of their directors as heads of the Bank of England, the Bank of Greece, and the European Central Bank. And let’s not forget the current Australian Prime Minister, Malcolm Turnbull, was previously the chair and managing director of Goldman Sachs Australia.

 

As Inside Job explores, during the GFC the financial system froze up and it appeared the global economy may come to a halt, after investment banks Lehman Brothers, Bear Sterns and Merrill Lynch collapsed. Yet, after the ‘biggest bank robbery in history’, the commercial banking sector was bailed out of the situation they’d created with trillions of dollars of money from national governments. Then, those who’d profited most from the crisis were put in charge of reforming the financial industry ‘to ensure a similar collapse didn’t happen again’. The result was larger and more powerful financial corporations conducting ‘business as usual’. Meanwhile many other businesses went broke, global stock markets dropped, and housing prices crashed, resulting in evictions, foreclosures and mass homelessness. Tens of millions of people lost their jobs and unemployment skyrocketed. Poverty rose and wealth was redistributed on a massive scale from workers/poor to the rich. Having bailed out the banks, governments around the world cut back expenditure, unleashed austerity programs, and normalised a prolonged crisis, which continues to this day.

Some readers may recall another popular documentary, from 2005, Enron: The Smartest Guys in the Room, which gave some forewarning of the practices behind the GFC.

 

Enron was the seventh largest corporation in the US – buying and selling energy, running energy services and gambling on energy prices. Enron turned the energy industry into a casino, betting on the price of energy – while controlling the supply and creating a phoney energy crisis, involving rolling blackouts in California. For years, Enron always seemed to win – but this was a lie constructed using phoney accounting and falsified bank records/financial statements. Their fictitious earnings allowed them to publish imaginary profits, in order to maintain optimism in the firm and sustain a rising share price, while losing billions and getting deeper into debt, until the whole house of cards came crashing down.  The CEOs cashed out their stocks, while the price was still high, and made off with the loot. Billions in investor, government, pension, and retirement funds disappeared.

Leading financial institutions assisted Enron’s deceptive practices, helping to design their fictions and profiting from them. Financial analysts at the time argued they didn’t understand how Enron was making money – “you just had to have faith in it.” When Enron went bankrupt (at that time the largest ever US corporate bankruptcy and widely described as the ‘corporate crime of the century’), the same people who’d received generous offerings from the firm were expected to investigate the company for fraud. Nearly every US Senator and member of the House of Representatives involved in the committees investigating Enron’s collapse, or the conduct of Enron’s accounting firm, had received donations from one or both companies.

Who pays the piper . . . ?

At the centre of the GFC was a crisis of debt and value. As the financial system went into meltdown the experts of finance and economics were at a loss to explain or calculate the value of shares, money and assets. They repeatedly exclaimed that the crisis was ‘too complex’, that they ‘lacked reliable data’; they didn’t know what had happened or was happening. This is a huge problem for the system, as it requires measuring processes and values that result in common activity for capitalism. Importantly, debt couldn’t be accurately valued. It became clear that trillions of dollars’ worth of loans were not going to be repaid – so most were ‘rolled over’ (becoming ‘new’ extended loans). Since then, debts have continued to grow faster than economies, with families, companies and governments borrowing an estimated $57 trillion more than they’d already borrowed.

Examining the debt situation in Greece, Slavoj Zizek argues; “The true goal of lending money to the debtor is not to get the debt reimbursed with a profit, but the indefinite continuation of the debt that keeps the debtor in permanent dependency and subordination.” Debts are meant to maintain a hierarchy of power, since the daily reproduction of capitalism is centred on social control through the imposition of work for capital. Yet John Holloway explains that: “Debt is essentially a game of make-believe: it is capital saying ‘if we cannot make the workers produce the profits we require, if we cannot impose the submission that we require, then we shall pretend that we can: we shall create a monetary image of the profits we need.’” Elsewhere (e.g. Radio Interview, Global Revolt, Class Struggle in China), I’ve supported an analysis that argues ‘we are the crisis of capital’ – that powerful resistance to and rebellion against capitalist work has thrown the system into question, there’s a widespread rejection of capitalist values, and the GFC was a generalised vote of ‘no confidence’ by ‘the market’ in both people’s willingness and ability to pay their debts.

Today, confidence in capitalist fictions is again at a very low level. Last month, the Royal Bank of Scotland (RBS) made headlines when it warned about growing debt, the coming “cataclysmic year”, and another crash; telling investors to “sell everything”. But before you follow their advice, it’s worth recalling that RBS was once a small retail bank, which transformed into one of the world’s largest. Then, during the GFC, went from a position of global leadership to a basket case – a failure that almost brought down the entire UK financial system. The bank’s collapse was only prevented by 45 billion pounds of taxpayer support and several hundred billions more in government loans.

rbs

A tale of . . . measuring the Emperor’s clothes

Over and over, around the globe, we hear a rising chorus of people asking – What is real and what is fiction? With a background in unemployed people’s organisations, I’ve long been aware that official unemployment rates and job creation numbers are made-up, with governments and statistical agencies ‘massaging’ and distorting the figures for political purposes. At a forum I attended last year, Victor Quirk, from the Centre of Full Employment and Equity at the University of Newcastle, estimated the actual unemployment rate in Australia at close to double the official number. Unemployment rates are among a range of measuring tools used to help maintain and reproduce the fictions of capitalism. These figures, statistics, and valuations are not objective truths, but creations reflecting widespread power struggles within, against, and outside of capital.

Economists tend to imagine an artificial world of graphs, tables and calculations, ‘invisible hands’, debts that are assets, and endless ‘growth’ that in fact destroys. Some have developed elaborate theories to calculate the finance industry’s ‘investments in investments’, ‘bets about bets’ and ‘bets about bets about bets’. However, these theories are mostly fables – tales told to keep us working and help us sleep. Economic theory and analysis relies on information provided by governments, banks, ratings agencies, and other mainstream institutions. Yet none of these can be trusted.

In 2007, economist Li Keqiang, currently China’s prime minister, let the American ambassador in on a secret: China’s GDP figures are “man-made” and therefore “unreliable.” He explained that most of the country’s economic data should be used for “reference only.” Recently, I read political economist Minq Li’s latest book, China and the 21st Century Crisis, which discusses the untrustworthiness of liofficial Chinese economic data, yet relies on this data to develop Li’s analysis of contemporary capitalist crisis. As we commonly find, in the absence of accurate information, people have limited options. It’s widely recognised that when considering China’s economy (on which so much now hinges) ‘we can’t trust the numbers’. Comparisons are sometimes drawn with the former Soviet Union. Although it was widely understood the Soviet government made-up many of their economic indicators, and was deluded about the political/social situation, it still came as a shock when this ‘super power’ collapsed.

Since the GFC, spending by the Chinese government has been a crucial factor in ‘combating global economic crisis’. It’s reported that between 2008 and 2014 available new loans in China rose by more than $US20 trillion. Apparently the Government has also spent over a trillion dollars on directly stimulating the economy. Yet fear of serious economic decline in ‘the world’s factory’ persists. Today, there’s little confidence Chinese policymakers know what they’re doing and growing concern that the Communist Party leadership are out of their depth is helping to destabilise ‘the markets’ and global economy.

In the world’s largest economy (apparently/for now) there’s a similar story. In 2008, the US government reportedly spent around a trillion dollars to stem systemic collapse. At the same time, as the finance industry went into crisis, in order to ‘save’ companies like General Electric, General Motors, Bank of America and Citi Group, the US Federal Reserve (as the lender of last resort) provided massive loans to corporations of all kinds. These corporations, like the banks, were ‘bailed out’, yet recession and economic instability continued. At the end of last year, a decision by the US Federbailoutal Reserve to very slightly raise interest rates was meant to tell a story of confidence in US economic recovery. The fragility of this gambit was indicated by the Reserve’s statement that this measure was made partially so it could be rapidly reversed if things started getting worse. So far this year, ‘the market’s’ vote on US and Chinese political/economic narratives has been one of ‘no confidence’.

Just an opinion . . .

Among the key players in the world’s financial architecture are the main credit ratings agencies – Moody’s, Standard & Poor’s and Fitch. They exist to assess the creditworthiness of corporations, institutions and countries who borrow money. Their ratings are meant to reveal how likely debts are to be paid back. A high rating indicates that a borrower’s finances are secure. But, surprise, surprise, the ratings are a fiction.

In 2001, it wasn’t until right before Enron declared bankruptcy that the agencies began to downgrade its credit rating. In 2007, the agencies rated Iceland’s banks at AAA (the highest possible) despite them borrowing $120 billion – ten times the size of the nation’s economy. Within a year, the banks had collapsed. And, in 2008, investment banks Bear Stearns, Lehman Brothers and Merrill Lynch were all highly rated just before they went bankrupt.

The ratings agencies are paid by those they’re meant to be assessing and rely on the accounts provided by them. They also cover-up and disguise problems their clients wish to hide, they miscalculate, misinform, and fail to appraise the ‘real’ situation of corporations, banks, and other financial institutions. Ratings agencies have made billions of dollars giving high ratings to fraudsters. In fact, the higher the rating given the more the agencies receive in payment. While Governments, investors, and ‘the market’, place great store on these ratings – the agencies themselves say they “are just their opinions and shouldn’t be relied on.” According to Standard and Poor’s, their ratings “should not be viewed as assurances of credit quality or exact measures of the likelihood of default.” Instead, the ratings should be considered a “commentary”.

ratings

None-the-less, these ratings have a direct impact on ‘the market’ and the wider economy. They are tremendously powerful ‘opinions’ and ‘commentaries’, with the potential for a downgrade to destroy a corporation, help bring down a government or destabilise a country. The agency’s ratings are repeatedly used as weapons by ‘market forces’ against states seeking to challenge the power of capital. At the same time, the agencies are key players in covering-up the crimes of the rich and powerful. Along with accounting firms, these key capitalist measuring instruments are sophisticated story tellers, weaving tales of punishment and discipline for most of us, and a web of lies for their corporate pay masters.

Not the whole story . . . ?

As David Harvey indicated above, much of the global economy is secretive, ‘hidden’ or in ‘the shadows’. This is commonly acknowledged through terms like the ‘grey economy’, which includes the incalculable and common array of ‘cash in hand’ payments. The size of this ‘informal economy’ is impossible to measure. It’s guessed the ‘grey economy’ in ‘developing countries’ is about 40% of their official GDP. In some nations it’s the largest sector of the economy. In ‘developed countries’ it’s said to be around 20% of GDP. There’s also ‘shadow banking’ – which includes financial institutions not subject to ‘regulatory oversight’, as well as the unregulated activities of supposedly ‘regulated’ institutions. The size of this part of the global economy has been estimated at $20 trillion. Then there’s the so-called ‘black economy’, which is also immeasurable. You only have to consider a part of it, illegal drugs, thought to be about 1% of total global trade, to grasp the importance of this economy.

As well, any story about the hidden or ‘black’ economies should acknowledge the open secret that ‘behind every great fortune is a great crime’. Anyone familiar with the development of capitalism, colonialism, and imperialism will have an appreciation of how they were founded on the theft of land and property, the plundering of environments, horrendous violence, cheating, swindling, the enslavement of millions, the robbery of people’s lives and freedom. And this history, written in blood, hasn’t ended.

In another blog post, The Last Delegation, I wrote about the rise of the new bourgeois in Russia during the 1990s. As the Soviet Union disintegrated, traditional crime areas, such as robbery, illegal drugs, gambling and prostitution, were thriving and those able to were enriching themselves. The black market ‘mafia’ were making off with whatever they could get their hands on, while cunning members of the ruling elite were using their privileges to become richer and to secure their futures. The up-and-coming oligarchs emerged as well-connected entrepreneurs, getting rich through connections to business or political networks, as they plundered state resources and robbed the populace as part of the new ‘free market’ economy.

Last delegation 8

A poster I bought in Moscow in 1990 reads; ‘Shadowy economics, corruption and criminality – woven in an organised manner. We have to organise to squash and untangle them and pull them out by the roots!’

During this period, as James Petras explains; “Over a hundred billion dollars a year was laundered by the mafia oligarchs in the principal banks of New York, London, Switzerland, Israel and elsewhere – funds which would later be recycled in the purchase of expensive real estate in the USA, England, Spain, France as well as investments in British football teams, Israeli banks and joint ventures in minerals.” The winners of the Russian gang wars “followed up by expanding operations to a variety of new economic sectors, investments in the expansion of existing facilities (especially in real estate, extractive and consumer industries) and overseas. Under President Putin, the gangster-oligarchs consolidated and expanded – from multi-millionaires to billionaires, to multi-billionaires. From young swaggering thugs and local swindlers, they became the ‘respectable’ partners of American and European multinational corporations”, as they continued to ‘diversify’ into stock speculation, banking, finance and company buyouts. Petras details a similar process with the rise of the ‘new bourgeois’ in China, Brazil, Mexico, India, and more. Many others have investigated the legal and illegal crimes of the ruling class in different parts of the world.

What can we believe in . . . ?

For those who’ve managed to read up to this point, you may be asking – how long does this story go for? While many people across the globe are saying; ‘What can we believe in?’ ‘There’s nothing we can trust anymore’.

It’s not surprising that numerous pundits now believe ‘extend and pretend’ is a confidence trick whose days are numbered. Systemic collapse has been forestalled by government cuts, intervention, bailouts, stimulus packages, interest rate and currency manipulation, and so on, seeking to guarantee future profits. Yet, the continuing refusal of people to pay their debts, to accept austerity, and to work harder for less, (along with the vicious battles between different capitalist gangs and the ruins left in their wake) sees fictitious capital continually expand, a range of economic, political, environmental and social crises intensify, the system’s crimes become more apparent, and claims of growth and recovery revealed as fantasies.

Throughout The Big Short there’s a consideration of value – of what things are really worth. The movie appears to centre on the value of money, stocks, houses, superannuation, pensions, wages, salaries, and dividends, as this is what people are often preoccupied with when worrying about financial crisis. Yet behind these concerns are deeper questions about what we value and how we value. How do we value life? How do we value each other? What are our relationships worth? How can we treasure the environment? How long can we put off making difficult decisions – seeking to avoid harsh realities? Are we reaching the conclusion of ‘extend and pretend’?

The future is unwritten . . .

Nick Southall

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Comments
  1. […] consumption fuelled by debt. (Nick at Revolts Now has written extensively of the financial ‘extend and pretend’ that underscores contemporary […]

  2. Randy Gould says:

    Nick, I very much like your writings and analysis in general. I find we are very much in tune. I’m curious have you written or are you writing a book?

    • revoltsnow says:

      Hi Randy, thank you for the positive feedback. No, I haven’t written a book, although I did briefly attempt to get my thesis published. Hopefully, one day, I’ll get the time and motivation to use some of these posts as the basis for a book.

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