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FALSE PROFITS - THE LIE OF CITY LIBERTARIANS

by

David Thompson



In the wake of the terrorist attacks on the World Trade Centre, the author and former Salomon Brothers trader Michael Lewis wrote a defiant, indeed triumphant, article for The Guardian's Comment pages. The piece, titled 'Financiers, Cry Freedom', advanced the notion of the City trader as a heroic figure and inspirational symbol: "Wall Street long ago ceased to be a place and became an idea. You can't destroy an idea with a bomb. You can't even dent it..." he wrote, "People who work in financial markets are not merely symbols but practitioners of liberty. They do not suffer constraints on their private ambitions, and they work hard to free others from constraints. This makes them, almost by default, the spiritual antithesis of the religious fundamentalist..."

That Lewis should regard the atrocities of 2001 as a validation of his former life seems, at best, a circular argument, but the article's overstatement and misplaced bravado were perhaps to be expected. At the time, nerves were frayed and tempers still heated. However, the oddity of this central notion -- of the financial speculator as some kind of Libertarian superhero -- warrants further examination.

Lewis would have us believe that financiers and speculators are the self-evident guardians of democratic liberty, freedom fighters for a capitalist system under siege. Those who have lost their livelihoods as a direct result of predatory speculation might, I suspect, feel differently.

The speculative capitalism practised by Salomon Brothers and their competitors does not, in fact, "work hard to free others from constraints." More precisely, it seeks to subtract freedom from others, on behalf of its clients, using capital's gravitational tendency to attract more capital. Contrary to free market mythology, wealth does not emerge spontaneously via some inter-dimensional rift. It is, rather more typically, moved from one place to another. In 1997, the billionaire speculator George Soros famously converted the homes and livelihoods of Thai and Malaysian workers into his personal property.

Throughout the nineties, news of redundancies and lagging wages rallied stock prices and, conversely, news of even the most marginal wage increases undermined 'market confidence'. Yet speculators still maintain their belief in an acausal world, one in which no-one loses out and wealth is somehow copied or coaxed into being, rather than forcible relocated. Advocates of unmoderated market forces regularly denounce the notion of a 'free lunch', yet the speculators' model of wealth creation presupposes an acausal miracle -- a kind of economic bi-location. The fact that Lewis describes the financial markets as indestructible and intangible serves only to illustrate just how closely free market ideology can mirror the religious fundamentalism he derides.

Lewis and his City Libertarian ilk suffer from a failure of moral logic, in that they wish to be seen as heroic figures, rescuing the world from tribal and ideological tyranny whilst affecting an ignorance of the consequences of their own actions. Performing this improbable manoeuvre requires a refusal to acknowledge a rather obvious and inescapable fact: that an individual's freedoms do not exist in a vacuum; they very often press against the freedoms of other individuals.

The interests of the shareholder are quite different from -and often at odds with- those of the employee and those of the consumer. In order to continually reward shareholders and CEOs and maintain a steep differential of income, outsourcing, mass redundancies and poorer working conditions may be a necessary part of the equation. In a speech given in 1999, the financial journalist Doug Henwood announced: "By 1993, it was clear that the quickest way to add 5 points to your stock price was to lay off 50,000 workers." As share options have become a standard addition to CEOs salaries, managers now often see their own pay rise in direct proportion to the number of employees they can do away with. Yet, against all evidence to the contrary, the City Libertarians cling to the delusion that basic moral principles (for example, trying to avoid doing harm to others) will never conflict with -- or define limits to -- one's personal degrees of freedom.

In keeping with so many ersatz Libertarians employed in the City, Lewis conveniently ignores the troublesome qualification of the Libertarian creed: to not infringe on the freedoms of others. Among them, the freedom to not have one's livelihood, prospects or social infrastructure wilfully destroyed by foreign speculators. Yet Lewis persists:"People who work in financial markets do not suffer constraints on their private ambitions..."

Presumably, a person's private ambitions -even when expressed in vast financial movements between continents and involving the destruction of entire communities -- can in no way ever have consequences for anyone else. Thus --and here's the pay-off -- such ambitions are entirely beyond reproach. This notion is clearly disingenuous and cowardly, and might more honestly be phrased as "To hell with everyone else." Of course, "To hell with everyone else" could itself be rephrased as "To hell with everyone." (At this point one might note that Lewis is the author of Liar's Poker, a tale of "his own rake's progress through the jungle of a powerful investment bank." For those unfamiliar with the term, liar's poker is a game played in idle moments by workers on Wall Street, the objective of which is to reward trickery and deceit.)

A related display of doublethink appeared in the literary pages of The Observer. In reviewing Marx's Revenge by Meghnad Desai, Faisal Islam adopted a tone that was similarly crowing, triumphant and irrational. With an unwarranted confidence that is eerily common among free marketeers, Islam asserted: "The market is a tool for eliminating scarcity." The housing market, one of many markets that thrive on scarcity, seems, rather improbably, to have escaped consideration. "For those who still express moral indignation at pronounced and prolonged inequality and poverty, the market is the most likely escape route..." he blustered, "Arguments expressed in the language of the free market are listened to, whereas moral sentimentality about excessive inequality is worthy but ineffective."

Islam's urge to repeat the free market catechism suggests a hope that repetition alone will somehow make it true. Certainly, he seems unwilling to consider the possibility that inequality and poverty remain "pronounced and prolonged" precisely because attempts to address the problem are no longer listened to, except when couched in the narrow self-regarding terms of the "free" market -- a market that can offer no credible solution since it requires poverty and inequality in order to benefit those whose interests it most generously serves. (Proposing the free market as a universal panacea calls to mind a great Simpsons gag, in which half the townspeople are digging for buried money and end up stuck at the bottom of a very deep pit. On realising their predicament, a solution is discovered: "No, dig up...")

Indeed, one could conceivably find amusement in the way Islam and other free marketeers sneerily dismiss any alternatives to their own faith as "sentimental" or "ideological", as though basic moral questions were mere metaphysical whimsy. (As I've argued elsewhere*, any morality worthy of the name is actually a matter of analysis and pragmatism, a way of moderating conflict and minimising damage. Any civilisation that feels it can dispense with moral questions is merely heading back towards the caves.)

Curiously, the unmoderated market is rarely acknowledged as a belief system or ideology, at least not by its proponents, and great claims are made for "going with what works". Of course, the notion of "going with what works" presupposes a context -- a set of values and objectives. That such bothersome details remain oddly tacit and unanalysed is a central weakness of the economic reflex that now presents itself as thought.

Taken at face value, "what works" seems to include the barbarity of a housing market that rewards those that already have at the direct expense of those who do not. "What works" also appears to be a 'market democracy' in which freedom and democracy are based exclusively on a person's spending power -and in which those with little or no disposable income themselves become disposable. And what about an ethos of ends justifying means (-the ethos inevitably fostered by an economic free-for-all-)? Yes, that too is, apparently, "what works".

If one is prepared to exclude "sentimental" morality and unflattering practical outcomes, almost anything can be said to be "what works". But this seductive streamlining of concerns is at the heart of our new economic mantra. To acknowledge such untidy practicalities as homelessness, short-term living and the mass export of employment would serve only to divert admiration from the alluring simplicity of the free market model. Consequently, fallout from the corporate world's wet dream must be studiously ignored.

In order to sustain the market's mirage of perfection, a kind of causal autism is required among its apologists and devotees. Gains in productivity, and the stock market swelling that follows, must be disconnected from the means by which such gains are so often achieved. In 1997, the writer P.J. O'Rourke addressed a conference held by the archly Libertarian Cato Institute and argued against restraining inequality. In doing so, he revealed a glib disregard for evidence that has become practically a trademark of right-wing economic thinking: "In a world without gaps we'd be all the same. We'd all be the same sex. Who'd get pregnant? Proposing to close the 'wealth gap' is worse than silly. It entails a lie. The notion of economic equality is based on an ancient and ugly falsehood central to bad economic thinking: That there's a fixed amount of wealth. If I have too many cups of tea, you will have to lick the teapot. But wealth is based on productivity, and productivity is expandable..."

Infantile humour aside, O'Rourke would have his audience imagine that, contrary to the laws of physics, productivity is indefinitely expandable and therefore, sooner or later, we'll all be made rich by the unmoderated market. Unfortunately, increases in productivity are no indicator of wealth diffusion. In fact, they now correlate with increases in income disparity and a consolidation of wealth among the corporate over-class. The economic 'growth' attributed to gains in productivity tends not only to exclude the bulk of the population, but actually operates at their expense. At the time O'Rourke was giving his speech, the richest 1% of Americans owned 40% of the country's wealth. As unrestrained capitalism is fundamentally gravitational in nature -- the more capital you have, the more capital will accrete -- this outcome is all but inevitable. Although 'trickle-down' effects do result in the production of more luxury products -- and domestic servants -- for the rich.

While productivity figures did rise sharply during the late nineties, workers' wages remained curiously stagnant throughout the same period. More to the point, the rise in productivity frequently involved mass redundancies and the firing and re-hiring of staff on short-term contracts with an attendant loss of security and benefits. As the Institute for Policy Studies neatly summarised: "CEOs of firms that announced layoffs of 1000 or more workers this year earned 80% more, on average, than executives at 365 top firms surveyed by Business Week..." In effect, employees were left to lick O'Rourke's metaphorical teapot. Yet, O'Rourke maintains that "Rich people are heroes", and when asking his audience: "Wealth is good, so why isn't everybody else's wealth good?" he sounds genuinely puzzled.

As the free market's gravitational effects become increasingly pronounced, market evangelism demands a denial of inconvenient evidence and a dulling of the critical and moral senses. As rungs of the social ladder are kicked away from above and society becomes more polarised and inflexible, those with positions to defend will inevitably offer arguments that are ever more fearful and absurd. Whatever its claims to pragmatism, modern economic theory has, for many, become a matter of faith and desperation. One of this new faith's many miracles is the severing of causal connections between possession and dispossession. To quote the words of one Charlie Chan: "Theory, like mist on eyeglasses, obscures facts."







ABOUT THE AUTHOR

David Thompson is a freelance writer, whose work has appeared in the arts and books pages of The Times, The Observer and Eye: the International Review of Graphic Design. An archive of his published work can be found at his website.




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