Instead of pay, we got loans and credit cards

November 25, 2008

(An editorial the local paper wouldn’t print.)

The mainstream media says the cause of the economic crisis is that people can’t pay their home mortgages, with the implication that the crisis is their fault. But the basic reason for this crash, the worst since 1929, is that working people in the U.S. haven’t seen a real rise in wages since the 1960’s.

Meanwhile, everything from housing to healthcare to college has risen out of sight—much of it ignored by the official inflation rate. Families have coped by both spouses working where one used to before. We borrowed to go to school. We borrowed to buy a car. We borrowed to pay our health care bills. Many of us borrowed against our houses, because the value of housing seemed to be going ever upward. So, we were told, you can always refinance and get a lower rate.

When the housing bubble burst and prices began to go down, we could no longer refinance. And when the usurious interest rates on adjustable rate mortgages jumped, we couldn’t pay those either. Surprise! The banks were dependent on us, not the other way around.

But the basic question is, why are we not paid enough on the job to obtain the requirements of life without incurring huge debt? A big part of it is that the labor movement has been hemmed in and destroyed by employer hostility and anti-worker laws. Unions—the main mechanism that allows workers to get decent pay and benefits for their work—only represent 12% of workers now, down from 35% in the 1950s. When the union movement was strong, everyone’s wages were higher because employers knew their workers could leave and get better pay elsewhere.

This suppression of unions was so successful that our employers, especially the big corporations, were rolling in cash—money they no longer had to pay in wages—and they had to find a place to lend it. I once got an offer from a mortgage company to lend me $30,000 on a falling-down shed I own. It’s worth about $2,000, generously. These companies were desperate to loan us money. But lots of cash at the top leads to a bubble economy.

The real economy is not based on complex derivatives and investment vehicles, the economy is us, working people who make things go. If we’re not paid enough to buy what we need, the system will eventually grind to a halt. Pushing credit cards and home equity loans instead of a decent paycheck only works as long as we can make payments, and there are now enough people who can’t make payments—perhaps as many as 6 million families who may face foreclosure—to make the banks freeze up.

It’s good news that the government is stepping in to buy up parts of the banks—that might help the acute, “heart-attack” phase of the disaster. But the longer-term solution must include paying working people the wages we need for a decent living. That means passing pro-worker laws like the Employee Free Choice Act so we can get more power on the job and negotiate higher wages. On top of that, our government should keep some of those banks in the public sector, so when we do borrow money, it’s not from a profit-making corporations with lying advertisements and punishing interest rates. The rest should be regulated like utilities—for the good of all.

And the leading cause of personal bankruptcy is health care bills—so we need a health care system that is publicly financed and universal, like Medicare only starting at age zero. Other advanced countries do that and get more care per dollar and better life expectancies than we have here.

Anyone at risk of losing their only home needs the chance to negotiate a workable payment. People complain “Why should someone else get a break when I made my payments on time?” But foreclosures are bad for everyone, not just the family struggling to make payments. They destroy neighborhoods and further drive down the cost of housing. And anyone could get laid off—and lots will in this “recession”—there needs to be a real safety net with unemployment insurance that doesn’t run out.

The looting of the banks has already occurred through years of big payments and bonuses to already fabulously wealthy owners and managers. Rather than rescuing the rich, who don’t need rescuing, let’s get some of that stolen wealth back by taxing the rich and raising wages, to increase the working class’s share of our national wealth. No more bubble economy, let’s build working-class power instead.

Jenny Brown is co-chair of the Alachua County Labor Party in Gainesville, Florida.

Economic meltdown

October 15, 2008

What a difference two weeks makes!

In late September, Republicans in Congress were laughing with scorn at the Democrats for suggesting that the U.S. government should buy stakes in the banks to forestall an economic meltdown. This strategy was derided as “too European” and interventionist.

Now Federal Reserve Chair Ben Bernanke, with pressure from foreign powers, is dragging Treasury Secretary Henry Paulson into doing just that. Why? Right now banks won’t lend money to each other, or to anyone else. They’re too scared they won’t get the principal back–they fear any bank might turn out to be a rotten shell. The resulting “credit freeze” and has the effect of bringing important economic activity to a screeching halt. Forecasting a looming disaster, the stock market has become bipolar and skittish.

The panic has meant that even conservatives are willing to cede some control of private enterprises to the government, at least for the moment.

Those of us disgusted with the system should ask, why not nationalize the banks permanently? They could be operated in the public interest, like the post office or the library, charging low interest for loans, paying their managers decent but not crazy salaries, but most importantly, not driven to make a profit no matter the cost. It turns out that would not be that expensive given that we’re having to shore them up when they are periodically looted by their owners.

This issue of the Iguana we direct you to several articles related to the economic crisis. We hope they will be more clarifying than recent news reports.

How did we get to this point?

We got to this point because, in the words of United Mine Workers union leader Cecil Roberts, “Too few people have too much money.” Inequality in the U.S. is approaching that of 1900. Indeed, economist Doug Henwood compares our period to the Gilded Age in a very clarifying short article in the Nation: . The richest 1% in the U.S. have more wealth than the bottom 95%. This punishing disparity didn’t come about without struggle. It is the result of sustained top-down class warfare, notably advanced under Carter when then-Federal Reserve chair Paul Volcker moved to create unemployment by pushing the federal funds rate up. This created a recession we know now as the “Reagan recession.” Eleven percent unemployment drove wages down, and they’ve been smothered ever since by a combination of slashed safety-nets and union-busting.

The right would like to blame the economic crisis on people of modest means who borrowed money to buy a house but couldn’t pay it back. But why are our wages so low (and employment so insecure) that we can’t afford housing? Why are we going deeper into debt to pay everyday bills? Why do 20% of U.S. households have zero or negative net worth? All of these things can be attributed to the decline in real wages in the U.S. Our wages peaked in the late 1960’s and have been falling since then, despite the fact that our productivity has risen more than 50% in the same period. Laws unfriendly to unions mean that we haven’t been able to bargain higher wages. So even though we’ve been very productive, our pay has not reflected the wealth we’ve created.

As an underpaid workforce, we’ve turned to borrowing to buy the things we need (housing, health care, higher education, lately even food and fuel). We’ve been using credit cards, taking out student loans, and borrowing against our homes (because their value was supposed to be going up, that seemed OK). But workers’ share of the money in the U.S. is not big enough to sustain our debt, never mind pay the interest rates that mortgage companies charged when low-interest mortgages reset to higher-interest mortgages. When we reached the breaking point, as millions of families did in the last two years, the banks that relied on our regular payments broke down too. Financial instruments which exaggerate both gains and losses have amplified the effect, but the basic problem remains that we are not paid enough to buy the products of our labor. Extending us credit could only hide the problem for so long. For a much deeper and extensive analysis of the crisis, see Sam Gindin and Leo Panitch’s article on Znet: “The Current Crisis, A Socialist Perspective,” at:

Where did the money go?
The employing class, rolling in cash due to our low pay, have been happy to lend us money, since they can get a return on it. Much better than paying it to us in wages! They’ve been investing in financial markets, including complicated insurance schemes which they expected would protect their investments while providing wild returns. All the money sloshing around tamed regulators and in many cases meant lobbyists could extract laxer laws from a pliant Congress. With the repeal of regulation came more and more fictional accounting which allowed firms to richly compensate their high-flying CEOs and owners. Like Enron, these firms looked profitable. Why not reward that? So the money went to make the very rich personally very richer–resulting in a new gilded age of $37 million apartments, $3 million birthday parties, $480,000 watches and $300,000 outfits, like that worn by Cindy McCain at the Republican convention. The rich have not been taxed much (certainly not nearly as much as they were in past eras), so instead an underfunded government has borrowed money from them, creating another source of financial wealth.

When banks and insurance companies started to fail, the “$700 billion bailout” was an attempt to inject ready cash from the U.S. Treasury into the remaining banks so they wouldn’t also go belly-up and bring the economy down with them. But people ask, where did the money go? Much of the money was already spent. Another great portion of it was imaginary, in that it relied on inflated expectations rather than goods in the real economy. Now it looks like the promise of $700 billion to buy bad assets isn’t enough to make private banks lend money to each other. Both sides of the aisle now agree that the government needs to buy them, or significant portions of them, to induce them to fulfill their lending role. More on the seriousness of the crisis can be found in an interview with the Monthly Review’s John Bellamy Foster, at

How will all this affect everyday people?
The recession has hit us first. Indeed, the last recession, the one that started with Bush’s first term, never really left if you look at our wages. Now we’re feeling the effects as millions face foreclosure and eviction or bankruptcy from unemployment and health care bills. The prices of food and fuel have nearly doubled in the last 3 years, whittling our savings down to nothing. And retirement funds linked to the stock market have lost 20% of their value over the past year (not counting recent market flailing), meaning many people who hoped to retire soon don’t dare. When people put off retirement, that makes jobs scarcer, and the general slowdown will amplify unemployment.

It is not an exaggeration to say that capitalism could bring us another Great Depression. (Some felt the Bush administration was crying wolf to shove through the bailout, but it may well turn out that the Administration was too slow to take action when banks started to fail, not too hasty.) But more likely is a long, miserable recession. Neither scenario automatically means our living standards must be further destroyed, however. Progressive measures that were unthinkable a year ago sound reasonable today, and we should push our advantage while the wage-slashers, union-busters and credit-pushers are in disarray.

Union folks, progressives and people who care about justice can (indeed, for our own survival, must) demand a major rearrangement of the priorities of our government. These should be aimed at blunting the blow of economic the downturn and increasing workers’ share of the national wealth. After all, it’s the gap between the rich and the rest of us that’s largely responsible for bringing our economy to a standstill.

Here are a few ideas:
–stop evictions; moratorium on foreclosures
–guarantee unemployment benefits that don’t run out
–raise the minimum wage to 1968 levels ($9.50 in 2007 dollars)
–make it easier to form and join a union (the Employee Free Choice Act would be a start).
–tax the rich and corporations as way of recovering some of the recent loot
–institute national health insurance for everyone–health care costs are the leading cause of family bankruptcy
–rewrite bankruptcy laws to work for everyday people not credit card companies
–rebuild and repair our infrastructure, putting people to work in good public jobs
–dedicate public funds to sustainable alternative energy with low carbon output
–build and fund public housing and cooperative housing instead of promoting expensive mortgages and “home-ownership” as a way to wealth.

What about the elections?
Barack Obama and the Democrats have cautiously supported some of these measures some of the time. Much of this support has been half-assed or absent when it mattered. And it’s true that the crisis has been a bipartisan creation, long in the making. However, if we want a legislature and executive branch we can push, a big mandate for an Obama administration and a large Democratic majority in both houses of Congress will give us a fighting chance. A Democratic victory would also allow us to see that Democrats are not enough, we need an explosively growing grassroots movement of working people of all colors to force our leaders to confront this crisis. Under Republicans, we’ll continue to be fed the line that we just need Democrats in power, and the Democrats will continue rightward.

What can we expect under a McCain-Palin administration, with its half-baked, pro-rich economic platform and profoundly militarist “us against the world” ideas? We’re getting a taste of where they’re going when we witness their appeals to white voters on the basis of racism and fear-mongering. At McCain and Palin rallies, people are rightly upset about the situation, but they’re led by the candidates to blame Barack Obama, yelling ‘kill him’ when Obama’s name is mentioned in association with former Weather Underground figure Bill Ayers, volunteering that Obama’s an Arab, that they fear for their lives if he’s elected president, and that the country is going ‘socialist.’

The McCain-Palin campaign and its right-wing supporters on talk radio and Fox News are trying to widen the fault lines in American on the basis of race, sex, religion and culture. If we allow ourselves to become divided along these lines in the middle of a depression, we won’t stand a chance to get the things we need. We already see the outlines of fascist ideology, where people blame immigrants or Black people or Arabs or feminists or trade unions or socialists because their future has suddenly become so uncertain. A disaster, economic or any other kind, can be endured only if we stand together and defend each other. We saw examples, both good and bad, in post-Katrina New Orleans.

Cynthia McKinney (Green Party) and Ralph Nader are each on the ballot for president in Florida, and, as expected, have much better platforms than the Democrats. McKinney, in particular, is an appealing choice–as a Georgia Congresswoman she bravely stood against the war and the Bush Administration’s attacks on human rights and civil liberties. However, she is polling at less than 2%. Florida is likely to be very close in this election. We live in a big state with a lot of electoral votes at stake. Floridians should think strategically when we vote. If the election is close enough to steal, the Republicans will steal it. Let’s not give them that chance. Their tactics are clear from recent years: In areas they control, they throw away votes, challenge Black and Democratic voters, engage in voting machine chicanery, and use intimidation and lies. So the election may turn out to be closer than we expect, which is another reason not to sit this one out.

But this election, even if there is an unprecedented Democratic sweep, is not going to be the answer to the fundamental problems with the way our economic lives are arranged. After the election, the hard work begins.

Humanizing our economies

August 28, 2002
Inevitable. That’s what we are told about our economic systems and their effects. When we protest, we’re asked, ‘But what other way is there?’

In The Job Market of the Future James Cooke Brown answers that question boldly, laying to waste the assumptions of our current economic systems. Brown launches a proposal to replace our current labor market economies with an invention he calls “the job market,” a system of money and employment which, he argues, will allow us to bring our economies under the control of human values, rather than being carried on the back of the business cycle to extreme poverty or wealth, unsupportable economic growth and needless waste.

Brown (1921-2000) is a writer and inventor who created the board game “Careers,” the logical language Loglan, and wrote the futurist novel The Troika Incident (Doubleday, 1970.) In that novel, Brown first introduced the idea of the job market. The current work develops the job market idea for the real world.

In “job markets,” as Brown defines them, it is the worker who chooses the job, and the employer who must make the job attractive. This shift is accomplished by transferring the power to set wages out of the hands of employers and placing it in the hands of the job market, a market administered by computer. The computer is instructed to slice work orders–whether from public or private firms–into jobs of the shape and size desired by workers, leaving no customer (job-seeker) unserved.

Desirable jobs, with many takers, are assigned lower pay rates. Undesirable jobs are made more attractive by higher pay rates. The employer who wishes to keep labor costs low is well-advised to improve his or her conditions of work. He or she is ill-advised to discriminate in any non-performance related dimension (such as race, sex, education, or disability) because each narrowing of the possible pool of workers means the employer will pay more for their labor.

The job market is instructed to ensure that everyone seeking a job can find one. It does this by cutting the hours of work until jobs are fairly distributed to all who want work, a practical implementation of U.S. labor leader Samuel Gompers’ dictum, “So long as there is one worker who seeks employment and cannot obtain it, the hours of labor are too long.” In job markets, increases in productivity created by technology accrue to the benefit of all workers in the economy through an increase in their hours of leisure.

Ordinarily, we would fear that shorter hours would mean pay would go down. But pay, too, is revolutionized. Instead of a currency which floats and inflates due to speculation and the extension of credit, Brown proposes the “credit hour.” Credit hours reflect the work done in an economy, and thus those earning them can be assured they will not inflate. In fact, the value of credit-hour money increases as productivity increases–something we would expect but rarely experience in labor markets.

Credit hours also treat the labor of each person equally, making international trade in credit hours the fairest yet seen by the world. An hour’s work by a Jamaican, a Canadian, an Indian and an Indonesian would have equal value in a system of international credit-hour trade.

Democratically-set instructions guide the computer which runs the job market. What should be the ratio of highest to lowest pay? What should be the maximum length of the work year? Do we want more leisure or more production? These questions would be debated and decided by the public. The experience of being tossed around on rough economic seas, which we have no power to predict let alone control, would be a thing of the past. Economic life could finally, Brown argues, be tuned to human needs.

Very nice, you say, but impractical and politically unfeasible. Brown addresses both charges, taking on the practical side with an inventor’s zeal and providing exhaustive answers to the thorny questions which would arise for job market computer programmers and planners in such an economy.

He also addresses the political dimension, identifying the benefits of job markets to each of the players in our current economic systems. He argues that job markets can work in economies regardless of the ratio of public to private enterprise. And he walks us through one possible scenario for the transition to a job-market economy in a small social-democratic country.

Many economists argue that humans are naturally self-interested or greedy and that current economic macrostructures simply reflect this immutable fact. Brown argues that there is good evidence emerging from evolutionary biology that while humans are very attuned to the costs to us of economic transactions, we are also guided–not inconsistently–by altruism, for reasons easily explained by the lives of our ancestors. He asserts that the pricing of labor and goods in a job market will seem fairer and more natural to us because the human cost of each job, as judged by its occupants, will at last be accurately reflected in the pay.

Some readers will recognize the work of 19th century American futurist Edward Bellamy in this description, and Brown credits Bellamy (Looking Backward (1888) and Equality (1897)) with the invention of the job market idea. High speed computing, Brown argues, has now made possible what could only be speculated about in Bellamy’s day.

The author, who died in 2000 at age 78, traced his interest in the job market idea to his experience as a demobilized U.S. Army Air Force veteran at the close of World War II. The critical question of how to re-employ U.S. veterans seemed designed for job market logic, but computers capable of running such a project had not yet been invented. A tireless polymath with a Ph.D. in sociology, philosophy and mathematical statistics, Brown invented the board game “Careers,” and the logical language “Loglan.” He first developed the job market idea in his utopian novel The Troika Incident (Doubleday, 1970.) In the world of 2070, his time-traveling astronauts report, job markets are the prevailing economic system.

After developing a complete working computer grammar for Loglan, the first for any speakable language, in 1991 he turned towards another invention that Troika readers had urged him to flesh out, the job market. The current book is the product of that effort.

Jenny Brown is the daughter of James Cooke Brown.  She edited the ms. after her father’s death.