you can only trust debtors

… another innovation of the early twentieth century: consumer debt. As Jackson Lears has argued, through the installment plan previously unthinkable acquisitions become thinkable, and more than thinkable: it became normal to carry debt. The display of a new car bought on installment became a sign that one was trustworthy. In a whole sale transformation of the old Puritan moralism, expressed by Benjamin Franklin (admittedly no Puritan) with the motto “Be frugal and free,” the early twentieth century saw the moral legitimitation of spending.

~ Matthew Crawford in Shop Class as Soulcraft

Not only do we have moral legitimitation for debt, but we also have institutional legitimitation. Matt and I have been entangled in paperwork as we’ve tried to establish his credit score. Every credit card application has resulted in rejection, not because Matt has bad credit, but because he has no credit. He’s a poor candidate for credit because he has never had a debt before.


*That being said, with the recent recession and growing concerns for the environment, debt and spending are beginning to take on different moral meanings.

it's a wonderful life revisited 2008

Excerpts from the article "The Rise and Fall of Finance and the End of the Society of Organizations" cited from the death of the corporation? on orgtheory.net:

The traditional model of banking is fairly simple: Banks gather deposits from savers, who are paid interest, and lend it to borrowers, who pay it back at a higher rate of interest.

In the movie It’s a Wonderful Life, banker George Bailey explains this model to his anxious depositors, who are causing a run on the bank: “No, but you . . . you’re thinking of this place all wrong. As if I had the money back in a safe. The money’s not here. Your money’s in Joe’s house . . . right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others. Why, you’re lending them the money to build, and then, they’re going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?”

The best-known form of securitization is mortgage- backed bonds, in which hundreds or thousands of mortgage loans are pooled together and then divided into bonds that, by the law of large numbers, have more predictable and “safer” returns. This practice allows banks to free up funds for additional lending and generally lowers the cost of taking out a mortgage. Rather than relying on a local bank and its depositors to fund their home purchase, buyers can access funds from dispersed investors around the world via mortgage-backed securities.

A modern-day George Bailey might have a more difficult time explaining contemporary banking: “No, but you . . . you’re thinking of this place all wrong, as if I held your mortgage on my balance sheet. I sold your mortgage to Countrywide 10 minutes after we closed the deal, and they sold it along with 3,000 other mortgages to Merrill Lynch, which divided it into bonds that were bought by a Cayman Islands LLC, which bundled them together with other mortgage-backed bonds into a collateralized debt obligation that Citigroup sold to a Norwegian pension fund. Now what are you going to do? Stop making your payments and force those Norwegian retirees to go back to work?”

nonprofit news

In Dallas, Plano children’s clinic refuses county funds because of reporting requirements, which would force them to screen patients’ income and citizenship status.

Meanwhile, Pennsylvania’s budget impasse is wreaking major havoc on Philadelphia nonprofits, including childcare centers and other social service agencies.

the tyranny of private enterprise

History has always been one of the hardest subjects of me to understand. It’s either a muddle of events that I cannot understand or a simplistic narrative that I do not believe. Perhaps I relate to how Hayden White sees historical narrative: “translations of facts into fictions” as “the events are made into a story by the suppression or subordination of certain of them and highlighting of others”.

The motives and actions of presidents and prime ministers, of ambassadors and representatives. The handshakes made behind closed doors and the secret chain of command through bureaucractic institutions. What story can you spin out of the sparse paper trail of letters, memos and communiqués? Or out of Obama’s Blackberry log? What do you believe?

I have been making an effort to learn history better, since I have been, historically, rather ignorant of it, precisely because I couldn’t make sense of it. It wasn’t until I read two books, the Sociological Imagination by C. Wright Mills and funny enough, the children’s book , A History of US All the People that history finally began making sense.*

These books presented history or insisted that we study history from a more sociological standpoint—looking at the impact of historical events on the consciousness of individuals in society. I don’t really care about what country was a world power or what conferences and negotiations took place, but I am fascinated about how people living in that country felt amidst the whirlwind of headlines and changes. And recently, I’ve also become intrigued by what history has to say about various philosophical questions: How do you reconcile order and liberty? Equality and freedom? Justice and law?

This newfound fascination came as a result of a book recommended to me by my husband, called Commager on Tocqueville (one of the benefits of marriage is that you get more books and if you’re lucky, your husband has similar tastes to yours). Despite a somewhat self-preoccupied and unenticing title, the book is excellent. Commager assesses American history in the last century through the set of questions raised by Alexis de Tocqueville, the famous French aristocrat who wrote about America in Democracy in America (who I vaguely recall having to read in my US AP History class). Tocqueville primarily was concerned with democracy – especially the tensions raised between liberty, order and equality. In Commager’s words:

Would democratic majorities destroy liberty? Would centralization of power, which democracy made almost inevitable, prove incompatible with liberty? Would individualism—so ruthlessly being exercised on the vast North American continent- be compatible with either democracy or with liberty? And what of justice? There can be no liberty without justice and no justice without order. Can individualism tolerate order? Can democracy be trusted to safeguard justice?

Published in 1993, Commager’s conclusions still speak relevantly to what is happening today:

... in the interaction between two forces that (Tocqueville) himself thought the most powerful: majority rule and individualism. He was fearful that majoritarianism would take over the surrender to its natural propensity for tyranny with catastrophic consequences. In that event, it was not the majority that imposed its will on desperate minorities, but the spirit of individualism and private enterprise that permeated majorities and persuaded or seduced them into supporting even the most extreme manifestations of private enterprise. The danger today is no more from majority tyranny than it was in the 1930s when Tocqueville first sounded the alarm. It is rather in that excess of virtue of individualism that we now call private enterprise, but which is no longer private but public, and which, for that matter, is no longer very enterprising. The operation of military-industrial-financial-labor-academic-scientific complex is an example of this. This group or complex does not constitute a majority, but it appears to represent a majority. And to speak for it, it does not formally exercise what we call tyranny, and as for all its triumphs and conquests, these have been brought about legal means and are not therefore tyrannical. But its character and conduct takes on more and more the character of tyranny. In all this, Tocqueville’s fears may yet be vindicated.

I wonder how history will write this past year—the demise of banking as we know it, the economic crisis, the first black president, the new uneasy alliance between banks and government.... What is happening? What does it mean? And how does all of this make us feel? Do we feel powerless as each company announces its own round of layoffs? Do we feel hopeful because there is now a president who seems to be intelligent and concerned about the people and because we may be able to rebuild new and better institutions? Or do we feel angry, ready to charge forth with our pitchforks and flames, because this military-industrial-financial-labor-academic-scientific-governmental complex has failed to demonstrate that it knows what it is doing, though it has justified its privilege and power on that very basis?



*So I am attempting to link to Goodreads more often, rather than Amazon. After all my ranting and railing about large corporations and all my lamenting about the demise of small bookstores, I really should stop giving Amazon free advertising. At the very least, I should sell out and have them pay me.
** For a progressive/liberal reading of American history, I recommend Commager on Tocqueville over Howard Zinn’s People’s History of the United States of America. This post was originally intended as a rant against Howard Zinn, but I decided to write something more positive instead…

the life and death of great american corporations

ramblings on the economy

“Around one in ten US companies disappears each year. Between 1989 and 1997, to be precise, an average of 611,000 businesses a year vanished out of a total of 5.73 million firms. Ten per cent is the average extinction rate, it should be noted; in some sectors of the economy, it can rise as high as 20 per cent in a bad year. According to the UK Department of Trade and Industry, 30 per cent of tax-registered businesses disappear after three years. Even if they survive the first few years of existence and go on to enjoy great success, most firms fail eventually. Of the world’s 100 largest companies in 1912, 29 were bankrupt by 1995, 48 had disappeared* and only 19 were still in the top 100.”

~ The Ascent of Money: A Financial History of the World by Niall Ferguson

In these hard economic times, I doubt it’s any consolation to know that capitalism has been characterized by innovation and failure at the micro-level and cycles of boom and bust at the macro-level.

But we should still remember that it’s not all bad news.* Many of us still have jobs (and are feeling more thankful for them than we ever have before.) It’s also encouraging to see the nation shifting away from consumerism, but the accompanying layoffs are troubling.

That’s the complicated part about fighting against consumerism-- every purchase links back to a job. (And likewise for sweatshops). We stop buying and companies start hurting, which in it of itself doesn’t bother me, but then the layoffs begin. And while this recession has been hard-hitting for well-educated financial professionals, it is still the most hurtful for the least educated and the most vulnerable in our society. (I can’t seem to find the article, but basically decline in employment has affected high school diploma-less men the most).

Bankruptcies and layoffs in a capitalist economy that champions creative destruction technically shouldn’t be something we fear. Nevertheless, when the destruction doesn’t just affect legal entities and the pocket change of the rich, but begins to leave many without jobs, then we do need more consolation than “It’s just the nature of capitalism. Boom and bust. We just have to wait it out.” (“Collateral damage” for a “cyclical adjustment” perhaps? It will just be a matter of mathematical calculations before the supply and demand curves reshift.)

How many days or years or decades of waiting before you can get back on track with your life?

I hope that as we wait out this recession, we will actively care for those who are most vulnerable. I hope that while we may be cautious with our spending, that we can still be generous with our giving. And I hope that as we are trying to fix the economy, we’re building something more sustainable and just, rather than just patching up something that was never that great to begin with.


* Interestingly enough, the longest-existing institutions in our day have been nonprofit organizations such as universities…
** For instance, Amazon is still doing okay and so is Wal-Mart, which obviously makes me happy since you all know how much I love and adore and worship Wal-Mart.