by Douglas Rushkoff
With any luck, the economy will never recover.
In a perfect world, the stock market would decline another 70 or 80 percent
along with the shuttering of about that fraction of our nation’s banks. Yes,
unemployment would rise as hundreds of thousands of formerly well-paid brokers
and bankers lost their jobs; but at least they would no longer be extracting
wealth at our expense. They would need to be fed, but that would be a lot
cheaper than keeping them in the luxurious conditions they’re enjoying now. Even
Bernie Madoff costs us less in jail than he does on Park Avenue.
Alas, I’m not being sarcastic. If you had spent the last decade, as I have,
reviewing the way a centralized economic plan ravaged the real world over the
past 500 years, you would appreciate the current financial meltdown for what it
is: a comeuppance. This is the sound of the other shoe dropping; it’s what
happens when the chickens come home to roost; it’s justice, equilibrium
reasserting itself, and ultimately a good thing.
I started writing a book three years ago through which I hoped to help people
see the artificial and ultimately dehumanizing landscape of corporatism on which
we conduct so much of our lives. It’s not just that I saw the downturn
coming—it’s that I feared it wouldn’t come quickly or clearly enough to help us
wake up from the self-destructive fantasy of an eternally expanding economic
frontier. The planet, and its people, were being taxed beyond their capacity to
produce. Try arguing that to a banker whose livelihood is based on perpetuating
that illusion, or to people whose retirement incomes depend on just one more
generation falling for the scam. It’s like arguing to Brooklyn’s latest crop of
brownstone buyers that they’ve invested in real estate at the very moment the
whole market is about to tank. (I did; it wasn’t pretty.)
Now that the scheme we have mistaken for the real economy is collapsing under
its own weight, however, it’s a whole lot easier to make these arguments. And,
if anything, it’s even more important for us to come to grips with the fact that
the system in peril is not a natural one, or even one that we should be
attempting to revive and restore. The thing that is dying—the corporatized model
of commerce—has not, nor has it ever been, supportive of the real economy. It
wasn’t meant to be. And before we start lamenting its demise or, worse, spending
good money after bad to resuscitate it, we had better understand what it was
for, how it nearly sucked us all dry, and why we should put it out of our
Back in the good ol’ days—I mean as far back as the late middle ages—people just
did business with each other. As traveling got easier and people got access to
new resources and markets, a middle class of merchants and small businesspeople
started to get wealthy. So wealthy that they threatened the power of the
aristocracy. Monarchs needed to come up with a way to stabilize their own wealth
before the free market unseated them.
They invented the corporate charter. By granting an exclusive charter, a king
could give one of his friends in the merchant class monopoly control over a
region or sector. In exchange, he’d get shares in the company. So the
businessperson no longer had to worry about competition—his position at the top
of the business hierarchy was locked in place, by law. And the monarch never had
to worry about losing his authority; businesses with crown-guaranteed charters
tend to support the crown.
But this changed the shape of business fundamentally. Instead of thriving on
innovation and progress, corporate monopolies simply sought to extract wealth
from the regions they controlled. They didn’t need to compete, anymore, so they
just sucked resources from places and people. Meanwhile, people living and
working in the real world lost the ability to generate value by or for
For example: In the 1700s, American colonists were allowed to grow corn but they
weren’t allowed to do anything with it–except sell it at fixed prices to the
British East India Trading Company, the corporation sanctioned by England to do
business in the colonies. Colonists weren’t allowed to sell their cotton to each
other or, worse, make clothes out of it. They were mandated, by law, to ship it
back to England where clothes were fabricated by another chartered monopoly,
then shipped back to America where they could be purchased. The American war for
independence was less a revolt against England than a revolt against her
The other big innovation of the early corporate era was monopoly currency. There
used to be lots of different kinds of money. Local currencies, which helped
regions reinvest in their own activities, and centralized currencies, for long
distance transactions. Local currencies were earned into existence. A farmer
would grow a bunch of grain, bring it to the grain store, and get receipts for
how much grain he had deposited. The receipts could be used as money—even by
people who didn’t need grain at that particular moment. Everyone knew what it
The interesting thing about local, grain-based currencies was that they lost
value over time. The people at the grain store had to be paid, and a certain
amount of grain was lost to rain or rodents. So every year, the money would be
worth less. This encouraged people to spend it rather than save it. And they
did. Late Middle Ages workers were paid more for less work time than at any
point in history. Women were taller in England in that era than they are
today—an indication of their relative health. People did preventative
maintenance on their equipment, and invested in innovation. There was so much
extra money looking for productive investment, that people built cathedrals. The
great cathedrals of Europe were not paid for with money from the Vatican; they
were local investments, made by small towns looking for ways to share their
prosperity with future generations by creating tourist attractions.
Local currencies favored local transactions, and worked against the interests of
large corporations working from far away. In order to secure their own position
as well as that of their chartered monopolies, monarchs began to make local
currencies illegal, and force locals to instead use "coin of the realm." These
centralized currencies worked the opposite way. They were not earned into
existence, they were lent into existence by a central bank. This meant any money
issued to a person or business had to be paid back to the central bank, with
What does that do to an economy? It bankrupts it. Think of it this way: A
business borrows 1000 dollars from the bank to get started. In ten years, say,
it is supposed to pay back 2000 to the bank. Where does the other 1000 come
from? Some other business that has borrowed 1000 from the bank. For one business
to pay back what it owes, another must go bankrupt. That, or borrow yet another
1000, and so on.
An economy based on an interest-bearing centralized currency must grow to
survive, and this means extracting more, producing more and consuming more.
Interest-bearing currency favors the redistribution of wealth from the periphery
(the people) to the center (the corporations and their owners). Just sitting on
money—capital—is the most assured way of increasing wealth. By the very
mechanics of the system, the rich get richer on an absolute and relative basis.
The biggest wealth generator of all was banking itself. By lending money at
interest to people and businesses who had no other way to conduct transactions
or make investments, banks put themselves at the center of the extraction
equation. The longer the economy survived, the more money would have to be
borrowed, and the more interest earned by the bank.
Which is pretty much how things have worked over the past 500 years to today. So
what went wrong? Nothing. The system worked exactly as it was supposed to. The
problem was that after America’s post WWII expansion, there was really no longer
any real growth area in the economy from which to extract wealth. We were
producing and consuming about as much as we could. Almost no commercial activity
was occurring outside the corporate system. There was no room left to grow.
Sure, outsourcing, lay-offs, and technology created some efficiencies, but wars,
rising costs of health care, and exchange rates essentially offset any gains.
Making matters worse, all that capital that the wealthy had accumulated needed
markets—even fake markets—in which to be invested. There was a ton of money out
there—just nowhere to put it. Nothing on which to speculate.
The dot.com boom seemed to offer the promise of a new market, but it fizzled
almost as quickly as it rose. So speculators turned instead to real assets, like
corn, oil, even real estate. They started investing speculatively on the things
that real people need to stay alive. What real people didn’t understand was that
there is no way to compete against speculators. Speculators aren’t buying homes
in which to live—they are buying houses to flip. Speculators aren’t buying corn
to eat or oil to burn, but bushels to hoard and tankers to park off shore until
prices rise. The fact that the speculative economy for cash and commodities
accounts for over 95% of economic transactions, while people actually using
money and consuming commodities constitute less than 5% tells us something
important. Real supply and demand have almost nothing to do with prices. We do
not live in an economy, we live in a Ponzi scheme.
Luckily for us, the banks, and the speculators depending on them, made a bad
wager: they bet on our continuing capacity to provide a reality on which to base
their highly leveraged schemes. We just couldn’t do it. They put us between a
rock and a hard place. With George W’s help, they sold us on the notion of home
ownership as a prerequisite to the American dream. And they created a number of
loan products which made it look as if we could actually afford over-priced
homes. The banking industry spent hundreds of millions of dollars lobbying for
laws making bankruptcy difficult or impossible for average people to
accomplish—while simultaneously selling average people loans that they would
never be able to pay back.
The banks didn’t really care, anyway, since they never meant to keep these
loans. They simply provided the cash to mortgage companies, who then packaged
the loans. In return for putting up the original cash, the banks also won the
right to underwrite the sale of those mortgage packages to investors—investors
like pension funds, retirement funds, or you and me. Get it? The banks get all
the interest, but we put up all the money. Our retirement accounts and pension
funds invest in the very mortgages that we can’t pay back. The bank collects any
interest, playing both sides of the equation but responsible for neither.
And when the whole scheme begins to break down, what do we do? We try to bail
out the very banks that created the mess, under the premise that we need these
banks in order for business to come back, since only banks can lend the capital
required for businesses to flourish.
Yes, It is Wrong
President Obama may be smarter than most of us, but he’s still attempting to
rescue the very institutions that robbed us in the first place. He’s not a
socialist, as conservatives may be arguing, but he is a corporatist. Using
future tax dollars to fund government job programs is one thing. Using future
tax dollars to give banks more money to lend out at interest is robbing from the
poor to pay the rich to rob from the poor.
As painful as it might be to watch, and as irritating as it might be to those
with shrinking retirement savings, the collapse of the centralized corporate
economy is ultimately a good thing. It makes room for a real economy to rise up
in its place. And while it may be temporarily uncomfortable for the rich, and
even temporarily devastating for the poor, it may be the fastest and least
violent way to dismantle a system set in place for the benefit of 14th Century
monarchs who have long since left this earth.
If the corporate supermarket chain’s debt structure renders it incapable of
stocking its shelves this spring, this may be the wake-up call that consumers
need to finally subscribe to a Community Supported Agriculture farmer. If the
former associate fund analyst at Lehman realizes that he is unable to get a job
not just because his industry is contracting but because his work day creates no
real value for anyone at all, he will be forced to learn how to do something
that does. If an urban elite parent realizes he can longer pay private school
tuition for his kids, maybe he’ll consider donating to public school the time he
would have spent earning that tuition.
In short, the less we are able to depend on business-as-usual to provide for our
basic needs, the more we will be forced to provide them for ourselves and one
another. Sometimes we’ll do this for free, because we like each other, or live
in the same community. Sometimes we’ll exchange services or favors. Sometimes
we’ll use one of the alternative, local currencies coming into use across the
country as Central bank-issued currencies become too hard to get without a
Deprived of centralized banks and corporations, we’ll be forced to do things
again. And in the process, we’ll find out that these institutions were not our
benefactors at all. They were never meant to be. They were invented to mediate
transactions between people, and extract the value that would have passed
between us. Far from making commerce or industry more efficient, they served to
turn the real world into a set of speculative assets, and real people into
The current financial crisis is the best opportunity we have had in a very long
time for a bloodless revolution against the faceless fascism under which we have
been living, unaware, for much too long. Let us seize the day.
also see his follow up post – Hack Money, Hack Banking
Great article, Mike! Thanks for posting – it belongs on this site as it succinctly explains so much. Wish I could get every newspaper in this country to print this!
there will be no revolution…………..sorry it has been postponed indefinitely.
but just to cover my bets the people running the world have a plan in place to fill the vacuum in case there is a revolution.
I just saw this post and though how prophetic. I see it was written in 2009. I think you have been proven right. It looks like the revolution may be upon us and it is world wide. I along with you am glad to see that it is finally here. It is very scary for many but hopefully it will remain peaceful. There have been incidents but most of the violence is the result of actions by the fascist police state. My main concern is that the actions being taken in the US are not being covered by the media. But then that is why the next revolution will not be televised the state has learned and the media is now controlled.