I thought I had seen a lot of galaxy-brain capitalist propaganda in the press this week, but then I woke up and turned on NPR:
INSKEEP: This election got Joel Stein thinking. He concludes that President Trump won office by attacking elites. And, in a humorous way at least, Stein set out to defend them. His new book is called “In Defense of Elitism: Why I’m Better Than You And You’re Better Than Someone Who Didn’t Buy This Book.”
In the interview , Mr. Stein backs up his exciting title with lukewarm, nonsensical attempts to distinguish the “intellectual elite”, which he considers himself a part of, from the “boat elite”, who want to beat him up. Literally:
STEIN: (Reading) The boat elite are steeped in honor culture. Dignity is their most valuable nonboat possession. If their girlfriend gets insulted, they fight. If their friend gets in a fight, they fight. If their fighting ability is questioned, they fight. When they get cut off, they honk. Then they yell at the other driver to get out of their car and fight. The intellectual elite don’t do this because we know that honking and yelling makes it hard to hear NPR stories.
INSKEEP: Stein was reading there from his new book. We spoke with the former Time columnist last week.
STEIN: This book is a call to arms for the intellectual elite that - not real arms because those are - we don’t believe in those.
STEIN: Those are dangerous. The other people have those arms. So my arms aren’t as good as their arms.
INSKEEP: It’s a metaphorical call to arms.
STEIN: A metaphorical call to…
INSKEEP: Call to words…
STEIN: …Metaphor - metaphorical arms. Yeah.
INSKEEP: (Laughter) OK.
STEIN: It’s a war we will lose. But it’s the best we can do.
This man really looks in the mirror and sees the “intellectual elite.”
Maybe it’s not his fault. We don’t talk about class in America. Despite the best efforts of the postmodern Neo-Marxist universities, the conversation is limited to “the middle class” (good) and the “elites” (bad, unless I’m one of them). This is the product of decades of linguistic war against the class consciousness of the 1930s. The New Deal was triage made by a government afraid of revolution, and it held for long enough that the revolutionaries died off or became comfortable. Most people alive are like frogs in a boiling pot. They raised the austerity so slowly that we didn’t notice it killing us.
The idea that there could be a “middle” class, in a system with only two classes, is ridiculous. There has to be something lower than the middle. But the idea of a middle class is a trap anyway: it frames the tiers of inequality in this country as a spectrum. You can rise from lower to middle to upper, they say. The upper class can make mistakes and become lower class. Some elites are intellectuals and some have boats.
In reality, class is more like a wall. It divides the Green Zone, the safe, smooth-functioning consumer paradise, from Hell, where the toys are made. In Hell everything is getting worse: the air is poisoned, the water is privatized and the people are working more hours for less pay. In the Green Zone, everything is techno-wizardry and unending optimism. Look at all the fun toys!
If there are only two classes, they are by definition “the ruling class” and “everyone else”.
What Mr. Stein is trying to distinguish, I think, is what my Marxist friends call the professional-managerial class . He might prefer the word technocrat . These are the people who get to live in the Green Zone because they know how to operate the machines that keep up the wall. If everyone else were to get through the wall, they would take the toys away from the people who are hoarding them. God forbid, they might even share!
So the managers are specialists and experts, right? Mr. Stein insists that their expertise must be respected, that we not have a “farmer on the Board of Governors of the Fed”. Because expert economists run the Fed, and look how well they’ve done!
Former Federal Reserve Chairman Alan Greenspan swore up and down that his policies were keeping the market stable and resilient, but the financialized fuck-arounds that he pushed, the interest rates and derivatives and mortgages, caused the 2008 crash and the global recession. During which, you may recall, the fund managers and finance technicians got big bonuses, and everyone else paid the price.
And it’s happening again! Of course, the intellectual elite will tell you differently, but we’re in a bubble worse than the dot-coms or the mortgages. Now remember, I am not a financial advisor. I am a millennial doomsayer on the internet. But once you get past all the hype and jargon, our current “economic growth” is just a sack of hot air.
See, the central bank’s answer to the Great Recession was “quantitative easing.” That’s a fancy way to say “printing free money”, as they lowered their interest rate to impossibly low numbers – in some cases 0%. That means that banks and corporations could get hundreds of millions of dollars at no cost. The point of this lending was to stimulate the economy, on the theory that businesses would expand operations and hire more people, and those people would then spend all their new money on consumer goods. But it hasn’t happened that way, as you may be able to tell by looking at your paycheck.
So what are the ruling class doing with all that free money? They’re transferring it to their bank accounts, through a fun trick called “stock buybacks”. Imagine you have 100 shares of stock on the market, and each one is worth $1. Your company is thus valued at $100. If you borrow $50 from the Fed, and and use it to take 50 of those shares off the market, your company is still worth $100. But the remaining 50 shares are worth $2 each.
Who owns those shares? Say it with me: the ruling class . The C-suite, the board of directors, the founders and venture capitalists. (See Ben Hunt’s explanation if you’re willing to wade through a bunch of finance lingo for the details).
In the meantime, those same interest rates make government debt worthless. If you buy a 10-year Treasury note, you can expect a maximum of 3% return over those ten years. So the elites take their money elsewhere. The textbook answer is to invest in stock indexes, which collect all the stocks in a given market, and expect a return of 7 to 9 percent over that same decade.
But that’s not enough for the big-brain robber barons. They’re hunting unicorns.
A “unicorn” is the American Dream in corporate form. You find some purple-haired youngsters with a clever techno-techno business model, pump it full of the free cash you’ve given yourself through stock buybacks, and wait for it to explode all over the world. Amazon and Google and Netflix were unicorns, and now they carry the whole market on their insane growth.
The thing about unicorn hunters is that they have shotguns full of money and they shoot at anything vaguely resembling a horse. For every start-up that succeeds, a thousand others fail. So the venture capitalists throw money at a thousand and one companies, and they need one of them to have a 1000% return just to compensate for all the others.
This is where the money went: unprofitable tech-adjacent shit like Uber and WeWork. And with their failed stock offerings this year, the veil has finally dropped. Suddenly investors want to see how these companies are going to make money, and the answer is: they won’t. Uber already costs more than a regular taxi in a lot of cases. How are they going to raise their prices (or lower their costs) enough to make a 1000x return? Derek Thompson at the Atlantic does a decent job of explaining the unit economics. But Mr. Thompson’s conclusion is that “Eating out and eating in, ride-hailing and office-sharing, all of it will get a little more expensive. It was a good deal while it lasted.” This belies the fact that nobody can afford the more expensive version, and when these companies fall, so will the markets.
The WeWork story is an even better example of the insanity of late capitalism. Adam Neumann, the founder and (until recently) CEO of the real-estate unicorn, just walked away from his imploding company. He was paid over a billion dollars to do so. In trying to staunch the hemorrhaging value of the company, investors have poured in more billions of dollars than the whole thing is worth. Not only are they throwing good money after bad, they’re paying Neumann for the privilege.
Matt Levine at Bloomberg explains the WeShitshow pretty well, but the best part is watching his broken technocrat brain try to justify the gigantic piracy of the ruling class:
[Neumann] spotted a bubble in venture-subsidized fast-growing money-losing capital-intensive low-margin tech-adjacent companies, noticed in particular that SoftBank seemed to be on the long side of that bubble, and set himself up to profit on the other side—by raising money for his own ultra-unicorn, by setting up the governance of that unicorn in a maximally self-interested way, and by selling and margining a bunch of his personal shares. When investors like SoftBank were frenziedly buying unicorn stock, he was frenziedly selling it. He set himself up to profit from the collapse of the unicorn bubble, and accelerated that collapse. Lessons were learned, and he taught them. Now he’s rich.
Did I mention that thousands of Weployees are getting fired without severance pay? “Lessons were learned” is a very polite way to say that, and with good reason: the technocratic apologists want very much to stay inside the Green Zone as the economy breaks down.
Many more lessons will be learned in the coming years, including the one that everyone else already knows: the ruling class do not care about you. They’re going to automate the managerial class, shrink the Green Zone and let the rest of us die in climate disasters. Mr. Stein, Mr. Thompson, Mr. Levine: welcome to Hell.
Thanks for reading, – Max
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