As the United States economy withers away into a ghost town, the truth is that the economy has been eroding for years; it is only now in the darkest of hours that one can hear the violins play while the foundation of the United States – the middle class – crumbles into debt and unemployment. “Public Home Auction” signs are now more prevalent in American neighborhoods than the once familiar white picket fence; the average American’s erstwhile dreams of prosperity have been held hostage for years by social negligence and politically sanctioned acts of corporate predation.

As a consequence, the hopes and future of many Americans are shackled by the ball and chain of seemingly interminable economic woes and unemployment anxieties made that much heavier by the great disparities of wealth that currently suffocate the perishing American middle class. The picture, then, is certainly a grim one: national poverty has hit a nearly 20-year high, unemployment rates remain stagnant around 10 percent, and many now speculate that the generational sobriquet of today’s 20 and 30-somethings will not begin with the words “prophet” or “hero” but rather the word “lost.”

Though for some, particularly the top decile of wealthy Americans, the outlook is not so dour. Reaping the benefits of across the board marginal tax rate deductions doled out by Ronald Reagen while simultaneously capitalizing on the profits from unregulated financialization, the economic elite took home nearly half of the wealth the United States in 2007. Such a disparity hasn’t existed since 1917, and so dramatic that it even eclipsed that of the “roaringly” disproportionate distribution of wealth seen in the precarious peak of the 1928 stock market. The benefits of this system have come in deluges for those chosen few, yet for everyone else have “trickled down” into a seemingly ceaseless drought.

Recently, a few dissenting members of the fiscal elite and political establishment have tried to salvage what’s left of the marrow of the increasingly anemic American economy with their proposal of a modest tax increase on those earning more than $1 million a year. The goal of the Buffett Tax, named for the high-ranking business rogue Warren Buffett, is to ensure that the top 1 percent pay at least the same annual percentage of their earnings as the middle class.

One would assume that after years of economic growth disproportionately enjoyed by the upper class, it would be the lower and middle class who would first cry of injustice of the Buffett Rule’s modest attempts to rectify economic inequality. Rather, it was Senator Paul Ryan, resident sycophant of the wealthy, who made the first of many hyperbolic and rather ironic claims that the proposal of the Buffett Rule was nothing more than Obama initiating class war.

Conversely, middle and lower class Americans have been intimidated into silence by years of economic insecurity and predation. It is the facts accompanied by the stories of those brave enough to share their suffering that must speak for the invasive growth of poverty. And make no mistake, the facts suggest that it is not the elite and unscathed few who should be angered and outspoken, but rather the masses.

In the United States, the current population of those living in poverty is 46.2 million. These individuals earn less than $11,100 per year; or for an average family of four, around $22,000. Keep in mind that these numbers reflect what the U.S. Government Federal Poverty Guidelines deem “not enough” as opposed to what is sufficient. Despite President Bush’s minimum wage increase from $5.15 per hour to a more tolerable $7.25 while in office, this increase did not correspond with the last 20 years of inflation, thus meaning that the real value of minimum wage is only $4.42 per hour, or 26 percent less than it was in 1979.

According to the US Department of Health and Human Services, a full-time minimum wage worker who works five 8-hour shifts every single week of the year earns approximately $13,624. Although these earnings do not take into account additional healthcare or transportation costs, this salary technically enables him or her to scrape past the poverty level. However, if he or she is the only one able to work in a family of three, this person is almost 25 percent under the $18,310 poverty level for a family of the same size.

While Bush does deserve credit for the Economic Policy Institute’s 2009 estimate that a full-time minimum wage worker’s salary would put his or her two person family above the poverty linefor the first time in over a decade, the unfortunate truth is that for larger families, this wage increase would improve nothing. According to the National Low Income Housing Coalition, in order to afford a two-bedroom apartment at 30 percent of an individual’s income (also known as the federal definition of affordable housing), a full-time minimum wage worker in a median state would have to work 87 hours per week, or almost 13 hours a day every single week of the year.

Inevitably due to housing prices, individuals and families are unable to stay afloat and subsequently sink even deeper into poverty, and soon have no place to call home. While the definition of homelessness is a contentious one, in 2007 the National Law Center on Homelessness and Poverty estimated that 3.5 million people are likely to experience homelessness in a given year. To put this number into context, imagine that the entire state of Connecticut does not experience a regular or adequate nighttime residence at some point throughout an entire year. As more stringent ID and address voting registration requirements increase in states like Texas, it is much more difficult for the homeless population to vote. As a result, those who can legally help the most do not hear their voices, and consequently they cannot be answered.

Even more have begun to lose their once-firm footing in the middle class and have now joined those beneath them in the dregs of impoverishment. Sixty percent of households saw their income fall last year along with a 7% inflation-adjusted drop from a 1999 peak in median household income for middle class families. While the alleged “face” of homelessness is difficult enough to accurately define, the growing group of impoverished individuals is even more so. The potent cocktail of global market slow downs and slumps, cheap overseas labor, and a lack of government regulation that allowed rapacious lenders to manipulate high-risk and largely unfit borrowers into subprime and adjustable-rate mortgages, has resulted in a hangover so massive that even those who once considered themselves safe from poverty and economic strife now experience what was once thought confined to the lower class.

Take, for example, Lyn Grotke of Fayette, Maine. A former homeowner equipped with a Master’s degree in Outdoor Education and a history of paying her bills on time, she now lives in a trailer while she anxiously waits for the federal housing assistance for which she applied over three years ago. What happened to her and what explains her current state and struggles is something that can happen to anyone: she broke her leg. After a lengthy recovery and when Grotke was able to return to work, no job welcomed her back. Grotke soon had to declare bankruptcy on her home, and now, despite the fact that she has found an occasional city consulting job supplemented by caring for children and the elderly, she still only earns between $200 and $800 a month.

According to her story in CNN Money, the slight income she earns on her own in addition to the $750 she receives in monthly food stamps is still not enough to meet her expenses. Grotke’s trailer costs $700 a month, and expenses like food, insurance, and gas tack on an additional $1,000 to her already high tab. Grotke, once a testament to the fruits that await a studious individual who seeks higher education and quality of life now feels weak, stuck, and helpless. “It’s very stressful,” she stated. “I’m in a loop I can’t get out of.”

There’s also Mary Ijaz, who lives in Monmouth, Oregon. For years, Ijaz lived a comfortable life at home with several children while her husband worked and earned enough to keep a Lexus and Land Rover in the garage of their former five-bedroom California home. And then, after a relatively common occurrence in the United States, Ijaz found herself living in a campground tent. According to the same series of stories on CNN Money, her husband decided to abandon her and her children one day and emptied out their bank accounts. Previously not a member of the work force, Ijaz was ill-equipped for the harsh competition so abundant during rough economic times as she had no college degree, limited skill sets, and decreased desirability since she had many children and was at the age of 46.

With the amount of government assistance she currently receives in the form of food stamps, cash assistance, and housing help, it would be relatively easy for the ignorant American to cast Ijaz and her children off as mere leeches with little-to-no incentive to ever get off of public assistance. This, however, is not the case. Ijaz views the community college Pell Grant she receives as a “complete turnaround.” At the moment, Ijaz is a straight-A student studying radiology so that she can soon support herself and her family on her own. And thanks to government assistance and the good grace of her sister, Ijaz, unlike Grotke, is optimistic toward her and her children’s futures–futures that will not involve government aid.

To some, the mere thought of any measure taken by the federal government to assist those in need is preposterous and potentially devastating to fiscal stability. However, recent census data shows that in 2010, unemployment insurance helped keep 3.2 million Americans out of poverty. Without this 99-week federal aid, these Americans would have increased the already impoverished 46.2 million citizens by nearly 7 percent.

If the Census Bureau were to consider food stamps as another source of income assistance, this federal aid program would have lifted 3.9 million out of federally defined poverty. Furthermore, if the Earned Income Tax Credit (EITC), a federally refundable income tax credit for low-to-middle class working Americans, had been counted as income, an added 5.4 million tics would be taken off the poverty tally. On top of that, federally funded health programs like Medicaid and the Children’s Health Insurance Program provided health insurance to the many children who, due to no fault of their own, lacked coverage when their parents’ lost their jobs. As a result, in 2010, 570,000 fewer American children were without insurance, a number surprisingly smaller than the pre-recession data from 2007.

While the Obama Administration does deserve some praise for its relative successes in the prevention of increased poverty this past year, some of the company he keeps is markedly less impressive, and to a certain extent, indefensible. Serving as United States Secretary of the Treasury under Barack Obama, Timothy Geithner’s name has drawn quite a bit of recoiling from progressive groups in recent years. After reporting a $61.7 billion loss at end of the fourth quarter in 2008, the American International Group (AIG) received over $170 billion in taxpayer bailouts. This money, under Geithner’s rather attentive watch (given his close relations with the group as former President of the Federal Reserve Bank of New York), was to go into efforts to keep the company afloat, not to keep the pockets of their executives heavy and warm.

That, however, is exactly what happened. After receiving what was given to them by the already empty pockets of the American people, AIG proceeded to pay its financial executives $165 million in bonuses. Despite his efforts to deny his involvement in this scandal, Geithner still had to appear at a hearing before the House Ways and Means Committee. However, one can credit the skepticism and anger that stemmed from his testimony as one of the few instances in these past several years wherein many Democrats and Republicans could actually agree on something, albeit only in their mutual disdain for and distrust of Timothy Geithner.

Furthermore, President Obama’s economic pedigree, as fledgling as it may be, will be that much weaker so long as Jeffrey Immelt, COB and CEO of General Electric, remains on Obama’s Economic Recovery Advisory Board. Remarkably, 2010 marked the second year in a row wherein the multi-billion dollar company, thanks to corporate tax codes, loopholes, and offshore profits, paid nothing in taxes. And despite Immelt’s position and allegedly good intentions to bring the American economy back to life, GE laid off 21,000 workers between 2007 and 2009. Furthermore, the sincerity of his wishes to stimulate growth and renewed prosperity on American soil is spurious at best, given the fact that over half of current GE employees reside outside of US soil.

Hinting at insider crookedness and failure-to-launch syndrome in his recently written opinion piece, James Carville implores the President to “panic, fire, and indict” members of his own team if he wishes to see another term in office, or to even glimpse the ever-fleeting opportunity to feel the warmth of a bright fiscal year for the first time since he has assumed office. Carville states that this “[is] not going to work with the same team, the same strategy and the same excuses,” and that “it’s time to show them the exit.”

It seems to many today that the United States’ 30-year drift from a democracy to an ostensible corporatocracy has resulted in nothing but business-interest legislation and disparities of wealth so wide among the classes that it appears impossible for them to be rectified. Oddly enough, the fight comes from self-made billionaires like Warren Buffett who have lived the American Dream and want others to have the opportunity to do so as well; it comes from brusque basketball team owners like Mark Cuban who consider balanced tax brackets patriotic, not bellicose; it comes from employees like Ted Wechsler, recently hired hedge fund manager for Berkshire Hathaway who would warmly welcome a 20 percent tax hike and a lower salary. And it especially comes from women like Mary Ijaz and Lyn Grotke, who, despite the oppressive odds stacked against them, continue in their efforts to stay afloat and support their families.

Savannah Cox is a Foreign Languages/International Studies and Political Science double major at Bellarmine University, and has recently returned from the University of Granada, where she studied Spanish and Political Science. She has interned for the World Affairs Council of Kentucky and Southern Indiana as well as Congressman John Yarmuth. In her free time, she enjoys reading, strumming a ukulele, and consuming large amounts of salty carbohydrates.

Full text below:

There is nobody in this country who got rich on his own. Nobody.

You built a factory out there—good for you! But I want to be clear.

You moved your goods to market on the roads the rest of us paid for.

You hired workers the rest of us paid to educate.

You were safe in your factory because of police forces and fire forces that the rest of us paid for.

You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.

But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

And that, my friends, is why we cannot cut defense spending. Just things that help the poor.

It’s not what you think:

One frequent and frustrating line that often crops up in the comments section of this blog is that American labor has no hope, it should just accept Chinese wages, since price is all that matters. That line of thinking is wrongheaded on multiple levels. It assumes direct factory labor is the most important cost driver, when for most manufactured goods, it is 11% to 15% of total product cost (and increased coordination costs of much more expensive managers are a significant offset to any savings achieved by using cheaper factory workers in faraway locations). It also assumes cost is the only way to compete, when that is naive on an input as well as a product level. How do these “labor cost is destiny” advocates explain the continued success of export powerhouse Germany? Finally, the offshoring,/outsourcing vogue ignores the riskiness and lower flexibility of extended supply chains.

This argument is sorely misguided because it serves to exculpate diseased, greedy, and incompetent American managers and executives. In the overwhelming majority of places where I lived in my childhood, a manufacturing plant was the biggest employer in the community. And when I went to business school, manufacturing was still seen as important. Indeed, the rise of Germany and Japan was then seen as due to sclerotic American management not being able to keep up with their innovations in product design and factory management.

But if you were to ask most people, they’d now blame the fall of American manufacturing on our workers. That scapegoating serves to shift focus from the top of the food chain at a time when executives have managed to greatly widen the gap between their pay and that of the folks reporting to them.

Said much more eloquently than I ever could.

Amateurs.

A cute little video, even if it seems to strawman Keynes a bit. For those of you not familiar with Hayek, here is a wikipedia article. He basically was one of the founders of the laissez-faire Austrian school now commonly associated with Ron Paul and the libertarian bunch. At the same time, he also wrote “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism.” According to Wikipedia, there is a term for the kind of limited governmental interference into the market, and that is ordoliberalism. Basically in ordoliberalism, the government’s role is to set the rules by which the market can operate, and those rules should be designed to encourage competition.

For more musical love letters to Hayek, please see:

I spent four months living in Athens from January 2011 to May 2011. Despite impressions to the contrary, Athens is not a beautiful European city. It was constructed predominantly in the 1950′s and 1960′s — an era that could not exactly be called the pinnacle of beauty in architecture. Many of the older buildings that weren’t destroyed by the Nazi’s in WWII were destroyed during the building boom that followed.

What it lacks in physical assets it makes up for in its history and the drama of the situation the country (of which Athens is overwhelmingly the most important part) faces. The astounding amount of debt they are responsible for poses a threat not just to the viability of the country, but of the entire Eurozone, and by extension the whole European Union project. The eyes of the world fall on this one tiny country with the power to break the most impressive and successful political and economic alliance potentially in all of history.

Greece is €328 billion in debt ($450 billion), a quarter of a million dollars for every working adult in the country. The deficit the government runs is currently 10.5% of GDP, down from 15.4% in 2009, but still far from the levels desired by the “troika”, comprised of the EU-IMF-Germany who provide the bailout. Thus the problem of getting out of debt is compounded by the fact that they are getting further and further into debt every day. While many countries in Europe are struggling mightily with their budgets, Greece leads in terms of overall debt compared to GDP (150% and rising quickly). Meanwhile, the GDP of Greece is currently shrinking at a 5% annual rate with unemployment at 15% of the workforce. By any metric, Greece is in a colossally painful depression.

The state has no money and would be bankrupt if not for a 110 billion Euro loan from the troika of Germany, the EU and the IMF. This loan has been very controversial in Germany, which is the only country in Europe with a stable budget and is paying the lion’s share of the loan. It’s been controversial in Greece as the Germans have asked for severe austerity measures on the part of the Greek government, including spending cuts of up to 20% for many public workers, privatizing public companies, and selling as much publicly owned land as they can. In part, this has all been easier for the government to do because it has been mandated under the memorandum by the bailout lenders and is not internally decided. With that being said, the austerity measures have caught tremendous opposition from groups familiar with mass protests and mobilizations.

Greece having problems with money is nothing new, nor is taking loans from the Western European powers, nor is, for that matter, defaulting on those loans. Greece was bailed out financially following its war for independence in the 1820′s with the result that the Britain, France, and Russia controlled the newly “independent” country. They installed a Bavarian king as a compromise. Although it went through ups and downs, that monarchy was not officially removed until 1974. In 1893, after decades of growth and overspending, they again defaulted on their loans from European powers. That year the Ministry of Finance had to be taken over by the British in order to assure that the loans were repaid. The current complaints from Greeks about losing national sovereignty to European powers vis-a-vis the austerity measures being imposed on them should then not be considered new ones.

Explaining the Financial Crisis

Professor Yiannis Stournaras is one of the top economists in Greece. In the 1990′s he served as Chairman of the Council of Economic Advisors at the Ministry of Economy and Finance and was a negotiator in getting Greece on the Euro in the first place. He explains that the problems of today stem in part from the political system which established democracy in 1974 and that a good deal of blame falls on New Democracy, the center-right party that took over in the 1990′s with the aim of liberalizing the economy and cutting spending. Stournaras says many of the problems:

Have started since 1996 under Kostas Simitis. But it was strange that although its rhetoric was positive, the New Democracy, the conservative party said that we’re going to curtail the state, to cut corruption, to impose the rule of law, actually they’ve done completely the opposite. They expanded the state, they appointed 100,000 more civil servants, 10% of the labor force in the state, they increased salaries and pensions, state salaries and state pensions, so that was the main reason why this happened in the last 3 or 4 years. Of course, on top of this, we had the collapse of Lehman Brothers, which led to the repricing of risks by the international financial markets, and countries like Greece, which found themselves with a very large public debt at that time, exceeding 100% actually they have been excluded from any borrowing. So, this situation is not fiscal. It was fiscal derailment. It is not like Ireland where the situation started from banks. The problem in Greece started from the public sector.

A main problem in Greece today has been overspending and under-taxing. To be more accurate, overspending and under-tax collecting. It’s a known problem that many in the country don’t pay their taxes at all. Due perhaps to the individualistic nature of Greeks, Greece has the highest percentage of self-employed workers in all of Europe. This can be seen everyday from the number of independently-owned stores versus retail or chain stores. A consequence of this is that many people are responsible only to themselves in terms of tax reporting. Add to that the incredibly lax system of oversight on the part of the Greek state and the fact that many of the politicians themselves are finding ways around paying taxes, and the situation comes into clearer focus. According to Stournaras, “It is not like in the United States where you can have a trial in a few months, and either you go to prison or you are set free. In Greece it takes years and years.”

It has been estimated that the government loses 50 billion Euros a year in unpaid taxes. This is an astounding amount, in that if it had a better tax collection system, the country would potentially be financially solvent. The bad loans, the extravagance, the poor accounting, the fudged numbers — none of these would even be in the news, much less have the importance that they do today if the state could just collect its taxes, according to that estimate. Stournaras thinks the whole system should be privatized, “The government should use auditors in the same way that it uses notaries for public service. They should use auditors like PriceWaterHouse to assist the government to tackle tax evasion. The other thing that the government should do is work with the Ministry of Justice because the problem of tax evasion is one that even if you get somebody who is evading taxes it will take such a long time to have a decision by a court.”

In recent years, there has been a concerted attempt on the part of the government to crack down on tax evasion. When you go into any of the numerous cafes that line the cobblestone road across from the ancient Agora or any of the posh nightclubs that surround Gazi Square, they will give you a paper receipt for every drink you buy. It may be working, the state having scared the businesses sufficiently enough to really comply, or it might be simply a show; after all, the records they print could just as easily be the records they throw away.

What Is Being Done?

Greece has 3 available options: they can take loans while cutting spending and increase revenue with taxes and privatizations, they can default on some or all of their debt, or they can leave the Eurozone and return to the Drachma, and revalue it to a level that’s optimal for them. Each of these options will cause pain. Austerity measures cause pain right now, defaulting will cause pain down the road, and no one knows what will happen if they choose to return to the Drachma, but it could be catastrophic.

The path they are currently taking is the one of loans, spending cuts, higher taxes, and sales of public property. With the Socialists in power with only brief interruption since the beginning of the 1980′s, public spending has increased, even, as Stournaras noted during the center-right controlled years of the 90′s. Not only has spending increased, but external money that Greece had been receiving since WWII, first from the U.S. Government, which pumped billions into the country in the 1950s and 1960′s, and then from the European Union, which pumped in Stabilization Funds in the 1980′s, had expired. Thus, this may be the first time in modern Greece that they have really had to account for all of their own expenses.

The current Greek Prime Minister, the Socialist George Papandreou has been to hell and back trying to get these measures passed through a stubborn legislature scared of mobilized public opinion. Even in spite of a significant majority in Parliament, some of his ministers have left the party and now vote against him, and many have been critical of his cabinet, leadership style, and political choices. Still, he managed to get serious cuts through. The problem has since been that the tax revenue is falling almost as fast as his cuts are reducing expenses. This has two reasons. One of them is that the global economy is unstable, which affects Greece as much as anyone else. The other is that the economy was state controlled to a level that would baffle many of those in the United States. Such drastic cuts to the public sector had a debilitating effect on the economy. It was in effect an enormous anti-stimulus spending bill. So while expenses are falling, revenues are decreasing as well, and the problem continues.

There has been severe pressure on Papandreou not to comply with the troika’s demanded austerity measures because they’re so debilitating. PASOK had a significant majority in Parliament and have been able to push through these tough austerity measures, but there have been huge public protests and as of last week the government in Athens was trying to remove an encampment of protestors in Syntagma Square called “The Indignant”. The protests can be large and sometimes violent. At the same time there are a lot of factors that make the protests not as powerful as they might otherwise seem. For one, protests are a way of life in Athens. When I lived there, it was almost uncommon for at least one group not to be striking or protesting something each day, whether is was public transportation, the pharmacies, or anything else. The demonstrations, while more rare in daily life, have a long history as well.

In 2008 there was a month long anarchist uprising following the shooting of an unarmed 15 year old by the police in the Anarchist neighborhood of Athens. During the insurrection there were protests nearly every day, which were accompanied sometimes by looting and damaging of stores and banks. In the 1980′s, during the rise of Papandreou’s father, Andreas Papandreou and his Socialist PASOK (Panhellenic Socialist) party people were mobilized to an astounding degree, with demonstrations of one million people in the central Syntagma Square. All that in a country with a population of only 11 million. In 1973 there were major demonstrations that succeeded in removing the military junta that had been in control of the country.

Another aspect of the demonstrations is that the unions feel a responsibility to stand up and protect their workers, or at least not to seem like they are taking things lying down. So they’ve organized protests. It’s tough to tell if they really think these are going to convince Parliament to reject the measures the IMF is mandating they adopt or if they’re only doing it for show. Whatever the case, many people go to them and there is a good percentage of the population that do not support the austerity measures. As always though, it’s hard to tell how many people quietly support them.

The second option is one of partial default, or debt restructuring, where the Greek government would work out deals with their creditors. These deal could include haircuts of 30% or 50% on the loans and/or interest-free extensions on payments. This would give Greece some breathing room and start over more or less, with loans they can actually pay off. The downside is that their credit would be destroyed, and no banks would want to lend to them in the future. That could be very difficult, as basically every country in the world depends on loans to meet their obligations. It would be impossible for Greece to ever run a deficit. Stournaras is strongly against it, saying, “restructuring would bring a huge cost to the Greek economy. If you restructure debt don’t forget that Greek banks own 50 billion of state bonds. Who is going to recapitalize them if there is a haircut of let’s say 40%? There will lose 20 billion euros in capital. It is not a situation now for banks to be recapitalized if they lose that money. It is not a way out.”

There’s more to it though, for Greece to restructure would have an impact on all of Europe, “Restructuring will not help at all. On the contrary it would be a disaster. First of all the European Central Bank does not accept it as a solution. It has imposed the condition that if there is any type of restructuring of Greek, Irish, or Portuguese debt, anything like that, than the European Central Bank is going to stop immediately lending money to banks in these three countries. So it’s out of the question now.” In these opinions however, Stournaras’s optimism is not shared by most financiers in the rest of Europe and America, the markets are betting on a restructuring.

There’s also the possibility of Greece returning to their original currency, the Drachma. This is a total wild card and would probably not be something the Greeks would do voluntarily, it would have to be imposed by the Eurozone countries who no longer want Greece on their currency. Stournaras completely discounts it, “Oh that’s totally out of the question. That would be immediate suicide. If you return to the Drachma, and it is devalued, then foreign debt which is denominated in Euros will be skyrocketing and at the same time a big hole is going to open in banks’ capital, because their money is still owed in Euro’s and assets will be in Drachmas, so there’s going to be a huge gap in the capital of banks. And definitely there would be a huge run. I mean why Greeks who have Euros, if there’s any idea of coming back to the Drachma, people will take their money from banks and send them abroad. It would be a bank run of immense proportions.”

A second bailout was set to be decided on in a meeting on July 3-4th, following the Greek vote last Wednesday in favor of additional austerity measures. The details are still being worked out. Additionally, Sarkozy has convinced French banks to voluntarily restructure Greek debt they hold. The plan is that to help Greece out, all bonds that mature from now until 2014 will be renegotiated as 30 year securities, that is, Greece will get an extension on their debt. This is the same things as restructuring the debt, but Sarkozy said it’s voluntary so it shouldn’t count against Greece’s credit. The French and EU-IMF additional money will help to keep Greece financially afloat for the next couple months or years s0 Greece will be able to pay the salaries of government workers and pay maturing loans.

It is hard to tell what the future holds. Few outside of Greece are as hopeful for the future as Stournaras is. This week Italy’s stock market sustained huge losses and banned short-selling temporarily. Their debt situation is frightening with debt higher than 100% of their GDP. It is feared that they will be the next country to require loans from the troika. Spain is also is horrible shape with unemployment over 20%. If the markets choose to give up on the continent by not lending to most of the countries like they are not lending to Greece, then Germany and the EU cannot take up for all of them. Anti-European Union sentiment is growing across Europe. Political parties like the True Finns in Finland are gaining in elections and in polls.

Up until 2011, the European Union project has been an unqualified success. Europe has been peaceful for the last 60 years since the beginning of the integration process with European Coal and Steel Community. There is the political will to continue for now on the part of Germany and France. There are those like Stournaras who lay out a strong case for recovery, growth, and success. However, it’s possible that “Europe” could dissolve back into individual countries in the next decade and that the great project of European integration has reached its conclusion, not with a United States of Europe, but with a hodgepodge of bankrupt, broken, and restless countries.

The causes of the mortgage fiasco beginning in 2007 which led to the financial meltdown are admittedly complex. Predatory lending played a significant part, but what was more troubling was the ability of financial institutions to inflate the value of debt that was never really meant to be paid back through various financial tools. Surely, the predatory lenders were acting in their own short-term self-interests. For creating a mortgage you get a commission. As far as the individual lenders can see there was only motivation to increase home sales and mortgages. What is interesting to wonder, though, is whether the “higher level” institution — those buying, repackaging, and reselling the debt in order to make a profit — were able to foresee the effects of what they were doing.

Marx predicted that as capitalism advanced people would begin to see the economic relations that they personally entered into as being for the purposes of making money rather than for being for the purposes of making a good. Money is supposed to be, in capitalism, the symbolic form of use-value. It is the symbolic dimension wherein the strength of both an economy and an individual to produce useful things is expressed. Banking is an industry which profits by mediating exchanges – it itself is much like money in this regard, its purpose is to mediate exchanges. What is the same with regard to a package of debt (interest bearing capital) and money is that neither is actually useful in the same sense a shovel or a coat is useful. That is, a shovel and a coat have a practical use, money does not have a practical use except to be exchanged for things that do have a practical use.

Marx also predicted that interest bearing capital would be treated as something which had an objective power to create value for the owner of that capital, which it does, but that value is purely symbolic, it is monetary but does not reflect a use-value. It, like money, doesn’t reflect any particular content. A symbolic value which does not reflect a real value might be thought of as, in modern terms, a “bubble.”

The 2007 financial meltdown reflects Marx’s prediction on every level, from the predatory lenders looking to make a quick profitto the highest levels, wherein the qualified economic experts managed to fool themselves into believing that they were actually creating value by repackaging debt into complex derivatives.

The point of bailing out the institutions was always acknowledged as being for purposes of maintaining belief: belief in the capitalist economies ability to sustain itself. “It’s not based on any particular data point. We just wanted to choose a really large number,” said one treasury spokeswoman to Forbes magazine regarding the Emergency Economic Stabilization Act of 2008, which pledged up to 700 billion dollars to help buy off mortgage backed securities. Regarding the bailouts, critical theorist Slavoj Zizek says:

Although we always recognized the urgency of the problems, when we were fighting AIDS, hunger, water shortages, global warming, and so on, there always seemed to be time to reflect, to postpone decisions (recall how the main conclusion of the last meeting of world leaders in Bali, hailed as a success, was that they would meet again in two years to continue their talks). But with the financial meltdown, the urgency to act was unconditional; sums of an unimaginable magnitude had to be found immediately. Saving endangered species, saving the starving children…all this can wait a little bit. The call to “save the banks!” by contrast, is an unconditional imperative which must be met with immediate action.

The panic was so absolute that a transnational and non-partisan unity was immediately established, all grudges between world leaders being momentarily forgotten in order to avert the catastrophe. But what the much praised “bi-partisan” and “multi-lateral” approach effectively meant was that even democratic procedures were de facto suspended: there was no time to engage in proper debate. As Alain Badiou succinctly put it:

The ordinary citizen must “understand” that it is impossible to make up the shortfall in social security, but that it is imperative to stuff untold billions into the banks’ financial hole? We must somberly accept that no one imagines any longer that it’s possible to nationalize a factory hounded by competition, a factory employing thousands of workers, but that it is obvious to do so for a bank made penniless by speculation?

It is regarded as “okay” to question the necessity of people starving in a world where we feasibly have the resources to feed everyone, but in the context of modern society what is unacceptable is to question the system itself which makes it beneficial to have poverty. Brazilian Archbishop Dom Helder Camara’s statement, “When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist,” comes to mind. Poverty serves as a supply of cheap labor for the wealthy, and furthermore institutions such as credit card companies and predatory lenders, by using means such as penalties and higher interest rates for the poor make much of their profit by people NOT being able to afford paying their debt. Of course, poverty only benefits the already wealthy.

One is tempted to draw a parallel between the subprime mortgage crisis and the early industrial-capitalist technique of paying miners in scrip, forcing them to buy the necessary goods to sustain a human existence from the company which they worked for, designing the system so that the worker would wind up in debt to the company. The same reality is occurring today except along class lines in a macroscopic sense. Although the credit institutions rely upon the lower class providing services which people have deemed necessary and beneficial (the service industry, manufacturing, etc) in order to sustain the economy which their industry relies upon, in practice they are treated as leaches who aren’t working hard enough. Wasn’t the reactionary standpoint with regard to the subprime mortgage crisis to blame the poor? In the liberal ideology it is not okay to blame the poor, but what is utterly unthinkable, as the bailouts teach us, is questioning the systematic impoverishment of people that is capitalism, itself. Everything can and will be suspended by the upper class, even democracy, to sustain capitalism, which it benefits from.

Capitalism is often understood, in the liberal mindset, as a rational order. Aren’t the economic depressions, the ups and downs which the economy as a whole suffers the proof that capitalism is anything but rational? In the subprime mortgage crisis, all the material wealth of the system, the actual houses, the productive services the buyers provided society, the food, the entertainment, it was all still there. The only thing which comes into question in times of “economic crisis” that aren’t rooted in things like natural disasters or drought is the monetary worth of things.

Marx understood that the upper class of society in capitalism would come to believe that capitalism were the rational expression of a system which has always existed, but in reality capitalism as a system is a technology. Money is a technology. What Marx understood was that thinking about things strictly in terms of capitalism is technologically limiting to society. Because we put maintaining the norm, maintaining the mores of capitalism, first, we are unable to substantially address the actual problems of existence because we treat the symbol, which is money, as more real than the reality which it is supposed to reflect.

There was a popular demand to bring those who were involved in the subprime crisis to justice. There is nothing wrong with demanding bringing predatory institutions such as subprime lenders to justice, nor is there anything wrong with demanding the death of exploitative institutions such as banks (which primarily make money by owning a stake in productive industries rather than by producing actual goods, much like a stock market investor profits simply by having money, by having ownership of something, rather than contributing to whatever that industry is producing). However, in capitalism, capital is regarded as “above the law.” This is a part of what Zizek means when he says Capital is the Real of our lives, capital isn’t the law itself, it’s the reality according to which we write the law.

Money can no longer be said to be symbolic, as it is, for individuals in capitalism, the point of production. It’s considered fine to say we should imprison the subprime lenders, and even the people at the top of the pyramid scheme that is modern speculative investment. But if you question whether it’s necessary or even beneficial to the majority of people to have money be the point of all economic relations, rather than basing economic relations on real particular ends and needs of society, the liberal reaction is “but Stalin,” as if anyone were advocating a repetition of Stalinism.

We’re encouraged, as individuals, to be charitable, to have pity for the poor. Whatever you do, though, don’t try to solve it, too many people stand to benefit from the system of financial mysticism and systematic exploitation that capitalism proves itself to be (in reality, of course, only a privileged few actually stand to benefit from it). It’s not as if we couldn’t provide the elderly with a system that takes care of them, we all want to, but we’re told “money doesn’t allow it.” It’s not that we like the banks and financial institutions which inflate values, provide very little if nothing in the way of productive services, and penalize the poor, it’s that it’s the way capitalism “works.” Oh. Thank God for capitalism, the rational expression of the way that the world works.

A fashionable statement in late capitalism is “make your money work for you” (as if it could!). Today, we theoretically could develop the technology to make our actual, non-symbolic wealth work for us. We could largely automate the means of production and make life less work, less oppressive to individuals. In capitalism, this would never be beneficial though, as the point of production isn’t to produce useful things, it’s to make money. As Theodor Adorno says, “no emancipation without that of society.” Without changing the actual structure of society all notions of equality, freedom, and justice will die before the market and in the name of it.

Written by Ross Wheeler, a young working class Marxist who believes in the necessity of letting suffering speak.

Infograph source: Onlinesociologydegree.net

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