The rise of logo America: capitalism unleashed.
A year ago the nation's banks, unable to convince Americans to accept variable mortgages at exorbitant rates, developed a brilliant marketing ploy. They reduced the interest rate in the first year to 8 percent (it went down to 4 percent in Houston, where there is a housing surplus). What the banks did not publicize, however, was another feature of many of the mortgage plans: if the payments at the lower interest rate failed to cover the loan's true cost, the principal would be expanded to make up the difference. The strategy worked. Housing sales boomed in 1983, despite the fact that real interest rates rose to record-high levels.
This spring, the story is different. Those folks who were paying low rates have had them adjusted to what the market will bear. Some people are protected by a "cap,' which holds their liability to an interest-rate increase of 2 percent per year or 5 percent over the course of the loan. But many of the less wary have no protection. Their monthly payments can jump by 50 percent a year or higher, depending on inflation. Since salaries cannot be expected to rise much, if at all, many of those people will simply be unable to afford their new houses. What will become of them? Who knows. America has embarked on a vast experiment in uncertainty, of which variable-rate mortgages are just one example, and no one can guess what will happen as a result.
Risk is much admired these days. Both neoconservative and neoliberal writers complain that we have things too easy. America, they tell us, has lost its competitive edge; it suffers from economic complacency. Only by taking risks, allowing the derring-do in us to come forth, can we recover our sense of self-worth. In that view, those who are uncertain about whether they can afford their own homes are just part of a national reawakening. The gamble might fail, or it might work--interest rates, after all, could come down--but whichever way the market responds, their character will have improved through the test.
Unfortunately for the national spirit, at the same time that risk is being distributed democratically, certainty is being limited to the elite. Just as Ronald Reagan has shifted benefits from the poor to the well-off, risk is being shifted away from those who hold power toward those who do not. A bank risks nothing when it grants a variable-rate mortgage. In almost every case, the bank turns around and sells the mortgage to a second lending institution. Even if it doesn't, it can set its charges at a rate consistently higher than what it pays for its own borrowed money, so it never loses. If you can't afford to pay back your loan, the bank repossesses your house and sells it all over again, profiting in the same way off someone else. And you have to pay all the costs the bank incurs in lending the money: an application fee, insurance, lawyers' charges and "points,' an exaction the bank tacks on for no reason except that it is in a position to do so.
In America in the 1980s power is the ability to purchase the avoidance of risk. By that definition, America is creating a vast group of powerless people which includes what used to be called the middle class. Fifty years after the greatest crisis in the history of capitalism, just about every aspect of American life is subject to the risks of the unrestricted marketplace. We are thus creating the first purely capitalist society in world history.
Although America has always been capitalist, some of its social institutions used to protect us against the enormous uncertainty inherent in the market. Before the New Deal, the family was one such buffer; with the New Deal, government became another. Today neither seems capable of sheltering us from the logic of profit and loss.
The family, based on love, has always been a foolish institution by capitalist logic. Only a fool would have children, since the cost is so much greater than the (monetary) return. Families that work best are based on the principle described by Lewis Hyde in his book The Gift: one contributes not because one expects reciprocity but because there is great joy in contributing. It may astonish us in these cynical times how many families used to work that way. My generation, for example, born during World War II, assumed that our parents would save money for our education. That little supplement did not depend on the Treasury-bill rate, an adequate credit rating, consumer confidence, the exchange value of the dollar or any such variable beloved by The Wall Street Journal. No one could calculate the self-confidence I gained from knowing that barring catastrophe, a way would be found to send me to college.
Except on the religious right, the family's decline has gone largely unlamented. On the left it has even been celebrated as a form of liberation. Yet if freedom from the family means enslavement to the interest rate, how much has been gained? To be sure, singles, childless couples and gays (at least in big cities) have been freed from most traditional constraints and can lead the life they choose. Yet those individuals are often conspicuous consumers, establishing fashion trends, pioneering gentrification, proving that even with two incomes there is no limit to the depths of debt. The Village Voice, with its leftist political articles sandwiched between advertisements for expensive clothing and fantastically priced real estate, is a barometer. If immediate gratification is liberation, there is something attractive in the oppressions of obligation and sacrifice.
Besides the family, the other major shelter against the tyranny of the market has been the state, which alone can match the power of capital. In a democratic society the state protects individual dignity and social diversity far more than the corporation does: compare the national parks with Disneyland. And because the market works invisibly while government's actions are subject to publicity and popular vote, corporations can interfere in people's lives to an extent that the Internal Revenue Service can only envy. Americans who advocate an end to high taxes and burdensome regulations (in a nation that has lower tax rates and less restrictive government than most others) prepare the way for much more ruthless discipline imposed by the market. Deregulated airlines cut the economic heart out of small cities without a second thought, while government is incapable of shutting down anything. Those who defend the marketplace say it is efficient and demands no messy accountability. But shifting power from the public sector to the private--no matter how invisible it becomes--does not alter how much power is being exercised, only how it is exercised.
We are, in short, citizens of government but subjects of corporations. Against the former we have rights; against the latter we have the choice of which particular companies will treat us as targets. Citizens band together to make life better for all. Subjects seek what is best individually and so lessen the power of everyone. When the market is exalted over government, people are less free. Greater choice and efficiency come, if they come at all, at the expense of rights meant to secure personal dignity.
To discover our future, we are often told, we must look to California. When it comes to divining the consequences of a society based on the ruthlessness of the market, I suggest we consider New York City. Under Mayor Ed Koch and an administration that proudly celebrates greed, a city that once had a reputation as a friend of labor and liberalism--"At this moment New York is the most radical city in America,' wrote Walt Whitman in 1852--is leading the way to a world where money, and only money, counts.
It may not rank high on the list of crimes against humanity, but the Koch administration's decision to encourage commercial property owners to double and triple the rents they charge has so significantly transformed the quality of life in Manhattan (and the gentrified neighborhoods in the other boroughs) that the advantages of city life have practically disappeared. The corner merchant has become the ice-cream-and-cookie franchise. Diversity, praised a few years ago by Jane Jacobs as the essence of the urban experience, has no place in a society where the market dictates who can and cannot live in an area. (If the New York City Council passed a law saying that only lawyers, doctors and stockbrokers could live on the Upper West Side, it would be unconstitutional; if the market produces the same result, it is praised as urban revitalization.) When Donald Trump, a voracious real estate developer, and George Steinbrenner, the Yankees' owner who buys and sells ballplayers as if they were personal property, are exalted as tough-minded, unsentimental heroes, is it any wonder that urban life becomes a Hobbesian struggle over who can break the maximum number of laws and get away with the minimum penalty? As Fiorello La Guardia symbolized a New York whose humor was earthy and broad, Ed Koch symbolizes a New York whose humor comes at the expense of others.
Because rent is the price charged for the most personal of needs, it has traditionally been considered one form of profit that should never be left free for maximum exploitation. Now, like airline fares based on what the corporate travel department will pay and not on what individuals can afford, new rents in Manhattan are based on the assumption that tenants are single and earn $100,000 a year. In 1980, at the urging of Citibank, the New York State Legislature dismissed 500 years of the Judeo-Christian heritage with little public notice when it lifted all usury laws and abolished restrictions on the interest rate. In a similar way, the New York real estate market makes it clear to all who must pay that one person's home supports another person's palace.
All this price gouging has created another, generally unnoticed, form of discrimination. A composite portrait of the experience of two friends of mine illustrates the point. Both attended the best graduate schools and wrote sterling dissertations. Charlie has a tenured academic position with a good salary and full benefits, and he lives in a rent-controlled apartment. Sara works at a series of part-time teaching jobs, accumulates no health or retirement benefits, is ineligible for tenure, makes far less money than Charlie (even though she teaches more courses) and pays three times as much rent (even though she lives in a smaller place). What makes my friends' lives so different? Their dates of birth. Charlie, because he is a few years older and started his career that much earlier, enjoys the last few nonmarket protections against risk that America offered, while Sara can live only for the moment and hope that she never becomes seriously ill.
I am even older than Charlie, so my protection against the market is considerable. As a youth I simply assumed that help would be there when I needed it, that jobs would be plentiful, that low-interest loans to finance my education would be there for the asking (I was even told not to worry about paying them back) and that after a few years in academia, tenure would be automatic. Those who enter adulthood now have paid tuition even where it was once free, have taken student loans at prevailing bank rates, must find apartments that absorb half their take-home pay, cannot accumulate a down payment for property of their own because their rent is so high, are unable to rely on deteriorating public services so must finance alternatives, and are forced to pay a surcharge on every quart of milk they buy so that merchants and restaurant owners can afford their own ridiculous rents. Young people have tenuous job security, and their inflation-cheated parents can offer them little help. Are they better people for having been tested in a way I never was? As far as I can tell, they are like characters in an Ann Beattie story, without much joy and given to self-blame.
No doubt Americans can do with less, and some may even be better off for it. It is not my point to lament the passing of middle-class consumption. My concern is with the social implications of one generation's being forced to pay more because another paid less. (Those straddled with ever-higher variable interest rates are paying for those who obtained lower, fixed-rate mortgages; banks have transferred to today's homeowners their own responsibility to assume the risks of the loans they made in a previous era.) Maximizing risk doesn't build character; it destroys community. When a society decides that trust and solidarity are too expensive, it can never again expect its people to feel mutual obligations, to respect one another or to adhere to standards of decency.
For the past 200 years at least, the maturity and cohesion of a society has been advanced only by protecting certain areas of human conduct from the dictates of profit and loss. (The expansiveness of those areas has varied from one society to another, but until recently no modern nation has been willing to put all its faith in the market.) Thus the imminent triumph of the marketplace in America will bring about one of the most extensive experiments with human subjects in the history of science. No one can foretell the consequences of the vast shift of resources to the private sector. The breakup of A.T.&T.--perhaps the largest corporate gamble in American history--provides a preview. Those in charge have no idea what will happen. The only certainty is that consumers will pay the costs if it proves a disaster. It is one thing to rely on the market when it is small and decentralized and society is growing, and another thing entirely to do so when corporations are ministates and society has matured.
Most of the issues we will be debating during the next few years will be cast in the language of the market, since capitalism will increasingly determine the thoughts we have about the future. We will ponder whether further deregulation can lower prices or whether alternatives to the deteriorating infrastructure can be cost-effective. Such questions are beside the point. I don't doubt that capitalism can be made more "efficient' than government, especially if it can pay lower wages, absolve itself of social responsibility and pass on its costs to consumers. The more compelling questions are social. The involve the kind of future America will face now that it has embarked on a project of reinstituting uncertainty and self-interest in a society characterized by complexity and interdependence.
Certain consequences have already become visible. For example, functions once performed by noncapitalist institutions like the family and the state have been placed under corporate auspices. Big companies subsidize public television, underwrite the Olympic Games, adopt schools in poverty-stricken neighborhoods, pay for academic and scientific research, publish brochures on nutrition and child care, lend executives to charities, assume police and security duties, organize recreational and cultural events, improve neighborhoods and carry out numerous activities that seem to bear little relationship to profit-making. There is self-advertised generosity in such ventures: often, the only price a company will charge for its public service activities is the right to display its logo.
And why should we be concerned about the logoization of America? Once upon a time there was presumed to be something called the public interest, a recognition by society that a sphere of life existed that added to the value of each person's life by contributing to the good of all. A corporate logo, by contrast, makes the opposite statement: it affirms loyalty to the particular, the elevation of a sector of society over the common good. When athletes representing the United States display corporate symbols on their uniforms; when public hospitals strapped for funds give new mothers nursing information that has been provided by manufacturers of infant formula; when public-television programs are preceded by an acknowledgment of the companies that made them possible, the net effect is to remind Americans that the common good no longer exists. America has clearly decided that it just costs too much.
Logoization is only one aspect of a larger issue America will face as it turns toward total reliance on the market. That issue is responsibility. The attraction of the market is not its allegedly greater efficiency, for in terms of the interests of society as a whole, corporate decision-making can be grossly wasteful. Instead, capitalism offers an irresistible solution to the problem of one person's responsibility to another. The degree to which we need concern ourselves with the well-being of others, a problem that has plagued theologians and philosophers for centuries, is solved by capitalism in the neatest possible way: it is ignored. Do unto yourself what is best for you, and you contribute to the greater good of all. After a century of extraordinary growth and expansion, neither of which encourages planning for the consequences of one's actions, Americans cam face to face with the reality of limits in the 1970s. By putting their faith in the market in the 1980s, they are announcing their discomfort with the concept of responsibility, conjuring up through illusion what global realities no longer make possible.
Reliance on the market will no doubt fascinate those who celebrate innovation and those who study people's reactions to stress. It will also cause suffering on a scale not seen since the 1930s, as people experience the trauma of learning new roles. There is, however, one difference between the Great Depression and our era. Then, economic catastrophe was attributed to fate; like a dust storm, it could not be alleviated by human intervention. We have learned a great deal in fifty years, particularly that suffering often can be avoided and destiny changed. Capitalism today demonstrates that a people can be made to give up what it took them generations to grasp. The tragedy is not only that people will experience hard times but that they will forget that their collective resistance to the market is the only thing standing between them and fate.
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|Title Annotation:||reliance on the market|
|Date:||May 26, 1984|
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