In the past, I’ve occasionally adopted the stance of an armchair revolutionary and opined about how to subvert the state apparatus and destabilize the corporate hegemony and that sort of thing. If pressed about it then, I would probably have had in mind a vague notion that Gramscian organic intellectuals—people I would relate to and endorse—would somehow lead the charge, that the efficacious force for radical social change would evolve out of the antiglobalization movement that disrupted the WTO meetings in Seattle in 1999. That was before I had even a rudimentary understanding of the financial system, and social change, in my mind, evinced itself only as a new virtuous life we all could be leading as individuals, not exploiting anyone with our consumerist purchases or any other manifestation of our destructive selfishness. Somehow everyone would be able to feel cool by doing the right thing—which was more of an aesthetic matter than an ethical one—and these virtuous new behaviors would never come to seem conformist or anything other than fulfilling and personally gratifying and expressive of our full uniqueness, etc., etc.
But unfortunately, that sort of personalized, self-contained revolution—together with a few righteous protest marches here and there—seems altogether irrelevant to the macro forces that shape the world’s institutions and systems. Now I’ve become much more cynical, Burkean. I’m fearful that the “will of the people” becomes relevant only when it becomes a virulent populism, that the revolution will be led not by organic intellectuals who can articulate a plan of attack in the name of a righteous cause, but by demagogic opportunists who can tap into an atavistic rage among the masses, who can exploit their ignorance to achieve no goal other than the seizure of power for its own sake. The revolution often transpires as a series of chaotic, reactionary upheavals that no one can hope to control, regardless of their historical inevitability. In short, revolutions don’t happen because smart people suddenly have more influence and scope to operate; they happen because the ignorant get riled up. This happens when it suddenly becomes impossible to ignore that their ignorance is being exploited by the “powerful.”
As many have pointed out (though not so bluntly), that is what seems to be happening now in the wake of the serial bank bailouts. Well-informed critics have been saying for years that the real-estate bubble was unsustainable, that financial derivatives should be regulated, that leverage rations were too high, that ratings agencies faced conflicts of interest, that the quants’ computer models were unreliable. But their complaints went unheeded; critics were marginalized further, and nothing changed. Now, after the fact, the same criticism is more likely to be raised in the tone Matt Taibbi adopts in this piece, which is well worth reading, even though the implications of its tone are scary. This sort of critique seems entirely righteous, and its deliberately inflammatory rhetoric is what seems to make it credible:
There are plenty of people who have noticed, in recent years, that when they lost their homes to foreclosure or were forced into bankruptcy because of crippling credit-card debt, no one in the government was there to rescue them. But when Goldman Sachs — a company whose average employee still made more than $350,000 last year, even in the midst of a depression — was suddenly faced with the possibility of losing money on the unregulated insurance deals it bought for its insane housing bets, the government was there in an instant to patch the hole. That’s the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers’ credit card.
The people who have spent their lives cloistered in this Wall Street community aren’t much for sharing information with the great unwashed. Because all of this shit is complicated, because most of us mortals don’t know what the hell LIBOR is or how a REIT works or how to use the word “zero coupon bond” in a sentence without sounding stupid — well, then, the people who do speak this idiotic language cannot under any circumstances be bothered to explain it to us and instead spend a lot of time rolling their eyes and asking us to trust them.
The degree to which we all feel somewhat powerless in the face of these monumental events warrants the contemptuous tone, which is proportionate to our impotence. In the run-up to the Iraq War, a similar impotence was felt, but generally only by those who could be ignored as pacifistic pansies from whom impotence was to be expected. The populace at large could enjoy a good war as a pep rally inspiring nationalistic pride. But there is no vicarious pride, no shock and awe to be found in the bank bailouts.
As this populist contempt builds, it worsens the conditions for doing business, the same conditions that bankers have already abused—so it becomes a vicious spiral. Corruption seems like it may as well be the rule, from the top down to the little people. The tunneling Simon Johnson described becomes the rule for everyone—the purpose of doing business is to loot, not to produce.
The furor over the AIG bonuses, et.al. has Felix Salmon wondering if class warfare has at last reached America.
In one corner are the technocrats not only in finance but also in government and the media: people who can understand the importance of distinguishing between a $250,000 base salary, a $2.5 million bonus, a $250 million bonus pool, a $2.5 billion bonus pool, a $250 billion bailout package, a $2.5 trillion monetary stimulus, and so on.
In the other corner are the real people, the angry people, the unemployed people—and with them their elected representatives in Congress. They’re not interested in such distinctions any more, they’re not interested in what’s fair or what’s sensible. They saw their real wages stagnate for decades as the orgy of plutocratic self-congratulation reached obscene levels only to keep on growing. All they ever had was the American Dream: the idea that they, too, might one day become dynastically wealthy and join the overclass.
Now, of course, that dream is shattered.
Carson Gross, a guest poster at Basline Scenario, examines “the cultural costs of bailout nation” and reaches similar conclusions. “There may be technical solutions to the banking problem. However, if those solutions do enough damage to the cultural framework on which the system was based in the first place, even the most brilliant among them will be useless.” The real problem, though, is that cultural framework may always have been inherently flawed, or as Marixsts argue, riven with unreconcilable contradictions.
What’s frightening is that no one knows in precisely what form this incipient class warfare will erupt. Would anyone be shocked to see anti-Semitism spike over the next few months?
Update: This morning, the NYT tries to throw some cold water on populist fire with this sentimental letter from a former AIG trader.