Conversations that Matter: Part 1

This is a four-part interview conducted by Cryn Johannsen, published on her estimable blog alleducationmatters.blogspot.com
THURSDAY, FEBRUARY 24, 2011
Conversations That Matter: Alan Nasser (Part I)

Last week, after I wrapped up a long day of writing and researching for EduLender, I returned to my hotel room to do more work for them and then eventually turned to AEM tasks. It was hardly a task when I called up Alan Nasser, however. We had a long conversation, even though he was under the weather, and he shared his views on student loan debt and how it fits into the bigger picture related to our current economic system, that of capitalism. Alan is a thrilling person to talk to, and I want to thank him publicly for such a lively and engaging conversation. It is my hope that this conversation will be the first of many more between the two of us.

Since the talk was quite lengthy and we talked about complex topics like capitalism, Keynesian economic policy, the Obama Administration, U.S. public intellectuals, etc., etc., the conversation will be posted in a series.

Let’s hear what Alan has to say about our current state of affairs.

CCJ: I realize the question is broad, but please tell us a little bit about your work and what you’re currently investigating. While many of AEM’s readers know who you are, I’d like to allow you to discuss your research and so forth.

AN: Right now I am finishing an article called “NeoLiberalism As First and Last Resort” for a journal called State of Nature. It is about the general historical trajectory of American capitalism, which began roughly in 1823 to the present. I’m also looking at the four depressions in the U.S., including this current one. This is not a recession, it’s a depression. I’m finding a pattern and certain lessons to be learned, and how they are responded to [by policymakers]. We need to correct the conditions that led to the current depression. The cause of course is capitalism. By that I mean that capitalism’s confining democratic decision-making to the political sphere only, and not to the economic, makes it so that investment decisions – and the investment decision is where it all starts – are made with the sole purpose of generating profits ad infinitum. Well, unlimited profit-making is impossible, and that’s where the cumulative instability begins. Capitalism must be understood as a dynamic system, and is probably the most unstable institution created by humans. I’m looking at how that all stands today, and where we’re going from here.

CCJ: If capitalism is dynamic, is that a good thing? What’s happening to it at this point in history?

AN: It looks as if dynamic capitalism is fizzling out. The Western countries have all become de-industrialized, and the dynamism is shifting to Asia and the BRIC countries. They will go through the same trajectory as Western countries because they too will aim at the impossible goal of unlimited growth. Perpetual growth is not possible. The requirement of growth in widgets, profits, expanding markets into perpetuity, all those things are what capitalism requires. That’s impossible. I use a term that economists used to use all the time, but it has fallen out of fashion since the end of World II. It’s the notion of maturity. Once a capitalist economy has accomplished industrialization, reached maturity, further growth can only be artificially induced – e.g. by injecting the economy with an overdose of credit – at the expense of working people. I begin my new book [which hasn’t been published yet], The “New Normal:” Capitalist Austerity and the Decline of American Democracy, with a quote by Sir Peter Medawar:

We have now grown used to the idea that most ordinary or natural growth processes (the growth of organisms, or populations of organisms or, for example, of cities) is not merely limited, but self-limited, i.e. is slowed down or eventually brought to a standstill as a consequence of the act of growth itself. For one reason or another, but always for some reason, organisms cannot grow indefinitely, just as beyond a certain level of size or density a population defeats its own capacity for further
CCJ: Tell us why you chose this quote by Medawar.

AN: Medawar was a Nobel Laureate. He was a humanist and wrote on a whole range of topics. He wrote about individuals as organisms which reach maturity, after which further growth is not possible. The growth of an organism is limited by the same forces that propel its growth in the first place. The same is true with populations, cities, and so forth, and is also true with capitalism. So my work on capitalism is based upon these questions: what limits its growth, i.e. what is it that makes unending economic growth impossible? What’s the process that led the U.S. to the point that our future is a permanently indebted workforce? Of course, I’ve enjoyed all the benefits of capitalism. I grew up during what economists now call the ‘Golden Age’, the period from 1949 to 1973, the longest period of sustained expansion in the history of capitalism. My students, on the other hand, are going to live in a different world.

CCJ: What are some other questions that drive your research?

AN: What are the dynamics that underlie and propel this process [of capitalism]? What is it that people can do to arrest this movement toward indefinite austerity in the U.S.? To me, it’s a no-brainer. It’s organized resistance.
UNDAY, FEBRUARY 27, 2011
Conversations That Matter: Alan Nasser (Part II)

Since I’ve already made introductory remarks about my engaging conversation with Alan Nasser, I’d like to immediately launch into the second part of our talk. (You can read the first part here).
CCJ: In 2009, you argued that New Deal Liberalism had written its obituary. In this piece you assert that Obama is a new type of Democrat. Ominously you wrote, “[Obama] means Business. Working people, take cover.” Are there any policies of the current administration that indicate they are concerned about working people?

AN: We all like balance. I’d like to say that there are some things he’s doing for working people, but there are so many more anti-working-class policies. I don’t see a single thing in this administration’s agenda that is designed to benefit working people.

CCJ: Agreed.

AN: If you take a look at the most recent developments, specifically the Council on Jobs and Competitiveness, the head of that council is Jeffrey Immelt, who is the CEO of GE . Immelt is an ardent outsourcer. GE employs more people overseas than in the U.S. In the last ten years GE has closed 29 plants, eliminated ten thousand jobs, and created thirty-thousand in India.

In 2002, Immelt gave a speech to his investors and said, ‘I am a China-nut. When I meet people I say, ‘China, China, China, China, China.’ This is where it’s cost effective.’

The guy is an outsourcer and this is the guy Obama appointed to be head of Council on Jobs and Competitiveness?

CCJ: It’s problematic to say the least.

AN: The name [of the council] also bears reflection. It’s this idea that the goal of job creation is not so much to provide working people with a decent living, but rather to promote jobs in industries targeted for export-oriented growth. [Obama’s] principal aim, his macroeconomic aim in shaping economic policy, focuses on investments and exports. We want to become competitive like we were during the Golden Age by becoming exporters. He seems unaware that we were the world’s major industrial exporter in ’50s, ’60s, and ’70s because we monopolized world markets. However Europe eventually re-industrialized after World War II and became a formidable competitor, and we now have a similar situation in Asia. So the U.S. will never be a dominant exporter in the way that it used to be. Even worse, if you focus on exports, you are going to be driving wages down. Our competitors have a system based on low wages. Since there is now, for the first time in history, a global labor market, international competition will drive wages in high-wage countries down towards the level of wages in low-wage countries. We’ve already seen that happen. For instance, the median wage has been declining since 1973. 38 years of stagnant or declining wages – that’s astonishing. Economics 101 tells you that can’t happen. What does that tell you about mainstream economics?

I want to get a little deeper into the logic of this. Obama sees the job issue as subordinate to the export issue, and there is a causal chain. If you want to promote exports, you have to increase investments. How do you do that? We know how Obama does that, you cut corporate taxes. The next link in the causal chain is that by cutting taxes on the rich you increase the deficit. When you increase the deficit, you then have a pretext to cutting social programs. It’s not apparent on the surface, but an export economy is where public spending is slashed.

Another relevant point in this connection is that some time in 2010, President Obama gave a speech where he said, ‘I’ve never believed it was government’s purpose to create jobs. Job creation has to happen in private sector.’ Obama is a free-market libertarian.

These policy changes suggest we’re living in such radically different times, and this requires that we change the way we think about progressives and progressive ideas. Mainstream liberals like Paul Krugman and Robert Reich call for an increase in government spending and aggregate demand. That’s not a Keynesian position. For Keynes it was not about aggregate demand or output but effective demand. That means it was about increasing jobs, not merely increasing output. Increasing output won’t necessarily have any effect on jobs. Keynes was a believer that ultimately you have to have government directly providing a stimulus for working people, and the point he made – and no one talks about this, and I think it’s important – is that government should provide direct aid where it is needed, not indirect aid by, e.g. reducing corporate taxes to stimulate hiring, or recapitalizing banks to stimulate lending, which we see now has failed. The way Keynesian policy has been taken up is to only provide jobs during recession. That’s not what Keynes argued. Policymakers think that it should be done during a recession, but Keynes thought it should be done during recessions and expansionary periods, because unemployment persists even during economic expansions.

So it’s not very helpful to think that there is ‘too much unemployment,’ but rather be more specific [that’s according to Keynes]. There are specific cities, states, regions where unemployment is a serious problem, and other places where it isn’t. So government should specifically target jobs by providing employment at these specific [geographical locations]. It seems like you would say, ‘of course,’ but when you read Krugman and others, they’re into what the British economist Joan Robinson called bastard Keynesianism. That is the kind [of Keynesianism] that has been adopted by U.S. policymakers, and it is a distortion of Keynes’s thought.

CCJ: I’d like to stay on this topic of working people. I’ve noticed that the SEIU has been promoting and arguing in support of ‘middle class workers’ Correct me if I’m wrong, but that seems to be another way in which working class people have been ‘erased’ from the public discourse. Do you agree?

AN: Of all the questions you asked so far, this has to be my favorite one. Furthermore, of all the questions, this one is the most significant. You could go on endlessly, too. I think you’re right in asking it, and I think I know why.

CCJ: Well, it seems to me that the working class and the poor are no longer being discussed.

AN: I am very troubled by the usage of the term middle class. Of course [the term] suggests that there is a class above and a class below. Americans are very angry at what the rich are carrying off and what they’ve been able to carry off. They’re doing better now than they ever have in American history. But what about that other class? If there is a middle, logically, there has to be at least two others. There has also been a significant change in the rhetoric of the Democratic party. As you know, they used to call themselves the party of the working class, but they don’t call themselves that anymore. It’s as if [working class people] don’t exist. Maybe they don’t vote, so they don’t carry much weight. They can’t donate money, so they are no use to the elites. The rich say: ‘we don’t care about them. It’s the middle class who goes out there stumping.’

The earnings of a typical wage earner is far lower than you’d think. These [wage earners] have in fact been marginalized. They are not constituents of the Democratic party. They are not a constituency of any party, except maybe that of a marginalized party. Parties that the press will acknowledge . . . well . . . the working class might well as not exist.

CCJ: To continue on this topic of the poor and working class. What does this mean then, this sanitizing of the poor and the working class from political discourse? What are the ramifications?

AN: The ramifications are the forces and tendencies that I outlined in the longer article that I sent to you that are leading towards rendering the majority of the population into permanently indentured debt peons. There is something dramatic happening, and that is the majority of wage earners will be consigned to an even lower standard of living, lower wages, and debt peonage. They are going to be ignored, and they will not be discussed in the media.

At the same time you hear how we need to pay attention to middle class, even though the media admits that the middle class is shrinking. Robert Reich makes a very big deal about this thing. He is not alone. Others like the Center for American Progress, Dean Baker, and Robert Kuttner – the best social democrat out there – all have very detailed explanations about the disappearance of the middleclass.

CCJ: Of course. I’ve argued that if the middleclass isn’t extinct already, it’s fast heading that way and ought to be considered endangered. And I guess that’s similar to what these folks are talking about.

AN: Yes, and all of them talk about the declining middleclass. OK, but where are they going? Some other class – the increasingly impoverished working class – might be getting bigger. But that’s not talked about! There was this great song that came out in the 1930s. It was called “Remember The Forgotten Man,” and the working class is now a part of that. It has become that forgotten class. It’s disregarded. It is treated like an appendix! It is an appendage that is there, but who cares about it? It doesn’t matter. The result of this, if I am right, is that the working class is becoming increasingly impoverished and larger. It is less an object of policy and political concern. People, however, will not sit there like bumps on a log. I see this larger class becoming part of a new form of resistance. But I also foresee that there will be more domestic violence, more crime, and more suicide. That always happens when economic insecurity increases. That is why I think progressives need to be looking at ways we can organize the poor and the working class. First, and you’ll understand this well, people need to be educated. They need to understand how the economic system works, how it grows in stages, and why it fizzles out at some point.

CCJ: And of course you’re speaking specifically about the stages of capitalism, correct?

AN: Yes. So, people need to understand how it works. Economic systems have come to an end many times throughout the course of history. Then there is something very new and different that needs to be born [afterwards]. That’s why it’s important to promote a sense of historical imagination, of greater possibilities whose contours are indicated by the way the current system malfunctions. Liberals have no historical imagination. That is why I can kind of admire Tea Partiers. They have strong beliefs and they act on them. Liberals seem to believe only in letting people do what they want as long as they don’t prevent other people from doing what they want. They seem to have no values.

Regular people need to know that there are greater possibilities. We need a correct diagnosis of our society. That will point us to a better future and help us understand what it will look like. That is a Marxist position, but I think it can be defended. If someone criticizes me for that, I can say, ‘What’s your suggestion then?’

CCJ: How do you feel people think about socialism versus capitalism?

AN: I noticed that the Rasmussen poll showed that the majority of people say they prefer socialism to capitalism. But I think that what they meant was that they prefer Obama to his far-right critics who call his policies “socialist.” Of course Obama is as far from democratic socialism as you can get. To my mind, Cryn, a major task at this point is for people who see democratic socialism as both possible and desirable to explain to their interlocutors exactly what democratic socialism is. Hardly anyone in the US, including the intellectual class, knows what democratic socialism means.
MONDAY, FEBRUARY 28, 2011
Alan Nasser (Part III)

Part III of my conversation with Alan Nasser about capitalism, the Obama administration, U.S. democracy, student loan debt, and so forth.
If you haven’t read Part I or Part II, I encourage you to do so before reading the next installment below.

 

CCJ: Speaking of appealing to regular people, you write a lot for publications like CommonDreams.org and Counterpunch.org. Could you tell us why that is?

AN: I’ve mostly quit writing for professional journals. I want to talk in plain, direct English, and I try to do that.

CCJ: You do a great job of that.

AN: Well thank you. So, that is why I write for Commondreams and Counterpunch. I want to reach more people. Education is a task that is very important. It’s overwhelming. For instance, I know that in public schools, they still promote anti-communism, portraying preposterous depictions of what communism is supposed to be. And the Soviet and Chinese ‘threats’ don’t even exist any more! I don’t think they do much better with fascism. History is not a well-taught discipline.

CCJ: I know that all too well! Your comment also reminds me of the way in which Obama is portrayed with a red flag behind him, which is obviously a Communist flag, and then has a Hitler mustache slapped on his face. I have news for these people: Fascists hated Communists. They were the first to be put in camps by the Nazis. But let’s move away from how these –isms are so poorly and laughably conflated. What do you think of this idea that Obama is a socialist?

AN: It’s not true. Let’s look at a few things. When it comes to home energy programs, Obama has twice cut back on these programs. So many people die from the cold or from fires, because they can’t afford heating. That’s another way I see this administration engaged on a frontal assault on the most vulnerable people. They are cutting aid to the disabled. But why bother providing energy assistance to people who are of no use to the vested interests, whether it is at the ballot box or in terms of campaign contributions? And perhaps most ominously, Obama stacked his Deficit Commission with people who have made a career of working to reduce or privatize Social Security. He now wants people to work longer for lower benefits.

CCJ: Yes. That’s quite troubling. Let’s talk about a group now that actually helped President Obama win the election. Well, at least a portion of them (those who are between the ages of 18 – 24+). You are obviously interested in the student loan issue. I call it a student loan debt crisis. How does this relate to the broader problems of the economic crisis that many Americans, and most people around the world, are still experiencing today?
AN: I think at one basic level it fits in with the economy de-industrializing not completely of course, but substantially. The economy has become increasingly financialized, leaving less and less real and productive activity. You and I both grew up seeing those familiar pictures of presidents surrounded by his advisory entourage. They were mostly CEOs from Ford, US Steel, General Motors, Alcoa, that is, those sorts of industrialists. Now you see the same the pictures, and there might be an industrialist or two in that entourage, but the majority of them are finance capitalists and generals. I think that you know that America is turning into an economy in which the principal thing sold is not widgets but debt. That’s what banks do: they sell debt. Debt is becoming the principal product sold in the U.S. Student debt is a big component of that total debt. Defaults on student loans far exceed those on any other types of loan. The student borrower is saddled with debt for a longer stretch of their life than those with home mortgage loans.

The burden of student loans is not infrequently a lifetime burden. Student debt is taking a terrible toll on people. The victims of the collapse of the housing market won’t be as oppressively burdened for as long a time as student debtors will be. This is consistent with the typical wage earner becoming a permanent debtor.

The impact of the assault on the public sector and public sector workers hit state and local governments as well as public colleges. Public colleges have been forced to drive up their tuition. Over-enrollment is forcing students into schools that are even higher tuition costs just in order to get that college degree, a degree that is becoming worth less and less. According to the most recent projections from the Bureau of Labor Statistics, most future jobs will not require a college education. Most of those jobs will also be low-paying. The general trend in industry is to both reduce and de-skill the labor force. The economic crisis, which really began in 2006, and was evident in 2008, hit the public sector very hard. Over-enrollment and an increased rush to other alternatives really set in the fall of 2008, so it stands to reason that for- profits would proliferate.

CCJ: I have to say, I have only been gone from the U.S. for 11 months, but I have been shocked by how many for-profit schools I’ve seen here. When I returned from South Korea in late December of 2010, I drove from Los Angeles, California to Dallas, TX. I was also in Washington, D.C. in mid-January. I am speaking to you from downtown Chicago. In all of these places in the country, there seemed to be a for-profit school is practically on every block. Downtown Chicago is filled with them, and I mean on every block. I realize that might be anecdotal, but I’ve been really taken aback.

AJ: I’ve noticed something similar. I’m from NYC, and I get back there on a regular basis. In the last 2 years I’ve noticed a change on the subway. The advertisements for these schools are just everywhere!

CCJ: I have noticed the same thing here in Chicago when taking public transportation, too. It’s disturbing.

AJ: Being away puts you at an advantage. Changes that others might not notice will strike you.

CCJ: I agree. Speaking more about the for-profits or proprietary schools, there has been a great deal of scrutiny on the for-profits or proprietary schools lately. Do you feel that they are a bigger problem than the non-profits?

AN: The Department of Education is looming now as a more serious problem, because the Department is the biggest student lender. Moreover, the department is raking it in with defaults – they recover 120% of every defaulted loan. And they know that the default rates they’ve backed are between 25% – 40%. They are not warning people about this. They aren’t doing credit checks. The department is making a killing, so I think I’d like to see people focus on that, without losing sight of the for-profit issue. It is just as salient, but I think the Department is looming very large as a real predator, a really horrible predator. That’s something we should pay attention to and not allow the for-profits to distract us from this. After I wrote about student loans, so many people wrote to me. I felt that I needed to respond in some way, and, as you know, the horror stories are astounding. Garnishing disability payments and their tax refunds? It’s stunning. It’s horrific. I don’t know how these poor folks . . . what they are going to do. A lot of people who have signed off on loans, for their sons and daughters, nephews and nieces, never suspected that the debt would be compounded and compounded.

It’s really a whole new kind of misery.
FRIDAY, MARCH 4, 2011
Conversations That Matter: Alan Nasser (Part IV)
The ruined Spanish-Gothic interior of the United Artists theater in Detroit. C. Howard Crane built the cinema in 1928. Photograph from the collection, “The Ruins In Detroit,” by Yves Marchand and Romain Meffre. Special thanks to Mr. Marchand and Mr. Meffre for agreeing to let me use their photography for this important conversation with Alan.

If you have not read the other parts of this interview, please do so! Alan is an engaging and insightful conversationalist. I hope he will join us again at AEM’s blog! For those of you who are now reading-contributors, I want to thank you for your continued support and donations. If you haven’t become a reading-contributor, please donate today, and help us build on AEM’s strength. You can either donate via PayPal or by check/money order.

CCJ: I agree entirely with this point you mentioned earlier about the student loan crisis being a ‘whole new kind of misery.’ That’s why AEM continues to advocate for the indentured educated class.

AN: It’s exploitation and people are being ripped off. These stories speak real cruelty. The idea that government should be a predator in the ways these hideous for-profits are . . . it’s dispiriting.

CCJ: I am actively discussing and promoting the $1 trillion ‘magic number.’ In 2012, outstanding student loan debt (federal and private) will be at $1 trillion. How does that bode for the health of the U.S. (both economically and culturally)?

AN: It really doesn’t bode well. It is a factor that will depress real income for generations of working people, whose incomes will be depressed anyway, and that has to do with the decline of American capitalism. We’re anticipating a low-wage country, where most workers will be paying in interest payments on their outstanding debts what they used to pay in taxes, because so many public services will become privatized. It’s going to add insult to already existing economic injury. You’re adding debt to a population already indebted on so many fronts, and who have to take on even more debt.

The Fed puts out this Gray Book, and it was I think in 2003 that the quarterly report noted this striking change. More wage earners were using credit cards in ways they hadn’t used them before, and that was for basic necessities.

CCJ: I am aware of the findings, and it’s troubling.

AN: Yes. That means people are using credit cards for food and gas and other essentials. Increasingly people have to rely on debt. During the ‘Golden Age,’ credit cards were used to buy consumer durables, a car, a fridge . . . Now, people are going into to debt to buy a Mounds bar, that is not a good thing, and I don’t think I’m exaggerating entirely! [Laughs]

CCJ: No [laughing], I don’t think that is really an exaggeration. That’s terrible, too.

AN: So using credit cards in this way is adding to an already crushing burden. I talked earlier about standard Keyneisan progressive policy. If you look at history, from 1950 up to today, the effect of Keynesian policy on employment . . . his main priority was to address unemployment. Look at each economic downturn or recession since 1950. You find that each downturn had fewer short term unemployed numbers (14 months or less) than the previous one. The short-term unemployed have been declining as a percentage of the total number of people unemployed. If you look at long-term unemployment figures, those in that group have increased from recession to recession. In other words, long-term unemployment has been steadily increasing since 1950.

That underscores how standard Keynesian macroeconomic fine-tuning has really failed in terms of addressing the employment issue. To repeat an earlier point, policy makers are misguided in wanting to stimulate output rather than jobs. In fact, the principal beneficiaries of current policy have been higher educated, higher paid people. My recommendation, that government directly provide employment to specific workers in specific areas, is a class policy. It aims to improve the condition of the working class. This is explicitly contrary to government policy since 1980, which primarily benefits the rich. I’m talking about progressives openly embracing class politics.

In my view the composition of the unemployed population is a good indication of where things are going. Obama and the rest of the liberals believe in this bastardized form of Keynesianism. That is the regime that student loan debtors are going to be living under.

When it comes down to it, the answer to your question has to be far reaching.

CCJ: I realize, it’s not the best question.

AN: No, it’s a good question. It’s relevant to student debtors, because they are not just student debtors. They will figure into the unemployment statistics and will become the low wage earners. In that way, the future looks grim. So, it’s not a bad question. For you and me, the answer is obvious, but for readers, it suggests that there are implications for the future.

CCJ: And, as I already said, you are probably aware that outstanding student loan debt – both federal and private – will hit $1 trillion by June of 2012. That’s why $1 trillion is my magic number, and not in a good way.

AN: Now you have this current default rate and then you add $1 trillion in outstanding debt. The implications for what these lives will look like, and we’re talking about past and current students, and what their children’s lives will look like . . . They will not be a position to help their kids at all, because they will be in a much worse position.

CCJ: I agree. It’s not good. That why AEM continues to fight on behalf of the indentured educated class. Thank you so much for having this conversation. It has been an honor and a privilege, Alan.

AN: Thank you for having me, and keep up the good work.

 

 

 

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