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Live from the London School of Economics, Andrea Gibbons’ reports and editorials on economic news and views.  Featuring international thinkers and analysts.

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Blue Line Group

7/19/2010 by Andrea Gibbons - 2 comments


Community space!


As I stumbled back home late one Friday night after many hours of travel to get from a tiny town in Southern France to London’s own Tower Hamlets, people busy painting a line along the pavement and doing various other things made it hard to get my roller bag past them. I was not pleased, but I woke up to this:


Blue Line


The London Festival of Architecture brought the University of Innsbruck’s Walk the Line project, and the weekend was full of activities, games, food (I suppose it was too much to hope for it as a Johnny Cash reference). The statue of Gladstone in front of the old church looked happier with his blue scarf.



Gladstone with blue scarfNone of that was for me sadly, I was exhausted and had one hell of a deadline coming up. But the idea was interesting, changing how people use public spaces and form community with the simple use of some paint and some props.


I think, however, that the aftermath was even more interesting, because for a few days the props were left, the hosts were absent, and my neighbors were left to do with the space and the props as they would. Of course, I was still on deadline, so I just saw it as I walked to and fro work and school. But this was after all just a student project, a taste of what this space could be with just a tiny bit of investment.


They took everything away, and my own pictures came just a few days late to capture the small magic – so I have borrowed some photos from Loopzilla, who has made them available for just this purpose.  And you can read a short story about the effort on Diamond Geezer.



But let’s take the Seating Furniture for example:


Blue tree stump seats


They had made innovative little tables out of plywood with holes in the middle to fit down over the bollards, and painted tree stumps blue for people to use as seats.  And all kinds of different people used them, from big burly guys to the guys who worked in the little shops to families to teenagers. The same way they used the “dinner at eight” station with a more traditional table and chairs. It made me happy to see a whole family sitting down there on a warm summer evening eating a meal.




People sitting at dinner for eight table


Blue dinner table


Blue hopscotch?Now I have no idea what this was supposed to be exactly, it’s the wrong shape and size for hopscotch…


And I don’t think anyone is much celebrating the olympics around here, but kids seem to like to play on it. They play in the “official” games area as well, with balls and stones where the tic-tac-toe board was painted (noughts and crosses anyone?) that once had x’s and o’s. And loads of different people used the “theatre” (just another bunch of blue tree stumps) as another place to sit and chat in the shade. These things very visually created more opportunity for my neighbors to come together in ways they wouldn’t usually do, and spend time in an otherwise rather unwelcoming space that most just travel through, apart from the hordes of teenage boys in the afternoons and evenings, and the chatty crowd in front of the bookies.



Blue tic tac toe


So now that it’s gone, what are the lessons learned?


  • You can do an immense amount of good with very little money. Stroudley Walk could clearly become a vibrant enjoyable place, and I applaud the student’s imagination and effort. You’d think planners would have figured this out by now.


  • DO set up seating areas. Do NOT set up seating areas without providing bins. Or trash cans. Depending which continent you’re in. Or people will no longer like the seating areas.


  • It’s always good know a bit more about the community when planning. If they’d spent much time here they surely would have thought of painting a football (soccer) pitch where the boys are always playing. And maybe had some better games? Like chess boards? A giant backgammon board? How cool would that have been? Maybe added some Bangladeshi artwork and made people’s smiles even bigger?


  • It’s a bit crap to come into a community and do a project like this, and then take most of it away though I’m sure the Council didn’t want to have to deal with it. But the next bright-eyed students with an idea will wonder why the residents are a bit jaded and blame them for not being open and participatory. These projects should always be connected to the actual and real, as there are currently what seem to be rather terribly generic plans to redevelop the walk. This would have been an amazing way to test out things before they became permanent, and I could not think of a better way to start people thinking creatively about what they want from their neighborhood plaza and how they could actually use it. If the Council cared to ask them in a way that actually invited creativity and enjoyable participation.

Seeds of Autonomy in Greece

6/15/2010 by Andrea Gibbons - No comments


imf outWhile the economic crisis has hit all of us, and hit us hard, Greece is a country riding the edges of bankruptcy, even after the intervention of the IMF and the European Union.


This intervention has come at a high price, requiring Greece to slash its national debt at a brutal cost to its own citizens.


To find out more about the impact of the crisis on the lives of people and how they are responding, I recently spoke to Antonis, who is from Greece and is a fellow graduate student at the London School of Economics.


ANDREA: Tell us a little about yourself.



ANTONIS: My name is Antonis. I’m a student here in London and I’ve lived here for quite a few years. But I’m originally from Greece. Since the revolt of 2008, together with some friends, we’ve been covering what’s been happening in Greece in a blog, the Occupied London blog. We were also running a journal, an anarchist journal, called Voices of Resistance from Occupied London. But I think our project was one where the blog completely overtook the journal itself, so that’s what we’re focusing on at the moment.


ANDREA: Would you just say a few things about how concretely the crisis has affected Greece, and how it is affecting people in their everyday lives?


ANTONIS: Obviously it’s had a massive effect on every single level — the political, the social and the everyday — all around. And it’s happened very rapidly.  Its very hard to explain in a few words how big the change is because its something we are still assessing. People are still trying to grasp what has actually happened.


But to see the difference in the everyday reality in the country and in people’s mentality, even from December (which was the second to last time I visited) to March this year (which was the last time I was there) is tremendous.  To put it quickly, pretty much everyone, or at least most people I know who work in the public sector (and the public sector is huge), are facing the same sort of decrease in their wages — about 20 to 30 % of their total wages, anywhere between the two roughly.  And they probably are faced with even higher cuts in their pensions —  if you ever get to get a pension, the way things are going.


The private sector is about to go through the same kind of process and the cost of life overall has increased tremendously. Just to bring one example out of many: the cost of gas, from August 2009 to what they predict it’s going to be in a couple of months (in August 2010) has gone up by about 150%.


ANDREA: So how are people reacting to this? I know there was a general strike just a few weeks ago…


ANTONIS: Four weeks ago… There’s been a few general strikes actually; the one on May 5th was the fourth in 2010 if I’m not mistaken. Which is not that much, by Greek standards, you would usually have at least a couple of general strikes in a year anyway.


ANDREA: And so when you say general strike, is it really everything that shuts down?

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Mr. T Says: Treat Your Mother Right!

5/11/2010 by Andrea Gibbons - No comments

So Mr. T and I have a lot in common. You probably didn’t know that, but it’s true. Apart from our shared love of mohawks, gold jewelry, knuckle rings, and camouflage short shorts (which I’m rocking even now), we also both think it’s about time we treated our mothers right.



Where did I find such a delicious video? Oh, I have my ways.

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How to Research a Slumlord

4/26/2010 by Andrea Gibbons - 4 comments


Andrea Gibbons, among other things, established SAJE‘s Research Department with some path-breaking work that uncovered an invisible criminal slumlord empire just by digging into the information that surrounded a single building.  Andrea was followed  by Albert Lowe (aka Uncle Joe) who laid the groundwork for the Shame of the City reports that are referred to in our recent Get the Lead Out article.  Both of their  efforts contributed mightily towards the criminal convictions of two of L.A.’s biggest and baddest slumlords.  Here Andrea share’s her 5-step method on how to research a slumlord, which is also summarized in the 5-minute video below.


So you wanna get down and dirty and research a slumlord?


How to Research A Slumlord from Gilda Haas on Vimeo.



inspector big eyeI believe that each and every one of us has a right to a safe and secure, I’d go so far as to say cozy, place to call home. While I have not yet succeeded in making this a universal belief (and I do stress the yet), I will say there is widespread agreement that a landlord must maintain his building if you’re paying him rent. Given that most owners see our beloved homes as nothing more than income streams that are only hurt by maintenance expenses, this is always a cause of no small tension. There are, of course, those among the wider pool of investors who are out and out blankety-blanks. Buy me a drink sometime and I will tell you what I really think, especially as this post has nothing to do with the whys of slumlords, so don’t forget the larger forces at work here that also require attention!


Far too many of our people are forced to live with rats, roaches, peeling paint, mold, an absence of heat, raw sewage, leaking pipes… the list goes on, as does my fury. If you’re going to dig deep and put the hours in to finding out exactly who is profiting off of such daily assaults upon their tenants, then I would first recommend love and fury in equal measures. They will make up for your learning curve, and sustain you in your attention to numbing detail and bureaucracy.


And so! For the agony and ecstasy of corporate research in 5 “easy” steps (and my apologies that specific sources are American though the theory is the same everywhere), keep reading…


Step 1: Know Your Rights


Know them up and down, backwards and forwards before you do anything, and I mean anything.  Slumlords don’t like tenants or tenant organizers getting uppity, so be extremely prepared.


  • Dig out those contracts, read them, find out exactly what you’ve signed up for if you didn’t already know. I’m afraid to say there are often some nasty surprises in there.  Those lawyers know what they’re doing.


  • Cities and states have different laws protecting tenants, find out which ones apply to you. All of them have basic requirements for building maintenance. At best you also have your rent control (which limits how much an owner can increase your rent), and you have your just cause eviction (which limits the reasons you can be evicted). If your town has neither, then it’s just down to you and whatever you can negotiate into your contract. Make sure you have back up, and check out Vida Urbana/City Life to see just how much tenants working together have been able to negotiate into collective contracts.


Step 2: Map out a Research Strategy


Knowledge alone isn’t power, I’m afraid.  If it were my life would be much different. What knowledge does is allow you to use your power most effectively to place pressure where pressure will make a difference. You need to consider your options on how best to use it.


You can pressure the owner directly. For example when I worked at SAJE, we once took a tenant delegation to meet with their landlord’s pastor. That stopped the harassment and threatened evictions pretty quickly.


Another obvious target is the city or county, who are more likely to try and act effectively after you have built a picture of the landlord’s evil business operations and their effects on their tenants and community.


The picture below shows the kind of  strategic information that maybe be useful and where the pressure points might lie, but don’t let this limit you!  Every landlord and city is different.  There are undoubtedly other possibilities.


slumlord relationships

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Read Sports Page, See World

3/11/2010 by Andrea Gibbons - 1 comment


The amount you can learn might come as a surprise if you don’t read the sports pages, and possibly even if you do. Last month I heard David Goldblatt speak, and definitely learned a whole lot about things I didn’t really know before.  In case you want to hear the whole talk yourself, here is a podcast recording and a video (for the video, scroll down to 18 February 2010 | Professor David Goldblatt).  It was a great talk.


Let’s take the African Cup of Nations 2010 for starters, what did it teach us?


CabindaNow I did know where Angola was, but I did not know that there is an unconnected piece of Angola called Cabinda, and that it has been fighting for its independence for decades. Why does Angola care? Cabinda contains a third of Angola’s oil. So to hold soccer games in this rather out-of-the-way place, miles from any other stadium, was entirely a political decision. Cabinda, we own you.


But that’s still up for rather violent debate, as rebels proved by attacking the Togolese tour bus with its Angolan military escort. Three people died in the ensuing thirty minute firefight. So wasn’t there a peace accord signed in 2006? Well, if you could call it an accord when you pull a rebel out of a Dutch prison where he has been languishing for some time and make him sign something on behalf of loads of other people he hasn’t talked to recently, and that contains nothing about disarmament or amnesty. I’d prefer to call it fraud.


And so the rebels attacked a soccer team’s tour bus.  For more on the dark side of national politics, you can read  David Goldblatt’s article, “Africa and the Cruelty of Football.”


And of course, there are the direct connections between teams and politics, Goldblatt gave another example of a trip to Israel, where soccer teams correspond to different political factions. He looked particularly at Beitar Jerusalem. Over the past 70 years it has become increasingly tied to the extreme right wing, fans planting soccer club flags beside those of settlements. During half-time you will customarily see  some fans gather to pray. When asked why, the leader of “La Familia” faction said “This is my country … When I see one million Muslims praying in my country, it makes me nervous.”

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UK-US Inequality Mashup

2/10/2010 by Andrea Gibbons - No comments

I saw Jane Wills of Queen Mary University of London speak last night on the battle for a living wage in the UK, a great talk and fascinating in its comparisons to the US…though the comparisons are all my own!


I think graphs always speak so much louder than words, so just a quick snapshot in the most comparable format I could find of growing inequalities in the two countries.


On inequality in the UK from The Guardian:


UKtop1%


On inequality in the US from Thomas Piketty and Emmanuel Saez (via The New York Times)


US Inequality


The US retains its role as a world leader… as of 2005, the top 1% in the US held 21.8% of the wealth, and it is perhaps more frightening to look at the other lines. But many of us aren’t so happy about this, as it means we’re generally fighting each other for the little that is left. So what is being done?


In the UK, as in the US, there has been a growing movement for a living wage. It is only a very small step towards the truly just world that I believe possible on alternate Wednesdays, but I will never say that such small steps do not require a most inhuman amount of work by an admirable and massive number of people.


Essentially the minimum wage (only introduced in the UK in 1999, upon which 2.1 million people received a raise averaging 10%!) is the maximum salary that the market says it can afford to pay people. The living wage is the minimum salary that people actually need to live. A bit simplified I know, but they reduce nicely to moral foundations.


The UK living wage campaign (inspired by the US living wage campaign, begun in Baltimore in 1994) is spearheaded by a non-profit called London Citizens, a group closely based on the organizing model of the Industrial Areas Foundation, working to create a broad and powerful coalition of those already involved in churches, mosques, schools, unions and community groups.


The victories have primarily been won in London. One of the main problems has been identified as the widespread, almost ubiquitous, practice of employers outsourcing every job possible (see the brilliant new book co-authored by Jane, Global Cities at Work). This forces contractors to compete amongst themselves and underbid each other in a mad rush to the bottom. So a huge push of the campaign has been to negotiate with large employers (hospitals, office buildings, the Olympic contractors) to only outsource to businesses providing a living wage.


This reminded me a great deal of SEIU 1877′s strategy in the Justice for Janitors campaign. So I asked, and indeed! They were here at the beginning, working with one of the unions involved in the struggle. Governmental authority works a bit differently here in London and so there hasn’t been a push for anything like a city-wide ordinance, but there are talks of a campaign to get any organization receiving Government funding to ensure the living wage.


It’s a small world, and hopeful to know that some of the lessons of struggle are crossing the Atlantic (and Pacific). May that continue and grow.


So to end not a cliche, but on John Cleese (because I’m smitten with him), here is a final graphic from The Guardian. Of course, it’s a load of doom in pretty colors really. The only bright light is the success of civil partnerships. I haven’t anything as pretty from the US, I just know (in my gut) everything is worse…


GuardianBig


Architecture Reanimated

1/18/2010 by Andrea Gibbons - 1 comment

If you sit very still and stare at downtown L.A. from the window of the Bonaventure Hotel’s cocktail lounge, this is what you will see:


Bonaventure Cocktail Lounge

 

The slowly revolving floor shifts the gorgeous view before your eyes. But apart from saving up for the drinks, how do you get here?

 

It’s public of course, but that does not make it easy to find. There are three entrances to the Bonventure, but none of them are your traditional grand salon entrance. And two of them are from those secret sky bridges of LA, the one we took joins the hotel to Hope Street past the YMCA. You enter what feels like a back door onto the fifth floor of a dark and massive tower with spiraling stairs and pillars, and street signs to direct you to where you want to go:

 

Bonaventure signs

 

Not all elevators go to the top you see, neither do the escalators. In fact, I don’t think there were any escalators on this floor. You have to find the red elevator, the red one! (The vertiginous ride in the glass elevator up the outside of the building for 35 floors and all of Central LA laid out beneath you? Highly recommended.) Any other colour and you will be lost in this vast echoing space.

 

Bonaventure

 

It has its own stores, its own running water far far down below, it even has its own track and exercise machines where you can sweat in full view.

 

Bonventure track

 

Built by John Portman and opened in 1976, it is an iconic building. And wandering through it, I couldn’t help but think of Frederic Jameson’s comments in an essay called Postmodernism and Consumer Society. He writes that the Bonventure has no main entry because it does not wish to be part of the city, it wishes to replace it. That it puts you into such a vast space so full of stuff you can no longer get a measure of just how big it is, you lose just how much emptiness is enclosed by these enormous walls of glass. The building toys with your perspective.

 

Bonventure looking up

 

He writes that this is a space that takes vengeance on those walking through it, one that forces you to lose your bearings. It transcends us as human beings, and makes it impossible for us to find ourselves within such a context.

 

Me? I thought it an incredible building, but it did make me feel very small, very lost, very much in desire of a nice drink. So I set off in search of the red elevator, and thought about architecture and its impacts on how we live and see ourselves in the world. And this one almost cathedral-like in how it humbles you, God replaced by wealth, retail, and facilities for showing off while working out…

Peter Marcuse on the Right to the City

11/23/2009 by Andrea Gibbons - No comments

right to the city


So we’re in crisis. Things are bad. In my last post, I gave you Davies and Marcuse presenting two takes on the whys and hows of that.   And they weren’t all that different.


What is different is that Davies critique is limited to lthe existing system, he cannot see beyond it. He combines a cautious optimism that we can correct all of this — that something simply went very wrong in a system that is perfectly all right — with the notion that the right technical fixes can leave all of that behind us.


Marcuse, on the other hand looks beyond, as should anyone who has lived through the many crises that our economy has rocked and who wants to know  why inequality is rising astronomically.

So where does Marcuse think that we who live in the city actually want to go?  And how do we get there?


Good City vs Just City

For a while some intellectuals talked about the “Good City.” A biblical reference, an ideal of what could be but lacking in a way to arrive there, utopia.


There’s also the idea of the “Just City.” On its face none of us would disagree with some justice. But this has been limited to the goal of inclusion, with the idea that with a more fair distribution of goods and services, maybe we could even manage opportunities. But don’t rock the boat too much. The system we have is a good one.  It just needs a little tweaking.


You can tell I don’t like that one! Neither does Peter Marcuse. So what then? What is neither utopian nor rigidly practical and self-limiting?


The Right to the City

The Right to the City, coined by Henri Lefebvre (and please do read Lefebvre, he’s been rocking my world lately –particularly State, Space, World, which is sitting half-read on my desk even now). Lefebvre’s Right to the City is the right to an alternative system, the right to construct an alternative vision of what could be. It is a right that must be demanded, and a vision of radical democracy where we all collectively create our communities together with the rest of our neighbors and those who actually live here.


Some people already have this right. The very wealthy primarily. We need to be clear that this campaign is not for them, it is to ensure that everyone has power in the city.  I agree with Marcuse that this is important.


And where does the campaign come from?

Marcuse argues that there are two groups who will drive this, and begs forgiveness for the inadequacy of the titles. These are:


  • The deprived. The unemployed, the exploited, the poor. Primarily people of colour.
  • The discontented. The artists, the intellectuals, those who see the deep injustice of the world and feel a need to do something about it.


The Role of Theory

And what is the role of theory in this endeavor? Critical urban theory is the glue. It is required to build the mutual understanding of how and why these two different groups need to come together, not to mention the multiple subgroups contained within each of them. We need to come together and fight for our right to the city.


I’m mostly all for it, and I’m sure you shall be hearing more about Right to the City. Marcuse even gave a shout out to the American alliance of that name.  Having been at the founding that made me happy.

For me, however, it is pivotal that those who Marcuse calls the deprived be the drivers.


Those who suffer most from having no rights to their city should be the ones to frame the question and push forward the process of radical democracy that Lefebvre argues is the key factor towards the New City.

It is to these demands and this process that the discontented need to ally themselves.


And theory needs to dialogue with both in a way that builds each, while at the same time building something entirely new and beautiful.

Too Big to Fail?

11/23/2009 by Andrea Gibbons - No comments

Andrew Sorkin

Andrew Ross Sorkin just wrote a book called Too Big to Fail. That phrase refers to institutions and the idea that by getting bigger and merging with others, institutions can escape their vulnerability. The economic crisis proved that all wrong of course…except they did get bailed out and they’re all still around but one. So maybe not. Still, the book, and the talk, was much more about the people. The talk was quite juicy in fact. So what surprised Sorkin most in his research, as the chief mergers and acquisitions reporter for the New York Times?


Did you know? Certain people really did see this coming. Everyone, including the Treasury, knew Lehman was shaky months beforehand, not to mention AIG and Merrill Lynch. So instead of being about five to six days in September as originally planned, the book starts back in March.


Did you know? Goldman Sachs had an annual board meeting in Russia, and Henry Paulson, Secretary of the Treasury, and former Goldman Sachs CEO, just happened to be there? They all had a nice social and un-calendered breakfast. They said no business was discussed.


And you’ll never guess some of the naughty things that were said. I even learned a new term for getting screwed. (to protect the sensitive, really wierd profanity omitted.  for the real deal contact Andrea directly)


And it’s fascinating this world of corporate helicopter commutes, chartered jets to travel the country, chauffeured town-cars. This world of town homes and country homes and fancy dinners at the best restaurants. These folks never have to interact with anyone outside the circle. It’s a fairy tale world where nothing else seems to have any reality.


Even sadder was how tight and incestuous this circle was (and continues to be), and how cut-throat. They couldn’t even pull together to save themselves. People in government like Hank Paulson, with the capacity to think of things beyond shareholders, had to force survival down their throats. Paulson had to take out a couple of members of the circle, and he did it ruthlessly. They thought it best to merge a couple members of the circle, they did that do. And I wondered just where the power came from allowing him (and the Federal Reserve and the FDIC) to give those kind of orders. And how they equated their circle’s survival with that of America.


That just might be the heart of the problem. The power of this idea that saving a group of institutions that had really fucked up to the tune of billions of dollars, just so they could return to business as usual immediately after, was the patriotic thing to do. That our democracy is tied to the stock market. That we absolutely must run our economy on this kind of engine. And every time it goes into crisis, which it does regularly, we must hold our noses and violate our free market principles and save it. Is this logic really the best we can do?


The most telling thing I think, is that according to Sorkin, most of the people in power in these companies (same group of people as before of course) refer to themselves as survivors.


As though they’d survived some kind of cancer rather than being rescued.


And maybe that’s due partly to the insanity of a market that depends primarily on confidence.

But I think we all know it goes a lot deeper than that.


No one agrees more than Senator Bernie Sanders whose 2-page “Too Big To Fail, Too Big to Exist Act” would break up some of the world’s biggest banks, and is being discussed in Congress as I write.

Here is Senator Sanders on the bill and why the U.S. shouldn’t follow the bath of England and Europe.



Here is an excerpt from Sorkin’s book printed in this month’s Vanity Fair.


Click here to get to Sorkin’s collection of original documents and emails.  I encourage you to check them out.


And here is a video of Sorkin talking about the crafting of a book, which he says is “written like a mystery, even though we all know how the story ends.”



Marcuse and Davies

10/18/2009 by Andrea Gibbons - No comments


Two Views on the Roots of the Crisis


Peter Marcuse spoke on Tuesday night at University College of London, and Howard Davies spoke in the heart of LSE on Wednesday at noon, so technically I suppose they weren’t speaking to each other. But they should have been. So they shall through me. This is my interpretation and expansion on events of course, not a faithful recording of exactly what I heard…just to be clear.



I thought I’d start out with a funny quote I’d forgotten about, courtesy of Howard Davies. It’s all downhill from here though…




Bank failures are caused by depositors who don’t deposit enough
money to cover losses due to mismanagement.

Dan Quayle


Who are these guys exactly?


Peter MarcusePeter Marcuse is a lawyer and planner and academic.  He has been a professor of Urban Planning since 1972, for three years at UCLA, and at Columbia since 1975. He has also been president of the Los Angeles Planning Commission, and has written extensively on housing and planning issues.  He is also the son of Herbert Marcuse.






Howard DaviesHoward Davies is the director of the London School of Economics, and the former head of the Chairman of the Financial Services Authority, the UK’s single financial regulator since 1998. He also served for two years as Deputy Governor of the Bank of England after three years as Director General of the Confederation of British Industry.




Two basic summaries of root causes:

Marcuse started with what are commonly seen as the underlying roots of the current economic crisis (then he tears those apart, but I’m saving the best bit for last!). In his view (his headings with with my own filler) these are:

  • The housing bubble – you know, that whole mortgage crisis thing. The inflated price of land, the mad speculation in it, the crazy loans to people with no equity. Those damn NINJA loans (I’ve always been with the pirates myself).

  • Unscrupulous people – the greedy bankers, the banks, those bastards who were out there sweet-talking your grandma into a loan worth more than her house, one that she would never be able to pay back. So she now lives with you instead.

  • Securitization – this is a big word, and of course it’s complicated. It’s deliberately complicated to get around annoying regulations and the agencies that tried to enforce them. Thousands of mortgages all packaged up together and insured and sold and then maybe reinsured and sold again and then maybe one more time…the important thing to know is that it made a lot of people rich as long as the housing market kept going up.

  • Deregulation – Not only were those “unscrupulous” people getting around existing regs and preventing the implementation of new ones, but they succeeded in getting rid of the Glass-Steagall Act which was made law in the 30’s to ensure that the Great Depression never happened again. Nice work.

  • Too much money floating around looking for something to invest in. You have to laugh at that really (and then cry), I’m sure none of us have known the feeling of too much money, too few options of what to do with it. But apparently there were trillions of dollars floating around the world economy that needed a home. I wished they’d asked me, but if equality and a just distribution of wealth around the world aren’t issues, than I suppose perhaps that could be seen as a problem.


 

This isn’t actually all that different from the analysis of the problem given by Mr. Davies, though he got much more technical around issues 3, 4 and 5, and sliced them up rather differently. I didn’t catch his final “summing up slide as he was talking fast and out of time, but the earlier top 4 underlying causes were:

 

  • Global imbalances – There was a huge increase in global imbalances, I know this is bad. I can’t remember exactly why, I do apologize! You can see the chart of global imbalances here, along with many other charts full of much technical financial information. I will, of course, be correcting my ignorance.

  • Loose monetary policy leading to a mispricing of risk and a credit bubble. What was Greenspan thinking keeping interest rates so low? There was just way too much money out there, anyone could borrow anything, and god help us all, they did. Luckily China was able to come in and sell the West lots of cheap goods (since they don’t really pay their employees) and then buy US treasury bonds. A third of them. That kept the wolf of inflation from the door, but confused everyone as to what kind of market they were operating in. Especially Greenspan.

  • Excess leverage facilitated by procyclical regulation and regulatory arbitrage. Yikes, no? It just means that banks were doing the same thing that all of those “gullible” homeowners (the same ones who are now getting evicted) were doing, taking out massive loans with no down-payment and not enough savings in the…er…bank. They had nowhere near enough money to cover their asses. And why did they think this was ok? Because their advanced historical and cyclical analyses of the housing market told them it was one market that would always go up. So everything would be fine. The equations promised.

  • ‘excess’ unmanaged growth of the financial sector – it exploded into one area really, securitizing mortgages and playing with derivatives, and by moving into this area the financial sector thought it was diversifying risk (you know, putting down bets on lots of horses, not just one. And placing bets as part of a pool so to speak, by insuring your bets and…it’s complicated). But turns out so much money was being put into trading these property related bonds and CDO’s and etc, they were actually creating risk rather than managing it. A failure of betting strategy if you like. The fall of dominoes was insanely impressive however.

 

As a combination of factors it all makes some kind of sense, it certainly hangs together. And if you’re a bit rusty on your economic jargon, it makes your eyes glaze over but it sure sounds damn impressive. I think I’ve got a handle on most of it, but who really knows? Understanding the ins and outs of what actually happened takes a massive amount of energy, involving remote corporate skyscrapers, hundreds of acronyms, and unfathomable sums of debt being sliced up, repackaged, insured, reinsured, moved constantly from one major player to another. And it’s all happening on a global scale. And let’s not forget the distracting million dollar bonuses and offshore accounts…


And so these kind of explanations lead to even more complicated solutions, we are witnessing a grand escape into the technical. For Howard Davies? We need more and better regulation, better internal management of banks, better global coordination and so on into excruciating detail and even bigger words.


But instead of delving into all of that, let’s return to Peter Marcuse’s lecture: everything I have written above is interesting, but really it is missing the point entirely. You got it. Missing the point entirely. How is it that so many incredibly smart people are missing the point?


Focusing on technicalities of regulation and management hide the reality that the economic system itself is fundamentally flawed.


Some of us take that for granted, others will never believe it is true. Capitalism? Well, you know what they (or some of us) say. Crisis happens. We’ve been in crisis quite regularly for several hundred years, and that will continue as long as the system continues. Because crisis is inherent to the capitalist system.


What is the motor of the current system? Adam Smith called it self-interest, but it seems rather silly to expect people to hold the contested and rather imaginary line between self-interest and greed. Greed ultimately is the motivating force, it is the entrepreneurial way and a constant pressure. When you see regulation as the answer, you really aren’t giving people enough credit. They are hell of smart. And there are thousands if not millions of them trying to get around any rule keeping them from their self-interest. And they will. The mass securitization of incredibly risky mortgages as sound investments was just one clever proof of the power of invention to get around regulation. We can fix that loophole, but there will surely be others as it is symptomatic of the fundamental basis of the current economy.


Why is this particular crisis concentrated in real estate, as so many of them are? When buying real estate, you aren’t just investing in land, you are investing in a commodity that has only a fixed supply. There’s only so much of it, and it’s all spoken for. Because of this, you can sit on it, do absolutely nothing at all to improve it, and it will continue to grow in value. This value is due entirely to population and urban growth, it is socially created, it is ‘easy’ money. It invites speculation, always has and always will until we change how the housing market and property ownership work, and we change it completely. As long as housing is seen as a means of profit and vehicle for investment, this kind of crisis will be a recurring one. There’s nothing new about housing bubbles!


Too much money? No, there isn’t too much money, there is too much capital. Capital is what is produced by the exploitation of workers, it is profit extracted from production and at great cost to those who actually produce, and it is money whose sole purpose is to be reinvested to make more money. For me, this distinction goes some way to explaining a world where we can have simultaneously the problem of ‘too much money’, and millions earning less than one or two dollars a day. Clearly there needs to be change there, as the fundamental dark absurdity of such a world is obvious. Isn’t it?


If Marcuse is right, and I rather think he is, it renders much of current policy and debate a bit meaningless really. All of these solutions are looking at the “fundamental” roots of an issue that really has foundations much deeper still. And if we dig those up, what will we build instead? That is the perennial question.


My next piece will be about Marcuse’s vision of the Right to the City and the role of critical theory in building a new world…very exciting, even my cynical self can get somewhat excited about that. And I will.


The other very exciting note is that Howard Davies admitted that we’ve seen the failure of the efficient market hypothesis, a mainstay of economics for years. The idea that investors will act rationally? Well, obviously, that’s been proved laughable, so we really need to start all over again there. They’re creating something to take a look. I’m going to have to watch the aftermath of such an admission, I mean, where can they go after that while keeping within their framework? I have no idea, but do hope it will be interesting. It should be, I have immense respect for their intelligence. So we’re all rebuilding, though not quite together, and not quite for the same people. But it’s an interesting time to be alive.


(also posted on http://blackdaffodill.wordpress.com/)