From PBS:

Within a single generation, digital media and the World Wide Web have transformed virtually every aspect of modern culture, from the way we learn and work to the ways in which we socialize and even conduct war. But is the technology moving faster than we can adapt to it? And is our 24/7 wired world causing us to lose as much as we’ve gained?

In Digital Nation: Life on the Virtual Frontier, FRONTLINE presents an in-depth exploration of what it means to be human in a 21st-century digital world. Continuing a line of investigation she began with the 2008 FRONTLINE report Growing Up Online, award-winning producer Rachel Dretzin embarks on a journey to understand the implications of living in a world consumed by technology and the impact that this constant connectivity may have on future generations. “I’m amazed at the things my kids are able to do online, but I’m also a little bit panicked when I realize that no one seems to know where all this technology is taking us, or its long-term effects,” says Dretzin.

Joining Dretzin on this journey is commentator Douglas Rushkoff, a leading thinker and writer on the digital revolution — and one-time evangelist for technology’s positive impact. “In the early days of the Internet, it was easy for me to reassure people about what it would mean to bring digital technology into their lives,” says Rushkoff, who has authored 10 books on media, technology and culture. “Now I want to know whether or not we are tinkering with something more essential than we realize.”

Read more at PBS site

Last week’s Supreme Court ruling was positive in one respect: it made law out of what was already happening. While corporations earned “personhood” back in the 1860s when a (likely bribed) court clerk added this language into the margins of another court decision, they never quite had the rights of citizenship before. They already write our laws (through lobbies) elect our leaders (with money) and create public opinion (with money and PR). (If you’re interested in how and why that happened, please read my book Life Inc.) But they have always tended to do so by working around government’s efforts to limit their influence.

It was a losing game for a government by the people, of course, because almost no one gets into office without the kind of corporate assistance they need to pay back if they want to get into office again. Meanwhile, while corporations have enjoyed the benefits of personhood for over a century, they don’t suffer the main pitfalls: chiefly, death—but also despair, fatigue, and the need to feed their kids. They could outrun or at least outlast any effort to curb their influence. That’s how the railroads got to trample States’ rights to their own land, how GE got out of cleaning the Hudson River, and so on. They just wait, make a little progress, and then wait some more.

The era of Obama seemed to promise something different. Here was candidate who, at least initially, raised more cash through decentralized means than by appealing to large centralized corporations. As a candidate funded through small donations by real people, he seemed to offer an antidote to business as usual. If a few million people donating small amounts could, in aggregate, raise more money than a couple of hundred mega-corporations, then democracy stood a chance even as the PR and money driven spectacle it has become. Of course, Obama’s later donations turned out to be just as corporate as anyone else’s (if for no other reason than that they smelled a winner), and his hands almost as tied. He raised so much, he rejected the campaign finance tenets he had promised to adhere to back when he thought he’d be the underfunded candidate.

But the lasting sense was still that real people might be able to exercise at least some influence over who gets elected to office. Maybe, just maybe, the net and a new spirit of participation could play some small role in the democratic process and even make incremental progress in developing campaign finance reforms. Meanwhile, over the last thirty years, legislators on both sides of the aisle have sought to free themselves of corporate influence, and passed what legislation they could limiting corporate campaign contributions (especially by non-humans).

Luckily for corporations, the activist justices appointed by an earlier version of our corporatist government (the Bush 2 regime) have decided to reverse this process. Instead of acting as as stopgap to preserve constitutional rights, they are serving as a new legislative branch—rewriting the law by declaring it unconstitutional. It is a violation of corporations’ civil liberties to limit their influence over the political process. Even though they are artificial entities, with greater access to capital, infinite longevity, and no interest in or connection to humanity, we now guarantee them the right of free speech.

Of course, the right of free speech was created in order for human beings to have the ability to talk back to the corporation—the British East India Trading Company—that was running the colonies before the Revolutionary War. And it was upheld a century later so that laborers could organize unions or speak out against industrial abuses without fear of getting killed. It was a way for human beings to guarantee their ability speak out against largely systemic and structural repression. Now, that structural repression itself has that same guarantee.

All this does is make centralized government even less relevant to our plight as human beings. I admire folks like Larry Lessig for their faith in our ability to reclaim a government by the people, to use the net to expose and even reverse corporate influence in the political process, and for us to legislate a commons back into human affairs (even though it has been on the decline for the past 600 years).

But I’ve got more faith in our ability, as people, to rebuild our society and economy from the bottom up, without the participation or approval of a corporate-funded and corporate-driven central government. We can rebuild local economies based on the abundance of our labor and resources rather than the scarcity of centrally issued currency. We can rebuild local agriculture based on the quality of the topsoil, the features of the climate, and the nutritional needs of people rather than corn lobby laws. And we can rebuild our mechanisms for making meaning based on our shared hopes and values rather than those developed by PR firms to make us compete for false, individualistic goals.

In short, I say screw ‘em. Let’s do this ourselves.

Hipped via The Howling Hex

The first time I worked with a computer, way back in high school in the late ’70s, there was no such thing as software. To use the terminal, I had to write my own code and then input it into the computer. Only then would the computer be a typewriter, a calculator, a psychiatrist, or an elevator controller. A computer was an “anything” machine. Moreover, everything I wrote and saved—my “content”—was accessible and changeable by anyone else on the system—unless I specifically ordered otherwise. Media was no longer fixed, it was changeable. Not only ownership, but also the notion of finality itself had become arbitrary—even artificial.

Today, most of us think of computers—and all of our digital devices—in terms of the applications they offer: “What does it already do” instead of “what can I make it do?” Likewise, instead of teaching computer programming in school, we teach kids how to use Microsoft Windows. This difference is profound. It exemplifies the core difference between a society capable of thinking its way beyond its current limitations, and one destined to repeat the same mistakes until it drives itself to extinction.

Computers and networking technology present humanity with the greatest opportunity for renaissance since the invention of the 22-letter alphabet in about the second millennium BCE. But, just like then, we are squandering the opportunity. We are afraid of what it means to live in a world where we are responsible for how things turn out. We would prefer to live under the false assumption that the rules by which we live are given circumstances rather than realize they are creations of human beings and utterly up for discussion. Just as we understand our technologies to be limited by the software with which they are packaged, we understand our world as limited by the social and economic codes currently in operation.

The real power of media revolutions—such as the ones that occurred during the Axial Age when the alphabet was created and the Renaissance of the 1300’s when the printing press was invented—is that the new medium offers people an entirely new perspective with which to relate to their world. The alphabet led to monotheism and contractual law. The printing press led to the notion of individuality and the Enlightenment. The status quo not only comes under scrutiny; it is rewritten by those who have gained access to the tools of its creation.

We now have technology at our disposal that offers us even more profoundly meaningful access to this creation than ever before. However, we are squandering its real potential to patch up the holes in our failing economy, market culture, and social hierarchy. Instead of working together, consciously, to harness the power of new media and build an infrastructure capable of networking human society, enhancing cognition, and promoting a full-scale reconsideration of the assumptions on which our culture, politics, and economics are based, we assign this task to programmers working offshore, at the behest of companies looking to improve the short-term bottom line. This means using technology to increase human predictability, conformity, and compliance rather than their opposites. The effect of the net on us as people is, at best, an afterthought to be argued by intellectuals.

This wouldn’t be the first time a medium failed on its promise to offer human beings a new level of understanding and agency. Like the participants of failed cultural eras before our own, we have embraced the new technologies and literacies of our age without actually learning how they work and work on us. The Axial Age invention of the 22-letter alphabet did not lead to a society of literate Israelite readers, but a society of hearers, who would gather in the town square to listen to the Torah scroll read to them by a rabbi. Yes, it was better than being ignorant slaves, but it was a result far short of the medium’s real potential. Likewise, the invention of the printing press in the Renaissance led not to a society of writers, but one of readers; the presses were reserved for those with access. Broadcast radio and television were really just extensions of the printing press: expensive, one-to-many media that promote the mass distribution of the stories and ideas of a small elite at the center. We don’t make TV; we watch it.

Computers and networks finally offer us the ability to write. And we do write with them. But the underlying capability of the computer era is actually programming—which almost none of us really knows how to do. We simply use the programs that have been made for us, and enter our blog text in the appropriate box on the screen. We teach kids how to use software to write, but not how to write software. This means they have access to the capabilities given to them by others, but not the power to determine the value-creating capabilities of the technology for themselves.

Like those failed media renaissances before this one, we remain one step behind the capability actually being offered us. Only an elite—sometimes a new elite, but an elite nonetheless—gain the ability to fully exploit the new medium on offer. The rest learn to be satisfied with gaining the ability offered by the last new medium. The people hear while the rabbis read; the people read while those with access to the printing press write; we write, while our techno-elite program. As a result, a majority of people remain one dimensional leap of awareness and capability behind those who manage to monopolize access to the real power of any media age.

And it breaks my heart, it really does. I knew the implementation of a people-focused media would be a struggle, but I didn’t think so many otherwise intelligent humans would surrender their agency and awareness to the always-on drone of the corporate-driven net—at least not this quickly and totally. Still, I can’t bring myself to believe it is an inevitable state of human affairs. History can be changed, particularly before it has even occurred. We can break the cycle of illiteracy, and—at the very least—develop technologies and interfaces that promote rather than repress the awareness and access implicit in digital media.

I’m going to start writing—here and elsewhere—about what our new media does and doesn’t do. How it promotes asynchronous communication, letting people get “work” done when they want, rather than at someone else’s schedule—loosening the connection between human time and the value of labor. How it gives small producers on the periphery an opportunity to sell and exchange directly with others—rather than through central authorities. How it allows people to relegate the inhuman parts of themselves to the machines, while preserving the human for the real world. How, contrary to most of our experience, it actually gives us the freedom to restore human scale in our real lives, while engaging in non-human-scaled activities exclusively through our laptops, on an as-needed basis.

It’s not too late to shift from an “always on” digital culture to an “always alive” real culture, with occasional, digitally assisted transmissions for non-local and sub-human activities.

The digital should have made all of this more probable and more possible, not less.

Douglas Rushkoff is the author, most recently, of Life Inc: How the world became a corporation and how to take it back. He hosts The Media Squat on WFMU, and teaches media studies at The New School.

The national healthcare movement was doomed from the start. TV clips of shouting matches at town halls and fear-mongering by cynical politicians may be lamentable, but we are witnessing something more profound than the collapse of civic discourse. The failure of a movement that could rightly claim over 70 percent public acceptance just a month ago, exposes the inherent failure of movements of any kind to effectively address our society’s ills.

That’s right. Mass organization may just have been a twentieth century thing: collective actions of all sorts—good and bad—were responses to the corporatization of government and industy. As such, they took the form of the entities with whom they sought to do battle. But—like the top-heavy, highly abstracted creatures they were created to counter —they are proving utterly incapable of providing an alternative to what they would replace.

They did work for a time. When a corporation had the power to hire a police force to crush labor unrest, labor created its own collective, virtual structure to fight back: the union. When disenfranchised blacks faced Jim Crow laws, the Civil Rights movement gave them a tent under which to organize, a charismatic leadership to follow, and a clearly articulated cause to promote. It was branded. Marches could be scheduled, buttons could be worn. And it worked.

Between the 1960s and today, however, the mediaspace through which these causes disseminated ideas and gained momentum has changed. The best techniques for galvanizing a movement have long been co-opted and surpassed by public relations and advertising firms. Whether a movement is real or Astroturf has become almost impossible for even discerning viewers to figure out. The question often becomes the new content of the Sunday morning news panel, taking the place of whatever real issue might have been addressed.

But the problem is not simply that we’ve lost the ability to distinguish between real movements and cynically concocted fake ones. It’s that they are functionally indistinguishable. They may as well be the same thing.

In our current position, when disconnection from the real world is itself a cause for concern, movements only serve to disconnect us further from the actionable. They give us content for websites, language for our bumper stickers, and faces to put on our ideals. But they distract us from the matter at hand, and worse, turn our attention upward toward brand mythologies instead of immediately before us to the people and problems that need our time and energy. In the place of real connections to other people, we get the highly charged but ultimately fake connection to an image.

This is why progressives are so disillusioned by President Obama. He was never anything other than a centrist Democrat. But “brand Obama” gave his supporters—a movement in the fullest sense of the word—an abstracted ideal on which to focus. At least until his election. Meanwhile, the real requirements of progressive activists to contribute to their neighborhoods, promote local business and agriculture, invigorate failing public schools, were again left to someone else. This is not the failure of a president, but the flawed functionality of movements themselves.

For while civil rights, suffrage, and many other causes were largely won through traditionally organized, long-fought, top-down movements, the scale on which these great battles were waged is one no longer appropriate to the tasks at hand. In fact, it is the scale itself on which we have been attempting to orchestrate human affairs that is suspect.

Activists would do more to fight Big Agra simply by subscribing to their local Community Supported Agriculture groups. We’d more effectively pull the rug out from under a corrupt financial sector by simply investing in one another’s businesses—our own town restaurants and drug stores—instead of outsourcing our retirement savings to Wall Street. We could more easily re-invent public schools by volunteering our time to them directly, instead of sending our kids to private schools while we sign petitions for government to re-prioritize. And even in health care, we’d end up cutting everyone’s costs by commuting less, smoking less, landscaping less, and, yes, hating less. For each of these actions triggers different responses, undermines industries, requires new legal structures, and so on. It’s tiny, but it’s almost fractal in its impact.

For as the alternative is now teaching us, one size does not fit all. Americans, in particular, have been living under the premise that there’s something to buy, vote for, or believe in that will simply change everything. And it’s certainly still possible that government could develop the single payer system that pretty much everybody knows deep down would bring the best of industrial health care to the most people.

But just as we are learning that industrially produced food is not ultimately nutritious, a top-down, passionately executed, and highly branded movement is not ultimately effective.

In fact, by creating and branding a movement, even the most well-meaning activitsts are disconnecting from terra firma, and instead entering the world of marketing, public opinion, and language selection. Potential participants, meanwhile, are distracted from whatever on-the-ground, constructive and purposeful activity they might do. They get to join an abstracted movement, and participate by belonging instead of doing, or blogging instead of acting.

Douglas Rushkoff is the author, most recently, of Life Inc.: How the World Became a Corporation and How to Take It Back.

http://www.mediasquat.com/

Thursday, June 18th: Book reading and launch party

Blue Stockings, book reading 7pm
172 Allen St, New York, NY 10002

Sutra Lounge AfterParty – 8:30p onward
16 1st Ave, NYC.

Doug shows up around 18:15…

Media-Squat Radio airs every Monday at 7pm EDT
Listen on WFMU, iTunes, or Media Squat

From http://lifeincorporated.net/:

This didn’t just happen.

In Life Inc., award-winning writer, documentary filmmaker, and scholar Douglas Rushkoff traces how corporations went from a convenient legal fiction to the dominant fact of contemporary life. Indeed as Rushkoff shows, most Americans have so willingly adopted the values of corporations that they’re no longer even aware of it.

This fascinating journey reveals the roots of our debacle, from the late Middle Ages to today. From the founding of the chartered monopoly to the branding of the self; from the invention of central currency to the privatization of banking; from the birth of the modern, self-interested individual to his exploitation through the false ideal of the single-family home; from the Victorian Great Exhibition to the solipsism of MySpace; the corporation has infiltrated all aspects of our daily lives. Life Inc. exposes why we see our homes as investments rather than places to live, our 401k plans as the ultimate measure of success, and the Internet as just another place to do business.

Most of all, Life Inc. shows how the current financial crisis is actually an opportunity to reverse this 600-year-old trend, and to begin to create, invest and transact directly rather than outsourcing all this activity to institutions that exist solely for their own sakes.

Corporatism didn’t evolve naturally. The landscape on which we are living – the operating system on which we are now running our social software – was invented by people, sold to us as a better way of life, supported by myths, and ultimately allowed to develop into a self-sustaining reality. It is a map that has replaced the territory.

Rushkoff illuminates both how we’ve become disconnected from our world, and how we can reconnect to our towns, to the value we can create, and mostly, to one another. As the speculative economy collapses under its own weight, Life Inc. shows us how to build a real and human-scaled society to take its place.

In Life Inc, Douglas Rushkoff presents the unnerving, unbelievable, but ultimately undeniable proof that our world has been overtaken by an absolutely artificial economy.

He shows how our most fundamental assumptions about money and commerce are actually false ones – artifacts of a 400-year-old plan by a waning aristocracy to maintain control of Western Europe. Although the architects of this corporatism have long since passed on, we still live in a landscape defined by their plans and have internalized their values as our own.

Taking on some of the biggest assumptions of our age, this is a book filled with dangerous ideas and rather unspeakable heresies:
# Money is not a part of nature, to be studied by a science like economics, but an invention with a specific purpose.
# Centralized currency is just one kind of money – one not intended to promote transactions but to promote the accumulation of capital by the wealthy.
# Banking is our society’s biggest industry, and debt is our biggest product.
# Corporations were never intended to promote commerce, but to prevent it.
# The development of chartered corporations and centralized currency caused the plague; the economic devastation ended Europe’s most prosperous centuries, and led to the deaths of half of its population.
# The more money we make, the more debt we have actually created.

Most importantly, Rushkoff shows how this moment of financial crisis is actually an opportunity to reinstate commerce and communities based in creating value for one another, rather than continuing to extract it for the benefit of institutions that no longer exist.

“Life Inc”’s Introduction and Chapter One are online at:
http://lifeincorporated.net/

http://www.boingboing.net/2009/05/07/the-economist-gets-s.html

http://www.boingboing.net/2009/05/07/debt-is-not-a-good-p.html

A description of the event from the I.D. Project Website:

Alternative currency systems naturally encourage cooperation, reciprocation, self-reliance, and mutual aid. These four elements are the foundation of social interdependence and socio-economic solidarity. Come learn about starting a complementary currency and how new forms of exchange build value in your community.

Join us for a panel discussion featuring Alex Gordon-Brander, Charles Eisenstein, and Douglas Rushkoff. Q&A to follow introductions and explanations.

Friday May 15, 2009, 8pm-10pm
Lila Center, Interdependence Project
302 Bowery @ Houston St., 3rd fl.
F/V, D, 6, R/W trains all nearby
$10 or $5 (students/unemployed/monthly IDP donors)

Money should not keep you away!
Let us know if you can’t afford the cost and would like to attend.
Contact info@theidproject.com

The I.D. Project also has a group in Portland, Oregon!

More info on Doug’s show, including past episodes:
mediasquat.com

Doug tweets:

StreetsBlog Aaron Naparstek joins me on MediaSquat: WFMU.org, 7pm, and itunes WFMU. I plan to defend the so-called Dark Ages.

Should be interesting listening, especially for folks who were intrigued by Doug’s recent essays on the economy (”Let It Die,” “Hack Money, Hack Banking”) when he touched on current scholarship regarding life and commerce in the late Middle Ages.

April 16, 2009

I’ve been trying to figure out exactly why President Obama’s approach to the economic crisis upsets me so much, so regularly, and I think I figured it out.

His impulse—perhaps as someone with more faith in the power of centralized, top-down decision-making than I have—is to fix our economic problems by supporting existing institutions. In the president’s view, the best approach now is to pump some necessary short-term assets into flagging institutions to help them make it through the rough patches in the economic road, and then get them to pay it back to the government once times are better. That’s the approach he’s taken to the banks, the automotive industry, and even the insurance industry.

What the Obama Administration doesn’t seem to understand is that the institutions they are attempting to prop up are the very ones whose solvency depends on the continuing extraction of wealth and value from the real people and places making up America.

Take the ongoing bailout of AIG. The American International Group is a big hedge fund masquerading as an insurance company, of sorts. Their fourth quarter loss last year of $61.7 billion was the largest loss by any company, ever. The core business of AIG, and the reason the government feels it is crucial to keep them afloat at taxpayer expense, is insuring corporations against lawsuits. Were AIG to go out of business, big enterprises like offshore oil rigs, amusement parks, and pharmaceutical firms might temporarily lose their insurance coverage.

What does that really mean? It means that larger corporations would lose a certain amount of their unfair leverage over smaller concerns. The handmade toy industry, for example, made up of thousands of individual craftspeople and cottage businesses, has been devastated by the Chinese lead paint debacle. It’s not that the domestic handmade toy industry has anything to do with corporate outsourcing to China. In fact, they represent the alternative to conglomerate-licensed, mass-produced, and outsourced toy manufacturing.

But the government, in its infinite wisdom and unflagging bias towards central control, saw the lead paint episodes as a call for regulating agencies to create industry standards that only larger corporations could meet. The tiniest toy producers with no history of lead contamination in their handcrafted products must attain costly approval from testing laboratories in order to sell their goods. The cost is prohibitive unless the manufacturer is producing very high quantities of toys—quantities on the scale that Mattel makes, not Joe the woodcarver.

Likewise, AIG insures big companies so that they no longer have to worry so much about the human damage their products and practices inflict. The institution itself provides conglomerates with the instruments they need to maintain their monopolies over industries. Of course, AIG went ahead and invested their corporate clients’ fees in really stupid, high-risk paper. And then they borrowed a bunch of money and invested it, too, in really stupid high-risk paper, in ways that could justifiably be called illegal. As a result of these bad decisions, they ended up owing much, much more money than they had, and became utterly insolvent. So then, ostensibly to protect the big companies depending on AIG for their insurance policies, the government came in and bailed them out. Repeatedly.

Then, when a Senate committee finally starts asking questions about all this, we all focus on little inconsistencies: like a few hundred million dollars in bonuses paid to the very brokers who made the decisions of questionable legality that put AIG in its financial mess in the first place, the executives testify about the life-threatening emails his employees are receiving. This circumvents all discussion about AIG’s real place in the economic fabric of corporatism. The truth is that lion’s share of AIG’s bailout funds—close to $200 billion of public money—went straight to European investment banks and other financial institutions. $12.9 billion directly to Goldman Sachs, in fact, a firm that claims an AIG failure would not have had a major impact on their own profitability. So why should taxpayers fork over $12.9 billion to them for still unspecified reasons?

The bonuses themselves were absolutely a red herring, and accounted for a tiny fraction of the American public’s recent contribution to the company. (So are the life insurance policies the company underwrote.) It’s not just that you and me and our children and grandchildren will be paying for these criminals’ bonuses for our entire lives; it’s that our futures are being spent to keep in place the companies that are institutionally biased towards preventing us from living productively in a safe and clean world.

And all of this is occurring because of a government bias towards central administration of economic affairs, and unexamined allegiance to larger corporate players.

The GM bailout, for example, has almost nothing to do with saving a Detroit motor company, and everything to do with saving the Treasury. The government’s Pension Benefit Guaranty Corporation is obligated to guarantee the pensions of GM employees and former employees if the company goes bankrupt. As of December 31, according to its 10-K report (as best I can understand it as a layperson) the plans had $84.5 billion in assets and $98.1 billion in liabilities. This means $14 billion unaccounted for. The Pension Benefit Guaranty Corp has never had to come up with anything close to that much cash. The largest bailout in their history was about $7.5 billion for United Airlines employees when that company went bankrupt.

But how many tens of billions is the Obama administration willing to pour into General Motors to avoid the 14 billion dollars it would have to raise for guaranteed employee pensions? And if the company were liquidated sooner rather than later, wouldn’t there be more assets to apply to these expenses (and repay bondholders who put up the money for employee health benefits)?

What if the billions were spent promoting the research and development of leaner, more innovative companies already working on transportation alternatives? Or, to be even more direct, how about looking at the way government subsidies converted public space (our streets) into conduits for private vehicles (automobiles) at the expense of mass transit (streetcars) in order to create demand for these highly inefficient vehicles, anyway. When does it become too costly to build an entire society around a machine that doesn’t really work?

Indeed, it would be much cheaper to simply build towns and supply chains less dependent on automobile travel, stop penalizing companies capable of innovating effectively, and repair laws on the books so they aren’t so biased in favor of gigantic corporate players. Almost no one questions the need for government spending as economic stimulus. But as long as we’re doing it, why not invest in people, rather than the oversized, over-centralized firms for whom people are just another resource to be exploited?

For a whole lot less cash investment, Mr. Obama could be sowing the seeds of a new economy, one that functions independently of government subsidy and one that creates jobs and opportunity for the bottom up.

To do so, however would require him to have as much faith in the industrious, collaborative spirit of Americans to rebuild America as he did in our ability to get him into office.

Longtime Arthur columnist Douglas Rushkoff has just finished his life’s work, “Life Inc: How the world became a corporation and how to take it back,” to be published June 2, 2009 by Random House. (Pre-order info: Amazon). His talk radio show, Media Squat Radio, broadcasts Mondays 7-8pm EDT on WFMU. Streams and archived shows at www.wfmu.org and iTunes.

March 27, 2009

I don’t believe Tim Geithner’s toxic asset auction plan will work to change the basic problem of bank insolvency, but that doesn’t stop me from appreciating the sheer brilliance and post-partisan nature of the approach.

Most commentators and economists are focusing on the way the plan distributes risk, perhaps unfairly—with the government guaranteeing most losses while giving hedge funds and investors half of the gains. But that misses the point of the whole thing.

The underlying problem with the toxic assets currently on the books of most banks is that no one knows quite how to value them. (Their market value is very low right now—lower than most believe it should be. This is what is meant by “mark to market.” In time, when things are better and the world is generally less risk-averse, they should be worth more. Most banks need their balance sheets to look better now, and they can’t while they have these—perhaps artificially—deflated securities on their books).

Were the government to simply go in and buy them all, the Treasury Department would have to hire a huge staff of accountants to look at each and every toxic asset—every single loan package and bond and bond fund, and come up with what it is worth. If that were even possible.

While this would give government all the winnings if and when the securities become worth what they are really worth, they would be saddled with a huge actuarial task, and would surely arrive at numbers that banks feel are unfairly underestimating the securities’ true worth.

Geithner’s plan is less about spreading risk than it is about finding a more efficient way to evaluate all those issues. So why not crowdsource?

The government assumes a hunk of the risk—the hunk that no one else wants to assume—while letting a huge army of investors bid and fight over the profit potential. His hope is that those people will do the necessary homework on all this stuff, since it is some real money they are staking.

Thus, Obama’s team comes up with entrepreneurial socialism, or market-based welfare. The scores of investors bidding on all these securities become a giant unpaid (but insured) bunch of bidders.

That’s the brilliant part.

The stupid part is that it’s not a real marketplace, so the invisible hand of collective market genius just won’t take effect. While the market may, in the best of circumstances, have some of the self-regulatory features of nature, we can’t expect it to act like nature when so many of the underlying rules have been rigged. Auction-determined prices will not reflect underlying value when some large percent of risk has been removed. And the percentage of risk assumed by government remains the same, regardless of the riskiness of the toxic asset. So, playing the game properly, investors should go for the highest odds instead of the lowest. Unless they don’t.

In the end, if these folks really and truly believed in the wisdom of the crowd, they would accept the fact that the market no longer values this stuff in the present.

Banks made a bad bet. Over time, it seems, banks came to believe that the terrible assets they were pawning on the rest of us actually had some value. They broke the cardinal rule of pyramid scheming and decided to maintain an account in the pyramid. They believed their own hype, or the guys who made up the hype died, leaving a generation of bankers who forgot how the scam of hand-me-down interest was supposed to work. It was actually a game hot potato: you’re supposed to get rid of it as fast as possible, and make your money on the commissions.

The fact that they were left holding stuff as crappy as the rest of us is the price of doing business.

The real market has crowdsourced this fact already.

Longtime Arthur columnist Douglas Rushkoff has just finished his life’s work, “Life Inc: How the world became a corporation and how to take it back,” to be published June 2, 2009 by Random House. (Pre-order info: Amazon). His talk radio show, Media Squat Radio, broadcasts Mondays 7-8pm EDT on WFMU. Streams and archived shows at www.wfmu.org and iTunes.

March 20, 2009

I’ve received a ton of great email and response from last week’s piece ["Let It Die"] on letting the banks die and letting the market go down another 70 percent. My commentary also generated some confusion, though, so I’d like to clarify and expand on a few points. (I’ll do this again on WFMU on Monday evening, when I’ll have the opportunity to take some calls and actually converse.)

First off, and I can’t stress this enough: Commerce is good. Commerce is not the problem. Monopolies are.

Except in a few rare cases, corporate charters and centralized currency were never intended to promote commerce. They were intended to prevent locals and non-chartered entities from creating and exchanging value. They are not extensions of the free market, but efforts at extracting value from the free market. Corporate monopoly charters were extended to a king’s favorite companies in return for shares. Then, no one else was allowed to do business in that industry. Centralized currency forced businesses to run their revenue through the king’s coffers. Likewise, in its current form, centralized currency is more akin to a ponzi scheme of interest rates, each borrower paying up to the banker above him.

Both of these innovations—corporate charters and centralized currency—tend towards resource exploitation rather than innovation. They are extractive in nature, not productive. And, more importantly, these particular innovations cause wealth to end up being generated through speculation rather than creation. They cause scarcity, not abundance. Over time, it becomes easier to make money by having money than by doing anything. And this was the pure, stated intent of centralized currency and banking in the early Renaissance: to keep the wealthy wealthy, in the face of a rising merchant class.

This isn’t some extremist perspective. It’s just historical fact, though largely forgotten and seemingly refuted by our collective false memory of the Renaissance’s greatness. If you’re interested in finding out more about this, or seeing the evidence on which my research is based, take a look at the best historians writing about the era: Fernand Braudel (The Wheels of Commerce: Civilization and Capitalism: 15th-18th Century, Volume 2, Univ. of California Press, 1992), Carlo M. Cipolla (Before the Industrial Revolution: European Society and Economy, 1000-1700, WW Norton, 1994) or Bernard A. Lietaer, whose book On Human Wealth used to be available for free download off his site, but doesn’t seem to be anymore. In these books, you can find out about the sustainable local economic systems of the Late Middle Ages, learn that the Black Plague actually began after mandated centralized currency had impoverished Europe, and find support of my contention that cathedrals were built with local money before the Renaissance, not Vatican money during the Renaissance.

For reasons I cannot understand, people seem to think that my explaining this phenomenon somehow means I want us to go back to a hunter-gatherer stage. Or that I long nostalgically for a return to a late-middle-ages lifestyle. Or that I am somehow renouncing my earlier enthusiasm for new technology and media.

Nothing of the kind.

The cyberpunk ethos was actually based in the very same DIY (do-it-yourself) ethos I’m espousing now. Cyberpunk was about reclaiming technology, making modifications oneself or with one’s friends, generating value from the bottom up, exchanging goods and services in an alternative economy. I’m not saying we get rid of money—only that we learn to make it ourselves, as communities. I’m not saying we get rid of banks—only that we stop outsourcing our banking to Wall Street firms that mean only to extract value from our communities.

I have always admired hackers—computer hackers and social hackers. I’m just trying to expand the range of technologies and institutions we feel ready and willing to hack. We should hack money. We should hack banking. We should hack business. This doesn’t necessarily mean hacking the dollar, which is just one kind of closed source currency. We should hack money by coding new kinds. Bank hacking has been around for a long time—it’s just that credit unions and other local or community-based bank models were driven down by the anti-competitive practice of banking conglomerates. It’s time for those institutions to be renewed, as well.

When I say it’s okay if the Dow Jones goes down another 70 percent, I’m not calling for an apocalypse. I’m calling for the re-balancing of the speculative economy. The speculative economy owns, represents and controls a disproportionate amount of money. There are simply too many investors, traders, and brokers trying to get rich off moving pieces of paper back and forth. These pieces of paper represent shares in companies (or derivatives based on the value of these shares), and trade at valuations unsustainable by real world commerce and activity. That’s why it’s a good thing, and not a bad thing, for these valuations to move back down to a level corresponding to the revenue stream of the company. This helps the company make decisions consonant with the needs of its customers and employees—its real culture—rather than people who invest from afar, with little personal human stake in its affairs.

The banking bailout is a fiasco because it is taking money from future generations to restore the lending-based economy. I believe it would be cheaper and better to use a tiny fraction of the money to actually employ people, and to educate communities in how to rebuild local economies.

This doesn’t necessarily mean the global economy has to go away—just that it be balanced by local activity. This doesn’t necessarily mean computers go away, or that we lose our internet. We can still work in big groups making really complex stuff. We can still enjoy cities and farms, Radiohead and Britney. We can still ship refrigerators from South Korea to Australia.

It’s just that this activity would be based less on the requirements of corporate debt structures than it would on actual supply and demand. It would be a much more efficient economy, by virtue of being one that would require people to create real value. I think it’s that final part that scares people so much at the mere mention of such reforms: they think the last time people actually created value was back in the Middle Ages, when folks made shoes or raised chickens.

Well, there are many different things people can do to create value for one another. And a few people can still be bankers and brokers. Just not so many of them. Maybe about 70 percent less.

Longtime Arthur columnist Douglas Rushkoff has just finished his life’s work, “Life Inc: How the world became a corporation and how to take it back,” to be published June 2, 2009 by Random House. (Pre-order info: Amazon). His talk radio show, Media Squat Radio, broadcasts Mondays 7-8pm EDT on WFMU. Streams and archived shows at www.wfmu.org and iTunes.

“Final Bell”
by Arik Roper

(UPDATE: “Hack Money, Hack Banking” by Douglas Rushkoff, the March 20 follow-up to “Let It Die,” is available here.)

LET IT DIE
by Douglas Rushkoff

March 15, 2009

With any luck, the economy will never recover.

In a perfect world, the stock market would decline another 70 or 80 percent along with the shuttering of about that fraction of our nation’s banks. Yes, unemployment would rise as hundreds of thousands of formerly well-paid brokers and bankers lost their jobs; but at least they would no longer be extracting wealth at our expense. They would need to be fed, but that would be a lot cheaper than keeping them in the luxurious conditions they’re enjoying now. Even Bernie Madoff costs us less in jail than he does on Park Avenue.

Alas, I’m not being sarcastic. If you had spent the last decade, as I have, reviewing the way a centralized economic plan ravaged the real world over the past 500 years, you would appreciate the current financial meltdown for what it is: a comeuppance. This is the sound of the other shoe dropping; it’s what happens when the chickens come home to roost; it’s justice, equilibrium reasserting itself, and ultimately a good thing.

I started writing a book three years ago through which I hoped to help people see the artificial and ultimately dehumanizing landscape of corporatism on which we conduct so much of our lives. It’s not just that I saw the downturn coming—it’s that I feared it wouldn’t come quickly or clearly enough to help us wake up from the self-destructive fantasy of an eternally expanding economic frontier. The planet, and its people, were being taxed beyond their capacity to produce. Try arguing that to a banker whose livelihood is based on perpetuating that illusion, or to people whose retirement incomes depend on just one more generation falling for the scam. It’s like arguing to Brooklyn’s latest crop of brownstone buyers that they’ve invested in real estate at the very moment the whole market is about to tank. (I did; it wasn’t pretty.)

Now that the scheme we have mistaken for the real economy is collapsing under its own weight, however, it’s a whole lot easier to make these arguments. And, if anything, it’s even more important for us to come to grips with the fact that the system in peril is not a natural one, or even one that we should be attempting to revive and restore. The thing that is dying—the corporatized model of commerce—has not, nor has it ever been, supportive of the real economy. It wasn’t meant to be. And before we start lamenting its demise or, worse, spending good money after bad to resuscitate it, we had better understand what it was for, how it nearly sucked us all dry, and why we should put it out of our misery.

Chartered Corporations

Back in the good ol’ days—I mean as far back as the late middle ages—people just did business with each other. As traveling got easier and people got access to new resources and markets, a middle class of merchants and small businesspeople started to get wealthy. So wealthy that they threatened the power of the aristocracy. Monarchs needed to come up with a way to stabilize their own wealth before the free market unseated them.

They invented the corporate charter. By granting an exclusive charter, a king could give one of his friends in the merchant class monopoly control over a region or sector. In exchange, he’d get shares in the company. So the businessperson no longer had to worry about competition—his position at the top of the business hierarchy was locked in place, by law. And the monarch never had to worry about losing his authority; businesses with crown-guaranteed charters tend to support the crown.

But this changed the shape of business fundamentally. Instead of thriving on innovation and progress, corporate monopolies simply sought to extract wealth from the regions they controlled. They didn’t need to compete, anymore, so they just sucked resources from places and people. Meanwhile, people living and working in the real world lost the ability to generate value by or for themselves.

For example: In the 1700s, American colonists were allowed to grow corn but they weren’t allowed to do anything with it–except sell it at fixed prices to the British East India Trading Company, the corporation sanctioned by England to do business in the colonies. Colonists weren’t allowed to sell their cotton to each other or, worse, make clothes out of it. They were mandated, by law, to ship it back to England where clothes were fabricated by another chartered monopoly, then shipped back to America where they could be purchased. The American war for independence was less a revolt against England than a revolt against her chartered corporations.

The other big innovation of the early corporate era was monopoly currency. There used to be lots of different kinds of money. Local currencies, which helped regions reinvest in their own activities, and centralized currencies, for long distance transactions. Local currencies were earned into existence. A farmer would grow a bunch of grain, bring it to the grain store, and get receipts for how much grain he had deposited. The receipts could be used as money—even by people who didn’t need grain at that particular moment. Everyone knew what it was worth.

The interesting thing about local, grain-based currencies was that they lost value over time. The people at the grain store had to be paid, and a certain amount of grain was lost to rain or rodents. So every year, the money would be worth less. This encouraged people to spend it rather than save it. And they did. Late Middle Ages workers were paid more for less work time than at any point in history. Women were taller in England in that era than they are today—an indication of their relative health. People did preventative maintenance on their equipment, and invested in innovation. There was so much extra money looking for productive investment, that people built cathedrals. The great cathedrals of Europe were not paid for with money from the Vatican; they were local investments, made by small towns looking for ways to share their prosperity with future generations by creating tourist attractions.

Local currencies favored local transactions, and worked against the interests of large corporations working from far away. In order to secure their own position as well as that of their chartered monopolies, monarchs began to make local currencies illegal, and force locals to instead use “coin of the realm.” These centralized currencies worked the opposite way. They were not earned into existence, they were lent into existence by a central bank. This meant any money issued to a person or business had to be paid back to the central bank, with interest.

What does that do to an economy? It bankrupts it. Think of it this way: A business borrows 1000 dollars from the bank to get started. In ten years, say, it is supposed to pay back 2000 to the bank. Where does the other 1000 come from? Some other business that has borrowed 1000 from the bank. For one business to pay back what it owes, another must go bankrupt. That, or borrow yet another 1000, and so on.

An economy based on an interest-bearing centralized currency must grow to survive, and this means extracting more, producing more and consuming more. Interest-bearing currency favors the redistribution of wealth from the periphery (the people) to the center (the corporations and their owners). Just sitting on money—capital—is the most assured way of increasing wealth. By the very mechanics of the system, the rich get richer on an absolute and relative basis.

The biggest wealth generator of all was banking itself. By lending money at interest to people and businesses who had no other way to conduct transactions or make investments, banks put themselves at the center of the extraction equation. The longer the economy survived, the more money would have to be borrowed, and the more interest earned by the bank.

Financial Meltdown

Which is pretty much how things have worked over the past 500 years to today. So what went wrong? Nothing. The system worked exactly as it was supposed to. The problem was that after America’s post WWII expansion, there was really no longer any real growth area in the economy from which to extract wealth. We were producing and consuming about as much as we could. Almost no commercial activity was occurring outside the corporate system. There was no room left to grow. Sure, outsourcing, lay-offs, and technology created some efficiencies, but wars, rising costs of health care, and exchange rates essentially offset any gains.

Making matters worse, all that capital that the wealthy had accumulated needed markets—even fake markets—in which to be invested. There was a ton of money out there—just nowhere to put it. Nothing on which to speculate.

The dot.com boom seemed to offer the promise of a new market, but it fizzled almost as quickly as it rose. So speculators turned instead to real assets, like corn, oil, even real estate. They started investing speculatively on the things that real people need to stay alive. What real people didn’t understand was that there is no way to compete against speculators. Speculators aren’t buying homes in which to live—they are buying houses to flip. Speculators aren’t buying corn to eat or oil to burn, but bushels to hoard and tankers to park off shore until prices rise. The fact that the speculative economy for cash and commodities accounts for over 95% of economic transactions, while people actually using money and consuming commodities constitute less than 5% tells us something important. Real supply and demand have almost nothing to do with prices. We do not live in an economy, we live in a Ponzi scheme.

Luckily for us, the banks, and the speculators depending on them, made a bad wager: they bet on our continuing capacity to provide a reality on which to base their highly leveraged schemes. We just couldn’t do it. They put us between a rock and a hard place. With George W’s help, they sold us on the notion of home ownership as a prerequisite to the American dream. And they created a number of loan products which made it look as if we could actually afford over-priced homes. The banking industry spent hundreds of millions of dollars lobbying for laws making bankruptcy difficult or impossible for average people to accomplish—while simultaneously selling average people loans that they would never be able to pay back.

The banks didn’t really care, anyway, since they never meant to keep these loans. They simply provided the cash to mortgage companies, who then packaged the loans. In return for putting up the original cash, the banks also won the right to underwrite the sale of those mortgage packages to investors—investors like pension funds, retirement funds, or you and me. Get it? The banks get all the interest, but we put up all the money. Our retirement accounts and pension funds invest in the very mortgages that we can’t pay back. The bank collects any interest, playing both sides of the equation but responsible for neither.

And when the whole scheme begins to break down, what do we do? We try to bail out the very banks that created the mess, under the premise that we need these banks in order for business to come back, since only banks can lend the capital required for businesses to flourish.

Yes, It is Wrong

President Obama may be smarter than most of us, but he’s still attempting to rescue the very institutions that robbed us in the first place. He’s not a socialist, as conservatives may be arguing, but he is a corporatist. Using future tax dollars to fund government job programs is one thing. Using future tax dollars to give banks more money to lend out at interest is robbing from the poor to pay the rich to rob from the poor.

As painful as it might be to watch, and as irritating as it might be to those with shrinking retirement savings, the collapse of the centralized corporate economy is ultimately a good thing. It makes room for a real economy to rise up in its place. And while it may be temporarily uncomfortable for the rich, and even temporarily devastating for the poor, it may be the fastest and least violent way to dismantle a system set in place for the benefit of 14th Century monarchs who have long since left this earth.

If the corporate supermarket chain’s debt structure renders it incapable of stocking its shelves this spring, this may be the wake-up call that consumers need to finally subscribe to a Community Supported Agriculture farmer. If the former associate fund analyst at Lehman realizes that he is unable to get a job not just because his industry is contracting but because his work day creates no real value for anyone at all, he will be forced to learn how to do something that does. If an urban elite parent realizes he can no longer pay private school tuition for his kids, maybe he’ll consider donating to public school the time he would have spent earning that tuition.

In short, the less we are able to depend on business-as-usual to provide for our basic needs, the more we will be forced to provide them for ourselves and one another. Sometimes we’ll do this for free, because we like each other, or live in the same community. Sometimes we’ll exchange services or favors. Sometimes we’ll use one of the alternative, local currencies coming into use across the country as Central bank-issued currencies become too hard to get without a corporate job.

Deprived of centralized banks and corporations, we’ll be forced to do things again. And in the process, we’ll find out that these institutions were not our benefactors at all. They were never meant to be. They were invented to mediate transactions between people, and extract the value that would have passed between us. Far from making commerce or industry more efficient, they served to turn the real world into a set of speculative assets, and real people into debtors.

The current financial crisis is the best opportunity we have had in a very long time for a bloodless revolution against the faceless fascism under which we have been living, unaware, for much too long. Let us seize the day.

(UPDATE: “Hack Money, Hack Banking” by Douglas Rushkoff, the March 20 follow-up to “Let It Die,” is available here.)

Longtime Arthur columnist Douglas Rushkoff has just finished his life’s work, “Life Inc: How the world became a corporation and how to take it back,” to be published June 2, 2009 by Random House. (Pre-order info: Amazon). His live talk radio show, Media Squat Radio, airs Mondays 7-8pm EDT on WFMU. Streams at www.wfmu.org and iTunes.

from Arthur Magazine No. 31, Oct 2008

I poked my head up from writing my book a couple of months ago to engage with Arthur readers about the subject I was working on: the credit crunch and what to do about it [see "Riding Out the Credit Crisis" in Arthur No. 29/May 2008]. I got more email about that piece than anything I have written since a column threatening to defect from the Mac community back in the Quadra days.

Many readers thought I was hinting at something under the surface—a conspiracy, of sorts, to take money from the poor and give it to the rich. It sounded to many like I was describing an economic system actually designed—planned—to redistribute income in the worst possible ways.

I guess I’d have to agree with that premise. Only it’s not a secret conspiracy. It’s an overt one, and playing out in full view of anyone who has time (time is money, after all) to observe it.

The mortgage and credit crisis wasn’t merely predictable; it was predicted. And not by a market bear or conspiracy theorist, but by the people and institutions responsible. The record number of foreclosures, credit defaults, and, now, institutional collapses is not the result of the churn of random market forces, but rather a series of highly lobbied changes to law, highly promoted ideologies of wealth and home ownership, and monetary policies highly biased toward corporate greed.

It all started to make sense to me when I attended Learning Annex’s Wealth Expo earlier this year—a seminar where teachers of The Secret, the hosts of Flip This House, George Foreman, Tony Robbins and former Fed Chairman Alan Greenspan [pictured above in banner from Learning Annex website] purportedly taught the thousands in attendance how to take advantage of the current foreclosure boom.

Using language borrowed from today’s more money-centric New Age spiritualists, as well as the get-rich-quick books of the early 1900s “New Thought Movement” on which these pyramid schemes are based (such as Elizabeth Towne’s The Science of Getting Rich or Napoleon Hill’s Think and Grow Rich), they encouraged their mostly black audience to get on the ladder to success by purchasing educational DVDs and wealth-building “systems.”

These courses all promised to teach the properly motivated American how to find homeowners down on their luck and approaching foreclosure, as well as how to buy those homes from under them and resell them at a great profit. What made the spectacle doubly outrageous were not the dancing girls or indoor fireworks; it was the fact that most of the participants were themselves desperate former homeowners, whose illnesses, divorces, fires, and floods had put them in to foreclosure, too. Get it? They were paying to learn how to feed on people just like themselves.

While most of the speakers and seminar leaders might be expected to show up at a Learning Center pyramid scheme convention, what the hell was Alan Greenspan doing there? First off, he was trying to make some money. He had a new book out, and this was a good way to pitch it to a few thousand potential buyers at once. On a deeper level, though, we can only assume he was there to pump some much-needed air into the collapsing real estate balloon. These poor folks might just be dumb enough to try to borrow some money to purchase foreclosed properties from banks and other lenders that had themselves made disastrous investments during Greenspan’s tenure. His presence lent credibility to the current, lowbrow version of the same scam over which he presided as Fed Chair.

The whole show was a fitting metaphor for the credit crunch, a misnamed sabotage of the credit system by institutions with the problem of too much, not too little, money to put to work. As I explained in my last column, banks and credit institutions simply had more money on hand than they had people who were qualified to borrow it. So they changed the law to create more demand for the money they had in oversupply.

The banking industry lobbied to reduce the remaining regulations on its lending practices. They won a repeal of the Glass-Steagall Act, a law enacted just after the depression as a way to prevent regular savings banks from doing risky things with depositors’ money. A “Chinese Wall” was put in place between banks and investment brokerages, preventing conflicts of interest and limiting financial institutions’ power over both the lending and borrowing sides of the same transactions. With the repeal of the Act in 1999, banks were now free use their capital to lend money to unworthy borrowers, package those loans, and then underwrite the sale of those loans to other institutions—such as pension funds.

Meanwhile, the credit industry spent over $100 million lobbying to change bankruptcy laws. Although a corporation in bankruptcy still has its debts erased, the regulations surrounding personal bankruptcy were changed so that personal debts stay on the books forever. The logic they used to argue for the change was that debtors are smart, gaming the system to buy beyond their means and then declaring bankruptcy at the last minute.

But the very same creditors knew that just the opposite was true—as evidenced by their sales tactics and marketing campaigns. They turned to a social science known as behavioral finance—the study of the way people consistently act against their own best financial interests, as well as how to exploit these psychological weaknesses when peddling questionable securities and products.

These are proven behaviors with industry-accepted names like “money illusion bias,” “loss aversion theory,” “irrationality bias,” and “time discounting.” People do not borrow opportunistically, but irrationally. As if looking at objects in the distance, they see future payments as smaller than ones in the present—even if they are actually larger. They are more reluctant to lose a small amount of money than gain a larger one—no matter the probability of either in a particular transaction. They do not consider the possibility of any unexpected negative event occurring between the day they purchase something and the day they will ultimately have to pay for it.

Credit card and mortgage promotions are worded to take advantage of these inaccurate perceptions and irrational behaviors. “Zero percent” introductory fees effectively camouflage regular interest rates up to 20 or 30 percent. Lowering minimum payment requirements from the standard 5 percent to 2 or 3 percent of the outstanding balance looks attractive to borrowers. The corresponding increase in interest charges and additional years to pay off the debt will end up costing them more than triple the original balance. It is irrational for them to make purchases and borrow money under these terms, or to prefer them to the original ones. But they do. We do. This behavior is not limited to the trailer park renters of the rural south, but extends to the highly educated, highly leveraged co-op owners of the Northeast.

Combine this with George Bush’s campaign to convince Americans that home ownership is a virtue—itself a revival of a strategy intended to assuage the resentment of veterans returning from World War II—and you end up with a population willing to do almost anything to “get into” a house, and a mortgage lending industry ready to provide the instruments capable of doing it. Once the mortgage rates shifted and homeowners began to default, the people who created the mess were largely safe. Bankers and high-salaried directors received their bonuses for a job well done, and the only people who lost money were the hapless shareholders—people like you and me—who might own some supposedly low-risk bank stocks. And, of course, all the people who were holding mortgages bigger than the total value of their homes.

The fiction is that the money just “vanished.” Financial newspapers and cable TV business channels say that the value of holdings has been “erased” by market downturns, but it hasn’t been erased at all. It’s on the negative side of one balance sheet, and the positive side of someone else’s. While Goldman Sachs was underwriting mortgage-backed securities of dubious value, it was simultaneously selling them short. Take the example of John Paulson, a trader who earned himself $4 billion and his funds another $15 billion in one year by betting against the housing market. For help predicting the extent of the downturn, Paulson hired none other than Alan Greenspan as an advisor to his hedge fund. The Fed Chairman who encouraged the housing bubble even after it began to crash is now cashing in on the very devastation his policies created. The money did not disappear at all. It merely changed hands. People’s homes were just a medium for the redistribution of wealth.

That’s because the biggest industry in America—maybe the only real industry left—is credit itself: money is lent into existence by the central bank, and then lent again to regional banks, savings and loans, and eventually to you and me. Each bank along the way takes its cut; the final borrower is the only one who has to figure out how to pay it back, with interest, by the close of the contract.

The problem is, in order to pay back three or four dollars on every one dollar borrowed, someone else has to lose. Our monetary system is itself a shell game, with losers built into the very rules. The more the credit industry dominates our economy, the more losers there will inevitably be.

As anyone in any business at all well understands—even the editor of this magazine, I’m sure—one has to borrow money to do almost anything real in this society. Anything that requires a resource, a supply, an office, a piece of ground, transportation, also requires a bit of capital. That capital has to be borrowed. And if it’s not coming from a friend or from mom or dad, it’s being borrowed from an institution that borrowed from another institution that borrowed it, and so on, and so on.

Participation in business or, in most of our cases, land or home ownership, means helping put those wheels of the credit industry in motion. And the more we push, the more momentum they gain, and the more influence they have over an increasingly large portion of our experience. Reality becomes defined by credit sectors, and our time is consumed more each day with wondering how we’re going to pay back what we’ve borrowed.

Every once in a while, though, we break the rules and get to see the possibility for another kind of economy. Whether it’s an alternative currency, an open source software solution, or the simple good faith gifts we make to one another for creating value in each other’s lives. It’s the way Arthur readers bailed out the magazine a few months ago, within a few hours of when creditors would have turned off the lights in the editor’s apartment bedroom (which doubles as the Arthur office). Or the way Robert Anton Wilson’s fans came to his rescue via Paypal to let the ailing writer die at home in his bed rather than a free city hospital (thus saving the taxpayers a whole lot more money than we raised and spent).

Without getting spiritual or mushy, we can agree that there are self-perpetuating cycles of greed and generosity in which we can participate. The more we commit to one or the other, the more of the world conforms to its rules.

rushkoff.com

from Arthur Magazine No. 29/May 2008

There’s two kinds of people asking me about the economy lately: people with money wanting to know how to keep it “safe,” and people without money, wanting to know how to keep safe, themselves.

Maybe it’s the difference between those two concerns that best explains the underlying nature of today’s fiscal crisis.

Is what’s going on in the economy right now really worse than anything that’s happened in the past few decades? Are we heading towards a bank collapse like what happened in 1929? Or something even worse?

On a certain level, none of these questions really matter. Not as they’re being phrased, anyway. What we think of as “the economy” today isn’t real, it’s virtual. It’s a speculative marketplace that has very little to do with getting real things to the people who need them, and much more to do with providing ways for passive investors to grow their capital.

This economy of markets was created to give the rising merchant class in the late middle ages a way to invest their winnings. Instead of actually working, or even injecting capital into new enterprises, they learned to “make markets” in things that were scarce. Or, rather, in things that could be made scarce, like land.

That’s how speculation was born. Speculation in land, gold, coal, food…pretty much anything. Because the wealthy had such so much excess capital to invest, they made markets in stuff that the rest of us actually used. The problem is that when coal or corn isn’t just fuel or food but also an asset class, the laws of supply and demand cease to be the principle forces determining their price. When there’s a lot of money and few places to invest it, anything considered a speculative asset becomes overpriced. And then real people can’t afford the stuff they need.

The speculative economy is related to the real economy, but more as a parasite than a positive force. It is detached from the real needs of people, and even detached from the real commerce that goes on between humans. It is a form of meta-commerce, like a Las Vegas casino betting on the outcome of a political election. Only the bets, in this case, change the real costs of the things being bet on.

That’s what happened in the housing market and the credit market—which, these days, are actually the same thing. Here’s the story, in the simplest terms:

Bush’s tax cuts and other measures favoring the rich led to the biggest redistribution of wealth from poor to rich in American history. The result was that the wealthy—the investment class—had more money to invest, or lend, than there were people and businesses looking to borrow.

The easiest way to bring more borrowers into the system—and to create more of a market for money—was to promote homeownership in America. This is precisely what the Bush administration did, touting home ownership as an American right. Of course, they weren’t talking about home ownership at all, but rather pushing people to borrow money tied to the value of a house.If people could be persuaded to take mortgages on homes, real estate values would go up for those already invested (like land trusts and real estate funds) and banks would have a market for the excess money they had accumulated.

In short, there was a surplus of credit in the system. Americans were encouraged to borrow in the form of mortgages, which created demand for the credit banks wanted to sell. In many cases the credit itself wasn’t even real, but leveraged off some other inflated commodity that the bank or investor may have owned.

Banks and mortgage companies invented some really shady and difficult-to-understand mortgage contracts, designed to get people to borrow more money than they could . Banks didn’t care so much about lending money to people who wouldn’t be able to pay it back, because that’s not how they were going to earn their money, anyway. They provided the money for mortgage companies to lend, and in return won the rights to underwrite the loans when they were packaged and sold to other people and institutions.

So a bank might provide the cash for a bunch of loans, but then get it back, plus a huge commission, when those loans were packaged and sold to someone else.

Lots of people take out mortgages, and housing prices rise. This is used as evidence to convince more people that real estate is a great investment, and more people buy into the housing bubble. Lots of these people put little or no money down, and buy mortgages whose interests rates are going to change for the worse. But they believe the price of their home is inevitably going to go up, and pin their futures on the idea that they can refinance their mortgage before their rate changes. Since the house will be worth more, the mortgage for what they owe should be easier to get; it will represent a smaller percentage of the new total cost of the house.

Of course, this was dumb. Banks didn’t really care (because they weren’t holding the bad paper) but the people investing in those “mortgage-backed securities” were slowly getting wise to the fact that many of the borrowers were in over their heads. What to do? The credit industry went ahead and lobbied Washington to change the bankruptcy laws. While corporations could claim bankruptcy and stop paying for their retirees’ health coverage, individuals would no longer be able to claim bankruptcy, and even if they did, they would still owe their creditors the money they borrowed, forever. The credit industry spent over $100 million lobbying lawmakers for the new provisions.

Then, just like the credit industry predicted, loans start going bad. (The industry labels these loans “sub prime” because they want to make it look like the borrowers were somehow less-than-respectable people. But the term really just refers to a less-than-respectable loan.) As homeowners default on their mortgages, housing prices start to go down. This, in turn, makes it impossible for people to refinance their mortgages when they thought they would; in fact, now many homeowners actually owe more on their home than the home is worth. How can you refinance a million-dollar loan on a house that is only worth half that? You can’t, so instead you have to hold onto the variable-rate loan that you foolishly bought from the predatory lender. The rate rises higher and faster than you can pay it.

Lenders go ahead and start foreclosing on properties, kicking out the mortgage holders who can’t pay. But this creates another problem: what to do with the house? It’s not even worth the outstanding portion of the loan, in many cases. And even if they can sell it, how to distribute the money? No one even really knows whose mortgages belong to whom, as they’ve been sold as parts of packages, again and again, to different lenders, pension funds, money markets…you name it.

This leads to what became known as the “credit crunch” or “liquidity crisis.” No one feels good about lending money anymore because so much of it was tied in one way or another to these bad mortgages. The creditors don’t want to take possession of all these foreclosed homes, and they turn to the government for help.

Under the guise of helping homeowners “stay in their homes,” the government starts bandying about various “relief packages.” The Treasury department and the Fed are actually taking a two-pronged strategy towards fixing the problem. One prong is cynical PR, and the other is just plain stupid.

First, they want to create the illusion that something is being done, so they talk about “superfunds” to bail out homeowners, freezes on rate hikes, checks mailed to every taxpayer, and other useless gestures. They do all this to appease angry consumers and consumer advocates because they won’t want real lending industry regulation (like what Barney Frank and other progressives are pushing for) to gain any traction.

Second, they want to make more money available to the creditors (banks), so they can keep lending money—because this is their business. So the Fed lowers interest rates again and again. Banks get more money, and guess what? We’re back where we started: with tons of money and nowhere to invest it! By lowering the “prime lending rate,” they simply add to the surplus cash that created the problem in the first place.

Of course, both measures serve to stave off panic selling, because it seems as though something real is being done. Homeowners may get a slight delay in the paralyzing rate increases on their mortgages, giving banks and creditors the chance to make a more orderly exit. They will bail from these mortgages while selling the artificially secured credit to the likes of you and me through money market accounts and other retail products. They just need time to make sure the real losses trickle down to someone else.

And remember: this whole mortgage fiasco is just a little preview of what happens next year when the credit card industry faces the very same self-imposed “crunch.” In the case of mortgage lenders, at least the terms of the loans were disclosed. Credit card companies—which are some of the very same banks that are in the mortgage mess today—are busy rewriting their policies, increasing rates, and adding fees to the policies of people already in debt to them.

You know those little ‘inserts’ in your credit card bill? Read them, and you’ll find out, like I did, that some credit card companies have begun charging interest on your purchases from the moment you make the purchase. You pay finance charges even if you pay your whole bill every month. Most people carry big balances, so they won’t notice the additional charges, or at least that’s what the credit card companies are—quite literally—banking on.

* * *

After a certain point, consumers just won’t be able to pay their bills. Even though they’ve paid the cost of their purchases several times over, they’re simply buried in interest and interest on the interest, sometimes compounding at a rate of 30 or 40 percent per year. The creditors know this, which is why they’ve sold a lot of this debt to other banks, pension plans, money market funds…you get the picture: the kinds of places where we invest our retirement money. The banks invested in us; we were the assets. Now that we’re about to go broke, they’re busy selling us to other financial institutions in a game of musical chairs that will cost the last debtholder a lot of money. Of course, unless we can convince some foreign sheiks to buy some lousy US assets with their oil money, that last debt holder will end up being you and me.

Over the past few months I’ve spoken to top strategists at some of the biggest banks in the world, and they share my perception of the scenario. Most of them are “holding cash” as their main investment strategy, spread out over a few of the major currencies. Those making money are doing so by short-selling shares of other companies in the same finance industry that they supposedly work for.

The bigger picture, of course, is that speculation just worked too well for too long. The disparity between the market values and real values (rich people and poor people) got too large. Every asset class, even money itself, got too expensive. We became more valuable for our borrowing power than our labor—which also meant there was no way to work off our debt. Meanwhile, the people using reality as an investment vehicle have overwhelmed the real economy on which their “structured investments” are based.

Sure, this has happened before. It’s just that, traditionally, when wealth disparity got too great and there wasn’t enough money in the right places, the wealthiest bankers temporarily suspended their greed to bail out the system. Or progressive tax policies opened corporate coffers, permitting a “New Deal” that employed people while rebuilding the infrastructure required to make real things and provide real services to citizens.

Today, however, such temporary restraints on greed are systematically untenable and philosophically unthinkable. Conservatives are still so angry about New Deal reforms of the 1930s that that they have infused politics and banking with an economic ideology that sees any regulation of worker exploitation or predatory investment as anti-capitalist, anti-American, and even anti-God.

So instead we are the beneficiaries of “wink” reform: stuff that’s supposed to make us feel good while reassuring the speculators that their interests will remain paramount. A few hundred dollars mailed to every American family creates the illusion that government is lending a helping hand, but this money is not redistributing anything. It’s being taken from the same people who are receiving it, in the hope that they’ll just pump it back into the system at Wal-Mart or the Exxon station.

Whether the coming economic crisis will be deep or shallow is left to be seen. We may be at the start of the kind of depression our grandparents lived through in the ’30s, or we may simply experience what our parents lived through back in the ’70s. Foreign investment trusts may come in and buy our biggest banks and turn us into global citizens through the very World Bank policies we were hoping would turn all of them into US vassals.

Whatever the case, the best thing you can do to protect yourself and your interests is to make friends. The more we are willing to do for each other on our own terms and for compensation that doesn’t necessarily involve the until-recently-almighty dollar, the less vulnerable we are to the movements of markets that, quite frankly, have nothing to do with us.

If you’re sourcing your garlic from your neighbor over the hill instead of the Big Ag conglomerate over the ocean, then shifts in the exchange rate won’t matter much. If you’re using a local currency to pay your mechanic to adjust your brakes, or your chiropractor to adjust your back, then a global liquidity crisis won’t affect your ability to pay for either. If you move to a place because you’re looking for smart people instead of a smart real estate investment, you’re less likely to be suckered by high costs of a “hot” city or neighborhood, and more likely to find the kinds of people willing to serve as a social network, if for no other reason than they’re less busy servicing their mortgages.

The more connected you are to the real world, and the more consciously you reject the lure of the speculative ladder, the less of a willing dupe you’ll be in the pyramid scheme that’s in the process of collapsing all around us at this moment.

Think small. Buy local. Make friends. Print money. Grow food. Teach children. Learn nutrition. And if you do have money to invest, put it into whatever lets you and your friends do those things.

Douglas Rushkoff writes books about media, technology, and values. He’s currently working on a project called “Corporatized,” which will explore how chartered corporations disconnected us from reality. rushkoff.com

from Arthur Magazine No. 29/May 2008

There’s two kinds of people asking me about the economy lately: people with money wanting to know how to keep it “safe,” and people without money, wanting to know how to keep safe, themselves.

Maybe it’s the difference between those two concerns that best explains the underlying nature of today’s fiscal crisis.

Is what’s going on in the economy right now really worse than anything that’s happened in the past few decades? Are we heading towards a bank collapse like what happened in 1929? Or something even worse?

On a certain level, none of these questions really matter. Not as they’re being phrased, anyway. What we think of as “the economy” today isn’t real, it’s virtual. It’s a speculative marketplace that has very little to do with getting real things to the people who need them, and much more to do with providing ways for passive investors to grow their capital.

This economy of markets was created to give the rising merchant class in the late middle ages a way to invest their winnings. Instead of actually working, or even injecting capital into new enterprises, they learned to “make markets” in things that were scarce. Or, rather, in things that could be made scarce, like land.

That’s how speculation was born. Speculation in land, gold, coal, food…pretty much anything. Because the wealthy had such so much excess capital to invest, they made markets in stuff that the rest of us actually used. The problem is that when coal or corn isn’t just fuel or food but also an asset class, the laws of supply and demand cease to be the principle forces determining their price. When there’s a lot of money and few places to invest it, anything considered a speculative asset becomes overpriced. And then real people can’t afford the stuff they need.

The speculative economy is related to the real economy, but more as a parasite than a positive force. It is detached from the real needs of people, and even detached from the real commerce that goes on between humans. It is a form of meta-commerce, like a Las Vegas casino betting on the outcome of a political election. Only the bets, in this case, change the real costs of the things being bet on.

That’s what happened in the housing market and the credit market—which, these days, are actually the same thing. Here’s the story, in the simplest terms:

Bush’s tax cuts and other measures favoring the rich led to the biggest redistribution of wealth from poor to rich in American history. The result was that the wealthy—the investment class—had more money to invest, or lend, than there were people and businesses looking to borrow.

The easiest way to bring more borrowers into the system—and to create more of a market for money—was to promote homeownership in America. This is precisely what the Bush administration did, touting home ownership as an American right. Of course, they weren’t talking about home ownership at all, but rather pushing people to borrow money tied to the value of a house. If people could be persuaded to take mortgages on homes, real estate values would go up for those already invested (like land trusts and real estate funds) and banks would have a market for the excess money they had accumulated.

In short, there was a surplus of credit in the system. Americans were encouraged to borrow in the form of mortgages, which created demand for the credit banks wanted to sell. In many cases the credit itself wasn’t even real, but leveraged off some other inflated commodity that the bank or investor may have owned.

Banks and mortgage companies invented some really shady and difficult-to-understand mortgage contracts, designed to get people to borrow more money than they could . Banks didn’t care so much about lending money to people who wouldn’t be able to pay it back, because that’s not how they were going to earn their money, anyway. They provided the money for mortgage companies to lend, and in return won the rights to underwrite the loans when they were packaged and sold to other people and institutions.

So a bank might provide the cash for a bunch of loans, but then get it back, plus a huge commission, when those loans were packaged and sold to someone else.

Lots of people take out mortgages, and housing prices rise. This is used as evidence to convince more people that real estate is a great investment, and more people buy into the housing bubble. Lots of these people put little or no money down, and buy mortgages whose interests rates are going to change for the worse. But they believe the price of their home is inevitably going to go up, and pin their futures on the idea that they can refinance their mortgage before their rate changes. Since the house will be worth more, the mortgage for what they owe should be easier to get; it will represent a smaller percentage of the new total cost of the house.

Of course, this was dumb. Banks didn’t really care (because they weren’t holding the bad paper) but the people investing in those “mortgage-backed securities” were slowly getting wise to the fact that many of the borrowers were in over their heads. What to do? The credit industry went ahead and lobbied Washington to change the bankruptcy laws. While corporations could claim bankruptcy and stop paying for their retirees’ health coverage, individuals would no longer be able to claim bankruptcy, and even if they did, they would still owe their creditors the money they borrowed, forever. The credit industry spent over $100 million lobbying lawmakers for the new provisions.

Then, just like the credit industry predicted, loans start going bad. (The industry labels these loans “sub prime” because they want to make it look like the borrowers were somehow less-than-respectable people. But the term really just refers to a less-than-respectable loan.) As homeowners default on their mortgages, housing prices start to go down. This, in turn, makes it impossible for people to refinance their mortgages when they thought they would; in fact, now many homeowners actually owe more on their home than the home is worth. How can you refinance a million-dollar loan on a house that is only worth half that? You can’t, so instead you have to hold onto the variable-rate loan that you foolishly bought from the predatory lender. The rate rises higher and faster than you can pay it.

Lenders go ahead and start foreclosing on properties, kicking out the mortgage holders who can’t pay. But this creates another problem: what to do with the house? It’s not even worth the outstanding portion of the loan, in many cases. And even if they can sell it, how to distribute the money? No one even really knows whose mortgages belong to whom, as they’ve been sold as parts of packages, again and again, to different lenders, pension funds, money markets…you name it.

This leads to what became known as the “credit crunch” or “liquidity crisis.” No one feels good about lending money anymore because so much of it was tied in one way or another to these bad mortgages. The creditors don’t want to take possession of all these foreclosed homes, and they turn to the government for help.

Under the guise of helping homeowners “stay in their homes,” the government starts bandying about various “relief packages.” The Treasury department and the Fed are actually taking a two-pronged strategy towards fixing the problem. One prong is cynical PR, and the other is just plain stupid.

First, they want to create the illusion that something is being done, so they talk about “superfunds” to bail out homeowners, freezes on rate hikes, checks mailed to every taxpayer, and other useless gestures. They do all this to appease angry consumers and consumer advocates because they won’t want real lending industry regulation (like what Barney Frank and other progressives are pushing for) to gain any traction.

Second, they want to make more money available to the creditors (banks), so they can keep lending money—because this is their business. So the Fed lowers interest rates again and again. Banks get more money, and guess what? We’re back where we started: with tons of money and nowhere to invest it! By lowering the “prime lending rate,” they simply add to the surplus cash that created the problem in the first place.

Of course, both measures serve to stave off panic selling, because it seems as though something real is being done. Homeowners may get a slight delay in the paralyzing rate increases on their mortgages, giving banks and creditors the chance to make a more orderly exit. They will bail from these mortgages while selling the artificially secured credit to the likes of you and me through money market accounts and other retail products. They just need time to make sure the real losses trickle down to someone else.

And remember: this whole mortgage fiasco is just a little preview of what happens next year when the credit card industry faces the very same self-imposed “crunch.” In the case of mortgage lenders, at least the terms of the loans were disclosed. Credit card companies—which are some of the very same banks that are in the mortgage mess today—are busy rewriting their policies, increasing rates, and adding fees to the policies of people already in debt to them.

You know those little ‘inserts’ in your credit card bill? Read them, and you’ll find out, like I did, that some credit card companies have begun charging interest on your purchases from the moment you make the purchase. You pay finance charges even if you pay your whole bill every month. Most people carry big balances, so they won’t notice the additional charges, or at least that’s what the credit card companies are—quite literally—banking on.

* * *

After a certain point, consumers just won’t be able to pay their bills. Even though they’ve paid the cost of their purchases several times over, they’re simply buried in interest and interest on the interest, sometimes compounding at a rate of 30 or 40 percent per year. The creditors know this, which is why they’ve sold a lot of this debt to other banks, pension plans, money market funds…you get the picture: the kinds of places where we invest our retirement money. The banks invested in us; we were the assets. Now that we’re about to go broke, they’re busy selling us to other financial institutions in a game of musical chairs that will cost the last debtholder a lot of money. Of course, unless we can convince some foreign sheiks to buy some lousy US assets with their oil money, that last debt holder will end up being you and me.

Over the past few months I’ve spoken to top strategists at some of the biggest banks in the world, and they share my perception of the scenario. Most of them are “holding cash” as their main investment strategy, spread out over a few of the major currencies. Those making money are doing so by short-selling shares of other companies in the same finance industry that they supposedly work for.

The bigger picture, of course, is that speculation just worked too well for too long. The disparity between the market values and real values (rich people and poor people) got too large. Every asset class, even money itself, got too expensive. We became more valuable for our borrowing power than our labor—which also meant there was no way to work off our debt. Meanwhile, the people using reality as an investment vehicle have overwhelmed the real economy on which their “structured investments” are based.

Sure, this has happened before. It’s just that, traditionally, when wealth disparity got too great and there wasn’t enough money in the right places, the wealthiest bankers temporarily suspended their greed to bail out the system. Or progressive tax policies opened corporate coffers, permitting a “New Deal” that employed people while rebuilding the infrastructure required to make real things and provide real services to citizens.

Today, however, such temporary restraints on greed are systematically untenable and philosophically unthinkable. Conservatives are still so angry about New Deal reforms of the 1930s that that they have infused politics and banking with an economic ideology that sees any regulation of worker exploitation or predatory investment as anti-capitalist, anti-American, and even anti-God.

So instead we are the beneficiaries of “wink” reform: stuff that’s supposed to make us feel good while reassuring the speculators that their interests will remain paramount. A few hundred dollars mailed to every American family creates the illusion that government is lending a helping hand, but this money is not redistributing anything. It’s being taken from the same people who are receiving it, in the hope that they’ll just pump it back into the system at Wal-Mart or the Exxon station.

Whether the coming economic crisis will be deep or shallow is left to be seen. We may be at the start of the kind of depression our grandparents lived through in the ’30s, or we may simply experience what our parents lived through back in the ’70s. Foreign investment trusts may come in and buy our biggest banks and turn us into global citizens through the very World Bank policies we were hoping would turn all of them into US vassals.

Whatever the case, the best thing you can do to protect yourself and your interests is to make friends. The more we are willing to do for each other on our own terms and for compensation that doesn’t necessarily involve the until-recently-almighty dollar, the less vulnerable we are to the movements of markets that, quite frankly, have nothing to do with us.

If you’re sourcing your garlic from your neighbor over the hill instead of the Big Ag conglomerate over the ocean, then shifts in the exchange rate won’t matter much. If you’re using a local currency to pay your mechanic to adjust your brakes, or your chiropractor to adjust your back, then a global liquidity crisis won’t affect your ability to pay for either. If you move to a place because you’re looking for smart people instead of a smart real estate investment, you’re less likely to be suckered by high costs of a “hot” city or neighborhood, and more likely to find the kinds of people willing to serve as a social network, if for no other reason than they’re less busy servicing their mortgages.

The more connected you are to the real world, and the more consciously you reject the lure of the speculative ladder, the less of a willing dupe you’ll be in the pyramid scheme that’s in the process of collapsing all around us at this moment.

Think small. Buy local. Make friends. Print money. Grow food. Teach children. Learn nutrition. And if you do have money to invest, put it into whatever lets you and your friends do those things.

Douglas Rushkoff writes books about media, technology, and values. He’s currently working on a project called “Corporatized,” which will explore how chartered corporations disconnected us from reality. rushkoff.com

I have to admit that I do this with some trepidation. I can already feel the assault on my inbox. But after a good long think about potential time and energy being lost by our entire community to senseless and ultimately inconsequential musings, I have to come out and say it: the alternative theories about 9-11 are wrong. Worse, the endless theorizing and speculation about trajectories, explosives, military tests, fake airplane parts and remote control navigation actually distracts some of our best potential activists from addressing the more substantive matters at hand.

Yes, I believe that 9-11 theorizing debilitates the counterculture. It robs us of some potentially creative thinkers. It replaces truly important questions with trivial ones. It marginalizes more constructive investigation of American participation in the development of Al Qaeda as well as its subsequent aggravation. And perhaps worst of all, it is precisely the sort of activity that government disinformation specialists would want us to be involved with.

9-11 theorists are unwittingly performing as the unpaid minions of the administration’s propaganda wing. (At least most of them are unpaid; no doubt, some of the loudest are working as contractors for the same agencies whose activities they pretend to deconstruct.) That’s why, instead of nodding along with their long-winded, preposterous yarns under the false belief that any critique is better than no critique, we—the informed, intelligent, and reasonable members of the war resistance—must instead disassociate ourselves from this drivel. In other words, we must draw the line between the kind of analysis done by Greg Palast and that done by Pilots for Truth. If we don’t apply discipline to our thinking, we risk falling into the trap that even some of our best intellectuals have—like Harper’s editor Lewis Lapham, who on reading a bit too much 9-11 conspiracy, has concluded that it all has some merit.

I’m all for supposing. It’s how the best science fiction gets written, the best science gets speculated, the best innovations get developed, and the wildest thoughts get hatched. But forensics is a different beast. As any detective will tell you, the most straightforward solution is usually the right one. As one NYPD detective explained to me, “Nineteen hijackers took four planes and crashed them at different places: WTC 1, 2, the Pentagon and a field in PA. These accounts broadly correspond to all that was observed and heard that day, who was on the flight manifests, where they came from and what they claimed to want to do, and yet do not involve vast US government conspiracies and do not need the coordinated, perfect lying of tens of thousands of people about the mass murder of their fellow citizens and those they gave their oath to spend their careers protecting.”

True enough, these huge incidents have produced many unexpected details. The plane in Pennsylvania scattered its parts differently than we might have expected it to. Lamp posts near the Pentagon got knocked over when we wouldn’t have thought were vulnerable given the altitude of the approaching plane. Building number 7 fell hours later, even though it was never directly hit by a plane. Video photography of the collapses show the towers falling quite neatly, as if in a planned detonation.

But strange and unexpected details don’t necessarily point to the fallacy of the central premise—especially when the alternative involves the active coordination of thousands, if not tens of thousands of citizens in a conspiracy to attack the United States. We must look at what each intriguing detail or inconsistency actually says about how the crime took place. Again, in the words of my favorite member of the NYPD, “These explanations are principally based on the fatally flawed idea that any confusion or misinterpretation or differing accounts in times of crisis must be the product of purposeful lies. They neglect the idea that in crises, and when there is mass confusion, people do not have specific recollections, only general ones that are highly subjective, such as what direction a plane sounded like it was coming from. Their stories seek to poke holes in prevailing truth, yet offer no alternative that could be seen as remotely plausible.”

For example, the Pilots for 911 Truth website explains: “Why was Capt. Burlingame, a retired Military Officer with training in anti-terrorism, reported to have given up his airplane to 5 foot nothing. 100 and nothing Hani Hanjour holding a “boxcutter”. (Exaggeration added for size of Hani, he was tiny, lets just put it that way). We at pilotsfor911truth.org feel the same as his family in that Capt. Burlingame would not have given up his airplane unlike what is reported in this linked article from CNN.”

What, exactly, is this supposed to mean? Was Captain Burlingame murdered? Or was he the willing participant in the government’s effort to sell the invasion of Iraq to America—so much so that he chose to enter into a suicidal pact? Or was the hijacker bigger than his passport suggests? Or is it implausible that a small dark man from an undeveloped country was able to overpower a big, trained, white man from a Superpower?

And that’s where I suspect all this theorizing really takes us: to the heart of a racist jingoism worse even than the triumphalism justifying our foreign policy to begin with. They can’t bring themselves to accept that our big bad government can really be so swiftly outfoxed by a dozen relatively untrained Arab guys. And rather than go there, they’d prefer to maintain the myth of American hegemony. On a certain level, it feels better to believe that we are only vulnerable by our leaders’ sick choice—not by our adversarsies’ increasing strength and prowess.

But maintaining this comforting illusion comes at a price. It paralyzes our ability to do the real work necessary to parse what is going on. I mean, on a certain level, what does it matter whether Osama Bin Laden, a CIA-trained former ally is currently acting on his own or as an operative of some covert semi-governmental organization or corporation? We can’t even begin to ask these questions when the people who might be most qualified to look into them are instead crippled by their own ethnocentrism.

The cultivation of a critically aware public is too important right now for us to entertain this silliness any longer. When a full 40 percent of the American public believes that Saddam Hussein was responsible for 9-11, we can’t afford the luxury of this delusional behavior. We are the alternative to the FoxNews version of events, and we must strive to present a more responsible alternative to Karl Rove’s disinformation.

The war profiteers are absolutely delighted that so many of us are still distracted by this phantom menace. And they delight in our belief that the central government is really powerful enough to pull something like this off. I’ve been interacting with intelligence people for the past three years, going to conferences and writing articles promoting an open-source approach to national security. After these encounters, I can assure you—anyone who knows anything about our government knows that a conspiracy on this order is well beyond their capabilities. Hell, the administration couldn’t even “find” weapons of mass destruction in Iraq. They can’t even reveal a Valerie Plame or fire the few remaining honest US attorneys without a complete backfire. Conspiracy is not what these folks are good at.

Our government excels at doing its really bad stuff out in the open. They break laws in order to spy on citizens, and refuse to acknowledge objections from lawmakers or justice. They take taxpayers money and give it to the companies they run. They acknowledge the many billions of dollars that go missing, and offer not even a shrug. They put the people who formerly lobbied on behalf of industries in positions running the agencies that are supposed to be regulating them.

By looking under the rug for what isn’t even there, we neglect the horror show that is in plain view. In the process, we make it even easier for the criminals running our government to perpetuate their illegal, unethical and un-American activities.

In fact, the most logical conclusion I can draw from the existing evidence is that 9-11 theorists are themselves covert government operatives, dedicated to confusing the public, distracting activists from their tasks, equating all dissent with the lunatic fringe, and provoking the counterculture’s misplaced belief in the competency of its foes.
That’s the real conspiracy.

NET LOSS
by Douglas Rushkoff

I’m a bit down on the Internet these days.

Sure, a lot of it has to do with that obsequiously pandering Time magazine cover—the one with the little mirror on it telling us all that each of us is the “person of the year.” That is, each of us connected to the Internet and throwing our photos and personal consumer histories up on the web for everyone to see. We’re supposedly undergoing a revolution because now, instead of paying for movie tickets, we can pay for computers, hard drives and access time—often to the very same media conglomerate we think we’re ripping off.

And some of my misgivings have to do with a recent mistake I made myself, posting to my weblog the fact that I had gotten mugged, and how that had caused me to reflect on my own participation in the gentrification of my part of Brooklyn. Diehard Brooklynites (no doubt harboring mixed feelings about whoever they may have displaced in order to live here and make it “cool” instead) went on something of a rampage against me, posting all sorts of nonsense on bulletin boards about how Rushkoff was leaving Park Slope because he’d got mugged. A few real-world newspapers even quoted fake postings in the comments section of my blog, mistakenly attributing those posts to me.

Adding insult to injury, some Zionist extremists (or their paid online shills) who don’t like me took the opportunity to create a “sock mob” effect —a term I coined to describe how one or two people can post dozens or even hundreds of comments online under different pseudonyms to make it look like there’s a mob of people agreeing to hate a particular person or idea. (Think Swift Boat Veterans, on a much smaller scale.)

So the Internet—the place where I actually grew up as a thinker and writer—was no longer a safe place for me to engage with others about the ideas that are most personally important to me. Even the “discussion” in the unmoderated comments section of my blog could at a moment’s notice turn as mean, vitriolic and ultimately fake as any conversation taking place anywhere online. The Internet didn’t elevate our discourse—it left us in the same pit we were in to begin with. In fact, the ability to conceal one’s identity, combined with the ability to attack others without ever looking them in the eye, has made discourse on the Internet even more prone to cruelty than in real life.

Meanwhile, on a daily basis, my inbox fills with messages from people I know and people I don’t. Everyone expects an answer from me the same way they expect an answer from the customer service department of the Gap. At least from me they get one. But am I making the most considered response I can? Of course not— for the most part, I’m simply trying to get through the stack of email and respond as sufficiently as necessary. But that’s not the way I want to interact with anyone—even if they’re treating me like the complaints desk. And it undermines the quality of the remaining exchanges with people whose queries really do merit consideration and response.

And all this keyboard activity has become quite draining. Back in the ’90s, I would log off the Well or a Usenet board feeling exhilarated by what I had learned and who I had “met.” Today I can’t get off the Internet fast enough. It’s as if my very chi is being absorbed by this pulsing datastructure—an avatar of the combined will of both humanity and the marketplace on each one of us.

We can’t help but want to respond when people reach out to us by email or on a discussion board—after all, there’s a real person on the other end of each transmission. But for me, anyway, it feels as if the transmissions themselves have been stripped of all prana—of all the nutrients otherwise associated with organic exchange. Think of the difference between teaching a person in a real bar how to play pool, and describing to someone in an email “how to play pool.” Almost the same information can be exchanged, but without any contact. Now, it’s not the lechery of live pool instruction I miss. Not exactly. What I miss is what one gets back during an exchange in person. The joy, the contact, the full range of subtle communication, is gone.

I’d argue that the data we’re exchanging —from pool lessons to political theories—are themselves just media for our social interactions. Yes, it’s great to have a cause to rally around, but for the most part these causes are excuses to rally. In our highly rational, highly time-pressured schedules, we need excuses to be with each other, from the woman taking a French class in the hopes of finding a husband to the guy taking yoga to check out girls in tight sweats. Somehow, the Internet convinces us that the content we’re exchanging is the end in itself—when it’s actually just a means to an end. And that end will never be found online.

I’ve been saying since the late ’80s—before the Internet really existed—that our networks are not a thing in themselves. They are a trial run, a social experiment: a way of practicing collective social engagement so that we might see whether or not such a thing is possible in real life. The Internet of the early to mid-’90s really was such a collaborative space, and a few of the projects that remain from those days, from Wikipedia to Craig’s List, still bear some resemblance to that earliest ethos of provisional collectivism.

But Wikipedia has now fallen victim, to some extent, to politicians and others with agendas, who change entries about their opposition to make them look bad. And Craig’s List has become increasingly difficult to patrol for scams and ruthless profiteers. Each organization has to spend more time and resources preventing abuse than it does doing the thing it originally set out to do. And that’s pretty much the definition of the “point of diminishing returns.”

I’m not signing off the Internet just yet. I need it for all the same reasons all of us do. But I no longer assume as much about the experiences I’m going to have online as I used to. I don’t take for granted the existence of a community on the other side the screen. I don’t read my email before my morning coffee—I wait until I’ve got my best psychological defense mechanisms in place. I don’t socialize online; I make appointments to socialize (as time allows these days) offline in some real place. Or even on the phone, which feels intimate compared to the asynchronous communication via computer screen.

I still refuse to believe the experiment in developing a virtual culture has failed. Even if the Internet doesn’t foster the gentle, compassionate, and open-minded society we might like to see in the real world, its descent into heated polarities, exhibitionism and profiteering should serve as an example of how even our best intentions can be undone. It makes us aware of how easily manipulated we are, how prone we are to excitation of the basest kind and how desperately we want attention from others. That is, each of the things we may dislike about the Internet—from its extreme forms of marketing to the cruelty and humiliation that pass as entertainment—are merely exaggerations of our tendencies in real life. But the Internet allows those tendencies to be rebroadcast and absorbed by us as if they were real—and they go on to influence the actions of individuals, organizations, corporations and governments in the real world.

People see an erroneous, venomous post somewhere, and can’t help but take in some part of that sentiment as justified or factual. Hell, I’m still getting emails from friends asking why I’m moving to Long Island, or why I denied the Holocaust—both completely fictitious constructions of anonymous Internet users that nevertheless trickle back out from the virtual world into the real one. A music reviewer I know became the recipient of death threats by phone and email after a band whose album she panned invited its fans—via their website—to go on the rampage. And we writers are a hell of a lot less victimized by these sorts of fabrications than the artists, scholars and activists who really stick their necks out, from Paul Krugman and Noam Chomsky to Tony Kushner and Al Gore.

The more monstrous thought-forms constructed online needn’t be allowed to feed back into the real world any more than the monsters of our nightmares need to invade our waking lives. They only lead to equally artificial extremes of thought and behavior — dangerously divorced from local, organic and social moderation. They grow into false polarities like the red-state/blue-state divide; they foment antagonism over religion and race; and they give license to the most ruthless marketers and profiteers.

Rather, we must remember that the expressions thriving in the online universe have been divorced of their connection to the flesh, the heart, and the neo-cortex.

Consumed in their raw form, many of them are toxic.

(Originally published in Arthur No. 25/Winter 02006)

This has been a very bizarre couple of weeks for me. I changed literary agents, did a bookstore discussion/debate with former Arthur columnist Daniel Pinchbeck, learned of Robert Anton Wilson’s dire end-of-life financial predicament, and then left my wife and 21-month-old daughter to fly to Germany (where I am right now, stuck in an airport thanks to a canceled flight) to give a talk to a big magazine conglomerate about what makes their publications relevant in a mediaspace fast migrating online.

And I’ve found myself alternatively inspired and unnerved, about each and every one of these events. I feel their connection on an emotional level —as if the microcosm in which I’m participating reflects a greater theme. Like an archipelago, this seemingly disconnected string of islands is all connected beneath the surface. And that connection is about how we make value—for ourselves and one another.

Take the Pinchbeck event. Now it’s no secret to Arthur readers that he and I come from different ends of the spiritual spectrum. When he was writing columns in these pages about channeling the wisdom of Quetzalcoatl, I was warning the same readers not to take any prophecy too seriously—and certainly not literally. Then, I ran into Daniel in a coffeeshop just a week after a particularly critical screed on him and the “psychedelic elite” came out in Rolling Stone—an article in which I was quoted on the value of communities over heroes.

We concluded that a face-to-face discussion was in order, and figured we might as well do it in public. So Daniel asked a bookstore where he was scheduled to speak if we could turn it into a two-man show. Almost as soon as the discussion was announced, email started coming in, asking how I was going to “take him on” or “take him out”—the assumption being that we’d have a take-no-prisoners debate. And while I’m certain we’ve pissed each other off over the years, I thought the point of mixing it up a bit would be to learn something from one another. Find common ground. Meanwhile, we’d end up bringing together a rather unlikely audience of media students, recent Burning Man returnees, psychedelics enthusiasts and comics readers. In business terms, we were “creating value” for one another and our separate readerships by introducing them to each other.

I’ll admit, the event both inspired and disturbed me. Sure, the assembled crowd was varied and eager. But the conversation itself was too competitive, no matter how I intended otherwise. All I meant to show was that we each have our own reality tunnels – and that no matter how spectacularly “real” something may appear, especially on super-strong shamanic entheogens, it’s just one metaphor for whatever it is that might really be going on. None of us knows what happens when we die, whether there’s anything or anyone else “out there,” or whether the connections we seem to perceive all around us are conspiring or coincidental.

Daniel tended to dismiss my points he disagreed with as “thoughts,” to which I finally snapped that “everything we’re saying is just thoughts, buddy.” I leave it to you to choose who of us is more Zen, but my lasting impression of the conversation was that we didn’t quite transcend the zero-sum game as I had imagined we would. It was still just two white guys with microphones, competing for mindshare and the marketshare that goes along with it. Had I been used simply to get more people to show up at his book signing? Was I seeing in him the qualities I dislike in myself? Why should such misgivings even arise?

Then came word from a truer pioneer of mind and cosmos than either of us, Robert Anton Wilson: his post-polio syndrome had gotten worse, and the attendant medical bills combined with some trouble with the IRS had tapped him out. He was three days away from not being able to make his rent.

Say what? Robert Anton Wilson, author of Cosmic Trigger and Prometheus Rising, the guy who put the number 23 on the map, and delightfully upgraded the minds of thousands if not millions, forever, could no longer support himself? For those who may be unfamiliar with his work, Wilson is the man who put the many insights of Sixties into perspective. By approaching the seeming interconnectedness of everything with a grain of salt and two grains of humor, he’s helped to demonstrate the value of seeing one’s own reality tunnel for what it is: a limited take on a much greater whole. Rather than getting lost in any particular tunnel (or, worse, pushing it on other people) the object of the game was to learn to move between them.

On learning of his predicament, I felt an anger welling up. I refused to be a member of a generation that could allow an author and philosopher of his caliber to die penniless in a state hospital, so I dashed out a blog post (http://www.rushkoff.com/2006/10/robert-anton-wilson-needs-our-help.php) alerting the “community,” along with Bob’s Paypal address (olgaceline@gmail.com). Thanks to a link from BoingBoing.net, we raised over $68,000 dollars in just the first couple of days, along with a few hundred heartfelt testimonials in the comments section.

But there was a second thread in the comments section that disturbed me. “How do we know this is not a hoax?” some people were asking. Indeed, I wondered. How do I prove I’m not a scam artist of some kind, putting up my own Paypal address? This is the Internet, after all. Further down in the comments, someone had posted the response I might have been embarrassed to make for myself: “just look at Rushkoff’s site and his work.”

And that’s when the value of “reputation”—what business folks call “brand”—actually made sense to me as a good thing rather than just some ego trip. The fact that I’ve been writing books for 15 years and have been hosting an online community of one sort or another for nearly as long has earned me the trust required to communicate an urgent fact and have it believed. At least by enough people to make a difference.

While by far the majority of comments and email since then have been very positive both towards Bob and about the effort to keep him solvent and cared for, there’s plenty of cynicism out there, too. “Why should he get cared for over some other sick and poor person?” one egalitarian asked. “He should have managed his money better,” another complained to me (like I have time to read emails from people who have decided not to help Bob when I can barely process the ones from people looking to help). “I already paid him when I bought his book,” explained another, who best exemplified the trend. It’s the logic of a perverted sort of libertarianism —one that can’t see beyond its own very limited notion of the competitive marketplace.

For even if we use the raw logic of the market, Bob is simply being paid back for the value he created. Those of us who are contributing to Robert Anton Wilson now are still, in effect, paying residuals on what we got from him. We’ve all bought plenty of twenty-dollar books—but few have been worth as much to us as Bob’s. The works generated value for us over time, and we see fit to share this wealth in the form of cash energy with the person who created it for us. This is not the order of a free market economy, but of what might better be called a free market ecology.

“Economics” is based on the assumption that people act in ways that maximize their wealth as individuals. It holds true for many situations. All else being equal, we’ll buy products at the best price we can get them and take the highest wage we can find. The assumption is that we act out of selfishness—and economics is just its rational application. Under the laws of economics, we wouldn’t pay for the same book twice.

An ecology, on the other hand, though wildly competitive and occasionally just as cruel as any economy, is based on interdependency. The members of a coral reef or slime mold know how to take coordinated action when it’s called for. The shit of one organism is fertilizer for another. An ecology still operates under the assumption of maximizing wealth, but of the whole collective organism —and over time.

By refusing to let Robert Anton Wilson die penniless, we—as a culture, or at least part of a culture—are caring for a certain kind of thinking and activity, even if this is after the fact. By doing so, we not only acknowledge to Robert Anton Wilson the tremendous contributions he made to our lives, but we have the opportunity to reaffirm the same thing to ourselves. Like college alumni who reinforce their own positive feelings about their alma maters when they make donations to keep the institution going, we publicly affirm the value of Bob’s legacy —thus making it more valuable or at least less dismissible for a society bent on recontextualizing the Sixties, psychedelia and mental adventurousness as an embarrassing phase.

Just look at the recent spate of articles accompanying the tenth anniversary of Timothy Leary’s death, as well as Bob Greenfield’s recent biography. These writers are all-too ready to condemn Leary for his undeniably self-centered personality, but all-too reluctant to acknowledge his even more powerfully compassionate, activist nature that spurred him to sacrifice pretty much everything for his vision of an intelligent human species that needn’t destroy itself. It’s as if embracing our inner “hope fiend” is as uncool today as, I dunno, believing that anyone who sets pen to paper or text to a blog is doing it for an ulterior, profit-based motive.

And all this is what I attempted to explain to the magazine executives in Germany yesterday. At their best, magazines —like any cultural product—serve their audiences not merely through their own value, but by allowing their readers to create value for themselves and one another. Sure, this means understanding that a magazine’s true customers are the readers, not the advertisers—a lesson that quality pay-TV is fast teaching their ad-based broadcast counterparts.

It’s also why I changed agents. Not because the first one was bad in any way, but because I met one who challenged me to consider what I thought was the most significant contribution to the world, rather than what might be expected to sell the most out of the gate. This is not the way most people who call themselves “literary agents” speak. It’s economics in reverse; not “how can I get the most value from my efforts,” but “how can I create the most value for everyone through them?”

Those of us dedicated to keeping Robert Anton Wilson’s flesh and finale as dignified as possible are rewarding a great writer for never selling out. But this ethos must not end with the passage of this individual, however heroic—not when he’s given us so many of the tools required to turn this society’s notion of value inside-out. If we’ve learned anything through all this, it’s that the universe we’re creating together needn’t be one where no good deed is left unpunished.

“Post-Modern Prophecy: Urgent Myths for Urgent Times?”

A dialogue between authors Daniel Pinchbeck and Douglas Rushkoff

I’ve been debating for a while about whether to do this. Whether to come right out and say it. On a certain level, it’s like shouting “fire” in a crowded theater. What good is it to announce a problem if I don’t have a ready solution at hand? Furthermore, what if sharing this information – this perspective on our predicament – simply exacerbates our paralysis to do anything about it. I mean, fascism breeds best in populations that have been stunned into complacency, cynicism, or despair.

(That’s called a “buried lede” – a publishing term for hiding the main idea of a story deep within a paragraph. Editors don’t like it because it makes it hard for the reader to figure out what an article is about. But I felt it necessary because, well, I’m not quite comfortable talking about it too directly, just yet. This fascism stuff.)

It all became blindingly clear to me the morning I found out Ken Lay was dead. I was listening to the radio – to a friend of mine, actually, reading the news report on NPR. He was explaining how the dishonored corporate elite criminal, the former CEO of Enron, had a fatal heart attack before he had the chance to spend the rest of his life in jail. Because of certain technicalities in the law, this also meant Lay’s family would in all likelihood be able to keep the millions of dollars that would have otherwise been paid back to Enron employees and shareholders in court fines.

The newsreader opined that Lay’s death might have been suicide, and not just for the money. Lay was in on those early secret energy industry meetings with Dick Cheney – the ones where they figured out oil prices and the Iraq War and other matters of state – and, facing prison, the fallen corporate superstar could have posed a security risk if he had leaked information about what had transpired to other prisoners or, worse, the FBI in trade for better living quarters.

But, given all that, I couldn’t bring myself to believe Lay was dead at all. If you’re that rich and powerful, why die? Why not just get a hold of some corpse, pay-off a coroner, move to an island and call it a day? This is no grassy knoll feat. It’s not even CSI, but early 90’s Law & Order. No big deal for a guy intimately connected with one of the most actively clandestine administrations in US history.

That same July morning, when news of North Korea’s failed nuclear test launches were broadcast, I didn’t feel sure I was being told what was happening, either. Not that news agencies can really know, either. Did they launch? Were they thwarted by a US counterstrike, or by their own ineptitude? Do they even know? Do we?

I’m not saying one thing or the other happened – just that I stare at the news and don’t believe anything they’re saying. I’ve got no idea. And it feels really weird.

I find I can trace this sense of uncertainty to the 2004 election. The 2000 election was crooked, but the fraud was rather out in the open. We watched hired thugs stop the Florida recount by trying to break into the room where the counting was happening – and thus delay the process long enough for the Supreme Court to choose Bush as the President. But the 2004 voter fraud in Ohio, fully documented by Robert Kennedy Jr., among others, was an entirely more hidden affair. Diebold voting machines, teams of fraud squads, and election officials too afraid that disclosure of what happened will turn people off voting forever.

Those of us who try to stay even remotely connected to what is going on in the world around us have enough hard evidence to conclude with certainty that voting in America has been systematically and effectively undermined by the party currently in power. In an increasing number of precincts, how people vote – if they are even allowed in – no longer has a direct influence on how their votes are tallied.

It’s sad and confusing not to live in a democracy, anymore. And while it’s quite plainly true, it’s a bit too unthinkable for most sane people to accept. It goes in the same mental basket as more outlandish (if not unthinkable) thoughts — such as dynamite on the WTC or no airplane crashing into the Pentagon — even though, in this case, it’s not conjecture, it’s just plain real.

So what I’m coming to grips with is accepting that I don’t live in a democratic nation, and that the propaganda state attempted in 1930’s Europe did finally reach fruition here in the U.S., just as Henry Ford and those of his ilk predicted.

Maybe I’m just old, and have a very idealistic view of democracy. When I was a kid, we were all told that this is a government of the people, and that our votes provided a check on the power of our leaders. That’s why we called them “elected.” Or maybe it’s just naïve to think that representative democracy could have worked the way it was presented to us.

The other side – the fascist side – does have an argument to make, and they’ve been making it since Woodrow Wilson was president. Having run on a “peace” campaign, Wilson later decided that America needed to get involved in World War I. So, with the help of one of the great Public Relations masters of all time, Edward Bernays, he created the Creel Commission, whose job was to change America’s mind.

Bernays, like the many political propagandists who followed, honestly believed that the masses are just too stupid to make decisions for themselves – particularly when it involved global affairs or economics. Instead, an enlightened and informed elite (corporate America) needs to make the decisions, and then “sell” them to the public in the form of faux populist media campaigns. This way, the masses feel they are coming up with these opinions, themselves.

Truly populist positions, on the other hand – such as workers’ rights or minority representation – must be recontextualized as the corruption of the public by elite “special interests” or decadent social deviants. Throughout most of history, these scapegoats were the Jews, but now it’s mostly gays and liberals. By distracting the masses with highly emotionally charged issues like flag-burning or gay marriage, those in power consolidate their base of support while developing a new mythology of state as religion.

As long as they do all this, they don’t have to worry about how people vote, or what might be happening on the ground. “Unregulating” the mediaspace turns the fourth estate (the news agencies) into just another arm of the corporate conglomerates that fascism was invented to serve. (Mussolini called it “corporatism,” don’t forget.)

The last and most crucial step in creating a truly seamless fascist order, though, is to frighten the intellectuals, students, and artists from seeing the world as it is and sharing their sensibilities with one another. Hell, calling America’s leaders “a fascist regime” can’t be good for business. The only place I’m allowed to write this way is on my blog or here in Arthur – and neither pays the bills.

Besides: why rock the boat? I may not have the right to vote, anymore, but I’m being kept comfortable enough. Like others of my class, I have a roof over my head. I’m crafty enough to get paid now and again for a book or talk or comic series. And the state is functioning well enough that I can afford a tuna sandwich and walk around my neighborhood eating it without getting whacked with a rock or a grenade. As far as history goes, that’s pretty good.

So was democracy a failed experiment? Should we just let these guys run the country as long as they let us eat? Clearly, they’re not scared of us or what we might be saying about them. In fact, their best argument that we haven’t descended into fascism is the fact that we’re allowed to distribute columns like this one. How could we be living in a totalitarian propaganda state if there are articles pronouncing the same? Because fascism looks different every time around. 1930’s fascism failed because it was too obviously repressive. Today’s fascism works because it has turned the mediaspace into a house of mirrors where nothing is true and everything is permissible. The fact that there are plenty of blogs and even major books saying what’s happening and still it doesn’t matter is proof that it has worked.

But there is hope. It’s not just the radicals and militias who are alarmed, but mainstream congresspeople and government wonks. I, myself, have been approached by two separate government intelligence agencies and three members of congress (of both parties) for help understanding what they already deem to be actionable offenses against the American people by some of our leaders. They are disturbed by the disinformation campaign leading up to the Gulf War, voter fraud, and the way Americans have been frightened into supporting the curtailment of civil rights.

Surprisingly, most of my conversations with these patriotic people involve two main concerns. First, they have been ostracized by their peers for their views. This has created some urgency, for they fear they will not get enough party support for re-election if they don’t succeed in their efforts in the next few months. Second, and more troublingly, they are afraid to disillusion America’s youth. Isn’t there a way to fix this problem, they wonder, without raising an entire generation of Americans in environment of acknowledged voter nullification? And what of our reputation in the world? Which is more damaging to democracy: voter fraud, or the public awareness of voter fraud?

To this, we simply must conclude that the reality of voter fraud is more dangerous than any associated disillusionment. To worry about the impact on public consciousness is to get mired in the logic of public relations – and that’s what got us into this mess to begin with.

It’s time to get real, and either fight (through the courts, if possible) to reinstate the rule of law as established by the Constitution, or accept that Enlightenment-era democracy simply doesn’t work and move into a new phase of government by decree or market forces or whatever it is that comes next.

In any case, it serves no one to have a “pretend democracy” that’s actually something else. I’m going to stop denying what’s going on here, and use what influence I have with lawmakers, government workers, and activists to get them to do the same. Instead of trying to feel better about all this, I’m going to allow myself and everyone around me to feel worse.

Indeed, the bad news is the good news. Total disillusionment, though momentarily painful, is utterly liberating and probably required. Acceptance isn’t acquiescence at all; it’s the first step towards reconnecting with a reality that can and must be changed. If we’re going to get back on the horse, we’ve got to acknowledge that we’ve fallen off.

��For an ad campaign that started a revolution in marketing, the Pepsi Challenge TV spots of the 1970s and ’80s were almost absurdly simple. Little more than a series of blind taste tests, these ads showed people being asked to choose between Pepsi and Coke without knowing which one they were consuming. Not surprisingly, given the sponsor, Pepsi was usually the winner.

But 30 years after the commercials debuted, neuroscientist Read Montague was still thinking about them. Something didn’t make sense. If people preferred the taste of Pepsi, the drink should have dominated the market. It didn’t. So in the summer of 2003, Montague gave himself a ‘Pepsi Challenge’ of a different sort: to figure out why people would buy a product they didn’t particularly like.

What he found was the first data from an entirely new field: neuromarketing, the study of the brain’s responses to ads, brands, and the rest of the messages littering the cultural landscape. Montague had his subjects take the Pepsi Challenge while he watched their neural activity with a functional MRI machine, which tracks blood flow to different regions of the brain. Without knowing what they were drinking, about half of them said they preferred Pepsi. But once Montague told them which samples were Coke, three-fourths said that drink tasted better, and their brain activity changed too. Coke “lit up” the medial prefrontal cortex — a part of the brain that controls higher thinking. Montague’s hunch was that the brain was recalling images and ideas from commercials, and the brand was overriding the actual quality of the product. For years, in the face of failed brands and laughably bad ad campaigns, marketers had argued that they could influence consumers’ choices. Now, there appeared to be solid neurological proof. Montague published his findings in the October 2004 issue of Neuron, and a cottage industry was born.

Neuromarketing, in one form or another, is now one of the hottest new tools of its trade. At the most basic levels, companies are starting to sift through the piles of psychological literature that have been steadily growing since the 1990s’ boom in brain-imaging technology. Surprisingly few businesses have kept tabs on the studies – until now. “Most marketers don’t take a single class in psychology. A lot of the current communications projects we see are based on research from the ’70s,” says Justine Meaux, a scientist at Atlanta’s BrightHouse Neurostrategies Group, one of the first and largest neurosciences consulting firms. “Especially in these early years, it’s about teaching people the basics. What we end up doing is educating people about some false assumptions about how the brain works.”

Getting an update on research is one thing; for decades, marketers have relied on behavioral studies for guidance. But some companies are taking the practice several steps further, commissioning their own fMRI studies ?� la Montague’s test. In a study of men’s reactions to cars, Daimler-Chrysler has found that sportier models activate the brain’s reward centers — the same areas that light up in response to alcohol and drugs — as well as activating the area in the brain that recognizes faces, which may explain people’s tendency to anthropomorphize their cars. Steven Quartz, a scientist at Stanford University, is currently conducting similar research on movie trailers. And in the age of poll-taking and smear campaigns, political advertising is also getting in on the game. Researchers at the University of California, Los Angeles have found that Republicans and Democrats react differently to campaign ads showing images of the Sept. 11th terrorist attacks. Those ads cause the part of the brain associated with fear to light up more vividly in Democrats than in Republicans.

That last piece of research is particularly worrisome to anti-marketing activists, some of whom are already mobilizing against the nascent field of neuromarketing. Gary Ruskin of Commercial Alert, a non-profit that argues for strict regulations on advertising, says that “a year ago almost nobody had heard of neuromarketing except for Forbes readers.” Now, he says, it’s everywhere, and over the past year he has waged a campaign against the practice, lobbying Congress and the American Psychological Association (APA) and threatening lawsuits against BrightHouse and other practitioners. Even though he admits the research is still “in the very preliminary stages,” he says it could eventually lead to complete corporate manipulation of consumers — or citizens, with governments using brain scans to create more effective propaganda.

Ruskin might be consoled by the fact that many neuromarketers still don’t know how to apply their findings. Increased activity in the brain doesn’t necessarily mean increased preference for a product. And, says Meaux, no amount of neuromarketing research can transform otherwise rational people into consumption-driven zombies. “Of course we’re all influenced by the messages around us,” she says. “That doesn’t take away free choice.” As for Ruskin, she says tersely, “there is no grounds for what he is accusing.” So far, the regulatory boards agree with her: the government has decided not to investigate BrightHouse and the APA’s most recent ethics statement said nothing about neuromarketing. Says Ruskin: “It was a total defeat for us.”

With Commercial Alert’s campaign thwarted for now, BrightHouse is moving forward. In January, the company plans to start publishing a neuroscience newsletter aimed at businesses. And although it “doesn’t conduct fMRI studies except in the rarest of cases,” it is getting ready to publish the results of a particularly tantalizing set of tests. While neuroscientist Montague’s ‘Pepsi Challenge’ suggests that branding appears to make a difference in consumer preference, BrightHouse’s research promises to show exactly how much emotional impact that branding can have. Marketers have long known that some brands have a seemingly magic appeal; they can elicit strong devotion, with buyers saying they identify with the brand as an extension of their personalities. The BrightHouse research is expected to show exactly which products those are. “This is really just the first step,” says Meaux, who points out that no one has discovered a “buy button” in the brain. But with more and more companies peering into the minds of their consumers, could that be far off?

������

And, continuing on the theme, here’s something from our
friend Douglas Rushkoff:

A bunch of you have asked, so here’s a copy of something
close to the script that was used for the narration for the CBS Sunday
Morning piece I did that ran last week. As you can see, TV makes for a
more skeletal analysis. But the pictures do help.

Will this year�s buying season be big enough to bail us
out of a recession? Can we somehow get ourselves to consume our way to
economic salvation? Is there a light at the end of this dark night?

    Christmas, like the pagan solstice
holidays that came before it, was put at the end of the year for a reason.
It brings good cheer and some rays of hope to the darkest days of winter.
And now Christmas is being asked to revive not only our spirit, but our
sadly depressed moving averages, daily yields, and GNP.

    We might have days off for Christmas,
but they�re not days off work, at all. In fact, the moment we leave the
office, our real employment as Americans begins: the hard, grueling work
of SHOPPING. It�s time to save the national economy, folks; desperate measures
must be taken.

    Which brings us here. This may look
like an average suburban shopping mall to you — but today�s retail environments
are selling machines engineered to extract the most money per second from
your wallet.

    The science of retail design � what
the industry calls �atmospherics� � was born by accident in 1956, with
the very first shopping mall, �the southdale center� in Minnesota. This
realization of an �indoor main street� provided laboratory conditions for
the study and influence of shopping behavior.

    Psychologists observed that the overwhelming
size and scope of an entirely self-contained universe has a strange effect
on shoppers. It�s called �Gruen Transfer,� named for the designer of the
first shopping mall, Victor Gruen. Gruen Transfer is the moment a person
senses the size the mall � their jaws may open, their eyes may glaze over
for a just a second. And they are transformed from a person who came to
the mall for a purpose, into a shopping drone. Ripe for the next battery
of psychological assaults.

    The first tactic is to keep people
inside the mall � the longer they stay, the more they buy. The key is to
disorient them. At least three turns from parking lot to mall entrance
prevents shoppers from remembering where they�ve put the car. There�s no
way out. Inside, malls are timeless and bland � a strict monotonous palette
throughout.  Early malls were sealed from daylight, like casinos designed
to keep gamblers from realizing how long they�ve been playing. But more
recent testing showed shoppers felt claustrophobic � and stay inside longer
if they are allowed to catch just a glimpse of sky.  Careful lighting
still keeps them from perceiving the passage of time. As the sun goes down,
these lightbulbs slowly fade up. Complex floor plans help keep patrons
from knowing exactly where they are. They�re not supposed to.

    �We want you to get lost,� explained
one leading mall designer.

    You can�t turn right at the ATRIUM
� you have to veer right, each turn disorienting you further. The more
lost you are, the more impulsive purchases you make. What did I come here
for, anyway? So you forgot � it doesn�t matter. As long as you ring up
more total purchases, everyone will be happy.

    Once disorientation is achieved, the
retailers begin their attacks on the senses:

    Start with Sight: Because they�re
lost, patrons use the only images they recognize as anchors: the big-name
department stores. You don�t go �north� � you move towards Macy�s. These
�Anchor� stores are always placed at angles to each other, so that you
can�t see one from the entrance of another. Each anchor presides over its
own section of the mall, like a reigning emperor � and a visual landmark. 
Besides, studies show that a shopper won�t voluntarily travel more than
600 feet, so the hallway has to bend before then.

    Then there�s the sense of Touch: Designers
often use hard floor surfaces in the halls and softer ones inside the store
� gently coaxing customers to come inside if they want their feet to feel
good. Other studies show that women feel more powerful � and buy more �
if they can feel and hear their heels clicking on polished hard wood.

    Which brings us to Sound: We all joke
about �elevator� Muzak � but it works. Dozens of different soundtracks
scientifically engineered to increase the rate at which we purchase products
at any moment of the day � is pumped into the mall and the stores. There�s
a special and tested melody, rhythm and sequence to maximize the efficiency
of any shopping behavior you can imagine.

    Don�t forget taste: Free food lures
strollers into shops. It�s always visible from the corridor.  Eating
food turns customers, quite literally, into consumers.

    They even use Smell: Cookie shops
spread scents throughout the mall, attracting customers from hundreds of
feet away. One study showed that people act nicer � and buy more � when
they can smell baking cookies. More advanced scientists, like those in
the �chemo-reception industry,� test flowers, spices, and synthetics for
their effects on human behavior. Williams Sonoma uses a special holiday
scent. Vanilla helps make people feel sexy � perfect to lower inhibitions
in the lingerie store. But even beyond the fives senses, the most advanced
attacks are on the emotions � and the subconscious.

    Each store has its own carefully researched
theme. They are total environments–stage sets where the brand values become
OUR values. It�s a self-contained world, where retail psychologists can
overwhelm us with the culture of their products. The only way to fit in,
is to buy.

    The stores also hire their own battalions
of behavioral researchers � many of whom use the security cameras to study
consumer behaviors, like an anthropologist studying a tribe in its native
habitat.

    Ever wonder why certain store aisles
are so wide? Chalk it up to the butt-brush. If a woman is brushed up against
while she inspects a product, she�ll get up and move. Items that require
close inspection by women � like scarves and underwear – are put in wider
aisles.

    Want to know why the counters have
gotten so big? Because consumers feel obliged to fill it up with more products
when they�re at the register.

    And that funny way salespeople have
of speaking? It�s all scripted at corporate headquarters. This young man
is doing a technique called GAP-ACT: Greet, Approach, Provide, Add-on,
Close and Thank.

    We�re all just cogs in the machine
�- the shopper, the salesperson, the merchandiser, and even the stockholder
depending on them.  So much for passively earned income. Sorry, friends,
there ain�t no Santa Claus.  We all end up working for it, in the
end. (After all, if people only bought what they actually needed, the entire
American economy would collapse.) I�m Douglas Rushkoff. Happy Holidays.