Street art in Puerto Rico
by artist SHITTYROBOTS.
Photo by SHITTYROBOTS
Monthly Archives: May 2015
How Companies Turn Your Facebook Activity Into a Credit Score
May 30, 2015
DEAUVILLE, FRANCE – MAY 26, 2011 : Facebook CEO Mark Zuckerberg Press conference at the summit G8/G20 about new technologies – Deauville, France on May 26 2011
Photo Credit: Frederic Legrand – COMEO / Shutterstock.com
Nicole Keplinger, 22, had long seen ads on Facebook promising financial relief, but she always ignored them and assumed that they were scams. Keplinger was drowning in student debt after obtaining a worthless degree from the for-profit Everest College, whose parent corporation, Corinthian Colleges Inc., had recently collapsed under accusations of fraud and predatory lending. But when an offer arrived in her e-mail inbox in April—“Cut your student loan payment or even forgive it completely!”—she thought it seemed more legitimate than the rest, so she called the number.
The person on the other end was aggressive. “They wanted my banking information, my Social Security number, my parents’ number and their information. I was like, ‘Wait a minute,’” Keplinger recalled. Even after she said that she lived on a fixed income (on disability due to a kidney transplant), the telemarketer kept up the pressure. “They said I needed to get a credit card. I don’t know if they were going to take money off it or what… but why do I need to get a credit card if I’m trying to reduce my student loans?”
Keplinger lied and said she’d call back, but not everyone gets away. If she disclosed her bank information, her loans most certainly would not have been cut or forgiven. At best, she would have been charged a large fee for something she could do herself: get on government repayment programs such as forbearance or deferment. At worst, she might have had the money debited each month from her bank account without any benefit provided in return, or been ensnared by a “phantom-debt collector”—a distressingly common racket that involves telling people they owe phony debts and scaring them into paying. It’s the perfect ploy to attempt on people who have already been preyed upon by unscrupulous outfits like Corinthian and who, having been misled and overcharged, are understandably confused about how much money they owe. At the same time, the fact that Keplinger was e-mailed in addition to seeing ads on Facebook suggests that her information was in the hands of a “lead generator,” a multibillion-dollar industry devoted to compiling and selling lists of prospective customers online.
Welcome to a new age of digital redlining. The term conjures up the days when banks would draw a red line around areas of the city—typically places where blacks, Latinos, Asians, or other minorities lived—to denote places they would not lend money, at least not at fair rates. “Just as neighborhoods can serve as a proxy for racial or ethnic identity, there are new worries that big data technologies could be used to ‘digitally redline’ unwanted groups, either as customers, employees, tenants, or recipients of credit,” a 2014 White House report on big data warns.
Thus, rather than overt discrimination, companies can smuggle proxies for race, sex, indebtedness, and so on into big-data sets and then draw correlations and conclusions that have discriminatory effects. For example, Latanya Sweeney, former chief technologist at the Federal Trade Commission, uncovered racial bias on the basis of Google searches: black-identifying names yielded a higher incidence of ads associated with “arrest” than white-identifying names. It’s discrimination committed not by an individual ad buyer, banker, or insurance broker, but by a bot. This is likely what happened to Nicole: Facebook’s huge repository of data has strong indicators of users’ socioeconomic status—where they attend school, where they work, who their friends are, and more—and the company targets them accordingly. In May, Facebook and IBM announced a partnership that will result in the two tech giants combining their vast data troves and analytics in order to achieve “personalization at scale.”
The authors of this article saw this firsthand when one of us (Astra) opened a second Facebook account to communicate with Corinthian students: Her newsfeed was overrun by the sorts of offers Nicole sees regularly—in stark contrast to the ads for financial services, such as PayPal and American Express, that she normally gets. Such targeting isn’t obvious to most users, but opening a new profile and associating primarily with students from a school known to target low-income people of color, single mothers, veterans, and other vulnerable groups cracks a window onto another Facebook entirely.
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Longstanding consumer protections should, in principle, apply to the digital landscape. The use of data-driven methods for judging people’s creditworthiness goes back a century. Before the passage of the Fair Credit Reporting Act in 1970, consumer-reporting bureaus would gather information on everything they could find about people—whether true or fabricated, fair or unfair, relevant or irrelevant—and then provide it to creditors. Your dossier was likely to contain whatever information they could get away with collecting or making up about you. So, if you were considered a sexual deviant, a drunk, a troublemaker, an adulterer, or whatever else, it was all fair game if a creditor was willing to pay for that information. The FCRA was meant to limit these practices by putting an end to the collection of “irrelevant” information and establishing rules for the “permissible” uses of consumer reports. In 1974, Congress passed the Equal Credit Opportunity Act, which added more bite to financial regulations by making it illegal for creditors to discriminate against applicants on the basis of race, religion, national origin, sex, marital status, age, or receiving public assistance. Cases brought under ECOA have often focused on the presence of human bias in making credit decisions—think of an African-American woman walking into a lender’s office and receiving unfair rates based on her race or gender.
Of course, the days when creditworthiness was assessed in one-on-one meetings are long gone. Today, lenders, employers, and landlords rely on credit-scoring systems like the widely used FICO score, which take data from an individual’s consumer report and derive a metric of his or her risk. These scores allow for automated decision-making, yet there’s evidence that such systems have not eliminated bias, but rather enshrine socioeconomic disparities in a technical process.
Though deeply flawed, credit scores and consumer reports are immensely consequential in many facets of our lives, from obtaining a loan to finding a job to renting a home. The lack of a score—or a lower score than one actually deserves—can mean higher interest rates within the mainstream banking system, or being forced into the arms of check-cashing services and payday lenders. Scores can become “self-fulfilling prophecies, creating the financial distress they claim merely to indicate,” as legal scholars Danielle Citron and Frank Pasquale have observed. The worse your score, the more you’re charged—and the more you’re charged, the harder it is to make monthly payments, which means the worse you’re ranked the next time around.
With the sheer quantity of data that can be collected online, FICO scores are just the tip of the iceberg. “Now the system has exploded, where you’ve got all these actors that you don’t actually have a relationship with: network advertisers, data brokers, companies that are vacuuming up information,” says Ed Mierzwinski, consumer-program director at the United States Public Interest Research Group (USPIRG). This information comes from sources both online and off-line: Thousands of data brokers keep tabs on everything from social-media profiles and online searches to public records and retail loyalty cards; they likely know things including (but not limited to) your age, race, gender, and income; who your friends are; whether you’re ill, looking for a job, getting married, having a baby, or trying to buy a home. Today, we all swim in murky waters in which we’re constantly tracked, analyzed, and scored, without knowing what information is being collected about us, how it’s being weighted, or why it matters—much of it as irrelevant and inaccurate as the hearsay assembled during the early days of consumer reporting.
Making things even more muddled, the boundary between traditional credit scoring and marketing has blurred. The big credit bureaus have long had sidelines selling marketing lists, but now various companies, including credit bureaus, create and sell “consumer evaluation,” “buying power,” and “marketing” scores, which are ingeniously devised to evade the FCRA (a 2011 presentation by FICO and Equifax’s IXI Services was titled “Enhancing Your Marketing Effectiveness and Decisions With Non-Regulated Data”). The algorithms behind these scores are designed to predict spending and whether prospective customers will be moneymakers or money-losers. Proponents claim that the scores simply facilitate advertising, and that they’re not used to approve individuals for credit offers or any other action that would trigger the FCRA. This leaves those of us who are scored with no rights or recourse. While federal law limits the use of traditional credit scores and dictates that people must be notified when an adverse decision is made about them, the law does not cover the new digital evaluation systems: You are not legally entitled to see your marketing score, let alone ensure its accuracy.
The opacity and unaccountability of online consumer-credit marketing negatively affect not only those individuals who get a bad deal or financial offer; there is evidence that these personalized predatory practices played a role in the subprime-mortgage bubble and subsequent financial crisis. “From 2005 to 2007, the height of the boom in the United States, mortgage and financial-services companies were among the top spenders for online ads,” write Mierzwinski and Jeff Chester in a scholarly article on digital decision-making and the FCRA. Companies like Google, Yahoo, Facebook, and Bing make billions a year from online financial marketing. Lead generation specifically “played a critical, but largely invisible, role in the recent subprime-mortgage debacle.” Since 2008, when the crash occurred, the capabilities for tracking and targeting have become only more sophisticated.
Proof of discrimination in online microtargeting is notoriously hard to come by. How can you tell if you’re being targeted with an advertisement for an inferior or bogus financial product because data brokers have deemed you part of the “rural and barely making it,” “probably bipolar,” or “gullible elderly” market segments? Or if you’re being offered a jacked-up interest or insurance rate based on your race, gender, neighborhood, or health condition? Or whether you’re receiving offers for a subprime financial product because a marketing score flags you as a risk, or you’ve been caught in a lead generator’s snare?
“Measurement is an enormous challenge,” says Aaron Rieke of Upturn, a technology-policy-and-law consulting firm. “You see one ad and I see another. It’s often impossible for a researcher on the outside to find out why. Maybe an ad buyer ran out its budget. Maybe we were profiled differently. Maybe the ads were geotargeted.”
To date, the best indication of potentially discriminatory practices is the marketing literature and public boasting that companies produce themselves. A recent white paper on “Civil Rights and Big Data, and Our Algorithmic Future,” which Rieke helped write, contains a prime example: “At an annual conference of actuaries, consultants from Deloitte explained that they can now use thousands of ‘non-traditional’ third party data sources, such as consumer buying history, to predict a life insurance applicant’s health status with an accuracy comparable to a medical exam.” The company does this partly by incorporating the health of an applicant’s neighbors.
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As many as 70 million Americans do not have a credit score, or have low scores due to “sparse” or “thin” files. A variety of start-ups are trying to exploit this situation under the banner of magnanimously extending credit to individuals facing a disadvantage under the traditional financial model. They do this by bulking up consumer credit files—crunching large amounts of data and feeding it into proprietary scoring formulas. The data comes from traditional sources (such as credit reports) and what some experts call “fringe alternative data,” which can include information about shopping habits, web and social-media usage, government records, music tastes, location, and just about anything else. The new big-data-fueled techniques are the innovative ingredients needed to “disrupt” the traditional business of consumer finance and “innovate” different types of products and services.
ZestFinance, which declined to be interviewed or comment for this article, leads the pack with a troubling motto emblazoned on its website: “All data is credit data.” LendUp, an online lender that specializes in short-term, small-dollar, high-interest credit—like the kind offered by payday lenders, pawnbrokers, and title loans—targets people without access to other forms of credit who need fast cash to make ends meet. On the other side of the socioeconomic spectrum, Earnest—another venture-capital-backed lending start-up—proclaims that it’s trying to “build the modern bank for the next generation, and the mission is better access to credit to millions of people at earlier ages and at cheaper prices—and we do that using software and data,” according to Louis Beryl, the CEO and founder. The project was born out of Beryl’s difficulty in getting a loan as a Harvard graduate student: Earnest caters to middle-class college graduates and offers them low rates (anywhere from 4.25 to 9.25 percent for personal loans) and personalized customer service.
These start-ups all tell very similar stories—common in Silicon Valley—about using technology to benefit their target population, this time through expanding opportunities for financial inclusion. But given the sky-high rates that some of them offer—the annual interest rate for loans offered by LendUp and other similar big-data lenders ranges from 134 percent to 749 percent—they seem little more than high-tech loan sharks. But while traditional loan sharks can only get people who walk through their door, online creditors and marketers have an enormous (and unsuspecting) population at their fingertips online. In myriad ways, these companies represent the ongoing shift of power away from consumers and the erosion of longstanding protections, yet there has been little regulatory scrutiny. “In addition to whether they’re covered by the laws,” says USPIRG’s Mierzwinski, “there is also the question of whether some of their algorithms are trying to evade the laws by creating illegal proxies—and that’s absolutely something that we’re hoping the [Consumer Financial Protection Bureau] can use its supervisory authority to figure out.”
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Officials we spoke to from the CFPB paid tribute to innovation when asked about the potential impact of digital technologies on fair lending. But while there’s no denying that big data, new credit-scoring models, and financial-services start-ups could be beneficial, in theory, for disadvantaged communities, market incentives in practice ensure that stigmatization and exclusion prevail.
Scoring systems are technologies of risk management, and new digital data collection and micro-targeting further shift the risk—and expense—to those who are most vulnerable. For example, compare Earnest and LendUp. The former shows how big data can be used to benefit consumers—but for Earnest, the risk is only worthwhile when dealing with a subset of people whose privilege and financial soundness have yet to be recognized by the mainstream banking system. The latter reveals the more common and exploitative uses of big data to entangle a financially insecure population with few, if any, alternatives available to them.
As the digital revolution unfolds, already limited consumer protections will come under increasing stress. Both the Consumer Financial Protection Bureau and the Federal Trade Commission lean on the FCRA and ECOA, yet plenty of evidence suggests that new, expanded safeguards are needed, given the laws’ limits and loopholes. That said, both the CFPB’s assistant director of fair lending, Patrice Ficklin, and the FTC’s Julie Brill insist that current laws are up for today’s challenges. “Whether they’re a large bank or a small start-up, it is illegal for lenders to discriminate against consumers,” Ficklin says.
No doubt, the laws currently on the books provide crucial protections—but experts and advocates warn that they don’t take into account the disparate impacts of the new technology. For example, it’s not illegal for companies to discriminate based on a potential customer’s or employee’s personal network—the people they know and the interests they share with others online. “The legal fight against discrimination (or, rather, the legal fight for equality) may be a long distance from the fight to safeguard ordinary people—and especially members of historically marginalized groups—from encountering unfairness and injustice due to data-driven discrimination,” says Seeta Peña Gangadharan, a researcher focused on data profiling and inclusion.
Given this fact, more fundamental reforms are needed. Brill, for one, has been extremely vocal about the need for more robust privacy protections in the form of data-broker regulations that curb data collection at the source. “I think that we need to give tools to consumers so that they can control their information used for marketing, to suppress it or correct it if they want,” Brill says. “I want to add, though, that I don’t think consumers can manage all of this on their own. And that’s why there need to be some rules around sensitive information—for instance, health information, information about race, financial status, geolocation. If that’s going to be used, consumers need to be told, and they need to say, ‘Yes, OK, you can use it.’”
In other words, we need to move from an opt-out model, where the default setting makes our private information freely available to thousands of invisible and unaccountable actors, to one that’s opt-in—a move that would inevitably constrict the flow of private data. This is what Brill calls the “right to obscurity,” a right that will become even more essential as more and more everyday devices get networked through the so-called “Internet of things.” (Imagine a future in which your auto insurer collects data from a device in your vehicle; this data, because it isn’t acquired through a third party, isn’t covered by the FCRA, and consumers have no right to access or correct the information.)
Data brokers and marketers, not to mention advertising-dependent tech giants like Google and Facebook, would not be pleased if such legislation came to pass. Lobbying associations like the Consumer Data Industry Association would no doubt spend huge sums to squelch any reforms, invoking their First Amendment right to use the data for whatever purpose they please, and arguing that advertising and scoring are tantamount to speech, and privacy equivalent to censorship. In his book The Black Box Society: The Secret Algorithms That Control Money and Information, Frank Pasquale points out that some lawyers are even using First Amendment cases “as a shield to protect credit rating agencies accused of wrongdoing during the subprime debacle.”
Strong data-broker legislation or, better yet, a baseline, cross-sector privacy law would be an enormously positive (if unlikely) development in the United States. Even so, the frame of privacy/obscurity needs to be expanded. Consider Nicole Keplinger again. When she and other for-profit-college students are targeted by scammers on Facebook, the problem isn’t simply that their privacy has been violated through the collection of personal information. The fact that they are treated as quarry by financial predators raises a deeper issue of fairness. Even in a scenario in which privacy protections are strong, data brokers regulated, and the FCRA and ECOA aggressively enforced, there would be no restrictions against targeting people who are poor. Discriminating based on income is as American as apple pie: Unlike race, religion, sex, or marital status, class is not a protected class.
Right now, many people insist that a combination of digital technology and the free market will solve the problem of financial inclusion, even though it’s a problem caused by the market itself. Perhaps the very concept of “consumer protections”—which inevitably leads to individualized solutions to systemic failures—is part of the problem. Looking back on the role that online consumer-credit marketing played in the 2008 crash, it’s clear that consumer protections are in fact citizen protections. Nothing less than the health of our entire society is at stake.
US economy contracted in first quarter
By Andre Damon
30 May 2015
The US economy shrank at an annual rate of 0.7 percent in the first three months of this year, the Commerce Department said Friday. The new figures mark a sharp downward revision compared with the already anemic 0.2 percent first-quarter growth rate estimated by the Commerce Department in April, and an even bigger slide from the previous quarter, which saw a growth of 2.2 percent.
While the White House was quick to dismiss the dismal figures as the expression of various technical quirks and one-off causes, the fact remains that, seven years since the start of the 2008 financial crisis, the US economy remains mired in stagnation and slump. Friday’s figures represent the third quarterly economic contraction since the beginning of the so-called economic recovery in 2009.
The slump is broadly expected to continue through a large section of this year, with the Federal Reserve Bank of Atlanta predicting a growth rate of just 0.8 percent in the second quarter. If that were the case, economic growth in the first half of this year would be effectively zero.
Apologists for the political establishment have pointed to the fall in the official unemployment rate as a sign of economic health, declaring that the US economy is on track to hit “full employment” next year. But the official unemployment rate is a fiction, as it entirely discounts the millions of people who have fallen out of the labor force since the 2008 crash. The labor force participation rate remains near a decades-long low at 62.8 percent, down from 66.4 percent in 2006.
While a number of factors contributed to the contraction in US economic output in the first quarter, the clearest and most immediate cause was the collapse in business investment, which fell by 2.8 percent, compared to an increase of 4.7 percent in the previous quarter.
This is not for lack of money. While US corporations are sitting on a cash hoard of some $1.4 trillion, they are refusing to make any significant investments, and are rather spending their cash on share buybacks and dividend hikes, while carrying out mergers and acquisitions at a record-setting pace.
This week, the Wall Street Journal reported that “companies in the S&P 500 sharply increased their spending on dividends and buybacks to a median 36 percent of operating cash flow in 2013, from 18 percent in 2003. Over that same decade, those companies cut spending on plants and equipment to 29 percent of operating cash flow, from 33 percent in 2003.”
The same day as the Commerce Department published its updated economic figures, the financial data firm Dealogic reported that mergers and acquisitions are on track to hit a record in May, with an expected $241.6 billion in deals, topping even the previous record set in May 2007, before the 2008 financial crash.
The enormous amounts of money generated for corporate executives, hedge funds and private equality companies through these mergers—which are largely financed with free money from the Federal Reserve—is the result of the ensuing mass layoffs and cost cutting that inevitably follow such consolidations.
Corporate boards of directors have rewarded CEOs who carry out layoffs and other cost-cutting measures with ever-greater pay packages. CEO pay hit a record high last year, according to figures calculated by executive pay research firm Equilar published in The New York Times earlier this month. The 200 highest-paid CEOs got an average of $22.6 million apiece last year, up 10 percent from the year before and more than double what they were paid in 2006.
The pervasive collapse in investment amid an orgy of financial parasitism has prompted many analysts to declare that the “new normal” is one of stagnant growth. Last month, the International Monetary Fund reported that “potential growth in advanced economies is likely to remain below pre-crisis rates, while it is expected to decrease further in emerging market economies in the medium term.”
Since the official end of the recession in 2009, the US economy has grown at an average annual rate of only 2.2 percent, compared to an average growth rate of 3.2 percent during the 1990s and 4.2 percent in the 1950s.
The fall in investment was particularly sharp in the energy sector, which has been hemorrhaging jobs by the tens of thousands amid falling oil prices. The category of business investment that covers oil exploration fell at an annual rate of 48.6 percent in the first quarter, according to the Commerce Department’s report.
The continued appreciation of the dollar has also led to a decline in exports, as US corporations face lower demand from overseas. US transnational corporations have demanded that the Federal Reserve do more in order to lower the value of the dollar and stimulate exports.
The Federal Reserve, for its part, has responded to the persistent weakness in the US and global economy and the appreciation of the dollar by keeping interest rates at a record low. The Fed has pulled back from its plan to raise the federal funds rate next month, and bank officials have indicated that a rate increase may not come until next year. These actions mirror those of the European Central Bank, which this month announced an expansion of its quantitative easing program amid a persistent economic slump on the continent.
As a result of seven years of ultra-low interest rates, bank bailouts and “quantitative easing,” the major stock markets have more than tripled in value, taking the wealth of the financial aristocracy along with them. The 400 richest individuals in the United States, whose wealth has doubled since Obama was first elected, now have a combined net worth of $2.29 trillion.
The influx of cheap money from the Federal Reserve and other central banks will only continue to fuel the massive orgy of parasitism gripping the economy, facilitating mergers and buyouts that lead to mass layoffs and wage cuts while further enriching the financial elite at the expense of society as a whole.
Street art in Vienna, Austria
Street art in Vienna, Austria,
by artist Alexis Diaz.
Photos by Alexis Diaz.
The fraudulent debate over NSA reform
30 May 2015
The US Senate convenes May 31 in a rare Sunday afternoon session called by Senate Majority Leader Mitch McConnell to forestall the expiration of Section 215 of the USA Patriot Act. This section of the vast police-state law passed in 2001 has been used as the basis for the National Security Agency’s collection of telephone metadata on every phone call made in the United States, as well as authorizing other forms of domestic spying.
In the week leading up to the Senate session, President Obama, Attorney General Loretta Lynch and the heads of the FBI and other security agencies have depicted the potential expiration of Section 215 in apocalyptic terms. Obama made several appearances before television cameras to demand action “because it’s necessary to keep the American people safe and secure.” Lynch said that a failure to act would cause “a serious lapse in our ability to protect the American people.”
Other administration representatives were even more strident. At a press briefing of three top officials, all unidentified at the insistence of the White House, one said, “What you’re doing, essentially, is you’re playing national security Russian roulette. We have not had to confront addressing the terrorist threat without these authorities, and it’s going to be fraught with unnecessary risk.”
This scaremongering is completely cynical. The surveillance powers embodied in Section 215 have nothing to do with defending the American people from terrorist attacks. On the contrary, the American people are the principal target of Section 215, and of the Patriot Act as a whole.
On the eve of the vote, a report by the Justice Department’s own Office of Inspector General conceded that the mass collection of data on telephone metadata—the core of Section 215 as interpreted by both the Bush and Obama administrations—has played no role in any terrorism investigation or prosecution. Another of the key powers under Section 215, authorization of “roving wiretaps” of individuals who change cellphones, has been used in only a handful of cases. A provision for wiretaps of so-called “rogue” terrorists—individuals not connected with any organization—has never been used at all.
Given these facts, how is one to account for the “sky is falling” rhetoric from the Obama administration and its congressional allies, both Republican and Democrat, over the possible expiration of Section 215?
Section 215 is of enormous importance to the government—but not for the reason given. The mass data collection on telecommunications and the Internet is a key element in the development of an authoritarian state that is accumulating vast databases on the political and social views of the entire population. The state is preparing to use this intelligence in an effort to crush popular opposition to ever-growing social inequality, police violence and militarism.
The greatest threat to the democratic rights of the American people comes not from Islamic fundamentalist terrorists or their Internet sympathizers, but from the capitalist state itself, which is the main instrument for defending the profits and wealth of the super-rich against the vast majority of the population, the working class. Whatever form the Senate debate takes on Sunday, this central issue will be evaded and covered up.
The Obama administration is pushing for Senate acceptance of the USA Freedom Act, a bill which makes cosmetic changes in Section 215 while reauthorizing it and placing it on a pseudo-legal foundation. The database of call records would be maintained by the telecommunications companies, rather than directly at NSA headquarters, and the NSA would route its data searches through the telecoms.
This bill passed the House of Representatives with overwhelming bipartisan support, but fell three votes short of winning consideration in the Senate. It appears likely that a dozen or more Republican senators, who initially opposed the bill, will switch their votes in order to beat the May 31 deadline. Procedural obstacles by a handful of Republican and Democratic opponents may delay this several days, which would supposedly lead to a temporary shutdown of the call surveillance program.
There is not the slightest reason to believe that the NSA and the vast military-intelligence complex as a whole will actually take such a step. These agencies engaged in mass domestic spying without any legal authorization long before the passage of the Patriot Act in 2001. As a federal appeals court ruled earlier this month, the Bush-Obama interpretation of Section 215 as an authorization of mass call data collection has no legal basis, meaning that the entire surveillance program has been conducted unlawfully for the past 14 years. Operating outside of and in defiance of the law is second nature to the US spy apparatus.
Even the present half-hearted and thoroughly insincere discussion is only taking place in response to the revelations by whistleblowers like Edward Snowden and Thomas Drake about the massive police-state buildup under the guise of “anti-terrorism.” The same senators who claim to be concerned about the “surveillance state” have joined in condemning the actions of the courageous individuals who done the public service of exposing it.
There will be much posturing in Sunday’s debate, both from those hyping the threat of terrorism, and those, a small minority, claiming to defend constitutional rights. But Republican Rand Paul, Democrat Ron Wyden and other professed opponents of Section 215 are objecting to only a small portion of the Patriot Act, which is itself only a series of amendments to earlier police-state laws like the Foreign Intelligence Surveillance Act. The collection of telephone metadata, moreover, is only one of hundreds, if not thousands, of programs through which the US military-intelligence apparatus collects information on the American population.
Patrick Martin
New film: From Gazi to Gezi – a stone’s throw away
This award-winning film on the Gezi uprising by Ross Domoney captures the poetry behind a rebellion; the art of resistance and the power of the spoken word.
Gazi to Gezi – a stone’s throw away explores the poetry of a nationwide revolt in Istanbul, Europe’s largest city. An explosive mix of the city’s inhabitants come together to fight the police and barricade themselves into one of the metropolis’ few remaining green spaces, Gezi Park. All are present; from the liberal students, to oppressed, illegal revolutionary groups living among the slums of the city. The film, told through the memory of a stone, attempts to link the past with the present in a cinematic format which is neither factual nor fictitious. Scored to a beautiful soundtrack, the audience is taken into a rebellious world.
Gazi to Gezi – a stones throw away from Ross Domoney on Vimeo.
Gazi to Gezi – a stone’s throw away (2015)
Produced by Ross Domoney and Ozan Kamiloglu
Script written by Ozan Kamiloglu with the inspiration of Arkadas Özger
Filmed, edited and directed by Ross Domoney
Performancy by Sarah Karakus
Music by Giorgos Triantafillou
Live music performance by Iskender Ozan Toprak
Street art in France
“Ali.”
Street art by combo. Paris, France
Wall Street buybacks: Another expression of parasitism
29 May 2015
In the biological world, a parasite lives at the expense of the host, sucking out its nutrients and life forces, and sometimes killing it. Analogies of course have their limits, but nonetheless they can be suggestive. And this is certainly so in the case of the rampant financial parasitism that has become the dominant feature of the American economy and, by extension, the world economy as a whole.
An article published in the Wall Street Journal this week details some of the impact of hedge funds on the operations of major US corporations, and the way in which their insatiable drive for profit through financial manipulations is sucking the lifeblood out of the economy and contributing to its deepening breakdown.
The article is based on a study conducted for the newspaper by S&P Capital IQ. It found that companies in the S&P 500 index had “sharply increased their spending on dividends and [share] buybacks to a median 36 percent of operating cash flow in 2013, from 18 percent in 2003.” The doubling of this rate was accompanied by a fall in spending by those companies on plant and equipment, from 33 percent to 29 percent over the same period.
The study found that in companies targeted by so-called “activist investors”—that is, hedge funds that hold hundreds of millions and sometimes billions of dollars on behalf of their wealthy investors—the figures were even higher. Targeted companies reduced capital spending from 42 per cent to 29 percent of operating cash flow and increased spending on dividends and share buybacks to 37 percent of operating cash flow from 22 percent.
One of the main factors facilitating these operations has been the provision of ultra-cheap money by the US Federal Reserve, which has kept official interest rates at almost zero, leading to historically low interest rates in financial markets. Hedge funds are able to use borrowed money to acquire major share holdings in corporations and then push for share buybacks and the payment of increased dividends. The buybacks, in turn, can be financed through borrowed funds at low interest rates.
The aim is to produce a rise in the share price of the company or generate an increased dividend flow returning large profits for the “activists,” often accompanied by job cuts or the outright closure of parts of the targeted company deemed not to be making a sufficient contribution to “shareholders’ funds.” At the end of the process, vast profits have been pocketed, without a single atom of new wealth being created, while productive capacity has been curtailed.
The consequences of these vampire-like operations are most prominent in major industries. The US energy giants, which have splurged billions on buybacks, dividends and mergers, have refused for decades to invest in infrastructure, leading to a situation where workers are subjected to 16-hour days and increasingly unsafe working conditions. Likewise, the auto industry firms and telecoms are notorious for their resistance to wage increases, while engaging in the same financial manipulation.
The deeper the economic crisis, the more frenzied the speculation. The article noted that since 2010 the number of activist campaigns directed at securing buybacks and increased dividends had risen by 60 percent. Last year there were 348 such campaigns, the most since 2008, and a further 108 in the first quarter of this year. Hedge funds now control $130 billion in assets, more than double the amount they held in 2011. This means that once they leverage these funds through borrowing at ultra-low rates, they can target virtually any corporation.
Would-be reformers of the capitalist economy will no doubt argue that these dangers can be overcome through the development of mechanisms or increased regulations to promote the “good” side of corporate activity—research and development and real investment—while taking action to control the “bad” side—parasitism. But the question remains: Why has it emerged now?
Underlying tendencies at the very center of the capitalist economy are at work. The long-term downward pressure on the rate of profit, which has led to the continuous restructuring of the American and global capitalist economy over the past four decades, is the driving force behind the rise of speculation and parasitism.
Well-known voracious hedge-fund investor Carl Icahn, cited in the Wall Street Journal article, pointed to these trends saying the economy was “being dragged down by too many mediocre CEOs, and it’s dangerous if profitability is going down despite interest rates being at zero.”
However, his resort to a “bad man” theory of economics does not pass even a preliminary examination. The same tendencies are also clearly visible in Europe and throughout the world’s major capitalist economies where, despite ultra-low interest rates, investment remains at historically depressed levels, reflecting a lack of profitable outlets.
Furthermore, any attempt to separate out the “good” and the “bad’ sides of corporations runs up against the fact, as Marx explained at the time of the emergence of joint stock companies in the middle of the 19th century, that the origin of parasitism is lodged in their very structure. The formation of such companies, he wrote, “reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors: an entire system of swindling and cheating with respect to the promotion of companies, issuing of shares and share dealing.”
For a whole period of capitalist development, notwithstanding swindling and cheating, the corporation or joint-stock company facilitated the development of the productive forces through the aggregation of capital to finance large-scale developments, which sustained the living standards of the mass of the population. Those days have long gone.
The elevation of parasitism to the basic mechanism of profit accumulation is bound up with the objective crisis of capitalism and, connected to this, the absolute stranglehold of the financial aristocracy over every aspect of economic and political life. Swindling, cheating and the destruction of the productive forces—above all through the impoverishment of the most important productive force of all, the working class—is a symptom of the rot and decay of the entire socioeconomic order.
It establishes the unanswerable case for the taking into public ownership of the major corporations, the banks and the entire finance industry as part of the socialist restructuring of economic life. This is the prerequisite for establishing a society where the productive forces, created by the labor of the working class, can be used for social advancement.
Nick Beams
Street art in Colombia
Street art in Colombia
by artists Gleo and Apaz.
Photo by Gleo.
Chris Hedges: America’s Mania for Positive Thinking and Denial of Reality Will Be Our Downfall
May 27, 2015
The naive belief that history is linear, that moral progress accompanies technical progress, is a form of collective self-delusion. It cripples our capacity for radical action and lulls us into a false sense of security. Those who cling to the myth of human progress, who believe that the world inevitably moves toward a higher material and moral state, are held captive by power. Only those who accept the very real possibility of dystopia, of the rise of a ruthless corporate totalitarianism, buttressed by the most terrifying security and surveillance apparatus in human history, are likely to carry out the self-sacrifice necessary for revolt.
The yearning for positivism that pervades our corporate culture ignores human nature and human history. But to challenge it, to state the obvious fact that things are getting worse, and may soon get much worse, is to be tossed out of the circle of magical thinking that defines American and much of Western culture. The left is as infected with this mania for hope as the right. It is a mania that obscures reality even as global capitalism disintegrates and the ecosystem unravels, potentially dooming us all.
The 19th century theorist Louis-Auguste Blanqui, unlike nearly all of his contemporaries, dismissed the belief, central to Karl Marx, that human history is a linear progression toward equality and greater morality. He warned that this absurd positivism is the lie perpetrated by oppressors: “All atrocities of the victor, the long series of his attacks are coldly transformed into constant, inevitable evolution, like that of nature. … But the sequence of human things is not inevitable like that of the universe. It can be changed at any moment.” He foresaw that scientific and technological advancement, rather than being a harbinger of progress, could be “a terrible weapon in the hands of Capital against Work and Thought.” And in a day when few others did so, he decried the despoiling of the natural world. “The axe fells, nobody replants. There is no concern for the future’s ill health.”
“Humanity,” Blanqui wrote, “is never stationary. It advances or goes backwards. Its progressive march leads it to equality. Its regressive march goes back through every stage of privilege to human slavery, the final word of the right to property.” Further, he wrote, “I am not amongst those who claim that progress can be taken for granted, that humanity cannot go backwards.”Blanqui understood that history has long periods of cultural barrenness and brutal repression. The fall of the Roman Empire, for example, led to misery throughout Europe during the Dark Ages, roughly from the sixth through the 13th centuries. There was a loss of technical knowledge (one prominent example being how to build and maintain aqueducts), and a cultural and intellectual impoverishment led to a vast historical amnesia that blotted out the greatest thinkers and artists of the classical world. None of this loss was regained until the 14th century when Europe saw the beginning of the Renaissance, a development made possible largely by the cultural flourishing of Islam, which through translating Aristotle into Arabic and other intellectual accomplishments kept alive the knowledge and wisdom of the past. The Dark Ages were marked by arbitrary rule, incessant wars, insecurity, anarchy and terror. And I see nothing to prevent the rise of a new Dark Age if we do not abolish the corporate state. Indeed, the longer the corporate state holds power the more likely a new Dark Age becomes. To trust in some mythical force called progress to save us is to become passive before corporate power. The people alone can defy these forces. And fate and history do not ensure our victory.
Blanqui tasted history’s tragic reverses. He took part in a series of French revolts, including an attempted armed insurrection in May 1839, the 1848 uprising and the Paris Commune—a socialist uprising that controlled France’s capital from March 18 until May 28 in 1871. Workers in cities such as Marseilles and Lyon attempted but failed to organize similar communes before the Paris Commune was militarily crushed.
The blundering history of the human race is always given coherence by power elites and their courtiers in the press and academia who endow it with a meaning and coherence it lacks. They need to manufacture national myths to hide the greed, violence and stupidity that characterize the march of most human societies. For the United States, refusal to confront the crisis of climate change and our endless and costly wars in the Middle East are but two examples of the follies that propel us toward catastrophe.
Wisdom is not knowledge. Knowledge deals with the particular and the actual. Knowledge is the domain of science and technology. Wisdom is about transcendence. Wisdom allows us to see and accept reality, no matter how bleak that reality may be. It is only through wisdom that we are able to cope with the messiness and absurdity of life. Wisdom is about detachment. Once wisdom is achieved, the idea of moral progress is obliterated. Wisdom throughout the ages is a constant. Did Shakespeare supersede Sophocles? Is Homer inferior to Dante? Does the Book of Ecclesiastes not have the same deep powers of observation about life that Samuel Beckett offers? Systems of power fear and seek to silence those who achieve wisdom, which is what the war by corporate forces against the humanities and art is about. Wisdom, because it sees through the facade, is a threat to power. It exposes the lies and ideologies that power uses to maintain its privilege and its warped ideology of progress.
Knowledge does not lead to wisdom. Knowledge is more often a tool for repression. Knowledge, through the careful selection and manipulation of facts, gives a false unity to reality. It creates a fictitious collective memory and narrative. It manufactures abstract concepts of honor, glory, heroism, duty and destiny that buttress the power of the state, feed the disease of nationalism and call for blind obedience in the name of patriotism. It allows human beings to explain the advances and reverses in human achievement and morality, as well as the process of birth and decay in the natural world, as parts of a vast movement forward in time. The collective enthusiasm for manufactured national and personal narratives, which is a form of self-exaltation, blots out reality. The myths we create that foster a fictitious hope and false sense of superiority are celebrations of ourselves. They mock wisdom. And they keep us passive.
Wisdom connects us with forces that cannot be measured empirically and that are outside the confines of the rational world. To be wise is to pay homage to beauty, truth, grief, the brevity of life, our own mortality, love and the absurdity and mystery of existence. It is, in short, to honor the sacred. Those who remain trapped in the dogmas perpetuated by technology and knowledge, who believe in the inevitability of human progress, are idiot savants.
“Self-awareness is as much a disability as a power,” the philosopher John Gray writes. “The most accomplished pianist is not the one who is most aware of her movements when she plays. The best craftsman may not know how he works. Very often we are at our most skillful when we are least self-aware. That may be why many cultures have sought to disrupt or diminish self-conscious awareness. In Japan, archers are taught that they will hit the target only when they no longer think of it—or themselves.”
Artists and philosophers, who expose the mercurial undercurrents of the subconscious, allow us to face an unvarnished truth. Works of art and philosophy informed by the intuitive, unarticulated meanderings of the human psyche transcend those constructed by the plodding conscious mind. The freeing potency of visceral memories does not arrive through the intellect. These memories are impervious to rational control. And they alone lead to wisdom.
Those with power have always manipulated reality and created ideologies defined as progress to justify systems of exploitation. Monarchs and religious authorities did this in the Middle Ages. Today this is done by the high priests of modernity—the technocrats, scholars, scientists, politicians, journalists and economists. They deform reality. They foster the myth of preordained inevitability and pure rationality. But such knowledge—which dominates our universities—is anti-thought. It precludes all alternatives. It is used to end discussion. It is designed to give to the forces of science or the free market or globalization a veneer of rational discourse, to persuade us to place our faith in these forces and trust our fate to them. These forces, the experts assure us, are as unalterable as nature. They will lead us forward. To question them is heresy.
The Austrian writer Stefan Zweig, in his 1942 novella “Chess Story,” chronicles the arcane specializations that have created technocrats unable to question the systems they serve, as well as a society that foolishly reveres them. Mirko Czentovic, the world chess champion, represents the technocrat. His mental energy is invested solely in the 64 squares of the chessboard. Apart from the game, he is a dolt, a monomaniac like all monomaniacs, who “burrow like termites into their own particular material to construct, in miniature, a strange and utterly individual image of the world.” When Czentovic “senses an educated person he crawls into his shell. That way no one will ever be able to boast of having heard him say something stupid or of having plumbed the depths of his seemingly boundless ignorance.”
An Austrian lawyer known as Dr. B, whom the Gestapo had held for many months in solitary confinement, challenges Czentovic to a game of chess. During his confinement, the lawyer’s only reading material was a chess manual, which he memorized. He reconstructed games in his head. Forced by his captivity to replicate the single-minded obsession of the technocrat Czentovic, Dr. B too became trapped inside a specialized world, and, unlike Czentovic, he became insane temporarily as he focused on a tiny, specialized piece of human activity. When he challenges the chess champion, his insanity returns.
Zweig, who mourned for the broad liberal culture of educated Europe swallowed up by fascism and modern bureaucracy, warns of the absurdity and danger of a planet run by technocrats. For him, the rise of the Industrial Age and the industrial man and woman is a terrifying metamorphosis in the relationship of human beings to the world. As specialists and bureaucrats, human beings become tools, able to make systems of exploitation and even terror function efficiently without the slightest sense of personal responsibility or understanding. They retreat into the arcane language of all specialists, to mask what they are doing and give to their work a sanitized, clinical veneer.
This is Hannah Arendt’s central point in “Eichmann in Jerusalem.” Technocratic human beings are spiritually dead. They are capable of anything, no matter how heinous, because they do not reflect upon or question the ultimate goal. “The longer one listened to him,” Arendt writes of the Nazi Adolf Eichmann on trial, “the more obvious it became that his inability to speak was closely connected with an inability to think, namely, to think from the standpoint of somebody else. No communication was possible with him, not because he lied but because he was surrounded by the most reliable of all safeguards against the words and presence of others, and hence against reality as such.”
Zweig, horrified by a world run by technocrats, committed suicide with his wife in 1942. He knew that from then on, the Czentovics would be exalted in the service of state and corporate monstrosities.
Resistance, as Alexander Berkman points out, is first about learning to speak differently and abandoning the vocabulary of the “rational” technocrats who rule. Once we discover new words and ideas through which to perceive and explain reality, we free ourselves from neoliberal capitalism, which functions, as Walter Benjamin knew, like a state religion. Resistance will take place outside the boundaries of popular culture and academia, where the deadening weight of the dominant ideology curtails creativity and independent thought.
As global capitalism disintegrates, the heresy our corporate masters fear is gaining currency. But that heresy will not be effective until it is divorced from the mania for hope that is an essential part of corporate indoctrination. The ridiculous positivism, the belief that we are headed toward some glorious future, defies reality. Hope, in this sense, is a form of disempowerment.
There is nothing inevitable about human existence except birth and death. There are no forces, whether divine or technical, that will guarantee us a better future. When we give up false hopes, when we see human nature and history for what they are, when we accept that progress is not preordained, then we can act with an urgency and passion that comprehends the grim possibilities ahead.
WORDVIRUS 