Archive for October, 2008
Wednesday, October 22nd, 2008
Metastasis of the Corporate Panopticon
In a report on how corporate spying and data mining contribute(d) to the general debt-pushed financial implosion, today’s New York Times conveys a bit of news on how the big business marketing juggernaut continues to do what it always does — grow in size and sophistication:
The American information economy has been evolving for decades. Equifax, for example, has been compiling financial histories of consumers for more than a century. Since 1970, use of that data has been regulated by the Federal Trade Commission under the Fair Credit Reporting Act. But Equifax and its rivals started offering new sets of unregulated demographic data over the last decade — not just names, addresses and Social Security numbers of people, but also their marital status, recent births in their family, education history, even the kind of car they own, their television cable service and the magazines they read.
The data agencies start by categorizing consumers into groups. Equifax, for example, says that 115 million Americans are listed in its “Niches 2.0” database. Its “Oodles of Offspring” grouping contains heads of household who make an average of $36,000 a year, are high school graduates and have children, blue-collar jobs and a low home value. People in the “Midlife Munchkins” group make $71,000 a year, have children or grandchildren, white-collar jobs and a high level of education.
In addition to selling these buckets of names, data compilers and banks also employ a variety of methods to estimate the likelihood that people will need new debt, even before they know it themselves.
One technique is called “predictive modeling.” Financial institutions and their consultants might look at who is responding favorably to an existing mailing campaign — one that asks people to refinance their homes, for example — and who has simply thrown the letter in the trash.
The attributes of the people who bite on the offer, like their credit card debt, cash savings and home value, are then plugged into statistical models. Those models then are used for the next round of offers, sent to people with similar financial lives.
The brochure for one Equifax data product, called TargetPoint Predictive Triggers, advertises “advanced profiling techniques” to identify people who show a “statistical propensity to acquire new credit” within 90 days.
An Equifax spokesman said the exact formula was part of the company’s “secret sauce.”
Such is the normal course of affairs in our market totalitarian social order — unceasing, unregulated, and politically undiscussed expansion of the overclass’s capacities to dictate human experience, behavior, and choices.
And, as I argued in The Consumer Trap, the effects of this on individuals are small but very real:
In 2005, Experian, and then rivals Equifax and TransUnion, started selling lists of these consumers to other banks and brokers, whose loan officers would then contact the customer and compete for the loan.
At Visions Marketing Services, a company in Lancaster, Pa., that conducts telemarketing campaigns for banks, mortgage trigger leads were marketing gold during the housing boom.
“We called people who were astounded,” said Alan E. Geller, chief executive of the firm. “They said, ‘I can’t believe you just called me. How did you know we were just getting ready to do that?’ ”
And, as I also argued in the book, the collective impact of having our individual actions scientifically nudged around like this is akin to an attack by a school of piranhas on a wounded animal.
In these days of economic meltdown and mounting pain for the commoners, the fact that this subtle but central and ever-growing kind of coercion is still miles away from anybody’s political agenda speaks volumes about the scale of our predicament.
Tuesday, October 21st, 2008
Old Overclasses Never Learn
As Chris Hedges noted yesterday, “[o]ur oligarchic class is incompetent at governing, managing the economy, coping with natural disasters, educating our young, handling foreign affairs, providing basic services like health care and safeguarding individual rights.” And, I would add, that’s just the short list.
And, now that their system has spent its latest and greatest upswing phase, the overclass hasn’t got a clue what to do about the coming downswing. As Hedges puts it, “the corporate managers and government officials trying to fix the economic meltdown are pouring money and resources into the financial sector because they only know how to manage and sustain established systems, not change them.”
Indeed, consider what Business Week calls “the next meltdown.” That is the coming implosion of the securitized ocean of credit-card debt in the United States. As Business Week explains, in the terminology of the times:
The troubles sound familiar. Borrowers falling behind on their payments. Defaults rising. Huge swaths of loans souring. Investors getting burned. But forget the now-familiar tales of mortgages gone bad. The next horror for beaten-down financial firms is…outstanding credit-card debt—much of it toxic.
That’s bad news for players like JPMorgan Chase (JPM) and Bank of America (BAC) that have largely sidestepped—and even benefited from—the mortgage mess but have major credit-card operations. They’re hardly alone. The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, further weakening the U.S. economy.
“The next meltdown will be in credit cards,” says Gregory Larkin, senior analyst at research firm Innovest Strategic Value Advisors. Adds William Black, senior vice-president of Moody’s Investors Service’s structured finance team: “We still haven’t hit the post-recessionary peaks [in credit-card losses], so things will get worse before they get better.” What’s more, the U.S. Treasury Dept.’s $700 billion mortgage bailout won’t be a lifeline for credit-card issuers.
But some banks and credit-card companies may be exacerbating their problems. To boost profits and get ahead of coming regulation, they’re hiking interest rates. But that’s making it harder for consumers to keep up. That’ll only make tomorrow’s pain worse. Innovest estimates that credit-card issuers will take a $41 billion hit from rotten debt this year and a $96 billion blow in 2009.
Those losses, in turn, will wend their way through the $365 billion market for securities backed by credit-card debt. As with mortgages, banks bundle groups of so-called credit-card receivables, essentially consumers’ outstanding balances, and sell them to big investors such as hedge funds and pension funds. Big issuers offload roughly 70% of their credit-card debt.
Making matters worse, the subprime threat is also greater in credit-card land. Risky borrowers with low credit scores account for roughly 30% of outstanding credit-card debt, compared with 11% of mortgage debt. More than 45% of Washington Mutual’s credit-card portfolio is subprime, according to Innovest. That could become a headache for JPMorgan Chase, which agreed on Sept. 25 to buy the troubled thrift’s credit-card business and other assets for $1.9 billion.
“Subprime,” of course, is the overclass label for all those who live in conditions below those enjoyed by the upper-middle-class and the overclass. What Business Week is trying to say is that the same problems that killed the housing gambit are about to devastate the long-running credit-card push.
And that figures, since it’s much easier to get a credit card than a mortgage, and, just as they did via the “home equity” delusion, the masters of the system have been enjoying the long-running substitution of credit cards for wage and salary increases among the peons. But people can’t not pay debts forever. That, in turn, means that credit cards can only compensate for class polarization for so long, even in the most aggressive, creative market-totalitarian conditions (a.k.a. “even in America”).
But the real lesson of the coming trouble is to realize that, despite the strong memories of the last Great Depression, the egregious even-more-of-the-same anti-solutions being fobbed off as “solutions” remain exactly the same as they were last time around: help the rich and wait for them to re-start the economy. After all, they’re entrepreneurs!
Want proof that that’s the going policy? Guess what the amount of outstanding credit-card debt is in the USA? $950 billion.
Hence, one massively obvious answer to the question of how to stimulate the economy was to aid its victims rather than its victimizers. And one massively obvious way to have done that would have been to pay off all the credit cards, instead of bailing out the Wall Street speculators.
But that idea was never, ever on the agenda. Naturally so, for history shows that established overclasses never, ever concede or learn or change, unless severely threatened with progressive overthrow.
As Hedges puts it:
Our elites—the ones in Congress, the ones on Wall Street and the ones being produced at prestigious universities and business schools—do not have the capacity to fix our financial mess. Indeed, they will make it worse. They have no concept, thanks to the educations they have received, of the common good. They are stunted, timid and uncreative bureaucrats who are trained to carry out systems management. They see only piecemeal solutions which will satisfy the corporate structure. They are about numbers, profits and personal advancement. They are as able to deny gravely ill people medical coverage to increase company profits as they are able to use taxpayer dollars to peddle costly weapons systems to blood-soaked dictatorships. The human consequences never figure into their balance sheets. The democratic system, they think, is a secondary product of the free market. And they slavishly serve the market.
We may elect representatives to Congress to end the war in Iraq, but the war goes on. We may plead with these representatives to halt Bush’s illegal wiretapping but the telecommunications lobbyists make sure it remains in place. We may beg them not to pass the bailout but 850 billion taxpayer dollars are funneled upward to the elites on Wall Street. We may want single-payer, not-for-profit health care but it is not even discussed as a possibility in presidential debates. We, as individuals in this system, are irrelevant.
[W]hat is coming, as long as our oligarchy remains in charge, will not be good. We will either recover the concept of the public good, and this means a revolt against our bankrupt elite and the dynamiting of the corporatist structure, or we will extinguish our democracy.
Thursday, October 16th, 2008
The Electric Boondoggle
boondoggle (n): a scheme that wastes time and money
In Reinventing Collapse, Dmitry Orlov observes that modern capitalism operates mainly via boondoggles. When one boondoggle reaches its inevitable end, the only “serious” proposals entertained as solutions are new-and-improved boondoggles.
Well, corporate capitalism’s core product — the private automobile — is proof of this theory, in spades. It would take a committee specifically charged with the task to come up with a more wasteful means of getting people around town.
But that, of course, is the whole point. Read the rest of this entry »
Tuesday, October 14th, 2008
Hank Paulson Plays Elmer Fudd
In big business marketing, they call selling the system (a.k.a. lobbying, a.k.a. ideological training of the public) “macro-marketing.” It’s a distinctly minor part of the overall corporate marketing juggernaut, yet an important one. 
Sometimes, circumstances compel the politicians, those eager puppets of “the shadow cast on society by big business,” to perform the macro-marketing themselves, at no charge to the major corporations.
Witness, then, the latest thespian efforts of Treasury Secretary Henry M. Paulson Jr., as reported in today’s edition of The New York Times:
“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Mr. Paulson said.
Capitalist wabbits everywhere are rolling on the floor laughing their asses off at this one. As if you lecture the heroin addict about how to spend the $100 bill after you hand over the cash! “I just hope you won’t buy drugs with that money I gave you last week…” As if capitalists would or even could put something other than their shareholders’ short-term profitability at the top of any agenda!
“He don’t know me vewy well, do he?”
Friday, October 10th, 2008
More Advances in Market Totalitarianism
Even (perhaps especially) in times of economic contraction, big business marketers continue their relentless search for new and improved methods of profitably controlling off-the-job behavior.
Here is a direct quote [via Advertising Age, September 15, 2008] that needs no further explanation:
“Now we have the ability to automate serendipity,” says Dave Morgan, founder of Tacoda, the behavioral-marketing firm sold to AOL in 2007 for a reported $275 million. “Consumers may know things they think they want, but they don’t know for sure what they might want.”
“We no longer have to rely on old cultural prophecies as to who is the right consumer for the right message,” Morgan says. “It no longer has to be microsample-based [à la Nielsen or Simmons]. We now have [total-population] data, and that changes everything. With [those] data, you can know essentially everything. You can find out all the things that are nonintuitive or counterintuitive that are excellent predictors. … There’s a lot of power in that.”
Wednesday, October 8th, 2008
What Started This Fire?
My great friend and fellow sociologist Douglas H. Pressman sent me the best summary I’ve seen of what’s happening these days. With his permission, here is his analysis:
I have been searching in vain for a comprehensive assessment of how we got into this mess, so I have had to assemble one myself.
My own analysis of our predicament is per follows. In short, we are reaping the whirlwind that was sowed over a 25-year period, extensively involving the dismantling, under neo-liberal pressure, of reforms established via the Progressive Movement, the New Deal, and the Great Society:
1) Excessive concentration of wealth, thanks to not paying producers (workers) enough to clear their own production from store shelves, etc.
1b) The robbing of producers of much of their work-product via extensively non-productive, astronomical military expenditures, a massive prison-industrial complex, and outright theft of public tax money, with resultant chronic price-inflationary effects on the civilian economy.
2) Simultaneously, the attempt to concentrate even more money wealth at the top by destroying (the Czech word is nice: ‘tunneling’) productive companies via takeovers, downsizing, outsourcing, or effectively predating on the capital of smaller firms [e.g., WalMart's business model, the corporate takeover of agriculture, aggressive promotion of GMO seeds], etc.
2b) Simultaneously, the attempt to concentrate even more money wealth at the top by decoupling, via trade agreements etc., of investor interests from US national interests (‘globalization’).
2c) Simultaneously, the attempt to concentrate even more money wealth at the top by shifting tax burdens onto the poor and reducing expenditures on public goods (roads, railroads, schools, etc.).
3) Thanks to 1 and 2, a restriction on avenues for domestic investment that yield real wealth, e.g., factories.
4) Thanks to 1 and 2, the substitution of consumer debt for real wages, via aggressive expansion of credit card usage, car loans, etc.
5) Thanks to 1, 2 and 3, the attempt to make additional money on the increasingly-concentrated money wealth via ‘investments’ aimed at producing dependable rents for the owners of concentrated wealth, resulting in a massive secular misallocation of resources into housing, offices, shopping malls, and financial service businesses.
6) The impossibility of the real economy, premised on 1 and 2, ever being able to afford those geometrically-expanding rents, and accompanying disconnect between the accounting economy and real wealth (e.g.,’bubbles’).
7) In reaction to 6, the scramble to produce money wealth via computerized accounting games, ‘derivatives’, outright fraud (Enron), etc.
8] An inbred, amoral and utterly corrupt ruling class, assisted by similarly degenerate auxiliary institutions: legislatures, judiciary, neo-liberal think-tanks, political parties, universities, press, Wall Street, military-industrial complex, Hollywood entertainment complex, fundamentalist religious-media complex.
9) A global empire cemented together and kept loosely intact by an endless stream of payoffs and bribes of foreign leaders and legislators.
10) The longest wars in US history, bleeding the savings of the developed world white, for an historic gamble by 8: attempting, with borrowed money, to consolidate a global empire based on military-enforced monopolization of core petroleum sources before the house of cards described in 1 to 9 collapses into permanent recession.
11) Thanks to the recklessness and corruptness of 8 in pursuing 10, while heavily relying on the strategy in 9, the loss of their historic gamble.
12) In view of 10, and increasing recognition of 11, plus initial signs of system breakdown thanks to the disappearance of buying power that had been unleashed previously by beneficiaries of a (now-fizzling) real estate boom, attempts by 8 to patch over the disconnect between the real economy and the accounting economy, via desperate implementation of 7-style measure by central banks.
