Pluralistic: 29 Sep 2021

Today's links

A Victorian drawing of a barred cell in a debtor's prison, captioned with 'Pray remember poor debtors having no allowance.' Behind the bars is a copy of Thomas Piketty's bestselling book 'Capital in the 21st Century.'

Debts that can't be paid, won't be paid (permalink)

It's been just over a year since the death of activist, writer and anthropologist David Graeber – a brilliant speaker, writer and thinker who helped give us Occupy, "we are the 99%" and "Bullshit Jobs."

On the anniversary of David's death, his widow Nika Dubrovsky convened the first "Art Project" discussion, a fascinating debate between Thomas Piketty and Michael Hudson, a pair of political economists whose work is neatly bridged by Graeber's own.

Piketty, of course, is the bestselling French economist whose 2013 Capital in the 21st Century was an unlikely, 700+ page viral hit, describing with rare lucidity the macroeconomics that drive capitalism towards cruel and destabilizing inequality

Hudson, meanwhile, is the debt-historian and economist whose haunting phrase "Debts that can't be paid, won't be paid," is a perfect and irrefutable summation of the inevitable downfall of any system that relies on household debt to drive consumption.

Like Hudson, Graeber was obsessed with the history and politics of debt. His 2012 book "Debt: The First 5,000 years" influenced not just Piketty's work, but the work of many non-economists, including a large group of science fiction writers.

Like Piketty, Graeber was capable of writing extremely long books that were so engaging that people actually read them, absorbing complex and nuanced subjects. DEBT clocked in at 534 pages, and not a dud among them.

And like both Hudson and Piketty, Graeber was obsessed with long timescales and the ways that history is pressed into service to assert that various political situations are inevitable products of human nature, meaning that there's no point in asking for a fairer system.

In Debt, Graeber reaches back 5,000 years to question (among other things), the "money story" that money was created by individuals who wanted to make barter more efficient, settling on coins as a way to make change for someone who wants a cow but only has chickens to trade.

Graeber shows the "confluence of needs" theory of money to be a fairy tale, something that orthodox economists literally made up as the "most likely" source of money, without ever asking historians about what the record tells us about the origins of money.

Which is a pity, because historians know a lot about this stuff! For example, they can tell you about the Babylonian use of ledgers to record the issuance and redemption of debt in the largely agricultural economy of the day.

This early money would be recognizable to farmers today: during planting season, a share of the eventual harvest is promised in exchange for the inputs needed to plant, nurture and reap the crops.

Like Graeber, Hudson also treats Babylonian policy as key to economics – specifically, the Babylonian understanding that "debts that can't be paid, won't be paid," which is why the state would periodically declare a jubilee in which all debts were declared void.

Without these periodic jubilees, the entire productive economy is swallowed up by debt service – every poor harvest or other unforseeable circumstance drives producers (who are also debtors) further into debt, whose interest creates an inescapable gravity.

Without some way to escape debt's gravity, all productive labor becomes oriented toward debt-service, and the economy grinds to a halt. If this sounds familiar, you're probably paying attention to today's political economy:

Piketty also works in long timescales, though his historical analysis is an order of magnitude more recent that Hudston or Graeber's. At Capital XXI's core is a data-set, painstakingly assembled by Piketty and his grad students over more than a decade.

That data-set traces "capital flows" (the distribution of wealth and income) for 300+ years, rigorously traced and normalized, so that we can understand things like the relative degree of inequality in different societies over centuries.

Famously, Piketty concludes that no matter how fast an economy is growing – no matter how productive its makers are – that wealth grows faster, making the takers who financed growth even richer than the people whose work is propelling the economy.

This fundamental truth (expressed in economic notation as r > g, or "return on capital is greater than economic growth") means that "meritocracy" is a lie: the richest people in a market economy aren't the people who do the best work, it's the people who started off rich.

Like Hudson, Piketty's work looks at the relationship between inequality and instability: Piketty uses his data to show that inequality crises trigger political crises, and that high degrees of inequality precede upheavals like the French Revolution and the World Wars.

Given all that, a discussion between Piketty and Hudson, convened in Graeber's memory, is bound to be fascinating, and they don't disappoint (if you prefer text to video, check out Naked Capitalism's transcript):

Here's my highlight reel of the discussion, with commentary. Hudson opens with a skeptical take on Piketty's conclusion to Capital XXI, in which he proposes a global wealth tax. Such a tax is nearly impossible to enforce, says Hudson – unlike a jubilee.

Hudson says the source of today's global vast fortunes is not earnings or income – rather, it's central banks' subsidy of the value of stocks and bonds, through rock-bottom interest rates, bond guarantees, etc. These fuel speculative bear markets that run up asset prices.

These state-subsidized fortunes are pumped into the financial markets, becoming the loans that everyone else has to pay debt on, just to survive. As in ancient times, the finance sector eventually swallows the productive economy whole. Without jubilee, you get collapse.

This is true within rich economies, but it's even more pronounced in the relations between poor debtor countries who were coerced into taking on massive debts by the IMF, who are going to pay an ever-larger share of their GDP to offshore creditors as the economy slows.

The only way for poor countries to service those debts is by imposing crushing austerity, which means starving domestic producers of investment, education and health services, reducing productivity, requiring more austerity – until the whole thing collapses.

Remember: debts that can't be paid, won't be paid. It's an iron law, and cannot be repealed – not by austerity, not by "better management," not by "living within your means." Can't be paid = won't be paid.

Piketty doesn't dispute any of this, saying that he's reconsidered some of the solutions in Capital XXI in light of subsequent events, like the pathetically inadequate global minimum corporate tax of 15%, which only rich countries' treasuries will get to participate in.

Piketty points to his followup to Capital XXI, the even weightier (and sadly less influential) Capital and Ideology for his more up-to-date thinking on the way to address inequality and instability.

He reiterates his thesis that inequality self-corrects, thanks to the instability it engenders. Left on their own, market economies collapse, torn apart by the bill for guards to defend lenders' fortunes, the bill for interest payments that enrich lenders.

Impose sufficient austerity and brutality on a society and the cost of defending it exceeds the wealth its productive sector manages to produce, and boom – French Revolution, the World Wars, etc.

Piketty proposes that mounting "catastrophic climate change" might precipitate the next crisis, which is certainly a safe bet, though of course, the question is whether that crisis will come after the point of no return for a habitable planet.

Hudson has ideas about how we might hasten transformative change without risking civilizational collapse. He points out that Piketty's work identifies inherited wealth as inequality's wellspring and points out that estate taxes are much more enforceable than wealth taxes.

Certainly, inherited wealth is a live issue today. The latest installment of Propublica's essential IRS Papers reporting shows how the richest Americans abuse a bizarre loophole to avoid ANY tax on indescribably vast estates:

No one knows exactly how much tax avoidance grantor retained annuity trusts (GRATs) drive, because they are shrouded in secrecy. In 2013, the lawyer who created GRATs said they'd allowed the ultra-wealthy to evade $100b in taxes. Their use has increased since then.

Another lever for reducing inequality is political competition. Hudson points out that during the Cold War, capitalist states took steps to prevent runaway inequality in a bid to show that market economies were more stable than centralized, planned economies.

Hudson suggests that competition with China might serve that function today. Without forgiving China for its autocracy and human rights abuses, he gives favorable marks to its economic planners for reining in the finance sector.

It's true that China intervened heavily in credit markets during the covid crisis, to prevent rentiers from destroying productive businesses that couldn't service their debts during lockdown, preserving larges swathes of otherwise vulnerable productive firms.

He reminds us that the original meaning of "free market" was "a market free from rents," where unproductive creditors were not allowed to lay a private tax on productive manufacturers.

Today, the meaning has been reversed – a market is "free" if creditors face no limits on rent-extraction.

But there's good reason to be skeptical of claims that China's economy is being well-managed, as Anne Stevenson-Yang writes.

Stevenson-Yang paints a picture of chaotic state management of the Chinese economy, hidden by state-owned media and its rosy outlook. Watchwords like "common prosperity" are empty buzzwords, used to paper over self-interested, corrupt business practices.

State initiatives measure progress through short-term, easily gamed KPIs, something she says is documented in Red Roulette: "a new book written by a disaffected property developer named Desmond Shum."

Now, I'm willing to stipulate that for investors and property developers "corruption" or "incompetence" might be indistinguishable from what the rest of us would call good governance, but some of Stevenson-Yang's charges seem factual and well-made.

I found the discussion between Piketty and Hudson fascinating, and if there was anything more that I'd add, it would be a dose of technopolitics (unsurprisingly). After all, technology has a huge bearing on the timing and nature of the shifts that both economists study.

For Piketty, inequality-driven instability collapses when the cost of guard-labor rises too high to bear – other words, eventually, a society gets so unequal that it costs more to stave off guillotines than even the ultrarich can afford.

For Hudson, debt-driven instability collapses when debtors begin to default because they have no ability to service their debts.

Technology changes the nature of both of these collapses.
Take guard labor: mass surveillance and technological controls make it cheaper than at any time in history to isolate and neutralize political threats to elite rule.

How much cheaper? Well, in 1989, the Stasi employed one in sixty East Germans to spy on the whole nation.

Today, the NSA spies on the whole world, at a spy:subject ratio that's more like 1:10,000 – two orders of magnitude more efficient than the spies of a generation ago. That's a huge productivity gain, and it's all thanks to digital technology.

When it comes to debtor default, the tension is between coercion and ability to pay. Yes, "debts that can't be paid, won't be paid," but "can't be paid" is not a hard limit – it turns on how much the debtor is willing to hurt themselves and their loved ones to make payments.

Every mafia armbreaker knows this. When someone can't pay their debts, you can break their arm and they'll cash in their kids' college fund and secretly remortgage their house to make the next payment.

When that runs out, if you threaten to break their legs, the debtor will start breaking into cars. Eventually, this comes to an end, when the debtor goes to prison for 25 years. But in the meantime, coercive force can wring a fair amount of blood from the stone.

Debtor coercion has been transformed by digital technology, from an artisanal, retail handicraft to a scaled up, industrial practice.

We don't need the threat of repo men to keep you paying your car note – miss a Tesla payment and your car will phone home and lock its doors. When the tow arrives, it will flash its lights, honk its horn and back out of its parking space for repossession.

The ability to digitally repossess, or partially repossess (as in India, where loan-shark cellphone companies disable your most-used apps if you miss a payment) the tools you rely on for life and livelihood makes it cost-effective to apply coercion at scale.

Cheap guard-labor and cheap coercion mean that crisis can be deferred for ever-longer timescales. Thus, societies run up the only kind of debt that really matters: policy debt. Lives are ruined, productive capacity tanked, the planet poisoned.

Add tech to Piketty or Hudson's analysis and things start to look a lot less self-correcting, and the odds tilt against our civilization, our species and our planet. If a correction only comes after the point of no return, we're in very deep shit indeed.

Protester seen at Chicago Tax Day Tea Party protest with sign reading 'I am John Galt'. Edited to protect protester's identity. Three tiny Klansman in hoods and robes have been superimposed in the corner of the picture.

"Are you calling me a racist?" (permalink)

In "I Can't Breathe," Matt Taibbi's book on Eric Garner's murder he writes, "You could reduce…Fox News and afternoon talk radio to a morbid national obsession that could be summarized on a t-shirt: ‘Are you calling me a racist?'"

It's a passage I found myself turning to regularly during the Trump years, when right wing figures bristled at being called racist merely for supporting an explicitly racist party that took power by appealing to white nationalism.

The media spent a lot of that period asking itself whether being a Republican was the same as being a racist, and one commonsense answer that cropped up a lot was, "It may not mean that you are racist, but it does mean that you'll accept racism as the price of GOP rule."

I was reminded of this by the current episode of Backbench, Canadaland's national politics podcast. This week, host Fatima Syed interviews a listener who sent an angry email to the show after hearing voters for the People's Party of Canada called "racist."

The caller was angry because he was not a racist: he's a "libertarian" who wants low taxes. At the start of the interview, he insists that the manifestly racist People's Party is not racist.

But as Syed points out the explicit racism in its platform its extensive ties to avowed neo-Nazis, the caller's position gradually shifts – from denying racism to describing racism as a universal factor in all parties.

Finally, he acknowledges the party's racist ties but excuses them as the price of low taxes – "You gotta take the good with the bad."

Interestingly, the caller was able to speak intelligently about the nature of systemic racism and identify it as a serious problem.

He just doesn't think it's as big a problem as high taxes.

This is what we mean when we talk about saying the quiet part out loud.

Of all the brain-worms that prey upon the conservative mind, none are quite so powerful as the "no tax" pathology.

After all, clowns like Doug and Rob Ford were not solely elected by people who were swayed by promises of $1 beers and a ban on teaching butt stuff in sex ed – the Fords' constituency includes millions who'd vote for a dead squirrel if it would knock $0.25 off their taxes.

Likewise, many wealthy Texan GOP donors are going to continue to procure abortions for themselves, their spouses and their kids. They're likely horrified by the state's new forced childbirth law. It's not that they don't believe in abortion rights.

Rather, it's that a $1 discount on their tax bill is worth more to them than the suffering of every person who endures a forced birth, and every child produced by those births. No-tax brain worms are a hell of a drug.

Libertarianism is notionally grounded in the idea of self-determination and personal responsibility, but in practice, powerful libertarians routinely trade off (others') freedom for (their own) tax savings.

Sure, the Kochs donate a lot of money to fighting private prisons – but it's eclipsed by their campaign contributions and dark money for GOP candidates who support private prisons. They sincerely oppose private prisons, but not as much as they support low taxes.

It was ever thus. Von Hayek and Friedman – those great defenders of freedom! – endorsed and gave material aid to Pinochet's military dictatorship, as it butchered 40,000 of its opponents, leaving their body parts in roadside trash-bags or pushing them out of helicopters.

There's nothing "libertarian" about a military dictatorship, but the Chicago Boys were all about low taxation. Indeed, Friedman never met a form of oppression he wouldn't trade for lower taxes.

Take school segregation: as Nancy MacLean writes, Milton Friedman saw racist fury at school integration as an opportunity to draw supporters to his plan to end public education (thus lowering taxes):

Friedman helped start the Charter School movement as a way for white parents to get public money to send their kids to private, whites-only schools, after the Supreme Court and Congress ended public school segregation.

I have no idea if Friedman was racist. I don't even care. It doesn't matter if you do racism because you are racist, or because you have anti-tax brain-worms that make you throw in your lot with violent, racist would-be genociders. Being "pro-genocide" is incompatible with being "pro-liberty."

In contemplating rightist thought, I have three definitions. The first is Steven Brust's (quoted in my novel Walkaway): "Ask what's more important, human rights or property rights. If they say 'property rights ARE human rights' they're on the right."

The second is Corey Robin's, from The Reactionary Mind: Some people (bosses, white people, Americans, men) are born to rule, and others (racialized people, women, workers, foreigners) to be ruled over. We thrive when natural rulers are in charge.

The third is Frank Wilhot's: "Conservatism consists of exactly one proposition, to wit: There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect."

The willingness to trade other peoples' fundamental rights for preferential tax treatment fits neatly into all three of these, as does the delusion that somehow this can be resolved with sufficient "personal responsibility."

(Image: HKDP, CC BY-SA, modified)

The Wells Fargo logo, with a superimposed sillhouette of a guillotine.

Wells Fargo can't stop criming (permalink)

Wells Fargo is America's third-largest bank. It used to be the largest, but it committed a string of terrible frauds that it was never truly punished for (it made more from crime than it paid in fines).

Its crime spree did result in one meaningful punishment: Wells was forced to downsize to #3, with a mere $1.77 trillion in assets.

Have no fear: Wells Fargo is down but not out, and despite its reduced stature, it is still engaged in egregious acts of fraud.

The latest scam? "Forex transposition." Say you have an account with Wells where you get income in euros but need to spend dollars. Historically, Wells would have defrauded you with "Range of Day" pricing.

That's where Wells converts your euros to dollars using the best rate (for Wells, AKA the worst rate for you), on the day you ordered the currency conversion. Currency prices move around a lot during the day, and this scam could easily double Wells' commission.

But the Range of Day scam is a grift for the little people, not suited to kings of con like Wells Fargo.

Wells just paid $76m to settle a federal investigation into a much more ambitious and brazen scam.

As Matt Levine writes for Bloomberg, the new scam involved simply "making up prices," while maintaining plausible deniability.

Here's how that worked: say the best Range of Day exchange rate (an already crooked number) was 1.0241. Wells Fargo's forex trader would exchange your funds at 1.0421. On big trades, that could cost you hundreds of thousands – even millions of dollars.

But you were unlikely to catch the error, and if you did, Wells's trader would just apologize and say that they transposed the digits accidentally.

As crimes go, this is pretty unambiguous. It's fraud. It made them a lot of money, and they only had to give some of it back.

That means they'll do it again.

Of course they will! This is Wells fuckin' Fargo, we're talking about. They cannot stop criming.

In case you've forgotten about Wells's crime-spree (it's been a minute), here's some highlights:

During foreclosure bonanza of the Great Financial Crisis, Wells led the pack. They literally broke into peoples' homes, stole all their worldly goods and changed the locks, all without bothering to check whether they had the right house.

Around then, Wells began to pressure its low-waged, young, precarious tellers to meet quotas on new accounts opened by existing customers. Its managers taught tellers how to fraudulently open these accounts. 2,000,000 customers were affected.

These new accounts racked up millions in fees and penalties. Victims' credit scores were tanked, costing them mortgages, access to student loans, and jobs. The executive who ran the program was given a $125m bonus.

The CEO – who took a $200m bonus himself – blamed low-level employees for the crimes. What he didn't say was that low-level employees who blew the whistle on the scam were illegally fired.

They fired a lot of whistleblowers.

They didn't just fire kids for blowing the whistle – they ruined them. After Wells fired a whistleblower, they'd add them to an industry database of bankers who'd been fired for doing crimes – people on that list can never work in the industry again.

Eventually, John Stumpf, the CEO who oversaw the crimes, resigned. The Wells board appointed a successor who insisted that the bank had no problems with its culture.

Naturally, some customers who'd been stolen from sued. Wells asked a judge to throw out the case, because those customers signed away their right to sue when a Wells Fargo employee forged their signature on the paperwork to open a fraudulent account.

The judge agreed.

Trump also liked Wells Fargo (he owed them a lot of money). Shortly after he took office, the Department of Labor's site for Wells whistleblowers vanished.

Wells Fargo's got great timing. During the Trump years, so many of its scandals came to light – and were never seriously punished by Trump's DOJ or regulators.

They stole millions with fraudulent "home warranties":

They stole millions by ripping off small businesses with fake credit-card fees:

They defrauded 800,000 car insurance customers and stole ("improperly repossessed") 25,000 cars:

They tricked people who sought mortgage refinancing into scam packages that looked good at first, but led to waves of defaults and foreclosures:

When Wells finally admitted it ripped off 2m customers with fake accounts and offered to pay them back, it created an opt-in repayment system, ensuring that most of its victims would never be made whole:

The Trump tax cuts only emboldened the company: after having its taxes slashed, Wells cut 26,500 jobs, shuttered branches across the country, and firehosed money over its shareholders with a $40.6 billion buyback.

Not all the shareholders were satisfied. Some of them sued because the company had not delivered on its promises to "restore trust" in the bank. The company's defense? "Everyone knows we're liars, so they shouldn't have relied on our statements."

I mean, they have a point. It was only months later when the company blamed a "computer glitch" for its theft of 525 homes from people who should not have faced foreclosure.

There's no such thing as a non-sociopathic giant bank, but even in the crowded field of crime-addicted financial firms, Wells Fargo stands out. The fact that they've paid $76m – instead of having their execs go to prison – means they'll do it again.

And again.

And again.

This day in history (permalink)

#20yrsago Doonesbury on 9/11

#10yrsago Goodbye letter from Borders employee(s) (?) spills secrets of bookselling trade

#5yrsago Arkansas lawmaker who pushed law protecting right to video police is arrested for videoing an arrest

#1yrago Leaked EU Big Tech rules

#1yrago The Anti-Monopoly War Song

#1yrago How I write

Colophon (permalink)

Today's top sources:

Currently writing:

  • Spill, a Little Brother short story about pipeline protests. Yesterday's progress: 302 words (21004 words total)

  • Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. Yesterday's progress: 1087 words (4454 words total).

  • A Little Brother short story about remote invigilation. PLANNING

  • A nonfiction book about excessive buyer-power in the arts, co-written with Rebecca Giblin, "The Shakedown." FINAL EDITS

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: Breaking In
Upcoming appearances:
* Reconciling Social Media & Democracy, Tech Policy Press, Oct 7

Recent appearances:

Latest book:

Upcoming books:

  • The Shakedown, with Rebecca Giblin, nonfiction/business/politics, Beacon Press 2022

This work licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to

Quotations and images are not included in this license; they are included either under a limitation or exception to copyright, or on the basis of a separate license. Please exercise caution.

How to get Pluralistic:

Blog (no ads, tracking, or data-collection):

Newsletter (no ads, tracking, or data-collection):

Mastodon (no ads, tracking, or data-collection):

Medium (no ads, paywalled):

(Latest Medium column: "Take It Back," about the obscure and absolutely essential right of authors to take back their copyrights after 35 years, and what it means for Disney/Marvel.

Twitter (mass-scale, unrestricted, third-party surveillance and advertising):

Tumblr (mass-scale, unrestricted, third-party surveillance and advertising):

"When life gives you SARS, you make sarsaparilla" -Joey "Accordion Guy" DeVilla