Did we just enter the age of extractive democracy?

extraction_by FishhawkLet me turn my blogging in a somewhat more political direction, at least for this post.  Working on higher education as a futurist, I have to wrangle dozens of major contextual factors from the worlds of politics, economics, and society.  In the course of doing so a hypothesis has come to mind, and I want to try it out here.

The idea is that American society is becoming an extractive democracy.

Short version: our economy and political institutions are now constructed to draw money and other resources from the lower half of society in order to transfer it to the wealthiest.  It’s a kind of plutocracy.

Longer version?  Let me draw together the intertwining strands.  Ten of them, in fact.  Ferguson will play an exemplary role.

First, local governments have ramped up their extraction of money from citizens through fees and bureaucracy.  This is probably obvious to most readers, but let John Oliver explain.

Note that Oliver relies on what the nation has learned about Ferguson and surrounding areas.

Second, such practices scale up to the business and federal government levels, as David Graeber observes.  Hence the epic-Kafka bureaucracies and exfoliating fee-charing systems. (No, I haven’t read Graeber’s most recent book)

“Almost every institution in America—from our corporations to our schools, hospitals, and civic authorities—now seems to operate largely as an engine for extracting revenue, by imposing ever more complex sets of rules that are designed to be broken.”

Once more, Ferguson’s shakedown policies are in view, but here as microcosm for the bigger machinery.

Third, American police forces are increasingly militarized, as Radley Balko has most extensively documented.  This gives local authorities more power to extract wealth from citizens.

Fourth, financialization.  That means an ever-increasing proportion of the American economy is based on financial services, rather than on manufacturing things.  For a neat example, some readers may recall when General Motors made more money on loans than on actual cars.  The Wikipedia page on financialization is actually very useful.  For more depth, let me recommend Giovanni Arrighi’s The Long Twentieth Century (1994) (Google).

Why mention financialization?  Because cities, states, businesses, nonprofits, and families increasingly depend on debt to survive, function, and grow.  Therefore they need revenue streams to pay back bonds and loans.  Hence all kinds of behaviors, including leaning on citizens for cash flow.  Moreover, financialization tends to increase inequality.

Fifth, many costs have gone up faster than inflation.  The United States federal government now has a bipartisan commitment to fighting a global war on terror, and that doesn’t come cheap.  The feds also are locked in to paying for a large number of social programs, some of whom are becoming more expensive due to demographics (Social Security, Medicare).  States face the dual problem of contributing to Medicare and Medicaid while figuring out how to pay pensions they’ve foolishly underfunded for years.  States and feds alike are also staring at a woefully undermaintained infrastructure, which can’t be addressed without immense funding.

extraction, photo by Joan Sorolla

“The quarry of Pepito Barbany in Òrrius (Barcelona) or how extractive industry destroys the landscape.”

Sixth, privatization.  As a result of #5 many public actors have turned over certain functions to business.  Think of public higher education, or parking, or prison management, or debt collection.  This takes a little pressure off of those governments, but adds still more pressure onto the rest of us.

Seventh, escalating economic inequality.  This includes stagnation or reduction in compensation for many, making it even harder to survive much less prosper within an extractive regime (again, see John Oliver, above, if you haven’t experienced this yourself).  This also depresses normal tax revenues, as the wealthy largely skate away from such annoyances while the rest of us have less to be taxed.

Eighth: economic growth has slowed down.  The debt-fueled “growth” of the 1992-2007 period has faded, and we seem to be living through what economics weirdly dub secular stagnation.  We’re not growing, really, beyond a maintenance level.  So if costs rise, it’s harder to scrape together funds.  (Things have to be cut; cf austerity)

Ninth: democracy structured to maintain extraction.  We rarely get to vote on the preceding factors.  Those policies are instead implemented administratively, bureaucratically.  At some level Americans must know this, and withdraw from political participation.  Those who do vote and, more importantly, donate either focus on unrelated issues or are openly committed to maintaining the extractive apparatus.  Apart from scantly voted elections, American democracy is being demobilized, in Tom Engelhardt’s phrase.

Note that what this post describes is generally bipartisan.  Both Republicans and Democrats contribute to the apparatus.

And tenth, surveillance.  Gathering intelligence on people makes it easier to assess and influence their behavior.  Additionally the sheer scope of post-9-11 surveillance also seems to cow Americans.  We might think the NSA has gone overboard, and some of us have taken steps to try to get a better handle on our privacy, but we don’t actually do anything organized about it, and there is no political avenue to express these ideas.

There’s so much more to say here.  These ten interlock and interlace in all kinds of ways.  A large number of antecedents and other forces power these up (offhand? post-1989 offshoring, the decline of unions, the Democratic party’s late 20th-century shift to the center, the long wreck of the war on drugs, bad television news, etc). I suspect our contemporary love affair with dystopia reflects on this disposition.  I’d love to hear thoughts along these lines in comments, as well as criticism.

But basically, the heart of this extractive democracy idea is that all of these ten drives coincide to hoover up wealth from the bottom of society, depositing it up top.  In a general sense this has been the case before (cf the first Gilded Age), but it’s gone professional now.  To paraphrase a hip saying, extractive democracy has gone big and gone home.  That’s the point.

What does this have to do with education?  Plenty, but that’s for another post.

What do you think?

(thanks to MetaFilter discussion and Facebook friends for helping me unfold this idea.  Bird and nuts photo by fishhawk; mining photo by Joan Sorolla)

*Is this post too political, readers?  Do you want more of this kind of thing, or less?

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22 Responses to Did we just enter the age of extractive democracy?

  1. Jim says:

    Stream of consciousness questions – how do you reconcile the flow of benefits to the people from the government (medicare/welfare/unemployment) with the idea that government is taking money back? Where does entitlement spending factor into your extractive theory? What about the numbers that say the bottom 50% of taxpayers only pay 2.9% of the taxes (googled from here – http://usgovinfo.about.com/od/incometaxandtheirs/a/who-pays-most-income-tax.htm – which I’m not sure about as fully authoritative). Is the game give money and take it back to pay for everything? I’m always a little puzzled by the discussion of oligarchy (while agreeing that obviously income deltas are growing which is bad) when the upper 50% seems to be paying 97% of the taxes. If we computed in your fee/extractive argument, how much do you think the 2.9/97.1 numbers would shift – i.e. what is the real tax/fee burden on the bottom 50%?

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    • Great questions for a messy post. Let me try:
      “how do you reconcile the flow of benefits to the people from the government (medicare/welfare/unemployment) with the idea that government is taking money back? Where does entitlement spending factor into your extractive theory? ”
      That flow comes first, dating back to LBJ’s Great Society programs. Now states and the feds struggle to maintain it.

      “What about the numbers that say the bottom 50% of taxpayers only pay 2.9% of the taxes (googled from here – http://usgovinfo.about.com/od/incometaxandtheirs/a/who-pays-most-income-tax.htm – which I’m not sure about as fully authoritative).”
      First, if you’re talking about income taxes, those guys by definition don’t make much money.
      Second, it might represent a small portion of the overall tax income, but it takes a lot out of those paying for it. Remember, they lack shelters the rich possess.
      Third, others taxes hit the poor harder, like sales.

      “Is the game give money and take it back to pay for everything? I’m always a little puzzled by the discussion of oligarchy (while agreeing that obviously income deltas are growing which is bad) when the upper 50% seems to be paying 97% of the taxes. If we computed in your fee/extractive argument, how much do you think the 2.9/97.1 numbers would shift – i.e. what is the real tax/fee burden on the bottom 50%?”
      Depends on definitions and numbers.
      The upper 50% make a heck of a lot more money than the bottom, to begin with.
      Taxes: which ones?

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  2. VanessaVaile says:

    Reblogged this on As the Adjunctiverse Turns and commented:
    This echoes/parallels Tom Engelhardt’s recent “TomGram” (also reprinted in AlterNet), “Tomgram: Engelhardt, Is a New Political System Emerging in This Country?” http://www.tomdispatch.com/post/175970/tomgram%3A_engelhardt%2C_is_a_new_political_system_emerging_in_this_country/

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  3. Steven Kaye says:

    Misconceptions and Realities About Who Pays Taxes puts paid to that claim nicely:

    http://www.cbpp.org/cms/?fa=view&id=3505

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  4. skjandrews says:

    Bryan – First off: yes, please more of these, though I know you have your own business to run – and without Engels there would be no Marx. Jim’s question above, with all due respect, is way too influenced by forty year old right wing talking points (more if we go back to Goldwater.) As the tax journalist David Cay Johnston has illustrated through countless articles, books, and media appearances, the biggest winners of tax and regulatory largess are the wealthy in this country. On the point you are making, he spoke a few years back about the taxes that are levied on your landline phone by AT&T and other carriers and the way they go into the coffers of companies like Berkshire Hathaway. There are all kinds of other shinanigans, like Apple and other tech companies use of intellectual property law to keep profits abroad in tax havens – so that it for a time last year it had more cash on hand than the U.S. government. There are countless other examples – such as the one we exchanged about a few months ago, where $1 out of every $3 donated to a wealthy college is effectively given by the federal government, which gives a tax rebate to the wealthy donor who makes the original contribution.

    But this is also what Philip Mirowski discusses as “mature neoliberalism” or David Harvey talks about as “Accumulation by Dispossession.” In both cases, it is roughly the use of the state to extract public resources for private benefit. Because the right wing discourse is so focused on not using the state to benefit the poor, they miss the far larger graft going on all around us through privatizing public services (along the lines of what Oliver is talking about).

    Second, I think you are spot on with this – maybe particularly in relation to education. The notion that we live in a meritocracy is one of the few things that all sides agree on, and education has long been the lever we claim will lift any impoverished person out of their hovel, no matter how structural the inequality is. So we all dutifully pay our local taxes (or agree to the lottery – another topic Oliver had a lively segment on) under the argument that this is our contribution to the poor person’s bootstraps. If you notice the rhetoric of people who promote charters, for instance, they don’t say we should not pay taxes for public schools, but that the tax money the government collects should be turned over to private firms. This has been the argument on the right since Milton Friedman advocated vouchers. Use the state to force people to pay taxes, then make a sweetheart backroom deal to get a piece of that guaranteed tax revenue money. And call anyone who objects a friend of the evil teacher’s unions – or a foe of the minority population who is FINALLY getting its shot at the quality education guaranteed (in various ways) by a couple of Supreme Court rulings over the last couple of centuries. The fact that Jeb Bush is pushing for virtual charters in Floriday is no different than his brother shilling for the testing corps in Texas or Gates trying to create a nationwide market for k-12 ed tech, a.k.a. the Common Core: in the end there is a shitload of money to be made from customers that already have tons of money pooled because they legally extract it from all of us in the form of taxes. And when we complain about it, their far right shock troops are there to wag their finger and say, “See what we told you about the state!”

    Look at the for-profit sector of higher ed – as we’ve talked about several times. As the congressional hearings on that a few years back showed, several of the operators were collecting as much as 85% of their revenues from taxpayer dollars in the form of Pell grants and other aid that is typically given to the underserved population they were dealing with – many of whom have less financial literacy than the people helping them get the funding. (On that, you also missed the housing sector, where the extraction of funds from big institutional investors like pension funds was as prominent in the 2008 crisis as the extraction of home values from unwitting low-income and minority customers though subprime mortgages – often times when they would have qualified for a regular 30-year.)

    And while that sector has seen a lot of scrutiny, it is effectively the reason MOOCs blew up the way they did. Or I’m trying to argue that in another window. For profits were out of favor as the preferred mode of credentialling (not actually educating, but no matter…) people at the lower levels of the income distribution. There is less tax revenue for higher ed at local and state levels (on this more in a moment) So the competition is for federal money, which is increasingly focused on narrow job training. So while the Udacity partnernship with AT&T at Georgia Tech or the Microsoft sponsored programs at EdX look like some kind of corporate charity for the moment, how long before they start asking for federal money to support those programs because they fit into the kind of thing Obama says he wants colleges to do? That is probably not what they hoped it would look like from inside the MOOC boardrooms, but hopefully they will still get some of the honey out of the pot.

    The big question mark for me in relation to higher ed is the increasingly frequent attacks by state legislatures – in part because of recession, but even before that – such as the recent state cuts in Wisconsin, Maine, and Illinois. Part of this is probably because it is somewhat harder to get the money guaranteed to go to one’s corporate buddies, but there is undoubtedly a political element to this as well. Though universities are hardly the hotbeds of radical thought they were in the 60s, part of that is due to the way debt has become a lever to focus the attention of the potentially wayward middle class students – who must be focused on gainful employment, even if the government isn’t forcing them to – and there are fewer low income people that can even afford it, hence fewer admitted (e.g. Wesleyan going away from need blind or the scandal over Pell gapping a couple of years back). Still, it is not long since the admission of a motley crew of students who were the first in their families to go to school resulted in some of the most intense student protests in U.S. history. As Terry Eagleton put it in his book, After Theory,

    “The universities which had been the very home of traditional culture, the citadels of disinterested
    inquiry, became for a fleeting moment, most unusually, the cockpits of culture as political struggle. Middle-class society had been reckless enough to set up institutions in which young, clever, morally conscientious people had nothing to do for three or four years but read books and kick ideas around; and the result of this ludicrous indulgence on society’s part was wholesale student revolt.” 25-26

    Regardless of how true this is any longer, the rhetorical threat of universities as potential spaces of free ideas is enough to keep right wing legislatures from feeling too bad about defunding them – particularly when they know that the Koch brothers will surely do their part to prop up the university as ideological apparatus, as they have for several decades now. Still, it seems a cynical move. Working through that, but it is clear that there is an oligarchy that cares little about actually educating the rest of the population – and would much rather see universities as one more place where they can extract middle class tribute for the purchase of the American Dream. It is ultimately eating the seed corn as people will only do that so long before they figure out it is not going to pay off. But no one ever accused people engaged in this kind of extractive capitalism (democracy is a bit extreme a word to describe this political system) of having a long view. Here they agree with Keynes: in the long run we are all dead – so get the money now!

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    • So many good points in your generous response, Sean. Let me get as many as I can.

      1. Thanks for the David Harvey pointer. Digging into that now.

      2. Great summary of the public revenue system. Reminds me of Rick Perlstein’s argument about the importance of scams to the right.

      3. I’m not sure where to go with the housing market. Need to figure that out.

      4. Correct about businesses and for-profit schools angling for federal .edu money. Interesting to see the other conservative argument about the feds giving out too much funding here.

      5. I’m not convinced about the threat posed by universities. That’s Christopher Newfield’s argument in _Unmaking the Public University_, and it just doesn’t bear out. The vast majority of academia fits the business agenda very neatly. Dissenting academics are pretty thin on the ground and have little public traction. (Remember George Lakoff’s linguistic gambit for the Dems? yeah.) This animus towards higher ed is either historical (which counts for a lot among elderly voters) or simple kabuki. The internet is a far, far greater area for the free flow of ideas.

      6 “an oligarchy that cares little about actually educating the rest of the population… It is ultimately eating the seed corn as people will only do that so long before they figure out it is not going to pay off.” Yes. So why do these putatively smart people do it?
      I think part of the answer is having very short temporal horizons. Another is that they don’t think most people are knowledge workers, but service workers, and hence need little education. Only a relatively few people are needed to make the knowledge economy work, at the macroeconomic scale.

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  5. Let me add this:
    “Since 2009 the Chicago Police Department has opened at least six investigations that involved spying on citizens, internal police records show. Four of the investigations were launched during the first term of Mayor Rahm Emanuel.”
    http://www.chicagoreader.com/chicago/chicago-police-spying-surveillance-first-amendment-protesters-nato/Content?oid=16893815

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  6. rpsk1vt says:

    A side note regarding: “For a neat example, some readers may recall when General Motors made more money on loans than on actual cars.”

    I used to work in the auto industry in the 1980s and 1990s. I have a relative that worked for GMAC (and now as Ally Bank). Most people that think that the “auto industry” collapsed in the last decade, but to me, that happened well before that, as far as profitability based on manufacturing vehicles alone. What collapsed was the one entity that was keeping GM profitable, or at least afloat: General Motors Acceptance Corp. (GMAC).

    Now here are two important items, both relating to Wall Street “ratings agencies”.

    1) In May 2005, Standard & Poor’s credit rating agency gave the rating of “Junk Bond Status” to both General Motors AND Ford Motor Company.

    http://www.npr.org/templates/story/story.php?storyId=4632949
    http://articles.chicagotribune.com/2005-05-06/news/0505060337_1_ford-bonds-investment-grade-gm-and-ford

    At the time, this seemed plausible given your comment in your article / blog post. But now consider this …

    2) In the aftermath of the 2008 financial collapse (Great Recession), via news reports and Congressional hearings, we learned that Standard & Poor’s and other credit ratings agencies were giving “AAA” ratings to toxic assets (mortgage-backed investments, CDOs, derivatives, etc). Now either S&P was blatantly inconsistent in the ratings of GM and Ford relative to their ratings of the “Financial-ization” Industry, or could this have been a “deliberate” move to weaken the auto industry? I don’t like to get into “conspiracy theories”, but having worked in auto industry, and being concerned about Wall Street economy versus Main Street economy, I can’t help but wonder. Was something more to that 2005 ratings downgrade?

    As the above NPR link mentions, the 2005 junk bond rating meant that it was more difficult for these auto companies to borrow money. In particular, GMAC needed to borrow money in order to lend it out. Eventually, GMAC (part of GM Common Stock, not a separate subsidiary stock) was sold 51% to another company, Cerberus, a private equity firm. GM thus gave up “control” of GMAC by selling 51% to Cerberus. During the very weeks that Hank Paulson and President GW Bush were telling Americans the bad news about what is now known as The Great Recession, an interesting situation was happening inside the Detroit HQ of then-GMAC. As planned months in advance, Cerberus was bringing in H1-B workers from India to train to take over some American jobs. But once the stuff-hit-the-fan, some long-time managers were questioning the wisdom of this transition given the economic meltdown underway. Eventually, the workers in India were handling the easier tasks, and some of the employees who thought they would lost their jobs, were allowed to stay to handle the tougher tasks. So, in some departments, the workforce actually “grew” instead of being cut or at least fully transitioned overseas. But with TARP and transition to Ally Bank, Cerberus is now out of the picture.

    IMHO, GMAC was either the “Achilles Heal” that brought down General Motors, of this S&P ratings debacle was the “straw that broke the camel’s back”. Rather than just “Extractive Democracy”, you might want to expand it to include the “Extractive Wall Street Economy”.

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    • That’s fascinating, rpsk1vt. I used to follow auto news closely when I lived in Michigan (1980-1997), and remember the downgrade in 2005, but didn’t follow it to the point of Cerberus and gutting GMAC. Many thanks for the insight and the links.

      “Extractive Wall Street Economy” is a better term, especially given Wall Street’s role in driving state/local governments to extractive measures.

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    • PS: if you’re a newshound, what do you make of my cobbled-together news routine, laid out here, https://bryanalexander.org/2015/03/18/getting-better-news-my-daily-routine/ ?

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      • rpsk1vt says:

        I have tried Google News and some RSS feeds in the past, but don’t have the time to manage all of that. I do watch some TV, and turn to C-SPAN regularly. I watch a small bit of C-SPAN Washington Journal every morning with my cereal. I like C-SPAN in that you can hear the words of our politicians directly, rather than relying solely on interpretations from pundits and bloggers.

        I have an hour commute each morning and evening, so I make use of my Sirius/XM radio subscription. I can also get C-SPAN radio (XM 120). I like to listen to POTUS channel (XM 124), which covers the President much like C-SPAN covers Congress and Supreme Court. They also have some good shows on XM124, including Michael Smirkonish (M-F) and Rick Unger and Michael Steele on Saturdays. These shows are more moderate / balanced compared to many other radio / TV pundit shows. Comedian Pete Dominick has a good show 9-12AM M-F, and he has many interesting guests on economy, politics, foreign policy, etc. He was originally on POTUS channel in afternoon, but now has a morning slot on XM121.

        I am also a Vermont resident, so I also rely on VPR, VPT (now called VT PBS), WDEV and VTDigger (where I found your blog).

        Google News is an aggregator, but sites like newslibrary.com have over 4000 sources, including today’s news, plus archives for each that can go back a few years or decades. NewsLibrary has permission to re-publish articles, whereas Google only indexes and points to other sources. NewsLibrary also indexes all of this content, so it is also searchable. You can search NewsLibrary.com for free and see headlines and lead paragraphs, but it is a pay for view site to see full articles. Besides newspaper archives, they also include radio and TV transcripts from major news networks. It includes large, medium and small news sources. But they are mostly traditional news operations, and not so much with content from blogs or alternative sites.

        http://newslibrary.com
        http://nl.newsbank.com/nl-search/we/Archives/?p_action=sourcelist&f_sources=all&f_place=All%20Sources

        BTW, I noticed that the Wikipedia page for NewsLibrary is sadly outdated. Knight-Ridder no longer exists, and the owner of NewsLibrary has been a Vermont company for almost 14 years.

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      • My dear rpsk1vt, many thanks for this rich and generous reply!

        Ah, C-SPAN. I used to love that when I watched TV. Do they still have the extra-geeky C-SPAN 2?

        Thanks for the prompt on Sirius. My wife loves it, but I’ve only used it for basics (BBC, VPR). Now I’ll hunt for more.

        And many thanks for the NewsLibrary. Exploring now.

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  9. Dan Luntzel says:

    Great post as usual! I’d just like to submit this for your consideration: government qua government is fundamentally extractive. Regardless of intentions or goals, the brute fact is that government exists in order to extract ‘resources’. (Through force if necessary: Militarized police? Check. IRS ‘Agents’ with full federal law enforcement authority? Check, etc.)

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