Monday, February 28, 2011

Alan Nasser (Part III)

Part III of my conversation with Alan Nasser about capitalism, the Obama administration, U.S. democracy, student loan debt, and so forth. 

If you haven't read Part I or Part II, I encourage you to do so before reading the next installment below. 

CCJ: Speaking of appealing to regular people, you write a lot for publications like and Could you tell us why that is? 

AN: I've mostly quit writing for professional journals. I want to talk in plain, direct English, and I try to do that.

CCJ: You do a great job of that.

AN: Well thank you. So, that is why I write for Commondreams and Counterpunch. I want to reach more people. Education is a task that is very important. It's overwhelming. For instance, I know that in public schools, they still promote anti-communism, portraying preposterous depictions of what communism is supposed to be. And the Soviet and Chinese 'threats' don’t even exist any more! I don't think they do much better with fascism. History is not a well-taught discipline.

CCJ: I know that all too well! Your comment also reminds me of the way in which Obama is portrayed with a red flag behind him, which is obviously a Communist flag, and then has a Hitler mustache slapped on his face. I have news for these people: Fascists hated Communists. They were the first to be put in camps by the Nazis. But let’s move away from how these –isms are so poorly and laughably conflated. What do you think of this idea that Obama is a socialist? 

AN: It’s not true. Let’s look at a few things. When it comes to home energy programs, Obama has twice cut back on these programs. So many people die from the cold or from fires, because they can't afford heating. That's another way I see this administration engaged on a frontal assault on the most vulnerable people. They are cutting aid to the disabled. But why bother providing energy assistance to people who are of no use to the vested interests, whether it is at the ballot box or in terms of campaign contributions? And perhaps most ominously, Obama stacked his Deficit Commission with people who have made a career of working to reduce or privatize Social Security. He now wants people to work longer for lower benefits.

CCJ: Yes. That’s quite troubling. Let’s talk about a group now that actually helped President Obama win the election. Well, at least a portion of them (those who are between the ages of 18 - 24+). You are obviously interested in the student loan issue. I call it a student loan debt crisis. How does this relate to the broader problems of the economic crisis that many Americans, and most people around the world, are still experiencing today? 

AN: I think at one basic level it fits in with the economy de-industrializing not completely of course, but substantially.  The economy has become increasingly financialized, leaving less and less real and productive activity. You and I both grew up seeing those familiar pictures of presidents surrounded by his advisory entourage. They were mostly CEOs from Ford, US Steel, General Motors, Alcoa, that is, those sorts of industrialists. Now you see the same the pictures, and there might be an industrialist or two in that entourage, but the majority of them are finance capitalists and generals. I think that you know that America is turning into an economy in which the principal thing sold is not widgets but debt. That’s what banks do: they sell debt. Debt is becoming the principal product sold in the U.S. Student debt is a big component of that total debt. Defaults on student loans far exceed those on any other types of loan. The student borrower is saddled with debt for a longer stretch of their life than those with home mortgage loans.

The burden of student loans is not infrequently a lifetime burden. Student debt is taking a terrible toll on people. The victims of the collapse of the housing market won’t be as oppressively burdened for as long a time as student debtors will be. This is consistent with the typical wage earner becoming a permanent debtor.

The impact of the assault on the public sector and public sector workers hit state and local governments as well as public colleges. Public colleges have been forced to drive up their tuition. Over-enrollment is forcing students into schools that are even higher tuition costs just in order to get that college degree, a degree that is becoming worth less and less. According to the most recent projections from the Bureau of Labor Statistics, most future jobs will not require a college education. Most of those jobs will also be low-paying. The general trend in industry is to both reduce and de-skill the labor force. The economic crisis, which really began in 2006, and was evident in 2008, hit the public sector very hard. Over-enrollment and an increased rush to other alternatives really set in the fall of 2008, so it stands to reason that for- profits would proliferate.

CCJ: I have to say, I have only been gone from the U.S. for 11 months, but I have been shocked by how many for-profit schools I’ve seen here. When I returned from South Korea in late December of 2010, I drove from Los Angeles, California to Dallas, TX. I was also in Washington, D.C. in mid-January. I am speaking to you from downtown Chicago. In all of these places in the country, there seemed to be a for-profit school is practically on every block. Downtown Chicago is filled with them, and I mean on every block. I realize that might be anecdotal, but I’ve been really taken aback. 

AJ: I’ve noticed something similar. I’m from NYC, and I get back there on a regular basis. In the last 2 years I’ve noticed a change on the subway. The advertisements for these schools are just everywhere!

CCJ: I have noticed the same thing here in Chicago when taking public transportation, too. It’s disturbing. 

AJ: Being away puts you at an advantage. Changes that others might not notice will strike you.

CCJ: I agree. Speaking more about the for-profits or proprietary schools, there has been a great deal of scrutiny on the for-profits or proprietary schools lately. Do you feel that they are a bigger problem than the non-profits?

AN: The Department of Education is looming now as a more serious problem, because the Department is the biggest student lender. Moreover, the department is raking it in with defaults – they recover 120% of every defaulted loan. And they know that the default rates they've backed are between 25% - 40%. They are not warning people about this. They aren't doing credit checks. The department is making a killing, so I think I'd like to see people focus on that, without losing sight of the for-profit issue. It is just as salient, but I think the Department is looming very large as a real predator, a really horrible predator. That’s something we should pay attention to and not allow the for-profits to distract us from this. After I wrote about student loans, so many people wrote to me. I felt that I needed to respond in some way, and, as you know, the horror stories are astounding. Garnishing disability payments and their tax refunds? It's stunning. It's horrific. I don't know how these poor folks . . . what they are going to do. A lot of people who have signed off on loans, for their sons and daughters, nephews and nieces, never suspected that the debt would be compounded and compounded.

It’s really a whole new kind of misery.

Woodward Avenue Presbyterian Church, built in the Gothic revival style in 1911. Photograph from the collection, "Detroit In Ruins," by Yves Marchand and Romain Meffre. Special thanks to Mr. Marchand and Mr. Meffre for agreeing to let me use their photographs for these next installments of my conversation with Alan. 


Anonymous said...

Alan is absolutely correct that the middle-class has shrunk, but not for the reason he thinks:

A few observations can put this into perspective:

In my immediate (and large) family approximately half of us have an income of ~$90k or above, one has a more traditional middle-class income of ~$60k, and the remainder work for around ~$20k to $30k. What makes the difference? Well, no man is an island, and the available opportunities play some part. Nonetheless, there is a fairly clear distinction in personality. The upper-income half all have very take-charge get-it-done personalities while the middle and lower income half are very easy-come easy-go types.

What doesn't make a difference is education. All but one of us have four-year degrees. The one with no college degree is in the ~$90k+ bracket (as a commissioned salesman - the ultimate meritocratic profession).

For a relatively brief period of time in the mid-20th century financial achievement tracked education. It is important to realize that this was not representative of a historical trends prior to that time (wealthy 19th century business owners and merchants seldom had and education that was substantially better then those around them, and prior to the 19th century there was even less correlation between income and education). The global economy is shifting to a much more radically meritocratic environment that will ultimately be more consistent with historical trends. Those who excel at the many subtle and shifting skills needed to succeed financially will continue to do well. Those that are well-connected will do well. Those who are neither will do poorly and advanced education will not help them.

I understand that it is very disorienting and distressing to think that there are no life paths that allow you to turn-the-crank, do your time, and come out with a job that will give you financial stability. I don't like it myself. But knowing how the world works makes me ever vigilant to keep my eye on the pulse of what skills will be needed and then teach them to myself so that I will be ready for the future. There is however no guarantee I will guess correctly which skills are valuable and I too may end up in the cold.

The real problem we have right now is that the government is a predatory lender. A large percentage of those who take the loans will end up in permanent debt servitude. The only way to end this is for government student-lending to become responsible. What would responsible lending look like? It would mean that your maximum allowable borrowing was directly tied to your likely wages after graduation (e.g. English or History degree? Maximum allowed debt ~$10K - if you want this type of degree you either go to community college, get a full-ride scholarship, or have wealthy parents). To paraphrase Bernanke's simile, this type of policy would be like taking the punchbowl away during the middle of the great education-bubble party. It will not happen, this government will prop this bubble up to the end and it will be extraordinarily painful as many colleges (for-profit and not-for-profit alike) go bankrupt and perhaps millions of students end up as debt-slaves. The debt will be so large and the potential damage to the lenders so great that those students will never be given the opportunity to declare bankruptcy and start over.

Anonymous said...

(continued from previous post)

To those of you who think the Democratic party will ever offer any help just remember where the big financial districts are located. Democrats have a lock on every major financial district and they will protect their patrons to the bitter end. Republicans tend to be from areas with no large banking centers and are much more likely to propose the type of radical financial correction that is needed (e.g. let the too-big-to-fail institutions go bankrupt). The urban-vs-rural bank issue has been a flashpoint since the founding of our country. The banking 'reform' bill that the Democrats passed in the previous session was a total giveaway to the banks. Everything you heard to the contrary was spin - after all, what better way for the megabanks to cover their trails then to use the 'party of the working-class' to do their bidding.

Some disclaimers: We are still recovering from a severe recession, so there are many very motivated and capable people who are not able to get started because opportunities are lacking. These people will eventually find their opportunities and will do well in the end. Unfortunately there are also those who are easy-come easy-go and who are unlikely, regardless of education and apart from luck, to every find jobs that offer financial stability in the new economy.

Oh, and I should also point out lest I come across as heartless that I very much want all of my family members to do well (and fortunately my shrill pleading that they avoid student debt paid off - none of them have any). I also realize as a manager that today's business moves extremely fast and it is difficult to keep up if you have very many easy-come easy-go type employees. They are fun to be around and useful for less-critical tasks, but to be competitive you need (and pay well) people who are always on the lookout for the next big thing and focused on how they can do things better tomorrow then they did them today.

Anonymous said...

I realized that I never concluded the though I started with so I will do so now:

The percentage of high-income (over $75k/yr) people in this country is growing but in a very disorienting way. Coming from a middle class background will not get you into that group. Getting an education will not get you into that group. Pursuing a profession that appears prestigious will seldom get you into that group. Merit and / or connections are the only reliable entryway. This is leaving many people who grew up middle-class profoundly disoriented when they cannot keep their position and the guaranteed paths of previous generations no longer work.

Cryn Johannsen said...

Thanks for the comments - they are great. Your last point hits home, and I've written about this in the past. (I was also working on my Ph.D. at one point and was doing a lot of research on the bourgeoisie and the middle class). It is definitely disorienting for people who grew up in middle- to upper-middle class households. I'm assuming your familiar with Friedman's well known work, The Moral Consequences of Economic Growth? He discusses the ramifications of people slipping from the class in which their parents grew up, as well as the loss in upward class mobility. This is not just disorienting, it causes unrest and other societal problems.