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Saturday, 8 February 2014

If you can't work with the State then you work without it

"Phantom economies tend to give rise to grey and black markets in proportion to the deviance of the phantom economy from reality."

College graduates around the world are discovering that getting a university diploma no longer guarantees the conventional success story of a secure job and a life of ever-rising consumption. Doing all the things that the Status Quo said would lead to success no longer yields success, for the simple reason that the Status Quo is failing on a structural/systemic level.

The system is rigged to protect the Status Quo mafia from competition. As noted in The Mafia State of Mind (February 6, 2014), the Status Quo is a set of overlapping monopolies/extortion rackets. The system needs a trickle of new technocrats and apparatchiks to manage the rackets, but there is no place for the tens of millions of college graduates who are flooding into the job market every year around the world.

New conventional enterprises face essentially impossible barriers: sky-high rents, absurdly lengthy and costly permitting processes, onerous fees and reporting requirements, and a host of other barriers reputedly imposed to "protect the public" but whose real purpose is to eliminate small-enterprise competition to corporate dominance.

Which organizations have the cash flow, financing, legal expertise and political influence to meet all the requirements and pay the insanely overpriced leases? Global corporations and the state--two sides of the same kleptocratic coin.

The high costs of launching and operating a legitimate Status Quo business serves two other primary purposes: maintaining high returns on capital for crony-capitalist financiers and funding the state's enormous cadre of functionaries at above-market-rate salaries, benefits and pensions. Recall that median personal income in the U.S. is about $40,000 for full-time workers, and compensation above $82,500 annually puts one in the top 10% of all wage earners.

The California Public Policy Center has just posted its own searchable site of state and local employee wages and pension benefits, Some of the results were rather revealing – and should be shocking to taxpayers: There are 31,527 retired public workers in the "$100,000 pension club" and 582 who are receiving pensions of at least $200,000 a year. Including wages and benefits, there are 227,059 state and local workers earning total compensation of at least $100,000 a year.

Some may argue that these large figures apply to a relatively small portion of public employees, and that the average public employee receives modest compensation. However, a CPPC analysis revealed that even average compensation is startlingly high. Average compensation for full-time state employees was $93,851 for public safety employees and $68,282 for all other employees. Adding benefits boosted these totals to $129,388 and $90,402, respectively. The figures for city and county employees were even higher.
Source: Public sector's growing $100K club

Two forces are disrupting this cozy interlocking mafia of financiers, corporate cartels and state functionaries: the End of (Middle-Class) Work and the rise of the peer-to-peer, self-organizing business models such as AirBnB, car-sharing, ride-sharing, farmers markets, etc.

The high costs of legitimate business (needed to keep rentier/financial profits and state functionary pay/pensions high) are effectively destroying middle-class jobs and pay scales: the only organization that can afford to pay high salaries and benefits, regardless of costs or the business climate, is the state.

Even the financial sector and global corporations can only pay middle-class salaries for technocrats and managers in what are effectively quasi-state agencies (sickcare, workers compensation insurance, the defense industry, etc.)

So what are the tens of millions of college graduates supposed to do for a livelihood if there are only a few slots open in the moated mafias of financiers, corporate cartels and the state? To answer, let's start with this obvious statement: that which cannot be paid will not be paid.

All the infrastructure of consumption depends on tens of millions of college graduates making enough money to pay high taxes, service their student loans, buy homes, autos, particle-board furniture, electronic gadgets, dozens of pairs of shoes, etc. etc. etc. If they can't make enough money to buy and own all that stuff, then they won't be buying and owning all that stuff.

And if they can't earn a living within the Status Quo mafia, they will do so outside the mafia in the gray and black markets.

This destruction of consumption is supposed to be a disaster, but it's only a disaster for the moated mafias of financiers, corporate cartels and the state that depend on tens of millions of workers voluntarily becoming debt serfs and tax donkeys. If young workers cannot make their student loan payments, those loans become worthless. As the old saying has it, You can't get blood from a stone.(Alternatively: You can't get blood from a turnip.)

If young workers can't make enough to buy autos, homes, etc., the market for those goods and services implodes. And if all the financial/debt churn generated by consumption goes away, so do the fees and taxes the state depends on to pay its armies of functionaries.

Rather than a disaster, this wholesale loss of middle-class incomes and aspirations is enormously liberating. Instead of the yoke of debt-based ownership, young people are finding sharing to be better than owning: one shared car can provide transport for 10 people. Ten people no longer need to own 10 cars to get around.

One way to grasp how deeply the mafia state of mind has taken hold is to ask: how many middlemen have to be paid to produce/buy a good or service? In Greece, liberation starts by eliminating the middleman, which of course includes the voraciously corrupt state: After Crisis, Greeks Work to Promote ‘Social’ Economy.

The state is naturally in full freakout mode, as self-organizing sharing/no-middleman enterprises are outside the debt-serf/tax donkey system that funds the state. In response, the state is frantically trying to impose the same fee structure that has crushed conventional small businesses on the sharing/no-middleman organizations.

The problem for the state is that its success in imposing exorbitant fees and taxes will simply drive low-income people scratching out a minimal living in the gray market to other networks that do not even have a corporate structure to tax. To wit: "The more you tighten your grip, the more systems will slip through your fingers."

If making a living in the grey market becomes untenable, then people will be forced into the black market, which is whatever trade can be done outside the reach of the state. As noted previously, that which cannot be paid will not be paid.

As recently observed: "Phantom economies tend to give rise to grey and black markets in proportion to the deviance of the phantom economy from reality." If we believe that phantom economies of moated fiefdoms, mafias and cartels are "reality," then the rise of liberating degrowth networks is distressing and confusing.

But if we look past the propaganda and see the debt-serf/tax donkey system for what it really is, a predatory system of oppression and exploitation, then we can see how de-growth, de-consumption, de-debt, etc. is liberating.