From Life.inc by Douglas Rushkoff :There are two economies--the real economy of groceries, day care, and paychecks, and the speculative economy of assets, commodities, and derivatives. What forecasters refer to as "the economy" today isn't the real one; it's almost entirely virtual. It's a speculative marketplace that has very little to do with getting real things to the people who need them, and much more to do with providing ways for passive investors to increase their capital. This economy of markets--first created to give the rising merchant class in the late Middle Ages a way to invest their winnings--is not based on work or even the injection of capital into new enterprises. It's based instead on "making markets" in things that are scarce--or, more accurately, things that can be made scarce, like land, food, coal, oil, and even money itself.
Because there's so much excess capital to invest, speculators make markets in pretty much anything that real people actually use, or can be made to use through lobbying and advertising. The problem is that when coal or corn isn't just fuel or food but also an asset class, the laws of supply and demand cease to be the principal forces determining their price.
When there's a lot of money and few places to invest it, anything considered a speculative asset becomes overpriced. And then real people can't afford the stuff they need. The oil spike of 2008, which contributed to the fall of ill- prepared American car companies, has ultimately been attributed not to the laws of supply and demand, but to the price manipulations of hedge- fund speculators. Real jobs were lost to movements in a purely speculative marketplace.
This is the reality of speculation in an economy defined by scarcity. Pollution is good, not bad, because it turns water from a plentiful resource into a scarce asset class. When sixty- eight million acres of corporate- leased U.S. oil fields are left untapped and filled tankers are parked offshore, energy futures stay high. Airlines that bet correctly on these oil futures stay in business; those that focus on service or safety, instead, end up acquisition targets at best--and pension calamities at worst. Such is the logic of the speculative economy.
As more assets fall under the control of the futures markets, speculators gain more influence over both government policy and public opinion. Between 2000 and 2007, trading in commodities markets in the United States more than sextupled. During that same period, the staff of the Commodity Futures Trading Commission overseeing those trades was cut more than 20 percent, with no corresponding increase in technological efficiency. Meanwhile, speculators have only gotten better at exploiting structural loopholes to engage in commodities trades beyond the sight of the few remaining regulators. Over-the- counter trading on the International Commodities Exchange in London is virtually untraceable, while massive and highly leveraged trades from one hedge fund to another are impossible to track until one or the other goes belly- up--and pleads to be bailed out with some form of taxpayer dollars. Government is essentially powerless to identify those who are manipulating commodities futures at consumers' expense, and even more powerless to prosecute them under current law even if they could. People, meanwhile, come to believe that oil or corn is more scarce than it is (or needs to be), and that they're in competition with the Chinese or the neighbors for what's left.
The speculative economy is related to the real economy, but more as a parasite than as a positive force. It is detached from the real needs of people, and even detached from the real commerce that goes on between humans. It is a form of meta- commerce, like a Las Vegas casino betting on the outcome of a political election. Only in this case, the bets change the costs of the real things people depend on.
As wealth is sucked out of real economies and shifted into the speculative economy, people's behavior and activities can't help but become more market- based and less social. We begin to act more in accordance with John Nash's selfish and calculating competitors, confirming and reinforcing our dog- eat- dog behaviors. The problem is, because it's actually against our nature to behave this way, we're not too good at it. We end up struggling against one another while getting fleeced by more skilled and structurally favored competition from distant and abstracted banks and corporations. Worse, we begin to feel as though any activity not in some way tied to the corporate sphere is not really happening.
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Collage by Jay Larsen
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