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mostlysignssomeportents · 9 months ago

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How to shatter the class solidarity of the ruling class

I'm touring my new, nationally bestselling novel The Bezzle! Catch me WEDNESDAY (Apr 11) at UCLA, then Chicago (Apr 17), Torino (Apr 21) Marin County (Apr 27), Winnipeg (May 2), Calgary (May 3), Vancouver (May 4), and beyond!

Audre Lorde counsels us that "The Master's Tools Will Never Dismantle the Master's House," while MLK said "the law cannot make a man love me, but it can restrain him from lynching me." Somewhere between replacing the system and using the system lies a pragmatic – if easily derailed – course.

Lorde is telling us that a rotten system can't be redeemed by using its own chosen reform mechanisms. King's telling us that unless we live, we can't fight – so anything within the system that makes it easier for your comrades to fight on can hasten the end of the system.

Take the problems of journalism. One old model of journalism funding involved wealthy newspaper families profiting handsomely by selling local appliance store owners the right to reach the townspeople who wanted to read sports-scores. These families expressed their patrician love of their town by peeling off some of those profits to pay reporters to sit through municipal council meetings or even travel overseas and get shot at.

In retrospect, this wasn't ever going to be a stable arrangement. It relied on both the inconstant generosity of newspaper barons and the absence of a superior way to show washing-machine ads to people who might want to buy washing machines. Neither of these were good long-term bets. Not only were newspaper barons easily distracted from their sense of patrician duty (especially when their own power was called into question), but there were lots of better ways to connect buyers and sellers lurking in potentia.

All of this was grossly exacerbated by tech monopolies. Tech barons aren't smarter or more evil than newspaper barons, but they have better tools, and so now they take 51 cents out of every ad dollar and 30 cents out of ever subscriber dollar and they refuse to deliver the news to users who explicitly requested it, unless the news company pays them a bribe to "boost" their posts:

https://www.eff.org/deeplinks/2023/04/saving-news-big-tech

The news is important, and people sign up to make, digest, and discuss the news for many non-economic reasons, which means that the news continues to struggle along, despite all the economic impediments and the vulture capitalists and tech monopolists who fight one another for which one will get to take the biggest bite out of the press. We've got outstanding nonprofit news outlets like Propublica, journalist-owned outlets like 404 Media, and crowdfunded reporters like Molly White (and winner-take-all outlets like the New York Times).

But as Hamilton Nolan points out, "that pot of money…is only large enough to produce a small fraction of the journalism that was being produced in past generations":

https://www.hamiltonnolan.com/p/what-will-replace-advertising-revenue

For Nolan, "public funding of journalism is the only way to fix this…If we accept that journalism is not just a business or a form of entertainment but a public good, then funding it with public money makes perfect sense":

https://www.hamiltonnolan.com/p/public-funding-of-journalism-is-the

Having grown up in Canada – under the CBC – and then lived for a quarter of my life in the UK – under the BBC – I am very enthusiastic about Nolan's solution. There are obvious problems with publicly funded journalism, like the politicization of news coverage:

https://www.theguardian.com/media/2023/jan/24/panel-approving-richard-sharp-as-bbc-chair-included-tory-party-donor

And the transformation of the funding into a cheap political football:

https://www.cbc.ca/news/politics/poilievre-defund-cbc-change-law-1.6810434

But the worst version of those problems is still better than the best version of the private-equity-funded model of news production.

But Nolan notes the emergence of a new form of hedge fund news, one that is awfully promising, and also terribly fraught: Hunterbrook Media, an investigative news outlet owned by short-sellers who pay journalists to research and publish damning reports on companies they hold a short position on:

https://hntrbrk.com/

For those of you who are blissfully distant from the machinations of the financial markets, "short selling" is a wager that a company's stock price will go down. A gambler who takes a short position on a company's stock can make a lot of money if the company stumbles or fails altogether (but if the company does well, the short can suffer literally unlimited losses).

Shorts have historically paid analysts to dig into companies and uncover the sins hidden on their balance-sheets, but as Matt Levine points out, journalists work for a fraction of the price of analysts and are at least as good at uncovering dirt as MBAs are:

https://www.bloomberg.com/opinion/articles/2024-04-02/a-hedge-fund-that-s-also-a-newspaper

What's more, shorts who discover dirt on a company still need to convince journalists to publicize their findings and trigger the sell-off that makes their short position pay off. Shorts who own a muckraking journalistic operation can skip this step: they are the journalists.

There's a way in which this is sheer genius. Well-funded shorts who don't care about the news per se can still be motivated into funding freely available, high-quality investigative journalism about corporate malfeasance (notoriously, one of the least attractive forms of journalism for advertisers). They can pay journalists top dollar – even bid against each other for the most talented journalists – and supply them with all the tools they need to ply their trade. A short won't ever try the kind of bullshit the owners of Vice pulled, paying themselves millions while their journalists lose access to Lexisnexis or the PACER database:

https://pluralistic.net/2024/02/24/anti-posse/#when-you-absolutely-positively-dont-give-a-solitary-single-fuck

The shorts whose journalists are best equipped stand to make the most money. What's not to like?

Well, the issue here is whether the ruling class's sense of solidarity is stronger than its greed. The wealthy have historically oscillated between real solidarity (think of the ultrawealthy lobbying to support bipartisan votes for tax cuts and bailouts) and "war of all against all" (as when wealthy colonizers dragged their countries into WWI after the supply of countries to steal ran out).

After all, the reason companies engage in the scams that shorts reveal is that they are profitable. "Behind every great fortune is a great crime," and that's just great. You don't win the game when you get into heaven, you win it when you get into the Forbes Rich List.

Take monopolies: investors like the upside of backing an upstart company that gobbles up some staid industry's margins – Amazon vs publishing, say, or Uber vs taxis. But while there's a lot of upside in that move, there's also a lot of risk: most companies that set out to "disrupt" an industry sink, taking their investors' capital down with them.

Contrast that with monopolies: backing a company that merges with its rivals and buys every small company that might someday grow large is a sure thing. Shriven of "wasteful competition," a company can lower quality, raise prices, capture its regulators, screw its workers and suppliers and laugh all the way to Davos. A big enough company can ignore the complaints of those workers, customers and regulators. They're not just too big to fail. They're not just too big to jail. They're too big to care:

https://pluralistic.net/2024/04/04/teach-me-how-to-shruggie/#kagi

Would-be monopolists are stuck in a high-stakes Prisoner's Dilemma. If they cooperate, they can screw over everyone else and get unimaginably rich. But if one party defects, they can raid the monopolist's margins, short its stock, and snitch to its regulators.

It's true that there's a clear incentive for hedge-fund managers to fund investigative journalism into other hedge-fund managers' portfolio companies. But it would be even more profitable for both of those hedgies to join forces and collude to screw the rest of us over. So long as they mistrust each other, we might see some benefit from that adversarial relationship. But the point of the 0.1% is that there aren't very many of them. The Aspen Institute can rent a hall that will hold an appreciable fraction of that crowd. They buy their private jets and bespoke suits and powdered rhino horn from the same exclusive sellers. Their kids go to the same elite schools. They know each other, and they have every opportunity to get drunk together at a charity ball or a society wedding and cook up a plan to join forces.

This is the problem at the core of "mechanism design" grounded in "rational self-interest." If you try to create a system where people do the right thing because they're selfish assholes, you normalize being a selfish asshole. Eventually, the selfish assholes form a cozy little League of Selfish Assholes and turn on the rest of us.

Appeals to morality don't work on unethical people, but appeals to immorality crowds out ethics. Take the ancient split between "free software" (software that is designed to maximize the freedom of the people who use it) and "open source software" (identical to free software, but promoted as a better way to make robust code through transparency and peer review).

Over the years, open source – an appeal to your own selfish need for better code – triumphed over free software, and its appeal to the ethics of a world of "software freedom." But it turns out that while the difference between "open" and "free" was once mere semantics, it's fully possible to decouple the two. Today, we have lots of "open source": you can see the code that Google, Microsoft, Apple and Facebook uses, and even contribute your labor to it for free. But you can't actually decide how the software you write works, because it all takes a loop through Google, Microsoft, Apple or Facebook's servers, and only those trillion-dollar tech monopolists have the software freedom to determine how those servers work:

https://pluralistic.net/2020/05/04/which-side-are-you-on/#tivoization-and-beyond

That's ruling class solidarity. The Big Tech firms have hidden a myriad of sins beneath their bafflegab and balance-sheets. These (as yet) undiscovered scams constitute a "bezzle," which JK Galbraith defined as "the magic interval when a confidence trickster knows he has the money he has appropriated but the victim does not yet understand that he has lost it."

The purpose of Hunterbrook is to discover and destroy bezzles, hastening the moment of realization that the wealth we all feel in a world of seemingly orderly technology is really an illusion. Hunterbrook certainly has its pick of bezzles to choose from, because we are living in a Golden Age of the Bezzle.

Which is why I titled my new novel The Bezzle. It's a tale of high-tech finance scams, starring my two-fisted forensic accountant Marty Hench, and in this volume, Hench is called upon to unwind a predatory prison-tech scam that victimizes the most vulnerable people in America – our army of prisoners – and their families:

https://us.macmillan.com/books/9781250865878/thebezzle

The scheme I fictionalize in The Bezzle is very real. Prison-tech monopolists like Securus and Viapath bribe prison officials to abolish calls, in-person visits, mail and parcels, then they supply prisoners with "free" tablets where they pay hugely inflated rates to receive mail, speak to their families, and access ebooks, distance education and other electronic media:

https://pluralistic.net/2024/04/02/captive-customers/#guillotine-watch

But a group of activists have cornered these high-tech predators, run them to ground and driven them to the brink of extinction, and they've done it using "the master's tools" – with appeals to regulators and the finance sector itself.

Writing for The Appeal, Dana Floberg and Morgan Duckett describe the campaign they waged with Worth Rises to bankrupt the prison-tech sector:

https://theappeal.org/securus-bankruptcy-prison-telecom-industry/

Here's the headline figure: Securus is $1.8 billion in debt, and it has eight months to find a financier or it will go bust. What's more, all the creditors it might reasonably approach have rejected its overtures, and its bonds have been downrated to junk status. It's a dead duck.

Even better is how this happened. Securus's debt problems started with its acquisition, a leveraged buyout by Platinum Equity, who borrowed heavily against the firm and then looted it with bogus "management fees" that meant that the debt continued to grow, despite Securus's $700m in annual revenue from America's prisoners. Platinum was just the last in a long line of PE companies that loaded up Securus with debt and merged it with its competitors, who were also mortgaged to make profits for other private equity funds.

For years, Securus and Platinum were able to service their debt and roll it over when it came due. But after Worth Rises got NYC to pass a law making jail calls free, creditors started to back away from Securus. It's one thing for Securus to charge $18 for a local call from a prison when it's splitting the money with the city jail system. But when that $18 needs to be paid by the city, they're going to demand much lower prices. To make things worse for Securus, prison reformers got similar laws passed in San Francisco and in Connecticut.

Securus tried to outrun its problems by gobbling up one of its major rivals, Icsolutions, but Worth Rises and its coalition convinced regulators at the FCC to block the merger. Securus abandoned the deal:

https://worthrises.org/blogpost/securusmerger

Then, Worth Rises targeted Platinum Equity, going after the pension funds and other investors whose capital Platinum used to keep Securus going. The massive negative press campaign led to eight-figure disinvestments:

https://www.latimes.com/business/story/2019-09-05/la-fi-tom-gores-securus-prison-phone-mass-incarceration

Now, Securus's debt became "distressed," trading at $0.47 on the dollar. A brief, covid-fueled reprieve gave Securus a temporary lifeline, as prisoners' families were barred from in-person visits and had to pay Securus's rates to talk to their incarcerated loved ones. But after lockdown, Securus's troubles picked up right where they left off.

They targeted Platinum's founder, Tom Gores, who papered over his bloody fortune by styling himself as a philanthropist and sports-team owner. After a campaign by Worth Rises and Color of Change, Gores was kicked off the Los Angeles County Museum of Art board. When Gores tried to flip Securus to a SPAC – the same scam Trump pulled with Truth Social – the negative publicity about Securus's unsound morals and financials killed the deal:

https://twitter.com/WorthRises/status/1578034977828384769

Meanwhile, more states and cities are making prisoners' communications free, further worsening Securus's finances:

https://pluralistic.net/2024/02/14/minnesota-nice/#shitty-technology-adoption-curve

Congress passed the Martha Wright-Reed Just and Reasonable Communications Act, giving the FCC the power to regulate the price of federal prisoners' communications. Securus's debt prices tumbled further:

https://www.govtrack.us/congress/bills/117/s1541

Securus's debts were coming due: it owes $1.3b in 2024, and hundreds of millions more in 2025. Platinum has promised a $400m cash infusion, but that didn't sway S&P Global, a bond-rating agency that re-rated Securus's bonds as "CCC" (compare with "AAA"). Moody's concurred. Now, Securus is stuck selling junk-bonds:

https://www.govtrack.us/congress/bills/117/s1541

The company's creditors have given Securus an eight-month runway to find a new lender before they force it into bankruptcy. The company's debt is trading at $0.08 on the dollar.

Securus's major competitor is Viapath (prison tech is a duopoly). Viapath is also debt-burdened and desperate, thanks to a parallel campaign by Worth Rises, and has tried all of Securus's tricks, and failed:

https://pestakeholder.org/news/american-securities-fails-to-sell-prison-telecom-company-viapath/

Viapath's debts are due next year, and if Securus tanks, no one in their right mind will give Viapath a dime. They're the walking dead.

Worth Rise's brilliant guerrilla warfare against prison-tech and its private equity backers are a master class in using the master's tools to dismantle the master's house. The finance sector isn't a friend of justice or working people, but sometimes it can be used tactically against financialization itself. To paraphrase MLK, "finance can't make a corporation love you, but it can stop a corporation from destroying you."

Yes, the ruling class finds solidarity at the most unexpected moments, and yes, it's easy for appeals to greed to institutionalize greediness. But whether it's funding unbezzling journalism through short selling, or freeing prisons by brandishing their cooked balance-sheets in the faces of bond-rating agencies, there's a lot of good we can do on the way to dismantling the system.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/04/08/money-talks/#bullshit-walks

Image: KMJ (modified) https://commons.wikimedia.org/wiki/File:Boerse_01_KMJ.jpg

CC BY-SA 3.0 https://creativecommons.org/licenses/by-sa/3.0/deed.en

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channeledhistory · 26 days ago

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[...]

[...] Es gibt eine große Wahrscheinlichkeit dafür, dass Frankreich - die zweitgrößte Volkswirtschaft der Europäischen Union - übermorgen erst einmal ohne Regierung dasteht. Grund ist der seit Monaten andauernde Streit um den Staatshaushalt für das kommende Jahr.

Barnier wollte dem Land einen ungewohnten Sparkurs verordnen. Die Opposition von links und rechts wollte das nicht - nicht so jedenfalls. Deshalb hat Barnier jetzt mit dem Sozialetat einen entscheidenden Teil seiner Pläne ohne Abstimmung durchs Parlament gebracht. Einen solchen Schritt erlaubt ihm die Verfassung laut Artikel 49.3.

Die derzeitige Situation und Frankreichs wachsende Staatsverschuldung ließen ihm keine Wahl, sagte Barnier im französischen Parlament, der Assemblée Nationale, begleitet von Zwischenrufen aus der Opposition: "In diesem Moment geht es darum, die Interessen unseres Landes zu verteidigen und seinen Einfluss in Europa und weltweit. Deshalb greife ich zum Artikel 49."

Allerdings hat Barniers Schritt einen Preis: ein Misstrauensvotum. Das möchte die Opposition nun schnell auf den Weg bringen. Am Mittwoch schon soll es in der Assemblée zur Abstimmung stehen. Die im Linksbündnis als sogenannte neue Volksfront zusammengeschlossenen Parteien wollen den Sturz von Barniers Regierung genauso wie der rechtsextreme Rassemblement National (RN).

Für dessen Frontfrau Marine Le Pen, Fraktionschefin des RN im Parlament, ist die Sache ganz klar: Barnier habe nicht auf das eingehen wollen, was elf Millionen Wähler des Rassemblement National in Frankreich verlangt hätten, meint Le Pen. Stattdessen habe der Regierungschef jede und jeden einzelnen aufgefordert, Verantwortung zu übernehmen. Und genau das werde man jetzt tun.

Barnier hatte noch versucht, Le Pen mit seinen Plänen entgegenzukommen: Die Stromsteuer für Millionen Verbraucherinnen und Verbraucher in Frankreich sollte nun doch nicht steigen, ebenso wenig wie die Zuzahlungen für Medikamente. Denn das hatte Le Pen als rote Linie bezeichnet. Es gab aber offenbar noch mehr. Auch bei der Streichung eines quasi entsprechend der Inflation automatisierten Rentenanstiegs wollte der Rassemblement Zugeständnisse, die es nicht gegeben hat.

Die Links-Opposition war mit den Haushaltsplänen insgesamt nicht einverstanden und hatte vor einigen Wochen bereits einmal ein Misstrauensvotum gegen Barniers Regierung auf den Weg gebracht. Das scheiterte allerdings. [...]

Es ist also wahrscheinlich, dass die extreme Rechte mit der Linken zusammen stimmt, um Barnier und seine Regierung zu Fall zu bringen. Auch das ist in dieser Form etwas Neues in Frankreich. Wenn die Regierung am Mittwoch tatsächlich stürzen sollte, ist völlig unklar, wie es politisch weitergeht im Land.

Frankreichs Präsident müsste einen neuen Regierungschef oder eine Regierungschefin ernennen. An den Mehrheitsverhältnissen im Parlament würde das allerdings nichts ändern. Der Pariser Politologe Yves Sintomer hält es für denkbar, dass Macron als Präsident deshalb auch einen bisher völlig ungekannten Weg gehen könnte.

"Macron könnte so etwas wie einen Neuanfang machen mit großen Konventen unter der Bevölkerung", sagt der Wissenschaftler. Auf diesem Wege könne der Staatschef ein Meinungsbild zu den großen Fragen wie Klima oder Haushaltsbudget einholen. "Macron kann dann eine technische Regierung einsetzen, solange es nötig ist."

Aber auch danach sieht es nicht aus. Le Pen dürfte auf jeden Fall darauf spekulieren, dass Macron aufgrund der derzeit völlig verfahrenen Lage seinerseits frühzeitig sein Amt niederlegt. Denn Macron trage für alles die eigentliche Verantwortung: Der Präsident müsse jetzt die notwendigen Entscheidungen treffen. Vorgezogene Präsidentschaftswahlen jedenfalls gäben Le Pen die vielleicht letzte Chance, selbst ins höchste Staatsamt Frankreichs zu kommen.

[...]

Im Vorfeld der wichtigen Haushaltssitzung am Nachmittag hatten auch Äußerungen des Leiters des französischen Rechnungshofs, Pierre Moscovici, die Märkte beunruhigt. "Unsere finanzielle Situation ist heute gefährlich", sagte Moscovici dem Fernsehsender France 2. In der vergangenen Woche hatte Regierungschef Michel Barnier gewarnt, es werde "einen großen Sturm und sehr schwere Turbulenzen auf den Finanzmärkten geben".

[...]

[...] Mit einer Schuldenstandsquote von 112,2 Prozent gemessen am Bruttoinlandsprodukt liegt Frankreich bereits deutlich über dem Durchschnitt der Eurozone. Nur Griechenland und Italien stehen noch schlechter da.

Die EU-Kommission prognostiziert eine weiter steigende Quote, und zwar auf mehr als 115 Prozent im kommenden Jahr und gut 117 Prozent 2026. Die europäischen Regeln sehen hier eigentlich eine Obergrenze von 60 Prozent vor.

Auch bei der Neuverschuldung reißt Frankreich die von der EU vorgegebene Obergrenze, die bei drei Prozent des Bruttoinlandsproduktes liegt. [...]

Und noch bleibt ungewiss, wann und wie das Land seine aktuellen Budgetprobleme in den Griff bekommt. Sollte die Regierung Barnier nach drei Monaten im Amt stürzen, könnten Neuwahlen erst im Juli 2025 angesetzt werden. Auch wenn sich die Regierung hält, dürfte sich der Streit bei den nächsten Haushaltssitzungen fortsetzen, von denen in diesem Jahr noch zwei anstehen.

An den Finanzmärkten wird die verfahrene Lage weiter für Unruhe sorgen. "Es fällt schwer, hinsichtlich der Entwicklung in Frankreich allzu optimistisch zu sein", kommentierte Anleihenexperte Mark Dowding von RBC BlueBay Asset Management. "Ausländische Anleger, beispielsweise aus Japan, sind stark in dem Land engagiert. Daher besteht das Risiko, dass französische Staatsanleihen unter weiteren Verkaufsdruck geraten, wenn sich die politische Lage verschlechtert."

Eine wichtige Rolle kommt in dieser Lage den großen Ratingagenturen zu. S&P und Moody's beurteilen die Kreditwürdigkeit Frankreichs weiterhin mit guten bis sehr guten Noten, und zwar mit "AA-" beziehungsweise "Aa2" - was überhaupt nicht nach Schuldenkrise klingt. Beide großen Agenturen drohten aber bereits, ihre Bonitätsbewertung herabzustufen. "Wir könnten die Ratings für Frankreich herabsetzen, wenn die Regierung nicht in der Lage ist, ihre hohen Haushaltsdefizite zu reduzieren oder das Wirtschaftswachstum über einen längeren Zeitraum unter unsere Prognosen fällt", hieß es etwa von S&P.

In diesem Fall besteht durchaus die Gefahr, dass die Finanzmärkte auch wieder genauer auf die Lage in den anderen hoch verschuldeten Euro-Staaten in der Peripherie blicken. Nach der Corona-Krise und den Belastungen des Ukraine-Kriegs ist es um deren Finanzen kaum besser bestellt als zur letzten Euro-Schuldenkrise vor zwölf Jahren.

Was das Sorgenkind Griechenland betrifft, haben die Euro-Staaten im Zuge der vergangenen Krise die direkten Risiken eingedämmt. Die griechischen Schulden liegen vor allem bei den europäischen Rettungsfonds EFSF und ESM beziehungsweise bei den anderen Eurostaaten - und das mit vorwiegend sehr langen Laufzeiten. "Nur ein kleiner Teil ist über die Kapitalmärkte direkt aufgenommen" [...]

[...]

#frankreich #michel barnier #emmanuel macron #marine le pen #eu #finanzmärkte #s&p #moodys #griechenland #finanzkrise #euro

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