Bonds and Chains: Marx, Capitalists and Workers
March 20, 2020
by William P. Meyers

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Liar's Poker redux

Trying to stay at home even more than usual due to the coronavirus, I examined my library and pulled out a copy of Michael Lewis's Liar's Poker. Published in 1989, it is about a group of people, organized as Salomon Brothers, making an astonishing amount of money trading bonds in the first half of the 1980s. I read this book long ago, but reading it again, I understood it much better. You should probably just read the book yourself and see what you get out of it, but allow me to add my own perspective.

I will begin with an extensive quote that probably violates, or at least puts my type too close to the genital regions of, the author's copyright:

I mean, you'd think that the borrower of money would be just as likely to be screwed by the middleman as the lender. But he isn't. The Wall Street oligopoly that cost lenders so dearly doesn't seem to affect the borrowers, perhaps because they are smart enough to play the few investment banks off against one another ... Anyway, no one dreams of trying to fool, say, IBM into issuing cheap stocks or bonds. IBM is regarded as too important too anger and therefore always issues its stocks and bonds dear. Wall Street salesmen then try to fool investors into buying the overpriced merchandise.

For younger folk, IBM was once the world's dominant computer maker. In 1972, when I first arrived at college and had access to a computer, the entire campus ran on a single IBM 370 mainframe computer. At the time covered by Liar's Poker, IBM was still the largest computer maker, but the Federal Government forced it to allow competition in early personal computers, leading to the rise of Microsoft and others. Lewis could have used any really big corporation, say Ford, to illustrate his point.

What this shows is that capitalists are, at least at times, divided against each other. By the way, lenders in the above quotes are those who buy the corporate bonds issued. They could be pension funds or trust funds or anyone with too much capital who wants a relatively safe, set rate of interest for their investment. Investment banks, before Glass-Steagall was obliterated, could not do business with ordinary people. Their clients were institutional, including Savings and Loans, excepting for some very high wealth individuals. One might imply there is a hierarchy of capitalists, the more powerful able to screw the less powerful. But keep in mind that the bonds issued are used to generate even more capital of the classic type: buildings, factories, and intellectual property.

Leftists, Marxist and non-Marxist, like to lump all capitalists together. It is convenient. Then you can accuse the leadership of the Democratic Party as just being another branch of the capitalist class, enemies of socialism. That most of the actual activists elected to the Democratic National Committee are not capitalists does not matter once you have created your lumps. More troubling, of late, to socialists is why they do not get the whole-hearted support of working class Americans. As shown by the failure of these Americans to vote Bernie Sanders into the Democratic Party Presidential candidate spot.

Like the traders, salesmen, and managers at Salomon that Lewis brings to life, no one wants to examine failures to avoid them in the future. It is much more important to blame someone, or something, else. Did the capitalist U.S. economy crash into a Great Depression in 1929? Most Capitalists blame the Fed or the government, or the new socialist programs passed by FDR, as if they could reach backwards in time and cause the crash. Similarly, most socialists don't want to blame the collapse of the Venezuelan economy on socialist policies like not reinvesting in the oil industry and importing so much food from abroad with oil money that the local agricultural economy was undermined.

Which brings us to Karl Marx, who in a way is the father of both Socialism and Capitalism, the Cain and Abel of modern, industrial society. Karl was an astute observer of the industrialization process of the 1800s. He really did his homework, and he spent a lot of time writing Capital. While mandatory pretend-to-have-read-it for socialists since it was published, it was a better a guide to making money, and to Harvard Business School students, who were assigned it until ideological considerations took it off the menu. But as astute as it is, it was written before the invention of the light bulb, transistor, computer, and mortgage-backed securities.

Many scholars have updated our knowledge of capitalism, and of socialist theory and practice, since the era of Marx. I used to have whole bookshelves filled with the writings of Lenin, Kautsky, Mao, the anarchist and more modern socialists. I have also read an extensive, if smaller amount of modern business and economics books. And I have seen capitalism, socialist organizing, and government from the inside. So I feel I can offer some guidance.

Marx was right in saying that circumstances shape people. So, to the extent class is a reality, it shapes people. But two work places may shape people very differently. Not only is the worker at a supermarket part of a different culture than the worker at a factory, but individual factories can have very different cultures. The same is true of capitalists. Food industry capitalists like food stamps because it helps them sell more food. Bond traders and bond buyers are perpetual frenemies. Stocks and bonds can help a union pension fund, and trust fund kids who mainly party are very different than trust fund kids who want to create more capital through enterprise.

The world is really overpopulated. Increasing the incomes of working class people just destroys the earth that much faster unless a plan is in place to gradually decrease the population (of workers, the middle class, and capitalists alike).

Workers, as they get older, often have a great deal of real world experience. They may hate their bosses or like their bosses, but most of them do not want to be bosses, even for an increase in pay. Being a boss is a pain in the ass. It is not worth it to most people. Even being a capitalist can be a pain in the ass.

Being in the right place at the right time is the single most important ingredient to making money, and most people don't control their place and time. My mother grew up on a white tenant farm in the south. Her lucky break was military spending well before Pearl Harbor that caused a military uniform factory to be built in her county, to which she fled from the heat, bugs, rags and weeds to work. If she had been born black instead of white she might have died as poor as she began. Even sub-classes, like agricultural workers, are not all alike. Cultures within families vary significantly. Capitalist families, too.

We need people who understand both capitalism and socialism, and can help convince the voters and the politicians to pick the best tools from each to do whatever job needs to be done. Whether it is protecting the environment, protecting our health, protecting our children, or protecting our overall economy. But expect a slow learning curve. Humans can ape other humans easily enough, but getting them to "Break Their Chains" is not easy. Evolution has provided us all with a basic set of capabilities. Which ones we exercise, and which ones atrophy, is mainly a result of the micro-environments we are born to.

Above all, parents in every class should think of having only one child, rather than splitting their resources trying to raise two or more. Capitalism, socialism, and mixed economic systems all require the earth to be healthy for their survival. A healthy earth is one with less humans. Get that idea clear in your head, if nothing else.