When housing is a commodity instead of a human right

A basic problem of housing it this: Housing is a commodity instead of a human right. We’re not accustomed to seeing housing as a basic right for everybody, but why isn’t it? Other than food and water, what is more basic a need than shelter?

It is here that questions about why the cost of housing is so out of control should begin. Because real estate is a massively profitable commodity — a locus of speculation — your rent is too damn high. So is your mortgage. And not disconnected from that is the scourge of gentrification, which continues to decimate urban communities around the world.

The specifics can change from one city to another, but ultimately massive accumulations of capital are at work. In New York City, where the form of government is a de facto dictatorship of the real estate and financial industries, the hands behind sharply rising rents are in the open. In San Francisco, where gentrification is fueled by cascades of money flowing into the technology industry, or Vancouver, where foreign speculators are seeking profitable outlets for the massive amounts of capital at their disposal, the proximate causes are somewhat different. But the underlying causes in these and other cities are ultimately “market forces.”

“Example of Bruxellisation” (photo by “Uppploader”)

Market forces are nothing more than the aggregate interests of the largest industrialists and financiers. Markets do not sit high in the clouds, dispassionately sorting out worthy winners and losers in some benign process of divine justice, as ideologues would have us believe. There is no magic at work here.

Neither housing, nor education, nor a clean environment are considered rights in capitalist formal democracies, and if you live in the United States, health care is not a right, either. Democracy is defined as the right to freely vote in political elections that determine little (although even this right is increasingly abrogated in the U.S.) and to choose whatever consumer product you wish to buy. A quite crabbed view of democracy or “freedom” if we stop to think about it.

That is because “freedom” is equated with individualism, a specific form of individualism that is shorn of responsibility. Those who have the most — obtained at the expense of those with far less — have no responsibility to the society that enabled them to amass such wealth. Imposing harsher working conditions is another aspect of this individualistic “freedom,” but freedom for who? “Freedom” for industrialists and financiers is freedom to rule over, control and exploit others; “justice” is the unfettered ability to enjoy this freedom, a justice reflected in legal structures. Working people are “free” to compete in a race to the bottom set up by capitalists.

Housing costs in U.S., Canada far outstrip inflation

Let’s run some numbers and examine just how this “freedom” works for working people. By no means are the massive increases in the cost of housing limited to a handful of popular cities. Nor is this merely a new or recent phenomenon.

Since 1975, the average prices of houses in the United States have risen by more than 60 percent faster than inflation. In Canada, real estate prices have increased 46 percent faster than inflation since 2000. Those are countrywide numbers, not specific to particular cities.

That inflation-adjusted cost of U.S. housing was calculated by comparing the statistics for the period January 1975 to February 2017, as reported by the S&P/Case-Shiller U.S. National Home Price Index, with the rate of inflation for that period as calculated by the U.S. Bureau of Labor Statistics’ inflation calculator. The increase in Canadian national housing prices from January 2000 to February 2017 was then compared with the rate of inflation as determined by the Bank of Canada’s inflation calculator.

San Francisco’s Haight-Ashbury district (photo by “Urban”)

If the prices of buildings are increasingly inflated above inflation, then as sure as the Sun rises in the east rents will rise, too. Often faster, as holders of real estate try to squeeze every possible dollar out of beleaguered renters. The U.S. government’s Department of Housing and Urban Development, in a report that the Trump administration has not yet gotten around to removing, says:

“Shelter costs have been increasing faster than the costs of other items. According to the Bureau of Labor Statistics’ Consumer Price Index (CPI), the costs of equivalent levels of shelter increased by 104 percent from 1985 to 2005 compared to a 74-percent increase in the cost of all other items.”

The department reports that for home owners, the cost of principal and interest on mortgages increased nearly 18 percent, adjusted for inflation, from 1985 to 2005. The cost of rent, over the same period also increased nearly 18 percent over the same period, again adjusted for inflation. As a result, the percentage of income paid toward either a mortgage or rent increased over these two decades. These trends have only accelerated since.

Incomes fall but rents keep rising

Those are national averages. In many cities, of course, rent increases have been much faster. Examining the trends in rents going back to 1960, Andrew Woo of Apartment List wrote:

“[I]nflation-adjusted rents have risen by 64%, but real household incomes only increased by 18%. The situation was particularly challenging from 2000 – 2010: household incomes actually fell by 7%, while rents rose by 12%. As a result, the share of cost-burdened renters nationwide more than doubled, from 24% in 1960 to 49% in 2014. … Rents have risen rapidly in many cities across the US, but looking at things over more than fifty years helps us understand the impact of these trends. If rents had only risen at the rate of inflation, the average renter would be paying $366 less in rent each month.”

Mr. Woo reported that although incomes in expensive areas like Washington, Boston and San Francisco have risen rapidly, rents have increased roughly twice as fast. In Houston, Detroit and Indianapolis, incomes have actually fallen in real terms, while rents have risen 15 to 25 percent. He found that the only U.S. urban areas where incomes kept pace with rising rents were Austin, Las Vegas and Phoenix.

For those workers struggling to survive on the lowest wages, the cost of living is a nearly impossible burden to bear. There is not one state in the U.S. in which a minimum-wage worker can afford the cost of the average one-bedroom apartment by working a full-time 40 hours. It would take 49 hours per week to afford the average one-bedroom apartment in West Virginia (the lowest figure) and 124 hours in Hawaii. In 14 states and the District of Columbia, you’d have to work at least 80 hours per week at minimum wage to afford the average one-bedroom apartment.

As this is a product of capitalism, not national peculiarities, we can see the same trends around the world. Average real estate prices in Toronto, adjusted for inflation, are seven times higher in 2016 than they were in 1953! Thus it comes as no surprise to learn the average rent of a one-bedroom apartment in Toronto is nearly double that of someone earning Ontario’s minimum wage. And not only does the supply of affordable housing not keep up, it is actually shrinking: In Calgary, for example, 3,000 rental units were converted into condominiums from 2006 to 2008 alone at the same time that the number of people in unaffordable housing steadily increases, while in Edmonton the wait-list for social housing in 2015 tripled.

A BBC report found that the average rent on a one-bedroom flat in London is £920, which would consume more than 90 percent of the after-tax income of someone working 39 hours per week at the minimum wage. Although not as expensive elsewhere, the rent for a one-bedroom would consume more than half of that minimum wage in Wales, West Midlands, and the southeast and east of England. A separate report by the Resolution Foundation found the household income of British renters increased two percent from 2002 to 2015, while their housing costs increased 16 percent.

And on it goes, from Paris to Berlin to Istanbul to Sydney to Melbourne.

Limited local efforts to counteract global forces

Some local governments in the cities subjected to the most extreme rent crises are taking measures to ameliorate market conditions, including those with a measure of effectiveness, such as Vancouver, which has instituted targeted taxes, and those with no effectiveness, such as New York, where the mayor continues his predecessors’ policies that accelerate gentrification.

Homelessness in Vancouver has reached record heights at the same time as the city has become one of the world’s least affordable, along with Hong Kong, Sydney, Melbourne, Auckland, and the California city of San Jose.

The city council of Vancouver in November 2016 instituted a tax on unoccupied homes that are not principal residences and are unoccupied for at least six months of the year. The city government estimates that more than 20,000 homes are empty or left vacant for most of the year. Earlier in the year, the British Columbia provincial government imposed a 15 percent tax on foreign buyers, who have been rapidly buying up real estate. “We need to find a balance between welcoming investment and ensuring it doesn’t skew the housing options for people who live here,” Vancouver Mayor Gregor Robertson told The Guardian, while lamenting the actions already taken as “too late.”

Vancouver as seen from Lookout Tower

Home prices were reported to have declined since the 15 percent tax on foreign buyers was imposed, but whether that decline will be sustained, or translate into reduced rents, remains to be seen.

Doomed to certain ineffectiveness, by contrast, is the housing plan of New York City Mayor Bill de Blasio. Rents there have escalated well beyond inflation for many years, with landlord profits increasing yearly. Gentrification was encouraged by the city’s mayor during the late 1970s and 1980s, Ed Koch, who infamously declared, “If you can’t afford New York, move!” The pace quickened under Rudy Giuliani and Michael Bloomberg, with the latter forcing through massive re-zonings of neighborhoods against the wills of residents.

The Bloomberg plan was to allow developers to run wild, and give gigantic subsidies to them in exchange for a few units to be set aside for affordable housing. Although he won election as a supposed progressive reformer, Mayor de Blasio has kept the Bloomberg plan firmly in place, and thus continues to drive gentrification, rising rents and the ongoing removal of residents forced out by unaffordable rents.

Gentrification is a deliberate process

Gentrification is not some natural phenomenon like the tides of the ocean, as ideologues are fond of asserting, but rather is a deliberate process. Gentrification frequently means the replacement of a people, particularly the poor members of a people, with others of a lighter skin complexion. A corporatized, sanitized and usurped version of the culture of the replaced people is left behind as a draw for the “adventurous” who move in and as a product to be exploited by chain-store mangers who wish to cater to the newcomers.

Gentrification is part of the process whereby people are expected, and socialized, to become passive consumers. Instead of community spaces, indoors and outdoors, where we can explore our own creativity, breath new life into traditional cultural forms, create new cultural traditions and build social scenes unmediated by money and commercial interests, a mass culture is substituted, a corporate-created and -controlled commercial product spoon-fed to consumers carefully designed to avoid challenging the dominant ideas imposed by corporate elites.

Bill de Blasio tries to assert that gentrification is some natural, uncontrollable process beyond human control as fervently as his billionaire predecessor, Michael Bloomberg. In sum, Mayor de Blasio believes that the only way to get affordable housing built is to allow billionaire developers to do whatever they want, grant exceptions to already pro-developer zoning regulations, and accept a few crumbs in return. As a result, rents have increased more than twice as fast as wages since 2012, and a minimum-wage worker would have to work 139 hours per week to afford the average New York apartment.

The new look of Williamsburg (Photo by Alex Proimos)

Rezoning is the linchpin of Mayor de Blasio’s housing plan — specifically, what is called “inclusionary zoning,” whereby developers are allowed to exceed height limits and are given huge tax credits in return for a few extra apartments below market rates and targeted for specific income levels. This simply does not work, instead funneling still more money into developers’ bulging pockets and further fueling higher profits for existing landlords because the new high-rent housing puts upward pressure on the rents of older apartments. The affordable units created by Bloomberg’s inclusionary zoning account for just 1.7 percent of housing growth between 2005 and 2013, according to Samuel Stein, writing in Jacobin.

That is below the level of the city’s population increase for the period. Coupled with de-regulation laws with large loopholes, an estimated 300,000 to 400,000 rent-regulated apartments have been lost since the 1990s, a city housing activist and reporter, Steve Wishnia, reported in Truthout. At the same time, other subsidies are thrown at developers to build luxury housing unaffordable by almost all city residents — a Midtown Manhattan tower in which apartments cost tens of millions of dollars and which is largely empty because the units are mostly bought by capitalists from outside the country as pied-à-terre received $35 million in tax breaks!

Jamming more money into developer pockets

Inclusionary zoning is a “fatally flawed program,” concludes Mr. Stein:

“It’s not just that it doesn’t produce enough units, or that the apartments it creates aren’t affordable, though both observations are undeniably true. The real problem with inclusionary zoning is that it marshals a multitude of rich people into places that are already experiencing gentrification. The result is a few new cheap apartments in neighborhoods that are suddenly and completely transformed.

De Blasio wants to use inclusionary zoning to create sixteen thousand apartments for families making $42,000. That’s just 3 percent of the need for such apartments in the city today, according to the plan’s own figures. At the same time, the mayor’s policies would build one hundred thousand more market-rate apartments in the same neighborhoods. What will happen when these rich people arrive? Rents in the surrounding area will rise; neighborhood stores will close; more working-class people will be displaced by gentrification than will be housed in the new inclusionary complexes. …

Rather than curbing speculation or aggressively taxing landlords, inclusionary zoning keeps the urban growth machine primed and ready to build. … What this and other public-private partnerships will not do is fix the city’s perpetual housing crisis.”

The only alternative is to fight back. Fran Luck, a housing activist who has fought the gentrification of the Lower East Side of Manhattan, notes:

“Progressive movements from the 1920s through the 1960s fought for and won some housing relief for low-income people — including rent controls, public housing and Section 8 subsidies. But during the ‘Reagan [counter-]revolution’ of the 1980s, federal housing monies were slashed and by the late ’80s, mass homelessness, such as had not been seen since the Great Depression, had made a comeback, accompanied by accelerating gentrification.

“Today, with little housing money from the Feds, mayors such as New York’s Bill de Blasio, even with the best of intentions, simply have no source for ‘affordable housing’ funds other than the crumbs thrown out by large developers. While the housing movement in New York City is not dead — as shown by the annual struggle between tenants and landlords over rent regulation — it has been on the defensive for some time due to a real estate climate heavily skewed toward developer profits, not people’s housing needs.”

Such a climate enables judges judges to overturn even tepid attempts at stabilizing rents, such as in San Francisco, where a federal judge in 2014 declared that rents rise without human invention and thus a ruled against a city law that would have forced landlords who kick tenants out of rent-controlled apartments to pay them the difference between the rent they had been paying and the fair market rate for a similar unit for a period of two years.

Landlords are innocent victims of rising rents, the judge declared, and have no responsibility for San Francisco’s housing crisis. Bizarre, yes, but the logical conclusion of rampant ideology that declares the workings of capitalism operate on their own, as a natural process outside of human control. Public-private partnerships, whether designed to create housing or public infrastructure, are thinly disguised schemes to turn over public property to private capital, so the latter can cash in at the public’s expense.

As long as housing is treated as a commodity to be bought and sold by the highest bidder, housing costs will increase and we’ll remain at the mercy of landlords, who, under gentrification, decide who is allowed to stay and who will be pushed out of their homes. Housing should be a human right!

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Wall Street bigger and badder than ever

Being a banker means never having to say sorry. Or worry where that next million is going to come from.

Financial results are in for 2016 for the biggest U.S. banks and — surprise! — profits continue to reach the stratosphere. And with Goldman Sachs in firmer control of the U.S. Treasury Department than ever before, the good times will continue to roll for Wall Street. For the rest of us, that’s another story.

No less than six “Government Sachs” executives have been nominated to high-level posts in the new Trump administration. As a candidate, Donald Trump attacked opponents for their ties to Goldman Sachs during the campaign, but the joke is on those who naïvely believed the real estate mogul was going to “drain the swamp.” Heading the list is the treasury secretary nominee, Steve Mnuchin, who spent years at Goldman Sachs before earning the title “foreclosure king” as chairman and chief executive officer of OneWest Bank.

Occupy Wall Street (photo by David Shankbone)

Occupy Wall Street (photo by David Shankbone)

Mr. Mnuchin, who bought distressed mortgages and evicted thousands of homeowners during the financial crisis, further demonstrated his humanitarian streak when he announced that, as treasury secretary, he would oversee “the largest tax change since Reagan” and said his “No 1 priority is tax reform.” More tax cuts for the wealthy and corporations. Hurray! How many more people would pay for this by losing their ability to keep their homes was not indicated.

The Guardian, however, did report that “Mnuchin went on to sell OneWest last year for more than double what he paid the Federal Deposit Insurance Corporation for the assets in the teeth of the financial crisis.” The California Reinvestment Coalition has calculated that Mr. Mnuchin’s bank was responsible for more than 36,000 foreclosures in in that state alone, and reported he disproportionally foreclosed on seniors. It did so frequently using harassment and other aggressive tactics, even to the point of changing the locks on a senior’s home in a blizzard.

Vampire squid” indeed. Those are the sort of tactics that surely endeared Mr. Mnuchin to President Trump.

Citigroup hopes to replicate destruction of Detroit

No roundup of the year in banking, however, would be complete without the wit and wisdom of JPMorgan Chief Executive Officer Jamie Dimon. When we last checked in a year ago, Mr. Dimon insisted that declining incomes for working people was no big deal, because they are better off by virtue of possessing iPhones, while in 2014 he complained that — oh the humanity! — “banks are under assault.” As we look back at 2016, he has again provided us with comic relief.

Somehow keeping himself composed as he told Bloomberg News that “business [has] been beaten down as if we’re terrible people,” he upheld the work of banks in saving Detroit. You can’t make this up: He said, “Detroit is a perfect example where civil society, not-for-profits, government, business all work together to improve the lives of American citizens. If you can duplicate what they’ve done in Detroit around the country, you’re going to have a huge renaissance.” He finished by declaring “JPMorgan didn’t jeopardize the system. We did not cause the crisis. We have three times more capital than we had back then. We saved 30,000 jobs.”

Goldman Sachs headquarters (photo by Quantumquark)

Goldman Sachs headquarters (photo by Quantumquark)

We’ll pause here so you can enjoy a hearty laugh. There is no need to point out the tremendous damage major banks did to economies around the world, and the trillions of dollars of handouts given to them as a reward for their destructive behavior. There is little need to point out the damage done to Detroit, but as a reminder, complex and poorly understood derivatives were decisive in Detroit’s fiscal downfall.

These derivatives were sold to the city as a form of “insurance” against possible increases in interest rates, but when interest rates fell and Detroit’s credit rating was cut, hundreds of millions were siphoned from city coffers into Wall Street pockets, and the banks that sold the derivatives jumped to the head of the line of creditors. No money for pensions or government services, but plenty for financiers.

Mr. Dimon does seem to be rather well compensated for his difficulties, “earning” $27.6 million for 2015, tops among banking chief executive officers. Goldman Sachs’ Lloyd Blankfein didn’t do too badly himself, hauling in $23.4 million in compensation. Another nine topped $10 million.

Bigger and badder than ever

These bloated salaries did not, so to speak, break the banks. Once again, profits for the six biggest U.S. banks were massive — nearly $93 billion for 2016.

Here’s a breakdown of the six banks for 2016, three of which reported record profits.

  • JPMorgan Chase & Company reported net income of $24.7 billion on revenue of $99.1 billion, the bank’s highest-ever profit, beating out the record set just the year before. These massive profits led to a massive bonanza for speculators — JPMorgan handed out $15 billion in dividends and stock buybacks.
  • Bank of America Corporation racked up $17.9 billion in net income on revenue of $83.7 billion, both increases from a year ago, which, in turn had tripled 2014 earnings. Speculators did well here, too, as Bank of America ladled out $7.7 billion in dividends and stock buybacks, and plans on buying back another $4.3 billion of its stock in the first six months of 2017.
  • Citigroup Incorporated reported net income of $14.9 billion on revenues of $69.9 billion, both a little bit lower than a year earlier. But shed no tear for downtrodden speculators as Citigroup handed out $10.7 billion in dividends and stock buybacks. Five separate violations cost a total of $485 million in government penalties, but that seems to be no more than a minor speed bump.
  • Wells Fargo & Company had net income of $21.8 billion on revenue of $88.3 billion, a dip in profits from 2015 due to having to pay a penalty of $1.2 billion for shady mortgage lending practices and another $185 million in fines because of its illegal practices of opening fake accounts in the name of its depositors. Who says crime doesn’t pay? Speculators certainly won’t say that: Siphoning money from its account holders helped Wells Fargo be in a position to shovel $12.5 billion into financiers’ pockets through dividends and stock buybacks, almost equal to what it handed out a year earlier.
  • The Goldman Sachs Group Incorporated reported net income of $7.4 billion on revenue of $30.6 billion, a bigger profit and profit margin that a year earlier. The company did not break out its expenses for its purchases of the U.S. government in its latest financial report. Goldman Sachs spent $7 billion on buying back its stock and proudly declared itself first in the world in mergers and acquisitions, work that added billions to the investment bank’s bottom line while costing untold numbers of people their jobs. Profits would have been even bigger had it not been for a $5.1 billion fine for selling toxic mortgage securities to unsuspecting investors.
  • Morgan Stanley reported net income of $6.0 billion on revenue of $34.6 billion, a profit about two percent lower than that of 2015. Despite that slight dip in income, the bank somehow found the means to buy back $3.5 billion worth of its stock — a 67 percent increase from what it bought back a year ago. Morgan Stanley would have seen its profits increase for 2016 had it not had to pay $3.2 billion in penalties related to its role in the subprime-mortgage housing debacle.

Beyond the whip of Wall Street

The biggest banks not only extract more money from the rest of the economy than ever, but are bigger than ever — banks with more than $100 billion assets increased their market share from 17 percent in 1995 to 59 percent in 2014. This is the mad logic of capitalism — grow or die. Finance capital, despite being the whip enforcing trends that worsen inequality, is not immune from what it enforces on everyone else. One measure of the cancerous growth of financial products bearing little relationship with actual needs is this: In 11 business days financial speculators trade instruments and contracts valued at more than all the products and services produced by the entire world in one year.

Reducing banking and finance to a public utility would be the only way to break the grip of giant banks and financial institutions. One intermediate step that could be taken would be government banks that would fund public infrastructure projects and provide low-cost loans, and which would be the recipient of government revenue rather than commercial banks.

The Bank of North Dakota is an example of such an institution that already exists, with proposals for state banks being floated for Vermont, Washington state, Oregon and California. A New Jersey gubernatorial candidate, Phil Murphy, has made a public state bank the centerpiece of his campaign, arguing that students would benefit from low interest rates for college tuition, more loan capital would be made available and municipal governments would no longer have to pay high interest to Wall Street.

The Left Party of Germany has a detailed plan to bring banks under democratic control. Although the party’s proposal is specific to Germany, its basic ideas are transferable to any country. Any form of democratic control of an economy would be impossible without banking and finance being reduced to a public utility, and thus serving to benefit communities rather than existing as a parasite that exists to profit over every aspect of human activity, no matter the social cost.

They throw us out of our homes but we get ice cream

If there were any doubt that gentrification has come to my corner of Brooklyn, that was put to rest last weekend with the appearance of an ice cream truck. An ice cream truck painted with the logo and red color of The Economist. Yes, it was just as this reads. Free scoops of ice cream were being given out as a young woman with a clipboard was attempting to get people to sign up for subscriptions to The Economist.

Not that there had been any reason to harbor illusions about gentrification — the glass-walled, high-priced high rises sprouting like mushrooms after a rainstorm are merely the most obvious of multiple signs. The neighborhood where I live, Greenpoint, is notable as a Polish enclave, although a sliver along the East River was mainly populated by Puerto Ricans, Dominicans and artists two decades ago. In short, a place for people needing a (relatively) cheap (by New York City standards) place to live and which still possessed a working waterfront.

A march for Alex Nieto in San Francisco (photo via Justice for Alex Nieto website)

A march for Alex Nieto in San Francisco (photo via Justice for Alex Nieto website)

Not really the sort of folks who might be expected to read one of the two main flagships of the British finance industry. To watch, or participate in, an art parade, sure. That is the sort of procession one used to see. Or Mr. Softee, a local franchise with ice cream trucks (of the traditional sort) that played a jingle, over and over again, that had a way of getting inside your head, although not necessarily in a good way. One summer a Mr. Softee truck seemed permanently stationed on my block, leading me to write a poem on the uses of Mr. Softee’s ice cream other than eating and even as a talisman against an invasion of space aliens. As I said, the jingle has a way of getting inside your head.

But no matter how bizarre the sight of an Economist ice cream truck, there is nothing actually funny about gentrification. Not even a Financial Times ice cream truck in pink (although perhaps a little too close to the color of Pepto-Bismol for comfort there) would be funny. Systematic evictions, the wholescale removal of peoples, the wiping out of alternative cultures and the imposition of the soul-deadening dullness of consumerist corporate monoculture has become a global phenomenon.

Rent laws don’t help if your home can be torn down

This has accelerated to where not simply buildings are being emptied out, but entire complexes. In Silicon Valley, a San Jose apartment complex with 216 units is being demolished to make way for a luxury high-rise. The hundreds of residents there are protected from higher rents by local rent-control laws. But that law has a rather big loophole — the rent-controlled buildings can be torn down, and the residents kicked into the street with no recourse and no right to a replacement apartment. The San Francisco Bay Area as a whole lost more than 50 percent of its affordable housing between 2000 and 2013.

Gentrification literally kills — symbolized by the tragic death of Alex Nieto in San Francisco’s Mission District. A story brought to a wider audience in an essay by Rebecca Solnit, Mr. Nieto was a long-time resident of the Mission who was shot by police for being Latino in a local park — targeted because gentrifying techies, new to the neighborhood, decided Mr. Nieto was a threat and called the police, a tragic ending that was set in motion when a techie thought it amusing that his dog was menacing Mr. Nieto as he ate on a bench.

The Mission, as is well known, has long been a Latin American enclave. What is happening there, and in so many other neighborhoods in so many other cities, is no accident. Gentrification is a deliberate process. Gentrification frequently means the replacement of a people, particularly the poor members of a people, with others of a lighter skin complexion. A corporatized, sanitized and usurped version of the culture of the replaced people is left behind as a draw for the “adventurous” who move in and as a product to be exploited by chain-store mangers who wish to cater to the newcomers.

Gentrification is part of the process whereby people are expected, and socialized, to become passive consumers. Instead of community spaces, indoors and outdoors, where we can explore our own creativity, breath new life into traditional cultural forms, create new cultural traditions and build social scenes unmediated by money and commercial interests, a mass culture is substituted, a corporate-created and -controlled commercial product spoon-fed to consumers carefully designed to avoid challenging the dominant ideas imposed by corporate elites.

Dictatorships of favored industries

There are interests at work here. The technology industry has a stranglehold on San Francisco, for example, its techies with their frat-boy culture rapidly bidding up housing prices and making the city unaffordable for those who made it the culturally distinct place it has long been. New York City is a dictatorship of the real estate and financial industries; the process of gentrification there has progressed through a mayor who snarls and can’t be bothered to hide his hatred for most of the people who live there (Rudy Giuliani), a mayor who covered himself with a technocratic veneer (Michael Bloomberg) and a mayor fond of empty talk but who is the Barack Obama of New York (Bill de Blasio). They follow in the footsteps of Ed Koch, who showed his humanitarian streak when he declared, “If you can’t afford New York, move!”

Despite the reasoning of a federal judge who two years ago overturned a San Francisco ordinance designed to slow down speculation in housing that accelerates exorbitant rises in rents, those rents do not rise without human intervention. Not a single county in the U.S. has enough affordable housing for all its low-income residents, according to a report issued by the Urban Institute, which also reports that only 28 adequate and affordable units are available for every 100 renter households in the U.S. with incomes at or below 30 percent of their local median income.

The trend of rents taking up a bigger portion of income, although accelerating in recent years, is a long-term trend — one study found that rents have risen close to double the rate of inflation since 1938, and the prices of new houses at an even higher rate. Gentrification and the rising rents that accompany it are found around the world, from Vancouver to London to Berlin to Istanbul to Melbourne.

Just as markets are nothing more than the aggregate interests of the biggest industrialists and financiers, allowing the “market” to determine housing policies means that the richest developers will decide who gets to live where. The vision of former New York City Mayors Giuliani and Bloomberg (enforced through policies kept in place by Mayor de Blasio) is of Manhattan and adjoining areas of Brooklyn becoming a gated city for the wealthy, with the rest of us allowed in to work and then leave. The most profitable projects for developers are luxury housing for millionaires and billionaires — interests coincide. Even when a local government makes a tepid attempt, under public pressure, to ameliorate the harshness of housing conditions, such as with San Francisco, it is swamped by the tidal pull of market forces.

This global phenomenon derives from a top-down global system, capitalism, under which housing is a commodity for private profit instead of a basic human right. A free scoop of ice cream really doesn’t compensate losing the ability to keep a roof over your head.

Let them eat iPhones

You say you are struggling to cover your rising expenses while your pay is stagnant? You should have become an executive at a bank. Break the economy and earn big rewards!

But don’t sweat it — you have a phone and that more than makes up for your lack of adequate wages, declining ability to access health care and lack of a pension. Just ask JPMorgan chief executive officer Jamie Dimon.

Mr. Dimon’s pay is more than 220 times that of the average employee at JPMorgan, reports Business Insider, but he says you underpaid employees shouldn’t complain — because you have iPhones! At least Marie Antoinette’s alleged belief in cake allowed France’s plebeians to eat, more than can be done with a phone. Here is what Mr. Dimon said in his latest attempt to show compassion, according to BloombergBusiness:

“ ‘It’s not right to say we’re worse off,’ Dimon said [last September 17] at an event in Detroit in response to a question about declining median income. ‘If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.’ ”

Cutting the pay of chief executive officers would do nothing to solve inequality, Mr. Dimon proclaimed. Instead, “investing in ‘intelligent infrastructure’ ” is what is needed. If possessing a “smart phone” is the key to happiness, apparently “smart buildings” would make us still happier. There’s progress for you — Marie Antoinette never offered anyone a bakery. But as you apply ketchup to your iPhone, you will surely digest smoothly with the knowledge that the chief executive officers of Goldman Sachs and JPMorgan officially became billionaires during 2015.

U.S. Treasury Department under new management (photo by takomabibelot)

U.S. Treasury Department under new management (photo by takomabibelot)

Goldman Sachs’ chief, Lloyd Blankfein — or Lord Blankcheck, as Occupy Wall Street activists memorably dubbed him — took home US$23 million last year, while Mr. Dimon “earned” $27 million, a healthy 35 percent raise. And shed no tears for those who have yet to reach the corporate pinnacle — three Goldman Sachs executives each took home $21 million and three JPMorgan execs each were awarded more than $10 million in stock alone.

Profits of biggest banks increase again

When we last heard from Mr. Dimon, about this time last year, he complained that “Banks are under assault,” adding that “We have five or six regulators coming at us on every issue.” As the six biggest banks in the U.S., which includes JPMorgan, racked up profits totaling $75 billion for 2014, you will be excused for having doubts about just how tough regulators are.

Profits for those banks were no more endangered in 2015, totaling almost $93 billion. Here is how they fared in the just concluded year:

  • JPMorgan Chase & Company: net income of $24.4 billion on revenue of $96.6 billion. JPMorgan reported its highest-ever net income in 2015, and paid out $11 billion to shareholders through stock buybacks and dividends.
  • Bank of America Corporation: net income of $15.9 billion on revenue of $82.5 billion. Net income more than tripled from 2014, and it nearly doubled the dividend it paid shareholders — the bank said it handed out $4.5 billion through common stock buybacks and dividends.
  • Citigroup Incorporated: net income of $17.2 billion on revenue of $76.4 billion. Although revenue was down slightly, net income more than doubled because Citigroup wasn’t troubled with having to pay out billions in fines over its toxic derivatives as it was in 2014.
  • Wells Fargo & Company: net income of $23 billion on revenue of $86.1 billion. The bank reported it handed out $12.6 billion through stock buybacks and dividends, yet it relentlessly demands its tellers pressure customers to open multiple accounts and pays those tellers too little to live on.
  • The Goldman Sachs Group Incorporated: net income of $6.1 billion on revenue of $33.8 billion. Goldman Sachs’ net income was below that of 2014 due to a $3.4 billion deduction (or “charge”) from its earnings due to its reaching a settlement with government regulators over its toxic mortgage-backed securities; profits would have risen without the fine. But please don’t shed any tears for the investment bank — it proudly reported that it “advised” on corporate mergers and acquisitions worth more than $1 trillion, work that by itself netted it billions of dollars while jobs disappeared.
  • Morgan Stanley: net income of $6.1 billion on revenues of $35.2 billion. Similar to its peer banks, Morgan Stanley shelled out $2.1 billion to buy back its stock in an effort to have its profits shared among fewer stockholders. Despite that profit, the bank has said it will lay off staff as part of an effort to “cut costs” under Wall Street pressure.

The biggest get bigger

Yes, the biggest banks keep getting bigger. The four banks with the largest holdings accounted for a composite 42 percent of all U.S. banking assets in 2014, a total that has steadily increased, both before and after the 2008 crash.

Wells Fargo Plaza, HoustonAnd not even the fines levied by regulators slow them down. Earlier this month, Goldman Sachs announced that it had agreed to $5 billion in penalties to settle claims arising from the marketing and selling of dodgy mortgage securities, although nearly $2 billion of that is “consumer relief” in the form of loan forgiveness, the bank said.

Banks have paid a total of $40 billion to settle claims by financial regulators and prosecutors, yet these penalties are bumps in the road for them, no more than a business expense. In part, perhaps that is because much of these penalties come in the form of mortgage modifications, rather than cash, and often these modifications are to loans that the banks service but don’t actually own — allowing them to get credit for modifying loans belonging to another company.

Banking of course is not the only industry undergoing consolidation. Mergers in 2015 were bigger than ever, with corporate deals worth $4.7 trillion. Investment banks earn huge fees for arranging mergers and acquisitions, none more so than the biggest U.S. banks. Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America and Citigroup ranked as numbers one through five in the world in terms of the value of the deals banks “advised” on.

Competitive pressure accounts for some corporate mergers — the capitalist imperative to grow or die does not abate even for the biggest corporations — but pressure to “enhance shareholder value” plays a significant role. “Enhancing shareholder value” is finance-speak for acceding to speculators’ demands for more short-term boosts to profits and higher stock prices, no matter the cost to others or the long-term damage to the company itself. Hedge-fund billionaires are among the fiercest in pressing these demands, continually demanding cuts to jobs that serve only to fatten their swollen wallets. The big banks, as major Wall Street players themselves, both apply this “market” pressure for the same reasons and further profit from acting as “advisers.”

Reforming such insanity is a hopelessly sisyphean task. What if instead banks became a public utility with an end to speculation? Proposals are being floated in the U.S. to create state banks, perhaps on the model of the successful Bank of North Dakota, and the Left Party of Germany has a detailed plan to bring banks under democratic control. Capitalist propaganda aside, there is no need for banking to exist as an uncontrollable behemoth extracting wealth from all other human activities. Why shouldn’t it be a utility under public control that exists to serve the productive economy? We can’t survive on iPhones alone.

Keynesianism will not save the world

Nostalgia for the supposed “golden age” of mid-20th century capitalism carries with it an assumption that we can simply go back to a Keynesian world. Yet this is not a matter of simply of switching horses for nobody decreed that we shall now have neoliberalism and nobody can decree we shall now have Keynesianism.

There are structural reasons for the neoliberal assault. It is the logical development of capitalism; “logical” in the sense that the relentless scramble to survive competition eventually closed the brief window when rising wages were tolerated and government investment encouraged. The Keynesian policies of that time was a product of a specific set of circumstances that no longer exist and can’t be replicated.

Mid-20th century Keynesianism depended on an industrial base and market expansion. A repeat of history isn’t possible because the industrial base of the advanced capitalist countries has been hollowed out, transferred to low-wage developing countries, and there is almost no place remaining to which to expand. Moreover, capitalists who are saved by Keynesian spending programs amass enough power to later impose their preferred neoliberal policies. A vicious circle arises: Persistent unemployment and depressed wages in developed countries and inadequate ability to consume on the part of underpaid workers in developing countries leads to continuing under-consumption, creating pressure for still lower wages by capitalists who can’t sell what they produce and seek to cut costs further because there is no incentive for them to invest in new production.

Counter-intuitively, the turn toward neoliberalism is a also a response to declines in profitability. The rising wages of the post-World War II era were tolerated by capitalists because profits and the potential for further expansion were both high. Pent-up demand across the global North and the massive destruction of capacity in Europe enabled U.S. manufacturers to gain an unprecedented, and unrepeatable, opportunity. Capitalists in Europe and East Asia used state investment to rebuild their economies and regain their competitiveness.

Workforce of the future?

Workforce of the future?

The Keynesian compromise was not necessarily what capitalists would have wanted; it was a pragmatic decision — profits could be maintained through expansion of markets and social peace bought. When markets could no longer be expanded at a rate sufficiently robust to maintain or increase profit margins, however, capitalists ceased tolerating paying increased wages.

Competition is now carried out on a global scale, and where in the past local monopolies tended to cohere within national or regional borders, corporate globalization has put the world well down the road of international monopolization. The same tendency toward a handful of corporations dominating a market is now being reproduced on a larger scale, a single global world system, replicating the processes that previously led to monopolizations within individual countries or regions.

This is part of the “grow or die” dynamic of capitalism. It’s not only grabbing market share, it’s a mad scramble to “innovate” to increase profitability. That can be new production techniques but it is especially cutting costs — in the first place, wage costs. Thus robotics and automation to reduce the number of workers needed, which also “deskill” work to make workers more expendable, putting downward pressure on wages. Work speedups are part of the extraction of more profits, or an attempt to stave off declines in profit rates. And when these are finally insufficient, the work begins to be moved to new locations with lower wage levels and weaker regulation. “Free trade” agreements negotiated in secret that bring corporate wish lists to life both accelerate this tendency and are a product of it.

The capitalist that cuts costs first gains an advantage, but competitors follow, eroding the advantage. So the next step, and the next step, is carried out, intensifying these processes. The personality of the capitalist does not matter; he or she is acting under the rigors of competition. There is no way to put a human face on this or to permanently reverse the logic of capitalist competition. The present era of austerity and neoliberalism is the product of capitalist development. Even if a massive movement becomes sufficiently strong to effect significant reforms, eventually they would be taken back just as the reforms of the mid-20th century have been taken back.

(Mural by Ben Shahn)

(Mural by Ben Shahn)

Not only does the scope for expansion that existed during the Keynesian era no longer exist, the environmental limits and global warming that the world did not then face can no longer be avoided. Humanity is consuming far beyond the world’s replenishment capacity and changing the climate at a faster rate than ever before known. We can’t turn back the clock (and the “golden age” of capitalism wasn’t so golden if you were a woman, a Person of Color or a working person in a developing country) nor is it environmentally sound to ramp up production and consumption on the scale that a global Keynesian initiative would require.

Alas, this is a variation on the theme of “green capitalism” — the idea that the same system that has brought the world to its present state of crisis, a system that requires infinite expansion on a finite planet, that has turned to financialization because speculation is more profitable than production, that treats pollution and waste as external costs to be ignored will somehow now save us. Tinkering with the machinery of capitalism — which is what Keynesian nostalgia amounts to — would ameliorate conditions somewhat for a while, but offer no solution.

The days when it was still possible to believe capitalism can be a progressive force are behind us; the neoliberal assault is the “new normal.” When capitalism has penetrated into every corner of the world, there is nowhere else to expand: The only route for capitalists is to reduce wages and benefits. The only route for the 99 percent is an entirely different world.

Corporate green-washing on Earth Day

Earth Day was celebrated three days early in New York City, with a pop-up shopping mall in a park. Green-washing in all its glory: We’ll shop our way to a clean environment and a re-stabilized climate! Adding a touch of bitter irony, this corporate green-washing took place in Union Square, traditionally a site for organized protest.

Although not really expecting anything different, going only to hand out fliers against the pending Trans-Pacific and Transatlantic “free trade” agreements and the threat these agreements pose to knowing what is in the food you buy, it was nonetheless a depressing spectacle. There were large displays there for Toyota and Honda — the automobile industry can not realistically be described as “green.” Citibank was there, too, as were a collection of food companies who brand themselves as environmentally sensitive but are owned by multi-national behemoths who don’t believe you have a right to know what is in the food you eat.

The two automobile companies were hyping electric vehicles. A bit less fossil fuel exhausts adding to the atmospheres’s carbon dioxide is good, yes, but building and driving an electric-powered automobile hardly qualifies as a stroke for a cleaner world. An electric automobile still has the metal, plastic, rubber, glass and other raw materials a gas-guzzling one has. By one estimate, 56 percent of all all the pollution they will ever produce comes before the vehicle hits the road.

Atmospheric carbon dioxide levels for the past 800,000 years (Graphic by the Scripps Institution of Oceanography at the University of California, San Diego)

Atmospheric carbon dioxide levels for the past 800,000 years (Graphic by the Scripps Institution of Oceanography at the University of California, San Diego)

Then there is the matter of where the electricity comes from; the electricity used to power the vehicle is only as clean as its source. A full two-thirds of electricity produced in the U.S. comes from fossil fuels. Coal is the biggest source of U.S. electricity, accounting for 39 percent in 2014; natural gas, also a huge contributor to global warming, is the second biggest source at 27 percent. About half of European electricity comes from coal or natural gas.

So increasing electricity usage, if it means an increase in coal or other global-warming and polluting sources, isn’t “green.” Then we would need to consider the battery for an electric vehicle, which is not without greenhouse-gas emissions and which contains nickel as a major input. Nickel exposure can cause damage to blood, lung, noses, kidneys, reproductive systems and skin. Mining it causes not only pollution but contributes to global warming. So, again, not really “green.”

And Citibank as a “green” enterprise? A 2011 report by a coalition of environmental groups, “Bankrolling Climate Change,” found that Citibank provided more than €4 billion in financing for coal mining in the previous five years, the third highest total of any bank in the world, and is also one of the top three financiers of mountain-top removal coal operations.

“Organic” brands that promote GMO foods

Two of the sponsors of New York City’s Earth Day fair were Morningstar Farms and Honest Tea. Both had prominent displays. But these are not mom-and-pop operations; both are part of multi-national conglomerates. Morningstar Farms is owned by Kellogg Company and Honest Tea by Coca-Cola Company. Coca-Cola contributed $1.2 million and Kellogg more than $600,000 to the corporate effort that narrowly defeated California ballot measure Proposition 37 in 2012, which would have required labels on genetically engineered foods and banned the industry practice of marketing GMO-tainted foods as “natural.”

Most natural foods brands have been swallowed by multi-national corporate behemoths, which gladly use consumers’ money for purposes anathema to organic consumers’ interests. The Cornucopia Institute notes that:

“[M]any iconic organic brands are owned by the titans of junk food, processed food and sugary beverages—the same corporations that spent millions to defeat GMO labeling initiatives in California and Washington. General Mills (which owns Muir Glen, Cascadian Farm, and LaraBar), Coca-Cola (Honest Tea, Odwalla), J.M. Smucker (R.W. Knudsen, Santa Cruz Organic), and many other corporate owners of organic brands contributed big bucks to deny citizens’ right to know what is in their food.”

The Cornucopia Institute also reports that Morningstar Farms’ veggie burgers (along with several other brands) are produced using hexane, an air pollutant and neurotoxin. The institute writes:

“In order to meet the demands of health-conscious consumers, manufacturers of soy-based fake meat like to make their products have as little fat as possible. The cheapest way to do this is by submerging soybeans in a bath of hexane to separate the oil from the protein. Says Cornucopia Institute senior researcher Charlotte Vallaeys, ‘If a non-organic product contains a soy protein isolate, soy protein concentrate, or texturized vegetable protein, you can be pretty sure it was made using soy beans that were made with hexane.’ … Troubling, then, that the FDA does not monitor or regulate hexane residue in foods.”

At least two New York City food coops refuse to carry Morningstar Farms products. Yet there it prominently was at the Earth Day fair, with passers-by lining up to be green-washed.

And then we have Honest Tea, or more accurately, Coca-Cola, its owner. The worldwide string of human rights abuses that Coca-Cola is so frequently implicated in speaks for itself. The activist group Killer Coke has compiled a country-by-country list of outrages in various countries, including thousands of children, as young as eight-years-old, used as labor on El Salvador sugar-cane farms that supply the company; multiple kidnappings and murders of union officials at a bottling plant in Guatemala; and, in the Philippines, the use of outsourced labor to avoid paying benefits and accusations of “smuggling” sugar into the country to avoid taxes and undercut local sugar producers.

Shopping is not participation in your world

The organizers of Earth Day New York, said to be organized by an unspecified “broad coalition of environmental groups,” have this to say about it:

“Earth Day is more than a one-day event or annual environmental wake-up call. It is a catalyst for ongoing education, action, and change. It simultaneously broadens the base of support and rekindles old commitments through highly participatory strategies.”

So there we have it: Consumption of corporate products falsely branded as “green” or “environmentally friendly” is participatory! Undoubtedly, many, perhaps most, of the people passing through Union Square that day wish to be have a lighter footprint on the Earth and have would like to diminish their contribution to global warming. But to do that requires less consumption, not a re-arrangement of unsustainable consumption patterns.

Above all, it will require a complete overhaul of the world’s economy. Most of the ideas floated to deal with greenhouse-gas emissions reaching a critical point feature untested technologies, reliance on biofuels that are no less polluting than fossil-fuel energy or various other techno-fixes. The cost of all these too good to be true “solutions” to global warming will be virtually nothing, according to, for example, the Intergovernmental Panel on Climate Change report issued last year.

Alas, cost-free “green capitalism” is an illusion. The economies of the world’s advanced capitalist countries are highly dependent on consumerism; household spending accounts for 60 percent or more of gross domestic products across the global North. Wasteful practices such as planned obsolescence exist to continually induce us to buy more and more products. And nor is it simply a matter of wishing away polluting industries — capitalism has no mechanism to provide jobs for the untold millions of people who would be thrown out of work if just the most polluting industries were shut down.

Production in the capitalist system is done for private profit, not for human need; environmental costs are externalized. Thus a capitalist corporation, faced with the need to expand because of the rigors of competition and forced to focus on “maximizing shareholder value” over all other values by market forces, has to expand and dump as much of the costs of its production, including pollution and greenhouse-gas emissions, on society as possible. It also means that popular demands for “green” products are nothing more than a marketing opportunity to exploit.

Producing products that consume less energy and resources is certainly good, but if more of these are being produced, then there is no real savings. All the incentives in capitalism are for more production, more consumption.

There is no alternative to drastically reducing what is consumed and building a new economy based on human need, incentivized to protect the environment and possessing the flexibility to re-deploy labor in large numbers when industries are reduced or eliminated. This would require a socialized economy that would have no need to grow. We can’t shop or grow our way out of environmental crisis. No amount of corporate green-washing can render “green capitalism” anything other than an illusion nor can shopping replace organized activism.

Bigger rewards for holding the economy hostage

They are bigger and badder than ever. The heightened offensive against regulations launched by the financial industry carried forward by the new Republican Party majority in the United States Congress is one demonstration, but just in case you wish more evidence, bank profits got bigger in 2014.

The multibillion-dollar fines U.S. government agencies have assessed banks has merely dented profits, and only in some cases. Four of the six biggest banks in the U.S. — which together hold about two-thirds of all assets in the U.S. financial system — reported higher profits for 2014 than in 2013, and in the cases of the other two, it appears that an increase in fines paid was responsible for their decline in profits.

Overall, these six banks — JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — racked up a composite net income of US$75 billion on revenue of $413 billion.

The most comical comment during the banks’ announcements last week of their financial results was that of JPMorgan Chairman and Chief Executive Officer Jamie Dimon, who whined on a conference call with reporters that “Banks are under assault,” adding that “We have five or six regulators coming at us on every issue.”

Those regulators seemed to have taken it easy on JPMorgan last year. The company’s total legal costs for 2014 were $2.9 billion, compared to $11.1 billion in 2013, according to a report carried by financial news network CNBC. Nonetheless, JPMorgan’s $21 billion in profits for 2014 was considered a disappointment by Wall Street, because the fourth-quarter profit dipped slightly from the previous year’s fourth quarter. Thus, the company wasted no time in announcing that “Senior executives at JPMorgan Chase & Company are pressuring managers across the bank to cut costs,” according to Reuters.

Wall Street traders have already punished the company by sending its stock down in three of the first four trading days following its “disappointing” results. Not even Wall Street banks are immune from their own role as enforcers. Some low-level employees are about to pay for that with their jobs.

U.S. Treasury Department under new management (photo by takomabibelot)

U.S. Treasury Department under new management (photo by takomabibelot)

Never mind that the U.S. Treasury Department handed out $700 billion to Wall Street (among other measures), bailing out the very banks whose bottomless greed and reckless gambling brought on a global economic downturn now in its seventh year. A downturn paid for not by the banks, nor their executives, but through the endless austerity imposed on working people throughout the world. Not one Wall Street executive has been prosecuted.

JPMorgan has been assessed fines for a variety of crimes, among them mortgage fraud and currency-market manipulation. A compliance lawyer for JPMorgan tried to alert authorities to systematic irregularities in mortgage securities before the crash, but was ignored. Jamie Dimon, heroically holding up against the assault on his bank, earned $20 million for 2013. One suspects he will not be homeless once his 2014 compensation is totaled.

That his company will need to come up with billions of dollars by 2019 to meet Federal Reserve capital requirements, which will slow down its ability to speculate with money it doesn’t have in reserve, might just have something to do with his whining.

It pays to be a banker

The year 2014 was a very good one for banks. Here are the full-year results for the six largest banks, as reported by themselves.

• JPMorgan Chase & Company: net income of $21 billion on revenue of $97.9 billion. This was three billions dollars more than the year before, but still not good enough in the eyes of speculators.
• Bank of America Corporation: net income of $4.8 billion on revenue of $85.1 billion. The net income is down from 2013, but that appears to be due to “litigation expenses” of $16.4 billion, more than double the 2013 litigation expenses of $6.1 billion. Almost all of those extra expenses occurred in its consumer real estate division; the bank agreed in August to pay nearly $17 billion to settle charges that it sold toxic mortgages.
• Citigroup Incorporated: net income of $11.5 billion on revenue of $77.2 billion. Citigroup’s profits were lower than the year before, but the culprit is familiar — it reported legal costs of $4.8 billion in 2014, more than ten times the $430 million of 2013. Citigroup agreed in November to pay $1 billion for rigging foreign-exchange markets and agreed in July to pay $7 billion for selling bad mortgages.
• Wells Fargo & Company: net income of $23.1 billion on revenue of $84.3 billion. With profits up from 2013, Wells Fargo said it handed out $12.5 billion to shareholders through dividends and net share repurchases, five billion dollars more than a year earlier. This at the same time that many of its branch tellers can’t move out of their parents’ house because of low pay.
• The Goldman Sachs Group Inc.: net income of $8.5 billion on revenue of $34.5 billion. Those were higher than a year earlier. The average pay for Goldman Sachs employees for 2014 was $373,265, but as that includes secretaries and clerks, those involved in speculation make far more.
• Morgan Stanley: net income from continuing operations of $6.2 billion on revenue of $33.6 billion. This profit is more than double what the company made the year before, but nonetheless is not good enough. The company moved quickly to appease speculators, announcing it would cut the percentage of its revenue going to wages, pay higher dividends and buy back more stock.

What would they do if they weren’t under “assault”?

Subject to the same remorseless laws of capitalism as any other industry, the industry rapidly consolidated. The percentage of total industry assets owned by the five biggest U.S. commercial banks has increased more than four-fold since 1990. Nor is that something peculiar to U.S. banking — the five largest banks in the European Union hold 47 percent of their industry’s total assets.

The “assault on banks” must have been conducted with a wet noodle. Although by any ordinary human logic, these colossal sums of money should satiate the most asocial speculator, the remorseless logic of capitalism dictates that more is never enough, that profits have to increase steadily. Even the rate of the increase can be expected to increase.

While working at a financial news wire during the stock-market bubble years of the 1990s, I vividly recall one day when a major computer company reported a profit of more than $800 million for its latest three-month period, more than the year-earlier quarter, only for its stock price to be driven down. Curious, I discovered that “analysts” had forecast a profit even bigger, and the rate of the increase had been lower than the rate of the increase a year earlier. That was enough for speculators to lash out.

The financial industry acts as both a whip and a parasite in relation to productive capital (producers and merchants of tangible goods and services). The financial industry is a “parasite” because its ownership of stocks, bonds and other securities entitles it to skim off massive amounts of money as its share of the profits. It is also a “whip” because its institutions — stock, bond and currency-exchange markets and the firms that trade these and other securities on those markets — bid up or drive down prices, and do so strictly according to their own interests.

A management that fails to maximize profits in the short term and deliver higher stock prices in the longer term is in danger of being pushed out, not because diffuse shareholders possess that leverage individually, but because the financial industry as a whole, through the markets it controls, can sell off enough stock to make the price nosedive, leaving the company vulnerable to an unfriendly takeover by a speculator seeking to profit from the reduced value of the company. Executives who do what the “market” dictates, on the other hand, are showered with riches.

Moreover, companies with stock traded on exchanges are legally required to maximize profits for shareholders, above all other considerations. A company that fails to make a deal, or decides against selling itself to another company, is subject to being sued in courts because angry speculators will sell their stock, causing the price to decline and then complain that the company’s management failed to maximize “shareholder value.”

Governments representing the world’s four largest economies — the U.S., the E.U., China and Japan — committed US$16.3 trillion in 2008 and 2009 alone on bailouts of the financiers who brought down the global economy and, to a far smaller extent, for economic stimulus. These are the governments that are “assaulting” banks. Such is the looking-glass logic of capitalism.