Serving the Pioneer Valley of Western Massachusetts

The Ownership Society? or The Peonage Society?

                                                              by DAVE HOPKINS

Warren Buffet asked this question, criticizing President Bush's campaign for an "ownership society," but Warren's point was not as deep as I had hoped. His concern was with the national debt and balance of payments and the precarious position of the US dollar. The sage of Omaha saw his country becoming a nation enslaved to foreign debt.

There is a deeper issue here, however. President Bush's "ownership society" is really code for privatization, for ownership of stocks and homes, for a reduction of government or state programs seeking to protect the average American from the vagaries of a free market economy. Nor is it only a Republican, "neoconservative" campaign. They are following the footsteps of the Clinton Administration in this. Indeed, there is hardly a person in this country who has not bought into this new paradigm: increasing your personal wealth by owning assets, be they houses or stocks. With goodie-goodie two-shoes social investment funds, the mutual fund industry, 401Ks, stock options for employees, homeowners gleeful over the rise in value of their homes, and so on, most of the country is riding this magic carpet, hopping on for a free ride. Massive pension funds and insurance companies are pouring money, actually workers' savings, into the stock market. If Bush's private accounts for Social Security are approved, this will be yet another "thickening" of the financial markets, mixing in still more savings of average Americans.

It is true that the Bush Administration is pursuing this "ownership society" more aggressively, but the idea spans all political ideologies in this country, with the exception perhaps of the far right (libertarian) and the far left of the political spectrum. Stephen Roach of Morgan Stanley has written blisteringly on the "asset economy," where we are living off the appreciation of our assets, houses, stocks etc., and debts based on this paper wealth, rather than off earned income, work, and production, the old-fashioned way to make your living.

It is nothing short of political genius that the Republicans have seized on the "ownership society" as a way of identifying this trend with an innocuous label and using it to further their agenda. In all fairness, Americans of all political stripes have acquiesced in this new asset economy. They have accepted low wage growth, accepted greater personal debt burdens to make up for their lack of purchasing power. In a sense, the fascination of the average American with the easy money to be made in the financial markets or in the appreciation of the value of their homes, has seduced them into accepting this revolutionary turn of events. Even the reduction of government programs that enrich their lives, upgrade infrastructure, and protect their health, is passively allowed, because it subtracts from the bottom line of companies that they may have a few shares in. They have become believers in this goose laying golden eggs, namely the financial system, and they want to keep feeding it.

I take a very different view of this, a much dimmer one. I believe it is inexorably leading to a destruction of our social wealth and an impoverishment of our world. It is not just the US dollar that is threatened; ultimately, it is our very ability to enjoy the world and live fulfilling lives that is at stake here.

True as this is, a more fundamental issue in my eyes is the way home mortgage debt is turning us into a nation of peons, property owners only in name. Mortgage terms are starting to stretch out now to 40 years in this country, to 50 years in the US already, even to 100 years in Japan!  The longer the term of the debt, the lower the monthly payments, the higher the house price an average buyer can swing. This is how we are keeping pace with the rampant inflation of the real estate market (see my earlier articles "War and Property Inflation" and "Why Home Prices Are Going Through the Roof: A Brief Guide to the 'New Economy'"). Yet the upshot of this is that we work our whole lives to pay for our houses! My aim in this article is to show that the asset inflation that President Bush and before him President Clinton encouraged Americans to enjoy the fruits of (with stock ownership and home ownership) is in reality just a carrot hanging on a stick to keep the donkey running. Our social wealth is being hollowed out in the process (reduction of state and town services

Even their foreign adventures in both wars of "liberation" and funding and perhaps even fomenting "democratic" revolutions, particularly in oil-rich states.