Corporate Predators Invade San Francisco

Guest blog by Steven Miller

 (This is the 5^th of 6 guest posts in which Miller discusses the corporate vultures descending on the Bay Area)

San Francisco’s Invasion by Corporate Predators – Part V

These are the best of times…. or so it appears. San Francisco is succeeding Detroit as the pre-imminent manufacturing city in America… except it does not manufacture tangible products. This development is amazing, since the city is isolated on a peninsula and never developed a large manufacturing base in the Industrial Era. For decades a Western center of finance, San Francisco is becoming the center of the high-tech industry, which produces intangible digital products, an extension of Silicon Valley 50 miles south.

The city’s population is over 800,000, the highest in history, as tech workers flood the city. Carl Guardino, president and CEO of the Silicon Valley Leadership Group notes that well over 100 of his 391 member companies “either have headquarters or a strong physical presence in San Francisco”. (15)

The economy of the Bay Area has reached pre-2008 levels, but with 200,000 fewer jobs. The difference is in the greater use of electronic technology, which inevitably means laborless production.  (16)

In this respect, the economies of San Francisco and Detroit are moving in the same direction. This trend, reflected throughout the US and the world in general, gives the lie to glib pronouncements by politicians that they will create more jobs. The hard reality is that there will be fewer and fewer jobs because technology needs ever fewer production workers.

Electronic technology is now so productive that it no longer requires people work 40 hours a week. Thus corporations are engineering Temp World right before our eyes. Part-time workers, permatemps, precariats, contingent workforce, outside contractors, flexible contract workers, personal entrepreneurs – the names change, but a new model of work is being imposed. (17)

One of the city’s vaunted hi-tech start-ups is Task Rabbit, where someone posts a job on line – anything from moving a couch to creating a website – and a mob of desperate workers, many with advanced degrees, compete to place the lowest bid. This is the hi-tech version of the day laborer shape-up that happens every morning as construction workers, mostly without papers, battle each other to work for contractors. This trend reflects capitalism’s latest production model of outsourcing production through chains of sub-contractors.

At the other end of the pole, well-off techies have suddenly discovered the wonders of capitalism and wax profound about the libertarian virtues of a society where everyone free-lances. Though they believe they are creating the new glamorous world of work, they are simply establishing the visionary model of capitalist work in the electronic era, articulated in the 1994 Fortune Magazine article “The End of the Job”:

“As a way of organizing work, the traditional job is becoming a social artefact, created in the 19th century and well suited to the demands of a newly industrial world, but poorly adapted to a fast-moving, information-based economy. Its demise confronts everyone with unfamiliar risks — as well as rich opportunities.”  (18)

Laborless production generates the polarization of wealth, the polarization of the job market and the polarization of society. Techies can afford to pay super-high rents. Immediately after the Melt Down, a massive wave of evictions swept the country. Many of these have been shown to be completely illegal. Now a new wave of evictions is being implemented across the city, leading to the eviction of working class families across the city. Evictions of entire buildings for purposes of sale are up 170% since 2010. (19)

Rebecca Solnit describes the Google buses that roam the San Francisco, picking up tech workers to carry them to Silicon Valley, “Most of them are gleaming white, with dark-tinted windows, and some days I think of them as the spaceships on which our alien overlords have landed to rule over us. (20)

The new evictions really reflect the penetration of speculation through the economy. Wall Street’s new campaign is to turn rental homes into cash cows! The banksters caused the 2008 Meltdown by bundling predatory mortgages together as “a security” that could be bet on, either for or against. Now they are securitizing rents themselves to serve as fodder for the new amped up Casino Economy. When the next crash hits, will Americans again be so gullible to accept the “too big to fail” line once again?

Dave Ransom reports on how this is going down in the San Francisco Bay Area:

“Oakland-based Waypoint Homes, for instance, calls itself “a next generation real-estate company.” It holds title to more than a thousand homes. And it is attracting serious capital to buy several thousand more—$2 billion from Silicon Valley venture capitalists and real-estate investors.

 “Waypoint buys foreclosed homes from banks or in auctions on the courthouse steps, generally at a steep discount. After fixing them up, it rents them out for a good deal less than the original mortgage payment.

 “That sounds good until you realize that, if the banks had offered the families living in the homes the same deal they offered Waypoint, those families could probably have avoided foreclosure entirely.

 “This spring, the Obama administration announced a plan to sell foreclosed homes owned by the government’s housing agencies—Fannie Mae, Freddie Mac, and the FHA.

 “But the hedge funds and private-equity firms are pressuring the administration to offer them cheap financing and guarantee they will be bidding on lots of as many as a thousand homes at a time.

 “Who currently holds the mortgages to these homes? We the People do—the 99%. Fannie Mae, Freddy Mac, and the FHA—all government backed and bailed out by the taxpayers—hold half the country’s mortgages, dumped there by the banks when the housing bubble burst.  (21)

Thom Hartman describes the same phenomenon nationally in his book The Crash of 2016:

“Among the firms and big banks buying up America’s real estate is the Blackstone Group, the largest private equity firm in the world. The Blackstone Group alone has bought nearly 40,000 houses across America, spending $7.5 billion in the process.

“Blackstone, for example, bought 1,400 homes in Atlanta in one day, and owns nearly 2,000 houses in the Charlotte, North Carolina metro area.

“So why are Blackstone and other Wall Street firms buying up foreclosed homes all across the country? It’s simple. By renting these homes back to Americans, and securitizing America’s home-rental market, they can bundle up rental payments the same way they used to bundle mortgage payments, and sell them to investors.”

“The predators are again up to their old tricks. Nothing has changed.” (22)

This is madness! The speculative section of capitalism is in the driver’s seat, but the only solution they can offer to any problem is… more speculation. They use carbon futures to speculate on the very atmosphere, and intend to make a profit all the way through Global Warming and the end of human society, as we know it.

References and Resources

15)  Patrick May, “Is it now the ‘Silicon Bay Area”? Oakland Tribune. 11-13-2013

16)  Caroline Said. “S.F. Bay Area economy thriving despite challenges”. 3-17-2012

17)  NPR Staff. “A ‘Permatemp’ Economy: The Idea Of The Expendable Employee”. January 28, 2013

18)  William Bridges. “The End of the Job”. Fortune. September 19, 1994

19)  SF Chronicle. City Insider. 12-29-13

20)  Heather Knight. City Insider, SF Chronicle, 12-15-2013

21)  Peoples’ Tribune, October, 2013

22)  Thom Hartman. “Are the Bankers Now Setting Up the Crash of 2016?” 12-3-2013

To be continued.

***

Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

Originally posted at Daily Censored

photo credit: Wikimedia Commons

Speculators

Guest blog by Steven Miller

(This is the second of 6 guest posts by Steven Miller describing the financialization of capitalism and the takeover of the global economy by bankster speculators)

Speculators – Part II

Today the financial industry makes far more profit than any other sector of capitalist production. In 1973, they made 16% of total US profits; by 2007, financial profits reached 41% of all profits. (2) Since credit and debt control the levers of the economy, the financial industry has become politically dominant. The planning function of government increasingly devolves to their control. Finance – producing money from money – produces no value; it simply moves money around, but it does centralize even more wealth in the hands of speculators.

Once Wall Street speculators realized, after the 2008 Crash, that their new “financial instruments” were actually weapons of economic mass destruction, they understood that these tools could be employed to attack national and public wealth. Speculators get richer by seizing your wealth.

They do this today with hedge funds, among other things, which are completely private, completely unregulated and completely hidden from the public. But you can make wild speculative bets with their expert staff. Because they are “private”, we are supposed to accept whatever negative effects they have on society. Though the results are highly destructive to society, this is not up for debate.

Today the financial industry in the US is sitting on the largest mountain of cash in human history, over $2 trillion. Why? This is perceived as strange behavior, since they received over $16 trillion in the 2008/9 Bailout. In addition, the US government for at least two years has been dutifully sending them $85 billion a month, over a trillion dollars a year, in free money. (3)

So why don’t they spend it?

Every modern industry, especially finance, is based on extending credit; the debt is then “leveraged” to takeover companies and engage in various forms of speculation. As financial companies began to collapse in 2008, every one that was “solvent” lied and minimized how much of their holdings were based on toxic assets. Since each one knew that the others were also lying, they began to curtail how much credit they would extend. Without credit, modern capitalist commerce was on the verge of collapse. This is why the form of the Bailout was for the government to buy up toxic assets. This situation still prevails today.

Michel Chussodovsky, professor of economics at the University of Ottawa, and organizer of the Center for Global Research describes how this was rigged:

“In a bitter irony, while the Wall Street institutions were the recipients of the bailouts, they are also the creditors of the federal government, which has been precipitated into a structure of debt financing controlled by Wall Street. This deficit financing… is controlled by the creditors. It does not create employment. It is not expansionary.” (4)

This reality illuminates the dangerous instability of the times. In essence, the public is financing its own indebtedness and funding its own privatization. The banks collapsed the economy in 2008 because they had been counting their various toxic assets as part of their wealth. Money is now generated, loaned and invested by clicking a computer keyboard. The monthly $85 billion gift, of course, is not put into gold bars and moved into the bank vaults by elves. The financial industry uses public money to offer increasingly shady loans, essentially organized criminal activity against the public.

Every day the value of one-year’s GDP in the US – about $14 trillion  – passes through Wall Street and other financial institutions! This is the Casino Economy. Most of this vast wealth is put into play as speculative bets, driven by computer-driven programs, on anything from water to debt to fracking. Just like mortgages, anything that can be financialized – entire electrical grids, school districts, pensions, and medical credit – almost anything at all – can also be securitized and bundled as fodder for speculation.

It is important to recognize that none of these vast transactions are taxed at all. Real people pay a large sales tax on almost everything in the US; corporate people pay ZERO on their schemes to increase their great wealth. A simple tax of 2 cents on the dollar would generate $28 billion a day, enough revenue to solve every financial issue that America faces.

Numerous people have proposed this idea, since it would end Austerity and usher in an era where governments could provide incredible resources to real people for free. The fact that this “reform” will never be permitted is a telling sign of a system that is approaching its demise.

The immediate result of the Crash was that the banks, hedge funds, insurance companies, private equity firms, real estate interests, etc. simply reprogrammed their computers to speculate on food and petroleum. Hence the mega-jump in food prices in the Fall of 2008. But money that doesn’t circulate produces no profit, so the financial industry has begun to invest in solid, material assets, tangible properties that cannot be wiped out with a click of a keyboard. Meta-money is the cousin of the NSA’s meta-data. Its use by corporations is equally malign.

Thus today we are in the midst of a tsunami of privatization, as the banksters are seizing and privatizing everything they can get their hands on. They are seizing public assets and a rate never before seen. Everything is financialized – given a monetary rating; then it is securitized – turned into speculative assets, which are quickly privatized; then your access to it without money is eliminated and thus criminalized. (5)

This trend has been noted by a number of observers:

Michael Hudson, professor of economics, University of Missouri Kansas City,:

“This financial engineering is not your typical bubble. The key to the post-2000 bubble was real estate. It is true that the past year and a half has seen some recovery in property prices for residential and commercial property. But something remarkable has occurred. This new debt-strapped low-interest environment has seen Hedge funds and buyout funds doing something that has not been seen in nearly a century: They are buying up property with cash, starting with the inventory of foreclosed properties that banks are selling off at distress prices.” (6)

Ellen Brown, Web of Debt Blog:

“Giant bank holding companies now own airports, toll roads, and ports; control power plants; and store and hoard vast quantities of commodities of all sorts. They are systematically buying up or gaining control of the essential lifelines of the economy.”  (7)

Michel Chussodovsky again:

“The privatization of public monuments, museums, national parks, the post office, etc., has been raised in recent media reports as a possible ‘solution’ to the debt crisis. But let us not be misled: the process of acquisition of federal public property including the infrastructure and State institutions is likely to go much further. The public sector is up for grabs. Wall Street will eventually go on a buying spree picking up State owned assets at rock bottom prices.” (8)

References and Resources

 2)  Dave McNally, Global Slump, 2011. P 86

 3)  Harding. “Bernanke takes plunge with QE3.” www.ft.com

4)      Chussodovsky. “The Shutdown of the US Government  and ‘Debt Default’. A dress Rehearsal for the Federal State System?”. Center for Global Research

5)       5)  “Debt As a Class Weapon”. Rally Comrades, October 2011

 6)  Michael Hudson. “The Bubble Economy as a 2 Part Play for Privatisation”. July 4, 2013

 7) Ellen Brown. “The Leveraged Buy-out of America.” Center for Global Research, August 26, 2011

 8)  Chussodovsky. Op sit

photo credit: nromagna via photopin cc

To be continued.

***

Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

Originally posted at Daily Censored