Proyect, Louis | Whose Media | Edited by Saswat Pattanayak

Goldman-Sachs :: Louis Proyect

Sat, 10 May 2008 20:04:04 -0400

In 1988, after about two and a half years on the job at Goldman-Sachs, I received a zero percent salary increase. I heard through the grapevine that if you didn’t get a raise, it would be a good idea to dust off your resume.

Goldman had recently hired a new Information Technology director named Rick Adam and his personnel manager gave a talk to our department outlining a new policy. She reported that Rick wanted to cut costs by replacing experienced, senior developers just like me with recent college graduates who they would train. I regret that I didn’t have a tape recorder going when she spoke to us, since I could have sued the bastards for age discrimination.

Adam was a class A prick who had the reputation for being some kind of genius. I guess the partners at Goldman were impressed with the fact was a triathlete, had graduated from West Point and worked on computer support for Apollo Space Missions. Considering the fiascos at NASA in recent years, I can’t say that I am totally surprised that Adam had to leave Goldman not long after I did.

Adam had hired a deputy director named Jim Burns, who had previously worked for the software consulting arm of Arthur Anderson Consulting (now called Accenture to separate itself from the stench of the defunct accounting division implicated in the Enron scandal.) Shortly after Burns arrived, Goldman was flooded with these snot-nosed kids from Arthur Anderson wearing suspenders and “power ties”. They looked like what central casting had turned up for Oliver Stone’s “Wall Street”. None of them really knew what the hell they were doing, but Arthur Anderson charged Goldman $1000 per day for their services. I always suspected that Burns was getting kickbacks from Arthur Anderson, but could never prove it.

After getting my zero percent increase, I resigned from Goldman and consulted for a couple of years until I crash-landed at Columbia University, where I have been for about 18 years. In my first year at Columbia, I was picking up a coffee and muffin in the Business School cafeteria when I was stunned to see Jimmy Primavera sitting at a table in blue jeans, work boots and a flannel shirt. Jimmy had been the manager of trading systems at Goldman, where he had worked for 20 years or so. Like a lot of Goldman veterans, Jimmy had no college degree and joined the firm right out of the army. Not long after Rick Adam arrived, word went out that they were trying to get rid of managers with last names ending in a vowel. During a job interview at Bear-Stearns, I had run into another manager who had gotten the boot from Goldman and who was there interviewing as well. He was a Greek-American who felt like he had been stabbed in the back. Guys like him and Jimmy used to work 60 hours a week and were gung-ho believers in the firm.

When I asked Jimmy what he was doing at Columbia, he said that he was washing windows and without missing a beat added that he was not kidding. He told me about the bloodbath that had left him and the Greek-American jobless.

One morning they came in and tried to log into PROFS, an IBM mainframe email system that predated the Internet. If the word PROFS rings a bell, that’s because it is what Oliver North used for communications during the Iran-Contra conspiracy. The Senate Investigating Committee subpoenaed the PROFS tapes and got the goods on Reagan’s boys.

Jimmy and about a dozen other managers and senior employees found that their login wasn’t working. What could be wrong? They soon found out. One by one, they were called into personnel to discover that their services were no longer needed and were then escorted back to their desk by security guards. After they put their belongings into cartons, they were escorted out of the building and put into a long string of town cars and driven home.

Robert Rubin ran Goldman at the time. He was responsible for hiring Rick Adam and for giving the green light to fire a bunch of loyal employees because they did not fit the waspy Ivy League image that the firm was trying to project. When Rubin went to work for Bill Clinton, it spoke volumes about the kind of liberalism that was being run out of the White House. What Clinton would do to the American people, Rubin had already done to people like Jimmy Primavera.

The story of the mass firings at Goldman, I should add, ended up in an early issue of Counterpunch. Jeff St. Clair, Cockburn’s partner at the time, read my account on PEN-L and asked me if he could write it up for Counterpunch. Sure, I said. Anything to tarnish their reputation was fine by me.

Every so often I like to check out what ever happened to Rick Adam. Shortly after he left Goldman, he started an aircraft company based in Colorado. He must have gotten a hell of a golden parachute to get something like that going. He had the bright idea to build corporate jets using carbon composite material. Given carbon composite’s light weight, the planes were supposed to use less fuel. Sounds like a good idea in light of the price of fuel today, right?

Well, apparently there was a gap between the good idea and the execution:

A single bulk buyer is being touted by trustees as the preferred choice to acquire the assets of bankrupt aircraft developer Adam Aircraft, which are being put up for sale on 4 April.

The lowest auction bid for the Denver, Colorado-based start-up which entered Chaper 7 bankruptcy last month, is $10 million. Each interested party must place $250,000 into an escrow account managed by trustee Jeffrey Weinman before bidding starts on 3 April.

General Capital Partners is soliciting interest, and Weinman’s hired attorney John Smiley says the trustees favour “an enterprise sale of this entire business. If that doesn’t produce satisfactory results, then the trustees will sell the assets on a piece or lot-sale basis,” he says. Assets do not include buildings or property, as all three manufacturing sites were leased. The sale is of aircraft, aircraft parts, intellectual property licences and patents, customer and vendor contracts, aircraft certifications, manufacturing equipment and backlog orders.

–Flight International, March 25, 2008

And I took even greater pleasure in reading this soon afterwards:

Bankrupt Adam Aircraft Industries Inc. is revving up its jet engines once again now that a Russian private equity firm has been cleared to restart its business.

The defunct maker of ultralight business jets won approval Wednesday, April 9, from the U.S. Bankruptcy Court for the District of Colorado in Denver to sell its assets to AAI Acquisition Inc.

AAI is identified in court papers as being affiliated with Moscow-based private equity firm Industrial Investors and was formed solely for the acquisition of Adam Aircraft. AAI was the only qualified bidder to step forward by Adam Aircraft’s bidding deadline, winning the assets with a $10 million offer.

–Daily Deal, April 11, 2008 Friday

The new owners did not retain Rick Adam’s dubious services. He got his walking papers right after the Rooskies took over and he has now started a new software company with Jim Burns, his old number two at Goldman, at his side once again. The company, called Recondo, is involved with setting up database systems to guard against indigent people getting hospital care using invalid Medicaid identification, just the ticket for a creep like Rick Adam.

I look back at the time I spent at Goldman and am amazed how corrupted I was by that experience. I spent a ton of money on fancy Paul Stuart suits and shoes that I gave to a thrift shop not long after starting at Columbia. The only “yuppie” artifact of my time spent there is a Mount Blanc ballpoint pen that I never use since the refills are so expensive.

The only thing that mattered to me at the time was the Sandinista revolution in Nicaragua. By day I worked at Goldman and by night I helped to organize Tecnica, a technical aid project, out of my living room. At one point, Newsday did a big article on Nicaragua solidarity in New York and the reporter came to visit me at Goldman. This is what he wrote:

Lou Proyect works in a Wall Street investment bank, one of 25 “database administrators” who sit in a numbing row of fluorescent-blanched cubicles and stares at computers until the end of the day. It is the latest variation on the kind of job he has held for 19 years. Tacked to the wall of his cubicle is the latest article cut out from PC Week, a personal computer trade magazine: “IBM’s PS/2s aren’t all that revolutionary.” Neither, he says, is Lou Proyect.

I can’t even remember what point I was trying to make at the time. Was I trying to say that I was not some stupid sectarian blathering about revolution? Or was I just trying to make sure that Goldman did not decide to fire me after the article appeared?

At any rate, they did get rid of me not long afterwards but not because of my politics. Looking back at my miserable but well-paid experience there, I have to say that it is the biggest favor that they could have done for me.

Marxmail is 10 years old today :: Louis Proyect

Thu, 01 May 2008 19:41:55 -0400

This is the tenth anniversary of the Marxism mailing list (also known as Marxmail, the name of the accompanying website) that was launched on May 1, 2008. It started off with about sixty subscribers who were fleeing the Marxism list that preceded it, which had been hijacked by supporters of the Shining Path in Peru, including one Adolfo Olaechea. Adolfo and his co-thinkers soon lost interest in the mailing list and went on to other projects. Adolfo, bless his soul, successfully defended himself recently against trumped up charges of terrorism in Peru and continues to rally people around the Maoist banner.

With all due respect to the Maoist left, it was not the kind of political culture that lent itself to a free and open exchange of ideas. After the Maoist comrades had seized the moderator’s reins, they began expelling people left and right-yours truly was the first to go. Ironically, I had written a defense of the Shining Path a few months before I was booted.

That did not save me from being punished as a “Trotskyite”. Those stormy days of 1998 seem like a century ago, while my genuine Trotskyist past from 1967 to 1978 now seems like a millennium ago. History marches on, to use a cliché.

The Marxism list now has 1103 subscribers. I serve as moderator and Les Schaffer serves as technical moderator. I have had a long and fruitful collaboration with Les whose solid grasp of subscribers’ psychologies, including my own, helps to keep the list on an even keel. To a large extent, my ideas about how to build a non-sectarian and non-dogmatic left are reflected in the way I moderate the list. Most of all, this involves a firm hand when it comes to any attempts to divide the list between ‘Bolsheviks’ and ‘Mensheviks’. Since Internet mailing lists tend to operate as pressure cookers to begin with, the worst thing for a Marxism mailing list would be to artificially raise the temperature. Labeling people as “revisionists” or “reformists” is an invitation to the kinds of flame wars that destroyed the mailing lists that preceded Marxmail.

While the list does not have nearly as many female subscribers that it needs, the global representation is pretty good-including many subscribers from the Third World. On a typical day, there will be posts from subscribers in Argentina, Australia, Canada, Colombia, Germany, and Great Britain. The political representation is also pretty good, with subscribers reflecting Trotskyist, Communist, state capitalist, and syndicalist traditions.

The mailing list has grown by about 100 new subscribers per year and I expect that it will continue at this rate unless there is a qualitative change in the political situation. If there was a radicalization as deep as that of 1968 (another anniversary now being celebrated) I can easily imagine adding 3 or 4 hundred subscribers per year. Given the economic crisis we are now entering, as well as the prospect of continuing imperialist war and environmental degradation, that could be in the cards.

Nearly 40 years ago, the Trotskyist sect that I belonged to embarked on a major infrastructure expansion campaign in anticipation of the same kind of future radicalization. Members gave millions of dollars to purchase an office building near the Hudson River and an expensive Web Press, which prints on continuous rolls of paper. The offices were seen as necessary to administer an explosive growth in membership and the Web Press would allow the massive circulation of party organs as the radicalization deepened. Although there were opportunities for the group after the 60s radicalization came to an end, they did not understand how to take advantage of them. Instead of growing, they shrank. The building and all the contents, including the Web Press, were sold a couple of years ago.

Although there will obviously always be a need for “dead tree” media such as books and newspapers, the Internet-which is a Web Press after a fashion-is as geared to our epoch as the Gutenberg press was geared to the epoch of peasant revolts. I like to think of the Marxism mailing list as the same kind of investment in infrastructure as the SWP’s office building and Web Press, even though it costs very little. In the coming years and decades, even after my ashes have been scattered in the Hudson River, Marxmail will enable revolutionaries worldwide to exchange information and debate ideas, all through the auspices of a technology that originated in the American military’s research into how state power could be maintained after a nuclear war! Talk about contradictions…

The Marxism list remains grateful to the support of Professor Hans Ehrbar of the University of Utah Economics department, one of the few schools in the country that allows scholarly critiques of the capitalist system to be mounted. Our mailing list operates on a computer that Hans donated and his technical support, along with Les’s, allows our communications to run smoothly.

I would also wish our comrade Doug Henwood well, whose LBO-Talk mailing list was launched on the very same day as Marxmail. Doug was a survivor of the early wild and woolly days of Marxism mailing lists on the Internet as well as senseless provocations from your moderator before I (and Doug) had reached our current Zen-like state of equanimity.

Introduction to Karl Marx's Capital :: Louis Proyect

Sun, 27 Jan 2008 20:04:53 -0500

(This was posted to the “Introduction to Marxism class” mailing list today.)

Marx’s decision to analyze the inner laws of the capitalist system was not primarily driven by intellectual curiosity. Faced with working class struggles breaking out all over Europe and challenged by theoretical debates in a socialist movement in its infancy, Marx decided that such a study would resolve political problems that were impeding future growth of the movement.

In this respect he was quite like Lenin who decided to analyze monopoly capital immediately after WWI broke out. When he was confronted by the immensity of the blood-letting and the betrayal of the socialist movement by its parliamentarians who voted for war, Lenin felt that it was necessary to look at the “latest stage” of the capitalist system, paying particular attention to the financial sector. In other words, economics for both Marx and Lenin is the handmaiden of politics.

Born in 1818 into a German Jewish family that had converted to Protestantism, Marx was a radical by his early 20s, just as was the case for just about everybody taking this class–including me. His early radicalism reflected the dominant current of his day, which was anarchism. If the anarchism of his time was as powerful as it is today, there was no alternate political movement that a young person could hook up with. Today you might have a choice at a place like Columbia University between an anarchist club and the ISO. In the late 1830s and early 1840s, anarchism and various forms of pre-scientific socialism were the only games in town.

As a challenge to the left in the 1830s, bourgeois economics largely served to justify existing class relationships in society and to represent the market as the most efficient way of generating wealth just as is the case today. Attempts at tampering with markets would only guarantee failure. There is nothing that a Thomas Friedman or one of Barack Obama’s advisers is saying now that has not already been said by Adam Smith. In attempting to answer both the anarchists and the bourgeois economists, Marx was forced to come to terms with their way of analyzing the world, which surprisingly overlapped in a number of ways.

When you first dive into Marx’s Capital with its terms like “use value” and “exchange value”, you might be led to the conclusion that Marx coined these terms himself. In reality, these terms had been around for a long time. Marx only hoped to redefine them using his own insights gathered from a study of the capitalist economy using a dialectical method he had adapted from Hegel.

In 1859, Marx wrote “A Contribution to the Critique of Political Economy", which contained many of the concepts that he would elaborate on in Das Kapital. The earlier work contains an addendum to chapter one on “The Commodity” that is titled “Historical Notes on the Analysis of Commodities” and that gives credit to a number of others for having grasped that labor is the source of value. Among them is Benjamin Franklin, who wrote “Trade in general being nothing else but the exchange of labour for labour, the value of all things is, as I have said before, most justly measured by labour”.

But by far the most significant advocate of the view that labor creates value is the British economist David Ricardo, who like Marx was born into a Jewish family. Of Ricardo, Marx writes:

David Ricardo, unlike Adam Smith, neatly sets forth the determination of the value of commodities by labour-time, and demonstrates that this law governs even those bourgeois relations of production which apparently contradict it most decisively. Ricardo’s investigations are concerned exclusively with the magnitude of value, and regarding this he is at least aware that the operation of the law depends on definite historical pre-conditions.

In terms of the “determination of the value of commodities by labour-time”, Ben Franklin gives a useful example as cited by Marx: “As, suppose one man is employed to raise corn, while another is digging and refining silver; at the year’s end, or at any other period of time, the complete produce of corn, and that of silver, are the natural price of each other; and if one be twenty bushels, and the other twenty ounces, then an ounce of that silver is worth the labour of raising a bushel of that corn.”

What distinguishes Marx from Ricardo or the good Ben Franklin, however, was his ability to see how labor is exploited to produce surplus value. In the world of Ricardo and Ben Franklin, there is no exploitation. The man producing corn and the man producing silver are free agents who meet each other in the marketplace. But in capitalist society, the producer is a worker who receives a wage that is less than the value of the commodity he or she is producing. In the pre-capitalist epoch, exploitation was much easier to perceive. A Lord would come collect 10 percent of the corn produced by a Serf at the end of the growing season. Under capitalism, the wage relationship is mystified as a kind of contract between equals and thus less susceptible to exposure. It was Marx’s breakthrough to throw a powerful light on this kind of exploitation.

The other giant of bourgeois economics that Marx entered into battle with is the aforementioned Adam Smith. For Smith, the source of all wealth is the division of labor, which in conjunction with the free market, makes for a more efficient economy. This schema shares Ricardo’s emphasis on the individual free agent that assumes society to be organized on the basis of millions of Robinson Crusoes pursuing a rational path to their own enrichment that will automatically benefit everybody else.

Marx kept notebooks titled “Grundrisse der Kritik der Politischen Ökonomie ” (Outlines of the Critique of Political Economy) that like the aforementioned “A Contribution to the Critique of Political Economy” was to become transformed into Das Kapital. In the introduction, he wrote:

Individuals producing in Society – hence socially determined individual production – is, of course, the point of departure. The individual and isolated hunter and fisherman, with whom Smith and Ricardo begin, belongs among the unimaginative conceits of the eighteenth-century Robinsonades, which in no way express merely a reaction against over-sophistication and a return to a misunderstood natural life, as cultural historians imagine. As little as Rousseau’s contrat social, which brings naturally independent, autonomous subjects into relation and connection by contract, rests on such naturalism. This is the semblance, the merely aesthetic semblance, of the Robinsonades, great and small.

Annette Rubinstein, the great Marxist literary critic who died last year at the age of 97, had the last word on Robinson Crusoe’s island as a prototype of capitalist civilization in her magnum opus “The Great Tradition: From Shakespeare to Shaw”:

The emphasis is not on wonderful and terrible events but on resourceful and effective activity. The initiative comes from man throughout. Nature is raw material for his shaping, not a god for his worship. Sometimes stubborn and difficult, it is never purposeful or malicious and can therefore be mastered and used by any educated, intelligent, self-reliant, hard working and prudent man who has a reasonable share of good luck—just such a share as the laws of probability (or the goodness of God) is likely to afford him.

For bourgeois economics to work, it is absolutely necessary to make the individual the principal economic actor. As Margaret Thatcher once said, “And, you know, there is no such thing as society. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first.” It was Marx’s most subversive insight to tackle this myth and drive a stake into its heart.

Given Adam Smith and David Ricardo’s commitment to the capitalist system, it is somewhat surprising to discover that many of their ideas were reflected in Pierre-Joseph Proudhon’s “The Philosophy of Poverty”. Born in 1808 and 13 years older than Karl Marx, the French father of anarchism was a pivotal figure in the radical movement that Marx joined up with as a youth.

Initially Marx viewed Proudhon in favorable terms. In the 1844 “The Holy Family “, Marx hails Proudhon:

Now Proudhon has put an end to this unconsciousness once for all. He takes the human semblance of the economic relations seriously and sharply opposes it to their inhuman reality. He forces them to be in reality what they imagine themselves to be, or rather to give up their own idea of themselves and confess their real inhumanity. He therefore consistently depicts as the falsifier of economic relations not this or that particular kind of private property, as other economists do, but private property as such and in its entirety. He has done all that criticism of political economy from the standpoint of political economy can do.

But as Marx deepened his understanding of the capitalist mode of production, he was forced to disassociate himself from the anarchist and wrote a sharp polemical attack in 1848 titled “The Poverty of Philosophy ” that inverted Proudhon’s title. This was the first work in which Marx began to rigorously define the terms that would crop up in Das Kapital.

Before turning to Marx’s critique, it would be useful to take a look at Proudhon’s work, which is available on the Marxism Internet Archives, where most of our readings can be found. In chapter 3, titled “Labor as the Efficient Cause of the Domain of Property”, you find a wholesale adoption of Adam Smith’s division of labor:

Let us admire Nature’s economy. With regard to these various needs which she has given us, and which the isolated man cannot satisfy unaided, Nature has granted to the race a power refused to the individual. This gives rise to the principle of the division of labor, — a principle founded on the speciality of vocations.

The satisfaction of some needs demands of man continual creation; while others can, by the labor of a single individual, be satisfied for millions of men through thousands of centuries. For example, the need of clothing and food requires perpetual reproduction; while a knowledge of the system of the universe may be acquired for ever by two or three highly-gifted men. The perpetual current of rivers supports our commerce, and runs our machinery; but the sun, alone in the midst of space, gives light to the whole world. Nature, who might create Platos and Virgils, Newtons and Cuviers, as she creates husbandmen and shepherds, does not see fit to do so; choosing rather to proportion the rarity of genius to the duration of its products, and to balance the number of capacities by the competency of each one of them.

Furthermore, where Proudhon writes about the capacity of labor to create value, it is done in a fashion that owes more to Ricardo than to the revolution in thinking carried out by Karl Marx. In language that is addressed to the boss rather than the worker (anarchism of this sort has a natural tendency to appeal to the boss’s better nature), Proudhon only asks for a fair deal and generously assures the boss that since “you have contributed to the production, you ought to share in the enjoyment”:

The price is not sufficient: the labor of the workers has created a value; now this value is their property. But they have neither sold nor exchanged it; and you, capitalist, you have not earned it. That you should have a partial right to the whole, in return for the materials that you have furnished and the provisions that you have supplied, is perfectly just. You contributed to the production, you ought to share in the enjoyment. But your right does not annihilate that of the laborers, who, in spite of you, have been your colleagues in the work of production.

Marx throws a Molotov cocktail into this cheerful chatter:

In English society the working day thus acquired in 70 [years] a surplus of 2,700 per cent productivity; that is, in 1840 it produced 27 times as much as in 1770. According to M. Proudhon, the following question should be raised: why was not the English worker of 1840 27 times as rich as the one of 1770? In raising such a question one would naturally be supposing that the English could have produced this wealth without the historical conditions in which it was produced, such as: private accumulation of capital, modern division of labor, automatic workshops, anarchical competition, the wage system — in short, everything that is based upon class antagonism. Now, these were precisely the necessary conditions of existence for the development of productive forces and of surplus labor. Therefore, to obtain this development of productive forces and this surplus labor, there had to be classes which profited and classes which decayed.

Proudhon’s socialism was basically a romantic yearning for a return to the days of the small proprietor. When he wrote that property is theft, his hope was not to abolish private property but to establish the conditions for individual proprietorship. While Marx accepted the reality of those seventy years of the private accumulation of capital, Proudhon longed to turn the clock back as Hal Draper made clear in Volume IV of “Karl Marx’s Theory of Revolution”, titled “Critique of other Socialisms”:

Early socialism—from the traveling salesman Fourier to the peasant-minded Proudhon, from the fashionable ladies’ tailor Weitling to the semi-proletarian artisans of the Communist League—was tied by a network of threads to petty-bourgeois producers caught in the act of turning into modern workers. All of socialism began with the tension between hostility to, and hope in, the state. This could be resolved only by a thought-through theory of the state, but the tension lasted for most of the nineteenth century.

There was, then, a vast reservoir of inchoate antistatism, lapping around the borders of the socialist movement, for a very long time, continually renewed as new streams of raw, undeveloped, unclass-conscious workers poured into the reservoir from the sea of peasantry. The history of anarchism—its flare-up and decline in one area after another, from the Jura Mountains to the plains of Andalusia—is one of history’s best cases of correspondence between politics and technology.

In volume one of “Karl Marx’s Theory of Revolution” it was stressed that pre-Marx socialism usually entailed hostility to politics; it was social-ism counterposed to political-ism. This early socialism was inhospitable to concern with the major political issues of the day (constitutional democracy above all), which it saw as of interest only to the bourgeoisie or the “politicians.” It was a theoretical advance when Marx showed how it was possible to link the “Social Question” up with the “political question” in a single programmatic approach, which he called a “new direction.” The primitive state of mind in the movement, general antipoliticalism, was the source of several isms, including pure-and-simple trade-unionism and cooperativism, and only in a specially abstract form did it also show itself as an ingredient of anarchism.

So to conclude on the note that we started with, Karl Marx’s economic theory was a challenge to the prevailing anti-political mood of the existing radical movement. By identifying the underlying and inescapable class antagonisms of the capitalist system, he hoped to make it abundantly clear that the only way to live freely and justly was by abolishing that system and replacing it with one that was in the interests of the overwhelming majority of the planet: communism.

Tomorrow evening I will post readings and study questions for Volume One of Capital. Feel free to discuss this post but understand that detailed questions and comments about “exchange value”, etc. would make more sense until we have had a chance to look at the readings tomorrow.