Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Of Insurgent Finance.....and Venture Communism...

by ChrisCook Mon May 16th, 2011 at 05:55:20 AM EST

Last week, on my way back to Scotland, I dropped by a conference on Platform Politics at Cambridge, and met a couple of people I have been hoping to meet for a long time.

The first of these was Michel Bauwens - who is behind the Peer to Peer Foundation - and the second was Dmytri Kleiner, whose Venture Communism project on worker ownership I have often referred to on ET.

Dmytri's talk at the conference was interesting, and  concerned the need for conventional Capitalism to maintain a 'Star' (super-node; intermediated ) network topology as compared to a 'Mesh' (P2P) network topology.

We subsequently had a great discussion over a drink or two, and Dmytri was enthusiastically telling me about his view that a revolution is necessary - but that the revolution might take the form of what he calls 'Insurgent Finance'.


Here's the article Dmytri wrote on Insurgent Finance on the way to the conference.

In the 70's and 80's Michael Milken was part of something rather remarkable. The son of an accountant, Milken was hardly born into old money, yet he raised billions of dollars to finance takeovers of major companies. In the process, Milken pulled in anual salaries so hefty that David Rockefeller himself called excessive, and later-day presidential hopeful Donald Trump, never himself allergic to ostentation, noted of Milken's remuneration "you can be happy on a lot less money."

Some of the companies that Milken funded where declining industrial concerns, which Milken's clients downsized, asset stripped and generaly liquidated. These clients where the "Corporate Raiders," the villains in what was popularly understood as a morality story of unrestrained greed. Other clients built new telecommunications companies, like MCI, that would become industry giants. Milken did this by way of issuing high-yield, "speculative grade" bonds, commonly derided as "Junk Bonds." Milken himself was labeled the "Junk Bond King." Milken never saw himself as a raider, and certainly not a king. The bonds that the establishment called junk, represented to Milken a democratization of Capital. Milken believed that he was a liberator that broke open the Capitalist vaults, getting Capital in the hands of a new generation of businesses that would otherwise have been shut out by the conservative old elite. In some sense that is true. Milken helped fuel the rise of many insurgents into a previously well-heeled old guard, notably himself and the likes of Rupert Murdoch. Milken's methods opened the door for a generation of gate crashers, elbowing crudely and aggressively into the ruling class. However, in the end this only created new elites, and did not democratize capital, let alone Capitalism. Today, capital continues to be concentrated in fewer and fewer hands, even if there may be a little more diversity among them. Any attempt to democratize Capitalism while retaining the wage labour system will always lead to the such concentration, but I can't help but wonder could there be a Communist Michael Milken? Could the financial techniques used to fund the hostile acquisitions of the Corporate Raiders be used to fund an insurgent Venture Communism?

Several years into the Telekommunisten project I'm increasingly haunted by Marx's warning that when the proletariat undertakes "Doctrinaire" experiments like Co-operative banking, labour exchange, etc, it seeks to "bring about it's emancipation behind the back of society, in private ways, within the narrow bounds of it's class condition, and, consequently, inevitably fails."

We can not overthrow society behind its back due to the narrow opportunities available in our class condition. Bootstrapping Venture Communism has not yet happened, in large part because the proletarian members of the Telekommunisten network have no Capital, and therefor need to keep full time jobs to sustain ourselves and our families. Our part-time capacity to build new ventures is vastly insufficient to actually compete against capital funded firms. Bootstrapping Venture Communism by initiating self-funding ventures seems like more and more of a longshot for us.

Perhaps it's simple desperation driven by revolutionary zeal, but the idea of employing insurgent finance to capture and mutualize existing operating companies is very attractive, and in many ways the conditions seem simular. Interests rates are at historic lows, and investors are looking for securities with better yields, even if they come with some risk as the markets themselves are unstable. Also, the declining Industrial concerns giving way to Globalizing Industry are perhaps mirrored by declining independent Internet Service Providers and the distributed, P2P infrastructure they traded in giving way to massive conglomerates and centralized platforms. The few remaining ISPs seem like ideal targets for Venture Communist take-over. And such take overs would be supported even by those who deny class struggle, yet oppose the centralization of the internet on sharing and privacy grounds.

Will the next proletarian revolutions take place, not via violence, nor by way of ballot boxes, but on the trading floors?

Dmytri has in mind the takeover by workers of their firms financed by a conventional Junk Bond issue.

I believe that  this loads the dice against the workers from the outset, and that it is possible for staff and management to acquire their firms simply by entering into production or revenue sharing 'Capital Partnerships' with investors within a suitable partnership framework agreement.

The alignment of interests between Labour and Capital in this model, and the absence of debt and compound interest will in my view enable Insurgent Financiers to wipe the floor with conventional finance.

Display:
by the lack of historical understanding of who Michael Milkin was. Some 30 years ago, I was part of a team that assembled what is basically an intelligence dossier on Milkin and his operation. In no way does Milkin represent a shift and break from the traditional Anglo-American establishment control of Wall Street and American finance. The entire network of Milkin's corporate raiders, in fact, were merely front men - thugs - deployed by old line oligarchical families as they pursued their policy of deliberate de-industrialization. Rupert Murdoch was no fucking upstart, either.

There were many others behind the scenes who should also have been held accountable for what Milkin eventually went to jail for. For example, Tony Gebauer who had been at J.P. Morgan for over 20 years before being brought into Milkin's operation. Lazard Freres should have been crucified but skated entirely. And then there were the bluebloods at the law firms such as Sullivan and Cromwell; Skadden, Arps, Slate, Meagher & Flom; and Cravath, Swaine & Moore.  Taking down the Wall Street law firms is going to be the thorniest problem in dealing with finance as a criminal terrorist conspiracy.

The fact that this remains an ongoing conspiracy is seen in the fact that AIG FP's credit default swap operation was basically set up by a bunch of thugs that had worked for Milkin, centered around trader Howie Sosin.

As for the idea that many of the targets of these bastards were "declining industrial concerns" the prize-winning work of Philadelphia Inquirer reporters Donald Bartlett and James Steele (http://americawhatwentwrong.org/Barlett-and-Steele/) in the early 1990s presented a number of case studies showing how these industrial companies had actually been decimated by the "miracles" of modern finance. It had nothing to do with their being "in decline."

Finally, a challenge for anyone who doubts all this: please identify for me the period or point in time in the past century when the Anglo-American oligarchies ceased to be self-perpetuating. This question goes directly to the "agency" question of whether history is accidental, or in some fashion shaped and directed by human design,

by NBBooks on Mon May 16th, 2011 at 10:55:02 AM EST
Mark Mitchell started out writing for the Columbia Journalism Review, but has posted his most provocative writing on Deep Capture, where he has a 15 part series on the history of Dendreon explaining in great detail how Michael Milken operated, at times in conjunction with Bernie Madoff, to manipulate the market in emerging pharma companies to the profit of those involved. Seems that legitimate companies that might produce genuine advancements in areas where Milken's spawn were scamming were deliberately tanked. This includes Dendreon, which is the focus of his series. Lots of names are named, some with ties to organized crime, who are part of the "new elite" that emerged in the 80s and 90s. It is surprising that Mark Mitchell is still alive.

I would expect that much of the material cited by NBBooks will collaborate Mark Mitchell's work, which is, unfortunately, too easily dismissed as "conspiracy theory". When someone commits crimes causing as much damage as the Junk Bond fiasco, as Michael Milken did, and ends up doing a short time in jail and emerges with $600,000,000 in "earnings" safely stashed in "The Milken Family Foundation" you can see just how rotten the finance system in the US has been for how long. Alan Abelson of Barron's was one observer who got it right in his weekly columns back then.

Madoff had a hedge fund back then, along with his pyramid scam fund. One of the things Mitchell shows is that, due to the rules of the SEC and other regulatory bodies, hedge funds can legally sell naked shorts on stocks. Whenever the involved players needed to tank Denderon, like after a favorable FDA ruling, Madoff's fund would sell a massive naked short on the stock. It is likely that much of the money for these operations came from the other Madoff fund.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 16th, 2011 at 02:08:20 PM EST
[ Parent ]
(I may have mangled the justification for naked shorting by Madoff's company, but I don't have time just now to go back to the Mitchell articles.)

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 16th, 2011 at 02:11:00 PM EST
[ Parent ]
Lots of names are named, some with ties to organized crime, who are part of the "new elite" that emerged in the 80s and 90s.

Brother, these guys ARE organized crime.

by US Blues on Mon May 16th, 2011 at 04:19:55 PM EST
[ Parent ]
Agreed. Organized and committing crimes, but, due to "regulatory forbearance" and political capture not prosecuted. That is the problem: if people are repeatedly allowed to engage in criminal activities without consequences, if they are smart, they obtain advantages that drive others out of business. Gresham's law applied to business practices.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 16th, 2011 at 04:44:03 PM EST
[ Parent ]
Chris, I am concerned that any competition between "venture communists" and our existing crimino-capitalists will be only at the sufferance of the criminals. The real strength of the existing system is their control of the existing governments and their ability to shape the business and legal landscape to THEIR needs. The sort of strategic sabotage that has been typical of competition between business enterprises will play out in no trumps in any competition with intruders with subversive approaches. And the existing players will have most of the face cards.

However, this is not to say that we should not engage in such contests when we can. In the USA the ESOP is a way to go, but there are still risks of agency problems. Given the existing system one can only expect that agency can be controlled mostly by self control. Enterprises that act in truly revolutionary subversive ways might best be spin-offs of more traditionally functioning ESOPS. Then the sponsors of these enterprises could have plausible deniability.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 16th, 2011 at 05:28:23 PM EST
Your concern is understandable, ARG, but I believe that the use of a 'capital partnership' framework will mean that stockholders will find the process of 'partnerisation' or unitisation of their corporation irresistible.

This was the case in Canada and Australia, where we saw the spontaneous emergence of Income Trusts - which used trusts to unitise future corporate revenues - simply because they worked. There are also numerous not dissimilar vehicles such as Real Estate Investment Trusts; Master Limited Partnerships, and so on.

My thesis is that co-ownership - within a capital partnership - of productive assets by capital and labour is in fact an optimal enterprise model, which is why it is emerging in use.

Since it benefits from the co-operative advantage of not having to pay returns to unproductive management and financiers, the model will, I believe, come to out-compete conventional rentier capitalism. This may then, through a debt/equity swap on a grand scale, consume itself and emerge in a new and non-toxic collaborative form.

Possibly a Utopian view, but every day that goes by confirms my view that this is the way we are heading.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon May 16th, 2011 at 07:21:07 PM EST
[ Parent ]
I certainly hope that you are right!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 16th, 2011 at 07:30:06 PM EST
[ Parent ]
The alternative does not bear thinking about...

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Mon May 16th, 2011 at 07:32:58 PM EST
[ Parent ]
In the '90s Oil Trusts emerged in Canada. I believe they operated along lines you describe. I understand that they have basically been put out of business by legal changes that, I presume, were bought and paid for by those companies who did not want to compete with the sorts of returns to investors that these trusts offered. That I what I expressed concern about up-thread. I would be glad to find that I am wrong.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon May 16th, 2011 at 07:35:07 PM EST
[ Parent ]
Actually, it was the tax-man did for them as far as I know....

....and of course, any solution would always have to keep the tax-man happy.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon May 16th, 2011 at 08:11:13 PM EST
[ Parent ]
Why do I expect that the tax man will never be happy if too many (of "the wrong sort" of) people start taking advantage of a law, an innovation, or.....? There are tax breaks, such as US mortgage interest detectability, that all home buyers can claim, but this benefits finance, real estate and construction while still keeping the benefits biased towards the top 50%. But most loopholes are there for a select few, who paid to have them put there or who found out and sold the information to other clients. Once too many start taking advantage, if it is a tax deduction, it comes to be routinely audited, if it is a loophole it is plugged and an new, more select loophole is opened.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 17th, 2011 at 12:51:39 AM EST
[ Parent ]
I am reminded of the history of JAK in Denmark:

JAK members bank - Wikipedia, the free encyclopedia

The co-operative society Jord Arbejde Kapital was founded in Denmark during the Great Depression in 1931. The society issued a popular local currency which was subsequently outlawed by the Danish government in 1933. In 1934 it founded an interest-free savings and loan system and a Local Exchange Trading System. Though both systems were forced to close, the savings and loan system reemerged in 1944.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue May 17th, 2011 at 08:51:20 AM EST
[ Parent ]
The society issued a popular local currency which was subsequently outlawed by the Danish government in 1933

Hey, just like in Wörgl.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 17th, 2011 at 10:04:40 AM EST
[ Parent ]
Banking, currency and corporate governance are SeriousTM matters, about which less than 1% of the population have any real understanding. So, if something comes along that threatens to undermine the existing order and damage those whom it benefits, all TPTB have to do is just say: "That might have helped under those circumstances, but it is no longer necessary and will only hinder PROGRESS."

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 17th, 2011 at 12:06:02 PM EST
[ Parent ]
I am reminded of a scene in The Remains of the Day where the (fascist-leaning) Lord is discussing politics with a visitor and calls the butler and asks him whether Britain should remain on the gold standard, as a way to argue that democracy is nonsense.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 17th, 2011 at 12:11:37 PM EST
[ Parent ]
I don't see any good alternatives to democracy, but, I don't really see any good examples of democracy in action, especially these days. We do need to be clear on the challenges facing us. There have been times when larger portions of the population were aware of and engaged with questions of economic governance. Much of the problem is that the whole subject has been made stultifying to the extent that only a powerful self interest will enable most to get through it in the terms in which it is presented. See Henry George.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 17th, 2011 at 12:45:34 PM EST
[ Parent ]
Well, there's always sortition...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 17th, 2011 at 12:47:07 PM EST
[ Parent ]
Yea, give sortition a chance -- every couple of millenia.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 17th, 2011 at 01:37:36 PM EST
[ Parent ]
And it is not like I am happy about the situation of which I complain.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue May 17th, 2011 at 12:48:36 PM EST
[ Parent ]
This article in the Washington Monthly - The Real Enemy of Unions - is extremely relevant.

Why organized labor should join with entrepreneurs to bust the corporate monopolies threatening them both.


"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Wed May 18th, 2011 at 04:14:07 AM EST
Revised lyrics for a Broadway musical:

"The ranchers and the packers can be friends!"

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 21st, 2011 at 10:29:15 AM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]

Top Diaries