A Modest Proposal in the Age of Google

Today's proposal from Graham Allen to commodify our children and sell profitable bonds in them could be read as the translation of the traditional fear of the feckless poor into the era of financialisation. No longer any need to fall into moral panic - rather see intergenerational disadvantage as a business opportunity.

The Labour MP's call for 'early years intervention' to prevent a cycle of 'dysfunction and under-achievement' appears so attractive at first sight that you may find me churlish even to question it. But it is when we get to the part about how the proposal is to be funded that my suspicions are aroused. Two things I have learned about capitalist innovation: it often involves shifting value through time, and it requires the commodification of some vehicle to carry that value. Children might provide just such a vehicle - and the younger the better.

Allen notes that this is not a good time to be asking people to invest in our future citizens, no matter how desperate their needs. According to Children and Young People Now website:

'the funding of initiatives is still a matter Allen is investigating. This month he made a public call for submissions of evidence to the review. "Given the economic climate, it's unrealistic to ask the government for funding," he says. "We want people with expertise in delivering financial tools to raise the money." Proposed ideas include social impact bonds that offer private investors the opportunity to earn a profit through social investment.'

This rampant desire to intervene when babies have barely emerged into the world is dressed up as concern for those who fail to share the hegemonic and culturally validated qualities of thrift and industriousness. Crack and computer games have replaced gin and the cock-fight, but the sentiment of disgust and the desire for control ring true through the ages.

In 1729 Jonathan Swift's Modest Proposal was that a solution to the problem of the fecundity of the poor be found in their children's sweet flesh: a source of cheap protein for the same poor who were having trouble affording enough to eat. Financial innovation has moved on apace in the past 300 years. In Allen's proposal the future value of the children of the poor is to be commodified and issued in profitable bonds, thus tempting private equity funds to invest, although not for charity but for profit. The main difference is not the moral content of the two proposals but the fact that Swift's was satirical whereas Allen is deadly serious.
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Out of sight but not out of mind

Just as most economic activity is now negative rather than positive, so most of the economic value of the economy is debt rather than credit. The whole economic system is being extracted and replaced with debt.

The most obvious example of this is the takeover of major companies by 'private equity' firms, misnamed because they really have no equity but fund these takeovers from debt. If they can persuade the banks to lend them enough money they can, like Archimedes with his unfeasibly long lever, move the world.

Concern has been raised about the loss of accountability when firms move from public, quoted status to private status--and you thought accountability was poor amongst stock-market corporations! Once removed from any scrutiny who knows what may befall the employees and suppliers of these firms? Ruthless maximisation of profit behind closed doors is to be expected.

The most concerning aspect of the activity of private equity firms is the way they allow the expansion of debt and delay the need for adjustment in the world economy, which will consequently be even more painful when it does occur. This was exactly the process that preceded the 1929 Crash, as more and more wheezes were found to deal with the problem that there was no more debt to be had and the pyramid-selling scam had come to the end of the road. This explains the willingness of banks to lend vast sums to 'private-equity' chancers.

Since debt is the commodity banks trade in, the move towards debt-based capitalism can only lead to their owning an ever greater share of the economy. Most people aged under 40 belong to the bank, as a consequence of vast mortgage and student-loan related debt. Companies facing hard times are likely to find banks eager to swap their equity for debt, a way in which the bank can come to own something of real value (a functioning company) by creating something with no value (bank debt).

As the economy becomes hollowed out only those with a risk-averse attitude and a willingness to take on frightening levels of debt are able to thrive.

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