Positively Barbara Ehrenreich

Barbara Ehrenreich, Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America.  (Metropolitan Books, New York,  235 pages, $32.95).

I’ve just finished reading Barbara Ehrenreich’s new book, Bright-Sided: How the Relentless Promotion of Positive Thinking Has Undermined America. This is an important book for a number of reasons. One is that everything Ehrenreich writes is important. She has been so consistently sensible, radical and original on everything from sex to socialism in 16 books and countless articles over 30 years that finally you must bump up against the word wise.

Ehrenreich is an alumnus of the small doorway in time called the Sixties—the political, or New Left, wing, not the hippie sex-drugs-and-rock-&-roll wing. She is a feminist, humanist, socialist, atheist and humorist. Anyone can be the first four of these simply by believing—I wish more were—but very few can be funny on the page. Her wit is pure bonus.

This is a book about America. If the habit of positive thinking isn’t quite uniquely American, it almost is. What other culture would produce pop tunes like “Put on a Happy Face,” “Let a Smile Be Your Umbrella” and “Pretend You’re Happy When You’re Blue”?

It’s hard to imagine anyone but Ehrenreich writing this book. No one else would produce a chapter titled “How Positive Thinking Destroyed the Economy,” referring to the ongoing crash of 2008. Linking culture and economics, she proceeds to make the case, demonstrating in detail how accentuating the positive and refusing to entertain the slightest hint of bad news sunk Lehman Brothers and produced the subprime mortgage collapse and all the other calamities.

Positive thinking is an old hobby horse of mine. I remember saying to a friend 20 years ago that the goal of positive thinking is to replace thinking. I meant it as a quip; Erehnreich shows how literally and sadly true it is: Critical thinking is the enemy. “Don’t intellectualize” is sage advice that greets all who wander into the tent of positive thinking.

The kind of uncritical—you might say magical—thinking that goes on in the name of positive thinking is abysmal, troubling and comic. Take “visualization.” Imagine something you want (this usually means money) and it will come to you—after you’ve signed up, paid the fee, bought the CD, said your prayers, etc. This idea is sometimes beefed up and called the Law of Attraction. In 2006, Michael J. Losier published a book called The Law of Attraction: The Science [sic] of Attracting More of What You Want and Less of What You Don’t. The mind is a magnet; it attracts, or repels, whatever it does, or doesn’t, want. Thoughts control reality and thinking makes it so. Slogans include “Ask, believe and receive” and “Name it and claim it.”

These ideas are infantile, literally. To oversimplify slightly: The baby wants food, it is provided; she wants to be held, it happens; she wants her diaper changed, it is done. As the child acquires language, the game becomes more complex. She learns to ask for what she wants, learns that the mother is “other” and might or might not grant the wish. The child is unlearning the Law of Attraction. Positive thinkers and toddlers cross lines on the cognitive maturation flow chart.

H. L. Mencken said that a puritan is one who fears that someone, somewhere may be happy. A positive thinker has the same fears about anyone who may be unhappy. The proper response to this sad-sack is shunning, and the message is blunt: “GET RID OF NEGATIVE PEOPLE IN YOUR LIFE,” bellows one motivational speaker. Another warns: “Negative people SUCK! . . . They suck the energy out of positive people like you and me. They suck the energy and life out of a good company, a good team and a good relationship. . . . Avoid them at all cost.”

In America, the shunning of negative individuals has an odd parallel. Ehrenreich points out how positive thinking helps to elevate nationalism into the unique kind of patriotism that promotes the belief, against mountains of evidence, that the U.S. is the greatest country in the world. It’s a small step from American exceptionalism to xenophobia and the shunning of others—let’s say other “negative” countries. To take a recent example, you don’t get much more negative than France, when it refused to join George W. Bush’s adventure in Iraq. The positive-thinking response was “freedom fries.”

Among the many branches of the positive thinking industry, one of the most important is found in the corporate world, which hires motivational speakers and “coaches” to keep employees functioning as upbeat, unquestioning team players. Perversely, it pitches the same cheery positive-think messages to workers it lays off. (Corporate downsizing eliminated about 30 million full-time jobs in the U.S. between 1981 and 2003.) It’s perverse, but sure enough, someone wrote a pop-business book called We Got Fired . . . And It’s the Best Thing That Ever Happened to Us.

Christianity has been infiltrated by the positive-thinking industry. Will Bowen, a Kansas pastor, is the author of the book A Complaint Free World. He is also the inventor of a purple complaint-free wristband, more than 4.5 million of which have been distributed worldwide. The purple’s a nice touch. I like to think of Bowen’s flock using the bracelets while engaging in obscene acts.

Christian “megachurches” have been all but remade by the invasion of positive thinking. Not only have negative concepts like sin and hell been edged off the stage, even Christ and the cross have been relegated to background roles. New messages include “Keep a good attitude” and “Don’t get negative or bitter.” God wants you to be healthy, happy—and rich. God wants to “prosper you.”

As it happens, the megachurch pastors—a.k.a. “pastorpreneurs”—are themselves rich, something for which they need not apologize. Their economic good fortune is evidence of providence shining upon them. The eye-of-the-needle maxim is too, well, negative.

There has been a lot of “research” on positive thinking. Some studies claim it to be related to much that is desirable. Like preventing cancer, or curing cancer, or extending the lifespan of cancer victims (Ehrenreich was diagnosed with breast cancer in the year 2000, and has a personal interest in this research), or strengthening the immune system, or generally contributing to a longer, healthier life.

There is also research that reports no connections between positive thinking and these good outcomes, though they are harder to find, and some actually claim to have discovered a negative relationship. Ehrenreich cites one long-term study in which “optimistic” children were found to have had shorter lifespans than pessimistic children. Another found that older people who were “pessimists” were less likely to become depressed after a negative life event, like a death in the family.

Ehrenreich has combed through the literature—I see this unpleasant task as pro bono work, like that of biologists who publicly debate creationists—and finds what is often found after a thorough review: The studies on positive thinking are inconclusive. No reliable generalizations can be made.  This should not come as a surprise. It’s very hard to discover genuine facts about human beings using the crude statistical methods employed in psychological experiments, especially when one of the variables is “psychological,” that is, vague and hard to measure, as in the case of positive thinking or optimism.

The theatre has two masks. The masters of positive thinking aim to banish the mask of tragedy and remold the mask of comedy into a smiley face. In the New Positive World, there will be neither tragedy nor comedy. I prefer the world of Woody Allen, who no one ever accused of positive thinking. He used to end his standup comedy act by saying, “I’d like to leave you with an affirmative message, but I don’t have one. Will you take two negative messages?”

1326 w.  January 21, 2010

Haunted by a Spectre

Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (Norton, 2009).
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My only literary prediction for 2009 is that we’re all going to be reading a lot more books about what was formerly known as The Economy, and is currently variously called The Crisis, The Collapse, Things Are Going to Get Worse Before They Get Better, The Brink of Great Depression II, and “A  Spectre Is Haunting…”  The spectre is haunting not just Europe, as the opening line of Marx and Engels’ Communist Manifesto of 1848 had it, but the entire globe, though it’s unlikely that it’s the “spectre of Communism” that’s doing the haunting, as the mid-19th century revolutionaries claimed. What to call the spectre will no doubt be the subject of many of this year’s forthcoming books.

Personally, I’m looking forward to the book that tells-all about the aptly-named Bernie Madoff, the New York financial wizard who allegedly made off with $50 billion in investors’ money in the biggest Ponzi scheme in history. (According to a book blog I recently glanced at, there are 8 such accounts in the works.) Or the inside story of that night in September 2008 when then President George W. Bush, the enemy of big government and lifelong proponent of unregulated cowboy capitalism, was told by Treasury Secretary Hank Paulson and Federal Reserve chair Ben Bernanke that the U.S. would have to, more or less, nationalize the entire finance and banking sector… or else. What did Dubya mutter, I wonder? “Gadzooks, that’s socialism! What will my daddy say?” We won’t know until the next Bob Woodward inside-the-White-House tome appears, I guess, but in any case it promises to be more exciting than Dan Brown’s sequel to The DaVinci Code.

While awaiting these nasty-pieces-of-work-in-progress, we already have available a range of tempting titles that includes Canadian economist Jim Stanford’s indispensable primer, Economics for Everyone: A Short Guide to the Economics of Capitalism (Fernwood, 2008), and the British-born Harvard historian Niall Ferguson’s latest TV-series-text, The Ascent of Money: A Financial History of the World (Penguin, 2008). For those still catching up with the last century, there’s Robert Skidelsky’s suddenly relevant massive biography, John Maynard Keynes (1883-1946): Economist, Philosopher, Statesman (Pan, 2003).

My own favourite Virgil-like guide to our present economic Hell is Paul Krugman, winner of the 2008 Nobel Prize for Economics. He’s also a Princeton professor, a New York Times columnist, and a self-declared liberal economist, author of The Conscience of a Liberal. It was Krugman who asked in a recent column (“The Madoff Economy,” New York Times, Dec. 19, 2008), “How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?” But before contemplating the possibility that much of capitalism is itself a Ponzi swindle writ large, we need a little background.

That’s provided by Krugman in his slim and cautionary new book, The Return of Depression Economics. Actually, as Krugman explains in his introductory chapter, Depression Economics is a recycled version of his not-much-noticed 1999 text about the bursting of the Asian monetary bubble and other warning signs ignored, hence the add-on subtitle, …and the Crisis of 2008, for this year’s edition. It’s a literary example of “doing more with less,” a conception that millions of us will probably have to adopt in the coming months.

As recently as the beginning of the 21st century, as Krugman reminds us, it was believed that “nothing like the Great Depression can ever happen again.” The monumental slump of the 1930s was now seen by economists and other policy makers as a “gratuitous, unnecessary tragedy.” If only the U.S. president of the day, Herbert Hoover, “hadn’t tried to balance the budget in the face of an enormous economic slump”; if only “officials had rushed cash to threatened banks, and thus calmed the bank panic”; if only… But in today’s enlightened era, claimed many prominent economists, we know better. Or do we?

Krugman sets up his account of the present crisis by reviewing various economic disasters and near-disasters of the past two decades in Mexico, Japan, Thailand and other points east and south, as well as doing the forensics on recent American economic “bubbles” that eventually burst. He also explains some of the machinations of the stock market and other frightening institutions. Occasionally my eyes glazed over as Krugman explained how fortunes were made by turning Thai bahts and Mexican pesos into other currencies, but for the most part, the analysis is pretty accessible, thanks to his commitment to ensuring that “there are no equations, no inscrutable diagrams, and (I hope) no impenetrable jargon” in his little treatise.

In due course, Krugman gets to the irrational housing bubble that initiated the present crisis. “Americans have long been in the habit of buying houses with borrowed money,” Krugman notes, then adds, “but it’s hard to see why anyone should have believed, circa 2003, that the basic principles of such borrowing had been repealed. From long experience we knew that home buyers shouldn’t take on mortgages whose payments they couldn’t afford, and they should put enough money down so that they can sustain a moderate drop in home prices and still have positive equity.”

Instead, “what actually happened was a complete abandonment of traditional principles.” A small part of the blame can be pinned on “the irrational exuberance of individual families who saw house prices rising ever higher and decided that they should jump into the market, and not worry about how to make payments.”

But the real culprits, says Krugman, were the lenders. “Buyers were given loans requiring little or no down payment, and with monthly bills that were well beyond their ability to afford — or, at least would be unaffordable once the initial low, teaser rate reset. Much though not all of this dubious lending went under the heading of ‘subprime,’ but the phenomenon was much broader than that,” and the total amount of the loans was in the hundreds of billions.

Why did the lenders relax the traditional standards, and why were they allowed to do so? Well, first, they too bought into the psychological bubble of believing in ever-rising house prices. They didn’t have to worry about whether the borrowers could make their monthly payments. If they couldn’t they could either get more cash by taking out a home equity loan or else sell the house, at a higher price, and pay off their mortage.

But far more important — and here’s where it gets interesting — the lenders didn’t worry about the loans “because they didn’t hold on to them. Instead, they sold them to investors, who didn’t understand what they were buying.” The process is known as “securitization” of home mortgages — “assembling large pools of mortgages, then selling investors shares in the payments received from borrowers.” Previous “securitization” had been limited to “prime” mortgages, that is, loans to borrowers who could make a substantial down payment and had enough income to meet the mortgage payments. Defaults were rare.

As the bubble inflated, everyone reached for a piece of pie-in-the-sky. Construction boomed, materials for construction were in demand (including wood from British Columbia), low unemployment and money in hand fuelled consumer purchases on big ticket items such as SUVs and newly-invented electronic gadgets (all aided and abetted by the availability of further borrowing via credit cards), and you could even call in for pizza. All boats were lifted in the rising tide of prosperity, including all those borrowed boats. Eventually, when the people who made the loans they couldn’t afford stopped paying, the foreclosures on houses began, housing prices plummeted, construction and consumption stopped, the boats whether bought or borrowed ran aground, and the bubble had burst. It was only when the plug was pulled that we learned that these weren’t real boats, but only children’s toys in a bathtub. The boats may not have been real, but people’s lives going down the fiscal drain surely were.

According to Krugman, the “financial innovation” that made this enormous conjuring trick possible was something called “collateralized debt obligation” (CDOs).  The CDOs created “senior” shares that were supposedly secure, and junior shares that were more speculative. The CDOs were touted as a very safe investment because “even if some mortgages defaulted, how likely was it that enough would default to pose problems for the cash flow to these senior shares?” The answer: “Quite likely, it turned out.” But because of the hype, the supposed watchdog or rating agencies were willing to classify senior CDO shares as AAA, “even if the underlying mortgages were highly dubious.” Of course, “as long as housing prices kept rising, everything looked fine and the Ponzi scheme kept rolling.” Since the CDOs were rated safe, that “opened up large-scale funding of subprime lending” to such institutional investors as pension funds that “were quite willing to buy AAA-rated assets that yielded significantly higher returns” than ordinary bonds and other super-safe properties. But once the bubble burst, we got this, the present monstrous mess.

In order to make the scheme work, there had to be institutions to bundle together and peddle the ultimately worthless mortgages. At this point Krugman introduces us to the crucial concept of the “shadow banking system.” Krugman asks, “But wasn’t the age of banking crises supposed to have ended seventy years ago? Aren’t banks regulated, insured, guaranteed up the wazoo? Yes and no. Yes for traditional banks; no for a large part of the modern, de facto banking system.”

In his thumbnail history of banking, Krugman notes that something eerily similar to what’s going on today happened one hundred years ago in the Panic of 1907. “The crisis originated in institutions… known as ‘trusts,’ bank-like institutions” originally intended to manage inheritance and estates for the wealthy. “Because they were supposed to engage only in low-risk activities trusts were less regulated and had lower reserve requirements and lower cash reserves than national banks.” As the economy boomed in the first decade of the last century, “trusts began speculating in real estate and the stock market areas from which national banks were prohibited.” As long as the bubble inflated, “trusts were able to pay their depositors higher returns.” When the bubble burst, it took all the republic’s bankers to restore a semblance of fiscal order. Even though the actual panic lasted only a week, “it and the stock market collapse decimated the economy. A four-year recession ensued, with production falling 11 per cent” and unemployment almost tripling.

Krugman then describes the far larger crisis of 2008, one that has a global rather than a merely national reach, and along the way he discusses the various arcane instruments and institutions of investment from the “auction-rate security system” to “hedge funds” and all the rest of the shadowy shadow-banking system that ultimately caved in, beginning with the 2008 bankruptcy of Lehmann Brothers. Krugman notes that the unsustainable risk of such institutions wasn’t really a result of deregulation, but rather that the shadow system, which was almost as large as conventional banking, was never regulated in the first place, even though the top five investment banks had balance sheets totalling $4 trillion. The catastrophe is a result of what Krugman calls “malign neglect.” Nonetheless, what permitted much of the malign neglect was an ideology of unregulated market capitalism and almost-theological opposition to government.

My recurrent emotion while reading Krugman’s account (and I’ve only reprised a small portion of the complexities) was one of shock. Again and again, I found myself gasping with astonishment, “They let them do that?!” Much of the operation of the financial system looks like little more than a besotted weekend of casino gambling. Though I can hardly claim to be utterly naïve about the workings of capitalism, Krugman’s brief book repeatedly brings home how little most people (including me) really know about what’s going on. I guess that as long as our credit cards still work with a simple swipe through a machine perhaps we don’t want to know. But at this point, continued ignorance is not an option.

Krugman wraps up with the important “What is to be done?” question. His solution, which is pretty close to that of the ideas of President Barack Obama’s economics team, is straightforward, and not especially radical. “What the world needs right now is a rescue operation. The global credit system is in a state of paralysis and a global slump is building momentum,” Krugman declares. Reform “is essential, but it can wait a little while.” Right now, policy-makers around the world “need to do two things: get credit flowing again and prop up spending.”

Krugman guesses that “recapitalization” of the economy will come close to requiring “a full temporary nationalization of a significant part of the financial system.” Other leading economics experts have been openly discussing the same thing (see “Nationalizing the Bank Problem,” New York Times, Jan. 22, 2009). Apart from loony-tune right-wing Republicans and neo-conservative thinktanks (a “shout-out” to the fabled Fraser Institute is appropriate here), there’s a near-consensus that temporary nationalization is not unthinkable. Since the spectre haunting global capitalism isn’t a radical reorganization of economic life, Krugman underscores that he isn’t advocating the long-term seizure of the economy’s commanding heights, as the Marxists used to say, and insists that “finance should be reprivatized as soon as it’s safe to do so, just as Sweden put banking back in the private sector after its big bailout in the early 1990s.” He adds, however, “Nothing could be worse than failing to do what’s necessary out of fear that acting to save the financial system is somehow ‘socialist.’” Some of us might be tempted to further add, “So what’s wrong with a little socialism?”, but we can leave that debate for another occasion.

Even if the credit markets can be brought back to life, what to do about the gathering global depression? “The answer, almost surely,” says Krugman, “is good old Keynesian fiscal stimulus.” That is, the next plan “should focus on sustaining and expanding government spending — sustaining it by providing aid to state and local governments, expanding it with spending on roads, bridges and other forms of infrastructure.” That’s pretty much what Obama proposes in his most recent $800 billion stimulus package, including such other forms of “infrastructure” as education and green technology.

Krugman says, more than once, “We’re not in a depression now, and despite everything, I don’t think we’re heading into one,” then parenthetically adds, “although I’m not as sure of that as I’d like to be.” If depression itself has not returned, depression economics — meaning, “the kinds of problems that characterized much of the world economy in the 1930s” — is back with a vengeance. Krugman’s useful discussion is hardly deathless prose, nor is it meant to be. It’s more on the order of “dispatches from the front,” a front that’s not located in some distant land, but is as close as your local haunting spectre.

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Vancouver, Jan. 22, 2009.