Debt: The First 5000 Years Part 11

He was philosopher enough to be contented with his venture, and set off that same evening for the Continent. He was never heard of again.90 If one is to believe MacKay, the entire population of London conceived the simultaneous delusion, not that money could really be manufactured out of nothing, but that other people were foolish enough to believe that it could-and that, by that very fact, they actually could make money out of nothing after all.

Moving to the other side of the debt chain, we find fantasies ranging from the charming to the apocalyptic. In the anthropological literature, there is everything from the beautiful "sea wives" of Aru pearl divers, who will not yield up the treasures of the ocean unless courted with gifts bought on credit from local Chinese shops,91 to the secret markets where Bengali landlords purchase ghosts to terrorize insubordinate debt peons; to Tiv flesh-debts, a fantasy of human society cannibalizing itself; to finally, occasions at which, the Tiv nightmare appears to have very nearly become true.92 One the most famous and disturbing was the great Putumayo scandal of 19091911, in which the London reading public was shocked to discover that the agents of the subsidiary of a British rubber company operating in the Peruvian rainforest had created their very own Heart of Darkness, exterminating tens of thousands of Huitoto Indians-who the agents insisted on referring to only as "cannibals"-in scenes of rape, torture, and mutilation that recalled the very worst of the conquest four hundred years earlier.93 In the debates that followed, the first impulse was to blame everything on a system whereby the Indians were said to have been caught in a debt trap, made completely dependent on the company store: The root of the whole evil was the so called patron or "peonage" system-a variety of what used to be called in England the "truck system"-by which the employee, forced to buy all his supplies at the employer's store, is kept hopelessly in debt, while by law he is unable to leave his employment until his debt is paid ... The peon is thus, as often as not, a de facto slave; and since in the remoter regions of the vast continent there is no effective government, he is wholly at the mercy of his master.94 The "cannibals" who ended up flogged to death, crucified, tied up and used for target practice, or hacked to pieces with machetes for failure to bring in sufficient quant.i.ties of rubber, had, the story went, fallen into the ultimate debt trap; seduced by the wares of the company's agents, they'd ended up bartering away their very lives.

A later Parliamentary inquiry discovered that the real story was nothing of the sort. The Huitoto had not been tricked into becoming debt peons at all. It was the agents and overseers sent into the region who were, much like the conquistadors, deeply indebted-in their case, to the Peruvian company that had commissioned them, which was ultimately receiving its own credit from London financiers. These agents had certainly arrived with every intention of extending that web of credit to include the Indians, but discovering the Huitoto to have no interest in the cloth, machetes, and coins they had brought to trade with them, they'd finally given up and just started rounding Indians up and forcing them to accept loans at gunpoint, then tabulating the amount of rubber they owed.95 Many of the Indians ma.s.sacred, in turn, had simply been trying to run away.

In reality, then, the Indians had been reduced to slavery; it's just that, by 1907, no one could openly admit this. A legitimate enterprise had to have some moral basis, and the only morality the company knew was debt. When it became clear that the Huitoto rejected the premise, everything went haywire, and the company ended up, like Casimir, caught in a spiral of indignant terror that ultimately threatened to wipe out its very economic basis.

It is the secret scandal of capitalism that at no point has it been organized primarily around free labor.96 The conquest of the Americas began with ma.s.s enslavement, then gradually settled into various forms of debt peonage, African slavery, and "indentured service"-that is, the use of contract labor, workers who had received cash in advance and were thus bound for five-, seven-, or ten-year terms to pay it back. Needless to say, indentured servants were recruited largely from among people who were already debtors. In the 1600s there were at times almost as many white debtors as African slaves working in southern plantations, and legally they were at first in almost the same situation, since in the beginning, plantation societies were working within a European legal tradition that a.s.sumed slavery did not exist, so even Africans in the Carolinas were cla.s.sified, as contract laborers.97 Of course this later changed when the idea of "race" was introduced. When African slaves were freed, they were replaced, on plantations from Barbados to Mauritius, with contract laborers again: though now ones recruited mainly in India or China. Chinese contract laborers built the North American railroad system, and Indian "coolies" built the South African mines. The peasants of Russia and Poland, who had been free landholders in the Middle Ages, were only made serfs at the dawn of capitalism, when their lords began to sell grain on the new world market to feed the new industrial cities to the west.98 Colonial regimes in Africa and Southeast Asia regularly demanded forced labor from their conquered subjects, or, alternately, created tax systems designed to force the population into the labor market through debt. British overlords in India, starting with the East India Company but continuing under Her Majesty's government, inst.i.tutionalized debt peonage as their primary means of creating products for sale abroad.

This is a scandal not just because the system occasionally goes haywire, as it did in the Putumayo, but because it plays havoc with our most cherished a.s.sumptions about what capitalism really is-particularly that, in its basic nature, capitalism has something to do with freedom. For the capitalists, this means the freedom of the marketplace. For most workers, it means free labor. Marxists have questioned whether wage labor is ultimately free in any sense (since someone with nothing to sell but his or her body cannot in any sense be considered a genuinely free agent), but they still tend to a.s.sume that free wage labor is the basis of capitalism. And the dominant image in the history of capitalism is the English workingman toiling in the factories of the industrial revolution, and this image can be traced forward to Silicon Valley, with a straight line in between. All those millions of slaves and serfs and coolies and debt peons disappear, or if we must speak of them, we write them off as temporary b.u.mps along the road. Like sweatshops, this is a.s.sumed to be a stage that industrializing nations had to pa.s.s through, just as it is still a.s.sumed that all those millions of debt peons and contract laborers and sweatshop workers who still exist, often in the same places, will surely live to see their children become regular wage laborers with health insurance and pensions, and their children, doctors and lawyers and entrepreneurs.

When one looks at the actual history of wage labor, even in countries like England, that picture begins to melt away. In most of Medieval northern Europe, wage labor had been mainly a lifestyle phenomenon. From roughly the age of twelve or fourteen to roughly twenty-eight or thirty, everyone was expected to be employed as a servant in someone else's household-usually on a yearly contract basis, for which they received room, board, professional training, and usually a wage of some sort-until they acc.u.mulated enough resources to marry and set up a household of their own.99 The first thing that "proletarianization" came to mean was that millions of young men and women across Europe found themselves effectively stuck in a kind of permanent adolescence. Apprentices and journeymen could never become "masters," and thus, never actually grow up. Eventually, many began to give up and marry early-to the great scandal of the moralists, who insisted that the new proletariat were starting families they could not possibly support.100 There is, and has always been, a curious affinity between wage labor and slavery. This is not just because it was slaves on Caribbean sugar plantations who supplied the quick-energy products that powered much of early wage laborers' work; not just because most of the scientific management techniques applied in factories in the industrial revolution can be traced back to those sugar plantations; but also because both the relation between master and slave, and between employer and employee, are in principle impersonal: whether you've been sold or you're simply rented yourself out, the moment money changes hands, who you are is supposed to be unimportant; all that's important is that you are capable of understanding orders and doing what you're told.101 This is one reason, perhaps, that in principle, there was always a feeling that both the buying of slaves and the hiring of laborers should really not be on credit, but should employ cash. The problem, as I've noted, was that for most of the history of British capitalism, the cash simply didn't exist. Even when the Royal Mint began to produce smaller-denomination silver and copper coins, the supply was sporadic and inadequate. This is how the "truck system" developed to begin with: during the industrial revolution, factory owners would often pay their workers with tickets or vouchers good only in local shops, with whose owners they had some sort of informal arrangement, or, in more isolated parts of the country, which they owned themselves.102 Traditional credit relations with one's local shopkeeper clearly took on an entirely new complexion once the shopkeeper was effectively an agent of the boss. Another expedient was to pay workers at least partly in kind-and notice the very richness of the vocabulary for the sorts of things one was a.s.sumed to be allowed to appropriate from one's workplace, particularly from the waste, excess, and side products: cabbage, chips, thrums, sweepings, buggings, gleanings, sweepings, potchings, vails, poake, coltage, knockdowns, tinge.103 "Cabbage," for instance, was the cloth left over from tailoring, "chips" the pieces of board that dockworkers had the right to carry from their workplace (any piece of timber less than two feet long), "thrums" were taken from the warping-bars of looms, and so on. And of course we have already heard about payment in the form of cod, or nails.

Employers had a final expedient: wait for the money to show up, and in the meantime, don't pay anything-leaving their employees to get by with only what they could scrounge from their shop floors, or what their families could finagle in outside employment, receive in charity, preserve in savings pools with friends and families, or, when all else failed, acquire on credit from the loan sharks and p.a.w.nbrokers who rapidly came to be seen as the perennial scourge of the working poor. The situation became such that, by the nineteenth century, any time a fire destroyed a London p.a.w.nshop, working-cla.s.s neighborhoods would brace for the wave of domestic violence that would inevitably ensue when many a wife was forced to confess that she'd long since secretly hocked her husband's Sunday suit.104 We are, nowadays, used to a.s.sociating factories eighteen months in arrears for wages with a nation in economic free-fall, such as occurred during the collapse of the Soviet Union; but owing to the hard-money policies of the British government, who were always concerned above all to ensure that their paper money didn't float away in another speculative bubble, in the early days of industrial capitalism, such a situation was in no way unusual. Even the government was often unable to find the cash to pay its own employees. In eighteenth-century London, the Royal Admiralty was regularly over a year behind in paying the wages of those who labored at the Deptford docks-one reason that they were willing to tolerate the appropriation of chips, not to mention hemp, canvas, steel bolts, and cordage. In fact, as Linebaugh has shown, the situation only really began to take recognizable form around 1800, when the government stabilized its finances, began paying cash wages on schedule, and therefore tried to abolish the practice of what was now relabeled "workplace pilfering"-which, meeting outraged resistance on the part of the dockworkers, was made punishable by whipping and imprisonment. Samuel Bentham, the engineer put in charge of reforming the dockyards, had to turn them into a regular police state in order to be able to inst.i.tute a regime of pure wage labor-to which purpose he ultimately conceived the notion of building a giant tower in the middle to guarantee constant surveillance, an idea that was later borrowed by his brother Jeremy for the famous Panopticon.105 Men like Smith and Bentham were idealists; even utopians. To understand the history of capitalism, however, we have to begin by realizing that the picture we have in our heads, of workers who dutifully punch the clock at 8:00 a.m. and receive regular remuneration every Friday, on the basis of a temporary contract that either party is free to break off at any time, began as a utopian vision, was only gradually put into effect even in England and North America, and has never, at any point, been the main way of organizing production for the market, ever, anywhere.

This is actually why Smith's work is so important. He created the vision of an imaginary world almost entirely free of debt and credit, and therefore, free of guilt and sin; a world where men and women were free to simply calculate their interests in full knowledge that everything had been prearranged by G.o.d to ensure that it will serve the greater good. Such imaginary constructs are of course what scientists refer to as "models," and there's nothing intrinsically wrong with them. Actually I think a fair case can be made that we cannot think without them. The problem with such models-at least, it always seems to happen when we model something called "the market"-is that, once created, we have a tendency to treat them as objective realities, or even fall down before them and start wors.h.i.+pping them as G.o.ds. "We must obey the dictates of the market!"

Karl Marx, who knew quite a bit about the human tendency to fall down and wors.h.i.+p our own creations, wrote Das Capital in an attempt to demonstrate that, even if we do start from the economists' utopian vision, so long as we also allow some people to control productive capital, and, again, leave others with nothing to sell but their brains and bodies, the results will be in many ways barely distinguishable from slavery, and the whole system will eventually destroy itself. What everyone seems to forget is the "as if" nature of his a.n.a.lysis.106 Marx was well aware that there were far more bootblacks, prost.i.tutes, butlers, soldiers, pedlars, chimneysweeps, flower girls, street musicians, convicts, nannies, and cab drivers in the London of his day than there were factory workers. He was never suggesting that that's what the world was actually like.

Still, if there is anything that the last several hundred years of world history have shown, it's that utopian visions can have a certain appeal. This is as true of Adam Smith's as of those ranged against it. The period from roughly 1825 to 1975 is a brief but determined effort on the part of a large number of very powerful people-with the avid support of many of the least powerful-to try to turn that vision into something like reality. Coins and paper money were, finally, produced in sufficient quant.i.ties that even ordinary people could conduct their daily lives without appeal to tickets, tokens, or credit. Wages started to be paid on time. New sorts of shops, arcades, and galleries appeared, where everyone paid in cash, or alternately, as time went on, by means of impersonal forms of credit like installment plans. As a result, the old puritanical notion that debt was sin and degradation began to take a profound hold on many of those who came to consider themselves the "respectable" working cla.s.ses, who often took freedom from the clutches of the p.a.w.nbroker and loan shark as a point of pride, which separated them from drunkards, hustlers, and ditch-diggers as surely as the fact that they weren't missing teeth.

Speaking as someone brought up in that sort of working-cla.s.s family (my brother died at the age of 53, having refused to his dying day to acquire a credit card), I can attest to the degree that, for those who spend most of their waking hours working at someone else's orders, the ability to pull out a wallet full of banknotes that are unconditionally one's own can be a compelling form of freedom. It's not surprising that so many of the economists' a.s.sumptions-most of those for which I have been taking them to task over the course of this book-have been embraced by the leaders of the historic workers' movements, so much so that they have come to shape our visions of what alternatives to capitalism might be like. The problem is not just-as I demonstrated in chapter 7-that it is rooted in a deeply flawed, even perverse, conception of human freedom. The real problem is that, like all utopian dreams, it is impossible. We could no more have a universal world market than we could have a system in which everyone who wasn't a capitalist was somehow able to become a respectable, regularly paid wage laborer with access to adequate dental care. A world like that has never existed and never could exist. What's more, the moment that even the prospect that this might happen begins to materialize, the whole system starts to come apart.

Part IV:.

Apocalypse.

Let us return, finally, to where we began: with Cortes and the Aztec treasure. The reader might have asked herself, What did happen to it? Did Cortes really steal it from his own men?

The answer seems to be that by the time the siege was over, there was very little of it left. Cortes seems to have gotten his hands on much of it long before the siege even began. A certain portion he had won by gambling.

This story, too, is in Bernal Diaz, and it is strange and puzzling, but also, I suspect, profound. Let me fill in some of the gaps in our story. After burning his boats, Cortes began to a.s.semble an army of local allies, which was easy to do because the Aztecs were widely hated, and then he began to march on the Aztec capital. Moctezuma, the Aztec emperor, who had been monitoring the situation closely, concluded that he needed to at least figure out what sort of people he was dealing with, so he invited the entire Spanish force (only a few hundred men) to be his official guests in Tenocht.i.tlan. This eventually led to a series of palace intrigues during which Cortes's men briefly held the emperor hostage before being forcibly expelled.

During the time when Moctezuma was being held captive in his own palace, he and Cortes pa.s.sed a good deal of their time playing an Aztec game called totoloque. They played for gold, and Cortes, of course, cheated. At one point, Moctezuma's men brought the matter to the king's attention, but the king just laughed and made a joke of it-neither was he concerned later when Pedro de Alvarado, Cortes's chief lieutenant, began cheating even more flagrantly, demanding gold for each point lost and when he lost, paying only in worthless pebbles. Why Moctezuma behaved so has remained something of an historical mystery. Diaz took it as a gesture of lordly magnanimity, perhaps even a way of putting the petty-minded Spaniards in their place.107 One historian, Inga Clenninden, suggests an alternate interpretation. Aztec games, she notes, tended to have a peculiar feature: there was always a way that, by a freak stroke of luck, one could achieve total victory. This seems to have been true, for instance, of their famous ball games. Observers always wonder, viewing the tiny stone hoops set high above the court, how anyone could ever possibly have managed to score. The answer seems to be: they didn't, at least not that way. Normally the game had nothing to do with the hoop. The game was played between two opposing squads, attired as for battle, knocking the ball back and forth: The normal method of scoring was through the slow acc.u.mulation of points. But that process could be dramatically preempted. To send the ball through one of the rings-a feat, given the size of the ball and the ring, presumably rarer than a hole in one in golf-gave instant victory, owners.h.i.+p of all the goods wagered, and the right to pillage the cloaks of the onlookers.108 Whoever scored the point won everything, down to the audience's clothing.

There were similar rules in board games, such as Cortes and Moctezuma were playing: if, by some freak stroke of luck, one of the dice landed on its edge, the game was over, and the winner took everything. This, Clenninden suggests, must have been what Moctezuma was really waiting for. After all, he was clearly in the middle of extraordinary events. Strange creatures had appeared, apparently from nowhere, with unheard-of powers. Rumors of epidemics, of the destruction of nearby nations, had presumably already reached him. If ever there was a time that some grandiose revelation was due from the G.o.ds, then surely this was it.

Such an att.i.tude does seem to fit perfectly with the spirit of Aztec culture gleaned from its literature, which exuded a sense of impending catastrophe, perhaps astrologically determined, just possibly avoidable-but probably not. Some have suggested that Aztecs must have somehow been aware that they were a civilization skating on the brink of ecological catastrophe; others, that the apocalyptic tone is retrospective-since, after all, what we know of Aztec literature is almost entirely gleaned from men and women who actually did experience its complete destruction. Still, there does seem to be a certain frantic quality in certain Aztec practices-the sacrifice of as many as tens of thousands of war prisoners, most notably in the apparent belief that, were the Sun not continually fed with human hearts, it would die and world with it-that it's hard to explain in any other way.

If Clenninden is right, for Moctezuma, he and Cortes were not simply gambling for gold. Gold was trivial. The stakes were the entire universe.

Moctezuma was above all a warrior, and all warriors are gamblers; but unlike Cortes, he was clearly in every way a man of honor. As we've also seen, the quintessence of a warrior's honor, which is a greatness that can only come from the destruction and degradation of others, is his willingness to throw himself into a game where he risks that same destruction and degradation himself-and, unlike Cortes, to play graciously, and by the rules.109 When the time came, it meant being willing to stake everything.

He did. And as it turns out, nothing happened. No die landed on its edge. Cortes continued to cheat, the G.o.ds sent no revelation, and the universe was eventually destroyed.

If there's something to be learned here-and as I say, I think there is-it is that there may be a deeper, more profound relation between gambling and apocalypse. Capitalism is a system that enshrines the gambler as an essential part of its operation, in a way that no other ever has; yet at the same time, capitalism seems to be uniquely incapable of conceiving of its own eternity. Could these two facts be linked?

I should be more precise here. It's not entirely true that capitalism is incapable of conceiving of its own eternity. On the one hand, its exponents do often feel obliged to present it as eternal, because they insist that is it is the only possible viable economic system: one that, as they still sometimes like to say, "has existed for five thousand years and will exist for five thousand more." On the other hand, it does seem that the moment a significant portion of the population begins to actually believe this, and particularly, starts treating credit inst.i.tutions as if they really will be around forever, everything goes haywire. Note here how it was the most sober, cautious, responsible capitalist regimes-the seventeenth-century Dutch Republic, the eighteenth-century British Commonwealth-the ones most careful about managing their public debt-that saw the most bizarre explosions of speculative frenzy, the tulip manias and South Sea bubbles.

Much of this seems to turn on the nature of national deficits and credit money. The national debt is, as politicians have complained practically since these things first appeared, money borrowed from future generations. Still, the effects have always been strangely double-edged. On the one hand, deficit financing is a way of putting even more military power in the hands of princes, generals, and politicians; on the other, it suggests that government owes something to those it governs. Insofar as our money is ultimately an extension of the public debt, then whenever we buy a newspaper or a cup of coffee, or even place a bet on a horse, we are trading in promises, representations of something that the government will give us at some time in the future, even if we don't know exactly what it is.110 Immanuel Wallerstein likes to point out that the French Revolution introduced several profoundly new ideas in politics-ideas which, fifty years before the revolution, the vast majority of educated Europeans would have written off as crazy, but which, fifty years afterward, just about anyone felt they had to at least pretend they thought were true. The first is that social change is inevitable and desirable: that the natural direction of history is for civilization to gradually improve. The second is that the appropriate agent to manage such change is the government. The third is that the government gains its legitimacy from an ent.i.ty called "the people."111 It's easy to see how the very idea of a national debt-a promise of continual future improvement (at the very least, five percent annual improvement) made by government to people-might itself have played a role in inspiring such a revolutionary new perspective. Yet at the same time, when one looks at what men like Mirabeau, Voltaire, Diderot, Sieyes-the philosophes who first proposed that notion of what we now call "civilization"-were actually arguing about in the years immediately leading up to the revolution, it was even more about the danger of apocalyptic catastrophe, of the prospect of civilization as they knew it being destroyed by default and economic collapse.

Part of the problem was the obvious one: the national debt is, first, born of war; second, it is not owed to all the people equally, but above all to capitalists-and in France at that time, "capitalist" meant, specifically, "those who held pieces of the national debt." The more democratically inclined felt that the entire situation was opprobrious. "The modern theory of the perpetuation of debt," Thomas Jefferson wrote, around this same time, "has drenched the earth with blood, and crushed its inhabitants under burdens ever acc.u.mulating."112 Most Enlightenment thinkers feared that it promised even worse. Intrinsic to the new, "modern" notion of impersonal debt, after all, was the possibility of bankruptcy.113 Bankruptcy, at that time, was indeed something of a personal apocalypse: it meant prison, the dissolution of one's estate; for the least fortunate, it meant torture, starvation, and death. What national bankruptcy would mean, at that point in history, n.o.body knew. There were simply no precedents. Yet as nations fought greater and bloodier wars, and their debts escalated geometrically, default began to appear unavoidable.114 Abbe Sieyes first put forward his great scheme for representative government, for instance, primarily as a way of reforming the national finances, to fend off the inevitable catastrophe. And when it happened, what would it look like? Would the money become worthless? Would military regimes seize power, regimes across Europe be likewise forced to default and fall like dominos, plunging the continent into endless barbarism, darkness, and war? Many were already antic.i.p.ating the prospect of the Terror long before the revolution itself.115 It's a strange story because we are used to thinking of the Enlightenment as the dawn of a unique phase of human optimism, borne on a.s.sumptions that the advance of science and human knowledge would inevitably make life wiser, safer, and better for everyone-a naive faith said to have peaked in the Fabian socialism of the 1890s, only to be annihilated in the trenches of World War I. In fact, even the Victorians were haunted by the dangers of degeneration and decline. Most of all, Victorians shared the near-universal a.s.sumption that capitalism itself would not be around forever. Insurrection seemed imminent. Many Victorian capitalists operated under the sincere belief that they might, at any moment, find themselves hanging from trees. In Chicago, for instance, a friend once took me on a drive down a beautiful old street, full of mansions from the 1870s: the reason, he explained, that it looked like that, was that most of Chicago's rich industrialists of the time were so convinced that the revolution was immanent that they collectively relocated along the road that led to the nearest military base. Almost none of the great theorists of capitalism, from anywhere on the political spectrum, from Marx to Weber, to Schumpeter, to von Mises, felt that capitalism was likely to be around for more than another generation or two at the most.

One could go further: the moment that the fear of imminent social revolution no longer seemed plausible, by the end of World War II, we were immediately presented with the specter of nuclear holocaust.116 Then, when that no longer seemed plausible, we discovered global warming. This is not to say that these threats were not, and are not, real. Yet it does seem strange that capitalism feels the constant need to imagine, or to actually manufacture, the means of its own imminent extinction. It's in dramatic contrast to the behavior of the leaders of socialist regimes, from Cuba to Albania, who, when they came to power, immediately began acting as if their system would be around forever-ironically enough, considering they in fact turned out to be something of an historical blip.

Perhaps the reason is because what was true in 1710 is still true. Presented with the prospect of its own eternity, capitalism-or anyway, financial capitalism-simply explodes. Because if there's no end to it, there's absolutely no reason not to generate credit-that is, future money-infinitely. Recent events would certainly seem to confirm this. The period leading up to 2009 was one in which many began to believe that capitalism really was going to be around forever; at the very least, no one seemed any longer to be able to imagine an alternative. The immediate effect was a series of increasingly reckless bubbles that brought the whole apparatus cras.h.i.+ng down.

Chapter Twelve..

(1971The Beginning of Something Yet to Be Determined).

Look at all these b.u.ms: If only there were a way of finding out how much they owe.

-Repo Man (1984).

Free your mind of the idea of deserving, of the idea of earning, and you will begin to be able to think.

-Ursula K. Le Guin, The Dispossessed.

ON AUGUST 15, 1971, United States President Richard Nixon announced that foreign-held U.S. dollars would no longer be convertible into gold-thus stripping away the last vestige of the international gold standard.1 This was the end of a policy that had been effective since 1931, and confirmed by the Bretton Woods accords at the end of World War II: that while United States citizens might no longer be allowed to cash in their dollars for gold, all U.S. currency held outside the country was to be redeemable at the rate of $35 an ounce. By doing so, Nixon initiated the regime of free-floating currencies that continues to this day.

The consensus among historians is that Nixon had little choice. His hand was forced by the rising costs of the Vietnam War-one that, like all capitalist wars, had been financed by deficit spending. The United States was in possession of a large proportion of the world's gold reserves in its vaults in Fort Knox (though increasingly less in the late 1960s, as other governments, most famously Charles de Gaulle's France, began demanding gold for their dollars); most poorer countries, in contrast, kept their reserves in dollars. The immediate effect of Nixon's unpegging the dollar was to cause the price of gold to skyrocket; it hit a peak of $600 an ounce in 1980. This of course had the effect of causing U.S. gold reserves to increase dramatically in value. The value of the dollar, as denominated in gold, plummeted. The result was a ma.s.sive net transfer of wealth from poor countries, which lacked gold reserves, to rich ones, like the United States and Great Britain, that maintained them. In the United States, it also set off persistent inflation.

Whatever Nixon's reasons, though, once the global system of credit money was entirely unpegged from gold, the world entered a new phase of financial history-one that n.o.body completely understands. While I was growing up in New York, I would hear occasional rumors of secret gold vaults underneath the Twin Towers in Manhattan. Supposedly, these vaults contained not just the U.S. gold reserves, but those of all the major economic powers. The gold was said to be kept in the form of bars, piled up in separate vaults, one for each country, and every year, when the balance of accounts was calculated, workmen with dollies would adjust the stocks accordingly, carting, say, a few million in gold out of the vault marked "Brazil" and transfering them to the one marked "Germany," and so on.

Apparently a lot of people had heard these stories. At least, right after the Towers were destroyed on September 11, 2001, one of the first questions many New Yorkers asked was: What happened to the money? Was it safe? Were the vaults destroyed? Presumably, the gold had melted. Was this the real aim of the attackers? Conspiracy theories abounded. Some spoke of legions of emergency workers secretly summoned to make their way through miles of overheated tunnels, desperately carting off tons of bullion even as rescue workers labored overhead. One particularly colorful conspiracy theory suggested that the entire attack was really staged by speculators who, like Nixon, expected to see the value of the dollar crash and that of gold to skyrocket-either because the reserves had been destroyed, or because they themselves had laid prior plans to steal them.2 The truly remarkable thing about this story is that, after having believed it for years, and then, in the wake of 9/11, having been convinced by some more knowing friends that it was all a great myth ("No," one of them said resignedly, as if to a child, "the United States keeps its gold reserves in Fort Knox"), I did a little research and discovered that, no, actually, it's true. The United States treasury's gold reserves are indeed kept at Fort Knox, but the Federal Reserve's gold reserves, and those of more than one hundred other central banks, governments, and organizations, are stored in vaults under the Federal Reserve building at 33 Liberty Street in Manhattan, two blocks away from the Towers. At roughly five thousand metric tons (266 million troy ounces), these combined reserves represent, according to the Fed's own website, somewhere between one-fifth and one-quarter of all the gold that has ever been taken from the earth.

The gold stored at the Federal Reserve Bank of New York is secured in a most unusual vault. It rests on the bedrock of Manhattan Island-one of the few foundations considered adequate to support the weight of the vault, its door, and the gold inside-eighty feet below street level and fifty feet below sea level ... To reach the vault, bullionladen pallets must be loaded into one of the Bank's elevators and sent down five floors below street level to the vault floor ... If everything is in order, the gold is either moved to one or more of the vault's 122 compartments a.s.signed to depositing countries and official international organizations or placed on shelves. "Gold stackers," using hydraulic lifts, do indeed s.h.i.+ft them back and forth between compartments to balance credits and debts, though the vaults have only numbers, so even the workers don't know who is paying whom.3 There is no reason to believe, however, that these vaults were in any way affected by the events of September 11, 2001.

Reality, then, has become so odd that it's hard to guess which elements of grand mythic fantasies are really fantasy, and which are true. The image of collapsed vaults, the melted bullion, of secret workers scurrying deep below Manhattan with underground forklifts evacuating the world economy-all this turns out not to be. But is it entirely surprising that people were willing to consider it?4 In America, the banking system since the days of Thomas Jefferson has shown a remarkable capacity to inspire paranoid fantasies: whether centering on Freemasons, or Elders of Zion, or the Secret Order of the Illuminati, or the Queen of England's drug-money-laundering operations, or any of a thousand other secret conspiracies and cabals. It's the main reason why it took so long for an American central bank to be established to begin with. In a way there's nothing surprising here. The United States has always been dominated by a certain market populism, and the ability of banks to "create money out of nothing"-and even more, to prevent anyone else from doing so-has always been the bugaboo of market populists, since it directly contradicts the idea that markets are a simple expression of democratic equality. Still, since Nixon's floating of the dollar, it has become evident that it's only the wizard behind the screen who seems to be maintaining the viability of the whole arrangement. Under the free-market orthodoxy that followed, we have all being asked, effectively, to accept that "the market" is a self-regulating system, with the rising and falling of prices akin to a force of nature, and simultaneously to ignore the fact that, in the business pages, it is simply a.s.sumed that markets rise and fall mainly in antic.i.p.ation of, or reaction to, decisions regarding interest rates by Alan Greenspan, or Ben Bernanke, or whoever is currently the chairman of the Federal Reserve.5 One element, however, tends to go flagrantly missing in even the most vivid conspiracy theories about the banking system, let alone in official accounts: that is, the role of war and military power. There's a reason why the wizard has such a strange capacity to create money out of nothing. Behind him, there's a man with a gun.

True, in one sense, he's been there from the start. I have already pointed out that modern money is based on government debt, and that governments borrow money in order to finance wars. This is just as true today as it was in the age of King Phillip II. The creation of central banks represented a permanent inst.i.tutionalization of that marriage between the interests of warriors and financiers that had already begun to emerge in Renaissance Italy, and that eventually became the foundation of financial capitalism.6 Nixon floated the dollar in order to pay for the cost of a war in which, during the period of 19701972 alone, he ordered more than four million tons of explosives and incendiaries dropped on cities and villages across Indochina-causing one senator to dub him "the greatest bomber of all time."7 The debt crisis was a direct result of the need to pay for the bombs, or to be more precise, the vast military infrastructure required to deliver them. This was what was causing such an enormous strain on the U.S. gold reserves. Many hold that by floating the dollar, Nixon converted the U.S. currency into pure "fiat money"-mere pieces of paper, intrinsically worthless, that were treated as money only because the United States government insisted that it should be. In that case, one could well argue that U.S. military power was now the only thing backing up the currency. In a certain sense this is true, but the notion of "fiat money" a.s.sumes that money really "was" gold in the first place. Really we are dealing with another variation of credit money.

Contrary to popular belief, the U.S. government can't "just print money," because American money is not issued by the government at all, but by private banks, under the aegis of the Federal Reserve System. The Federal Reserve-despite the name-is technically not part of the government at all, but a peculiar sort of public-private hybrid, a consortium of privately owned banks whose chairman is appointed by the United States president, with Congressional approval, but which otherwise operates without public oversight. All dollar bills in circulation in America are "Federal Reserve Notes"-the Fed issues them as promissory notes, and commissions the U.S. mint to do the actual printing, paying it four cents for each bill.8 The arrangement is just a variation of the scheme originally pioneered by the Bank of England, whereby the Fed "loans" money to the United States government by purchasing treasury bonds, and then monetizes the U.S. debt by lending the money thus owed by the government to other banks.9 The difference is that while the Bank of England originally loaned the king gold, the Fed simply whisks the money into existence by saying that it's there. Thus, it's the Fed that has the power to print money.10 The banks that receive loans from the Fed are no longer permitted to print money themselves, but they are allowed to create virtual money by making loans at a fractional reserve rate established by the Fed-though in the wake of the current credit crisis, at time of this writing, there has been a move to remove even these restrictions.

All this is a bit of a simplification: monetary policy is endlessly arcane, and it does sometimes seem, intentionally so. (Henry Ford once remarked that if ordinary Americans ever found out how the banking system really worked, there would be a revolution tomorrow.) What is remarkable for present purposes is not so much that American dollars are created by banks, but that one apparently paradoxical result of Nixon's floating the currency was that these bank-created dollars themselves replaced gold as the world's reserve currency: that is, as the ultimate store of value in the world, yielding the United States enormous economic advantages.

Meanwhile, the U.S. debt remains, as it has been since 1790, a war debt: the United States continues to spend more on its military than do all other nations on earth put together, and military expenditures are not only the basis of the government's industrial policy; they also take up such a huge proportion of the budget that by many estimations, were it not for them, the United States would not run a deficit at all.

The U.S. military, unlike any other, maintains a doctrine of global power projection: that it should have the ability, through roughly 800 overseas military bases, to intervene with deadly force absolutely anywhere on the planet. In a way, though, land forces are secondary; at least since World War II, the key to U.S. military doctrine has always been a reliance on air power. The United States has fought no war in which it did not control the skies, and it has relied on aerial bombardment far more systematically than any other military-in its recent occupation of Iraq, for instance, even going so far as to bomb residential neighborhoods of cities ostensibly under its own control. The essence of U.S. military predominance in the world is, ultimately, the fact that it can, at will, drop bombs, with only a few hours' notice, at absolutely any point on the surface of the planet.11 No other government has ever had anything remotely like this sort of capability. In fact, a case could well be made that it is this very power that holds the entire world monetary system, organized around the dollar, together.

Because of United States trade deficits, huge numbers of dollars circulate outside the country; and one effect of Nixon's floating of the dollar was that foreign central banks have little they can do with these dollars except to use them to buy U.S. treasury bonds.12 This is what is meant by the dollar becoming the world's "reserve currency." These bonds are, like all bonds, supposed to be loans that will eventually mature and be repaid, but as economist Michael Hudson, who first began observing the phenomenon in the early '70s, noted, they never really do: To the extent that these Treasury IOUs are being built into the world's monetary base they will not have to be repaid, but are to be rolled over indefinitely. This feature is the essence of America's free financial ride, a tax imposed at the entire globe's expense.13 What's more, over time, the combined effect of low interest payments and the inflation is that these bonds actually depreciate in value-adding to the tax effect, or as I preferred to put it in the first chapter, "tribute." Economists prefer to call it "seigniorage." The effect, though, is that American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.

At the same time, U.S. policy was to insist that those countries relying on U.S. treasury bonds as their reserve currency behaved in exactly the opposite way as they did: observing tight money policies and scrupulously repaying their debts.

As I've already observed, since Nixon's time, the most significant overseas buyers of U.S. treasury bonds have tended to be banks in countries that were effectively under U.S. military occupation. In Europe, Nixon's most enthusiastic ally in this respect was West Germany, which then hosted more than three hundred thousand U.S. troops. In more recent decades the focus has s.h.i.+fted to Asia, particularly the central banks of countries like j.a.pan, Taiwan, and South Korea-again, all U.S. military protectorates. What's more, the global status of the dollar is maintained in large part by the fact that it is, again since 1971, the only currency used to buy and sell petroleum, with any attempt by OPEC countries to begin trading in any currency stubbornly resisted by OPEC members Saudi Arabia and Kuwait-also U.S. military protectorates. When Saddam Hussein made the bold move of singlehandedly switching from the dollar to the euro in 2000, followed by Iran in 2001, this was quickly followed by American bombing and military occupation.14 How much Hussein's decision to buck the dollar really weighed into the U.S. decision to depose him is impossible to know, but no country in a position to make a similar switch can ignore the possibility. The result, among policymakers particularly in the global South, is widespread terror.15 In all this, the advent of the free-floating dollar marks not a break with the alliance of warriors and financiers on which capitalism itself was originally founded, but its ultimate apotheosis. Neither has the return to virtual money led to a great return to relations of honor and trust: quite the contrary. By 1971, the change had only just begun. The American Express card, the first general-purpose credit card, had been invented a mere thirteen years before, and the modern national credit-card system had only really come into being with the advent of Visa and MasterCard in 1968. Debit cards were later, creatures of the 1970s, and the current, largely cashless economy only came into being in the 1990s. All of these new credit arrangements were mediated not by interpersonal relations of trust but by profit-seeking corporations, and one of the earliest and greatest political victories of the U.S. credit-card industry was the elimination of all legal restrictions on what they could charge as interest.

If history holds true, an age of virtual money should mean a movement away from war, empire-building, slavery, and debt peonage (waged or otherwise), and toward the creation of some sort of overarching inst.i.tutions, global in scale, to protect debtors. What we have seen so far is the opposite. The new global currency is rooted in military power even more firmly than the old was. Debt peonage continues to be the main principle of recruiting labor globally: either in the literal sense, in much of East Asia or Latin America, or in the subjective sense, whereby most of those working for wages or even salaries feel that they are doing so primarily to pay off interest-bearing loans. The new transportation and communications technologies have just made it easier, making it possible to charge domestics or factory workers thousands of dollars in transportation fees, and then have them work off the debt in distant countries where they lack legal protections.16 Insofar as overarching grand cosmic inst.i.tutions have been created that might be considered in any way parallel to the divine kings of the ancient Middle East or the religious authorities of the Middle Ages, they have not been created to protect debtors, but to enforce the rights of creditors. The International Monetary Fund is only the most dramatic case in point here. It stands at the pinnacle of a great, emerging global bureaucracy-the first genuinely global administrative system in human history, enshrined not only in the United Nations, the World Bank, and the World Trade Organization, but also the endless host of economic unions and trade organizations and non-governmental organizations that work in tandem with them-created largely under U.S. patronage. All of them operate on the principle that (unless one is the United States Treasury), "one has to pay one's debts"-since the specter of default by any country is a.s.sumed to imperil the entire world monetary system, threatening, in Addison's colorful image, to turn all the world's sacks of (virtual) gold into worthless sticks and paper.

All true. Still, we are speaking of a mere forty years here. But Nixon's gambit, what Hudson calls "debt imperialism," has already come under considerable strain. The first casualty was precisely the imperial bureaucracy dedicated to the protection of creditors (other than those that were owed money by the United States). IMF policies of insisting that debts be repaid almost exclusively from the pockets of the poor were met by an equally global movement of social rebellion (the so-called "anti-globalization movement"-though the name is profoundly deceptive), followed by outright fiscal rebellion in both East Asia and Latin America. By 2000, East Asian countries had begun a systematic boycott of the IMF. In 2002, Argentina committed the ultimate sin: they defaulted-and got away with it. Subsequent U.S. military adventures were clearly meant to terrify and overawe, but they do not appear to have been very successful: partly because, to finance them, the United States had to turn not just to its military clients, but increasingly, to China, its chief remaining military rival. After the near-total collapse of the U.S. financial industry, which despite having been very nearly granted rights to make up money at will, still managed to end up with trillions in liabilities it could not pay, bringing the world economy to a standstill, eliminating even the pretense that debt imperialism guaranteed stability.

Just to give a sense of how extreme a financial crisis we are talking about, here are some statistical charts culled from the pages of the St. Louis Federal Reserve web page.17 Here is the amount of U.S. debt held overseas: Meanwhile, private U.S. banks reacted to the crash by abandoning any pretense that we are dealing with a market economy, s.h.i.+fting all available a.s.sets into the coffers of the Federal Reserve itself, which purchased U.S. Treasuries: Allowing them, through yet another piece of arcane magic that none of us could possibly understand, to end up, after an initial near-$400-billion dip, with far larger reserves than they had ever had before.

At this point, some U.S. creditors clearly feel they are finally in a position to demand that their own political agendas be taken into account.

CHINA WARNS U.S. ABOUT DEBT MONETIZATION.

Seemingly everywhere he went on a recent tour of China, Dallas Fed President Richard Fisher was asked to deliver a message to Federal Reserve Chairman Ben Bernanke: "stop creating credit out of thin air to purchase U.S. Treasuries."18 Again, it's never clear whether the money siphoned from Asia to support the U.S. war machine is better seen as "loans" or as "tribute." Still, the sudden advent of China as a major holder of U.S. treasury bonds has clearly altered the dynamic. Some might question why, if these really are tribute payments, the United States' major rival would be buying treasury bonds to begin with-let alone agreeing to various tacit monetary arrangements to maintain the value of the dollar, and hence, the buying power of American consumers.19 But I think this is a perfect case in point of why taking a very long-term historical perspective can be so helpful.

From a longer-term perspective, China's behavior isn't puzzling at all. In fact it's quite true to form. The unique thing about the Chinese empire is that it has, since the Han dynasty at least, adopted a peculiar sort of tribute system whereby, in exchange for recognition of the Chinese emperor as world-sovereign, they have been willing to shower their client states with gifts far greater than they receive in return. The technique seems to have been developed almost as a kind of trick when dealing with the "northern barbarians" of the steppes, who always threatened Chinese frontiers: a way to overwhelm them with such luxuries that they would become complacent, effeminate, and unwarlike. It was systematized in the "tribute trade" practiced with client states like j.a.pan, Taiwan, Korea, and various states of Southeast Asia, and for a brief period from 1405 to 1433, it even extended to a world scale, under the famous eunuch admiral Zheng He. He led a series of seven expeditions across the Indian Ocean, his great "treasure fleet"-in dramatic contrast to the Spanish treasure fleets of a century later-carrying not only thousands of armed marines, but endless quant.i.ties of silks, porcelain, and other Chinese luxuries to present to those local rulers willing to recognize the authority of the emperor.20 All this was ostensibly rooted in an ideology of extraordinary chauvinism ("What could these barbarians possibly have that we really need, anyway?"), but, applied to China's neighbors, it proved extremely wise policy for a wealthy empire surrounded by much smaller but potentially troublesome kingdoms. In fact, it was such wise policy that the U.S. government, during the Cold War, more or less had to adopt it, creating remarkably favorable terms of trade for those very states-Korea, j.a.pan, Taiwan, certain favored allies in Southeast Asia-that had been the traditional Chinese tributaries; in this case, in order to contain China.21 Bearing all this in mind, the current picture begins to fall easily back into place. When the United States was far and away the predominant world economic power, it could afford to maintain Chinese-style tributaries. Thus these very states, alone amongst U.S. military protectorates, were allowed to catapult themselves out of poverty and into first-world status.22 After 1971, as U.S. economic strength relative to the rest of the world began to decline, they were gradually transformed back into a more old-fas.h.i.+oned sort of tributary. Yet China's getting in on the game introduced an entirely new element. There is every reason to believe that, from China's point of view, this is the first stage of a very long process of reducing the United States to something like a traditional Chinese client state. And of course, Chinese rulers are not, any more than the rulers of any other empire, motivated primarily by benevolence. There is always a political cost, and what that headline marked was the first glimmerings of what that cost might ultimately be.

All that I have said so far merely serves to underline a reality that has come up constantly over the course of this book: that money has no essence. It's not "really" anything; therefore, its nature has always been and presumably always will be a matter of political contention. This was certainly true throughout earlier stages of U.S. history, incidentally-as the endless nineteenth-century battles between goldbugs, greenbackers, free bankers, bi-metallists and silverites so vividly attest-or, for that matter, the fact that American voters were so suspicious of the very idea of central banks that the Federal Reserve system was only created on the eve of World War I, three centuries after the Bank of England. Even the monetization of the national debt is, as I've already noted, double-edged. It can be seen-as Jefferson saw it-as the ultimate pernicious alliance of warriors and financiers; but it also opened the way to seeing government itself as a moral debtor, of freedom as something literally owed to the nation. Perhaps no one put it so eloquently as Martin Luther King Jr., in his "I Have a Dream" speech, delivered on the steps of the Lincoln Memorial in 1963: In a sense we've come to our nation's capital to cash a check. When the architects of our republic wrote the magnificent words of the Const.i.tution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir. This note was a promise that all men, yes, black men as well as white men, would be guaranteed the "unalienable Rights" of "Life, Liberty and the pursuit of Happiness." It is obvious today that America has defaulted on this promissory note, insofar as her citizens of color are concerned. Instead of honoring this sacred obligation, America has given the Negro people a bad check, a check which has come back marked "insufficient funds."

One can see the great crash of 2008 in the same light-as the outcome of years of political tussles between creditors and debtors, rich and poor. True, on a certain level, it was exactly what it seemed to be: a scam, an incredibly sophisticated Ponzi scheme designed to collapse in the full knowledge that the perpetrators would be able to force the victims to bail them out. On another level it could be seen as the culmination of a battle over the very definition of money and credit.

By the end of World War II, the specter of an imminent working-cla.s.s uprising that had so haunted the ruling cla.s.ses of Europe and North America for the previous century had largely disappeared. This was because cla.s.s war was suspended by a tacit settlement. To put it crudely: the white working cla.s.s of the North Atlantic countries, from the United States to West Germany, were offered a deal. If they agreed to set aside any fantasies of fundamentally changing the nature of the system, then they would be allowed to keep their unions, enjoy a wide variety a social benefits (pensions, vacations, health care ...), and, perhaps most important, through generously funded and ever-expanding public educational inst.i.tutions, know that their children had a reasonable chance of leaving the working cla.s.s entirely. One key element in all this was a tacit guarantee that increases in workers' productivity would be met by increases in wages: a guarantee that held good until the late 1970s. Largely as a result, the period saw both rapidly rising productivity and rapidly rising incomes, laying the basis for the consumer economy of today.

Economists call this the "Keynesian era" since it was a time in which John Maynard Keynes' economic theories, which already formed the basis of Roosevelt's New Deal in the United States, were adopted by industrial democracies pretty much everywhere. With them came Keynes' rather casual att.i.tude toward money. The reader will recall that Keynes fully accepted that banks do, indeed, create money "out of thin air," and that for this reason, there was no intrinsic reason that government policy should not encourage this during economic downturns as a way of stimulating demand-a position that had long been dear to the heart of debtors and anathema to creditors.

Keynes himself had in his day been known to make some fairly radical noises, for instance calling for the complete elimination of that cla.s.s of people who lived off other people's debts-the "the euthanasia of the rentier," as he put it-though all he really meant by this was their elimination through a gradual reduction of interest rates. As in so much of Keynesianism, this was much less radical than it first appeared. Actually it was thoroughly in the great tradition of political economy, hearkening back to Adam Smith's ideal of a debtless utopia but especially David Ricardo's condemnation of landlords as parasites, their very existence inimical to economic growth. Keynes was simply proceeding along the same lines, seeing rentiers as a feudal holdover inconsistent with the true spirit of capital acc.u.mulation. Far from a revolution, he saw it as the best way of avoiding one: I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work. And with the disappearance of its rentier aspect much else in it besides will suffer a sea-change. It will be, moreover, a great advantage of the order of events which I am advocating, that the euthanasia of the rentier, of the functionless investor, will be nothing sudden ... and will need no revolution.23 When the Keynesian settlement was finally put into effect, after World War II, it was offered only to a relatively small slice of the world's population. As time went on, more and more people wanted in on the deal. Almost all of the popular movements of the period from 1945 to 1975, even perhaps revolutionary movements, could be seen as demands for inclusion: demands for political equality that a.s.sumed equality was meaningless without some level of economic security. This was true not only of movements by minority groups in North Atlantic countries who had first been left out of the deal-such as those for whom Dr. King spoke-but what were then called "national liberation" movements from Algeria to Chile, or, finally, and perhaps most dramatically, in the late 1960s and 1970s, feminism. At some point in the '70s, things reached a breaking point. It would appear that capitalism, as a system, simply cannot extend such a deal to everyone. Quite possibly it wouldn't even remain viable if all its workers were free wage laborers; certainly it will never be able to provide everyone in the world the sort of life lived by, say, a 1960s auto worker in Michigan or Turin with his own house, garage, and children in college-and this was true even before so many of those children began demanding less stultifying lives. The result might be termed a crisis of inclusion. By the late 1970s, the existing order was clearly in a state of collapse, plagued simultaneously by financial chaos, food riots, oil shock, widespread doomsday prophecies of the end of growth and ecological crisis-all of which, it turned out, proved to be ways of putting the populace on notice that all deals were off.

The moment that we start framing the story this way, it's easy to see that the next thirty years, the period from roughly 1978 to 2009, follows nearly the same pattern. Except that the deal, the settlement, had changed. Certainly, when both Ronald Reagan in the United States and Margaret Thatcher in the UK launched a systematic attack on the power of labor unions, as well as on the legacy of Keynes, it was a way of explicitly declaring that all previous deals were off. Everyone could now have political rights-even, by the 1990s, most everyone in Latin America and Africa-but political rights were to become economically meaningless. The link between productivity and wages was chopped to bits: productivity rates have continued to rise, but wages have stagnated or even atrophied:24 This was accompanied, at first, by a return to "monetarism": the doctrine that even though money was no longer in any way based in gold, or in any other commodity, government and central-bank policy should be primarily concerned with carefully controlling the money supply to ensure that it acted as if it were a scarce commodity. Even as, at the same time, the financialization of capital meant that most money being invested in the marketplace was completely detached from any relation to production of commerce at all, but had become pure spec