Dressed like a preppie banker or finance manager in his chinos, loafers and oxford-cloth shirt, Doug Henwood is addressing a roomful of professors and graduate students who have come to listen to this maverick economist give a ruthlessly detailed, up-to-the-minute lecture about the Southeast Asian financial crisis. Looking very serious, Henwood concludes quietly that the exploded economies in the former "Asian bubble" are indeed stabilizing. International Monetary Fund bailouts will soothe anxious investors. This will allow the United States' seemingly unstoppable bull market to continue almost unabated. The news seems to startle everyone.
"I don't understand your optimism," an audience member says in an incredulous tone.
"Actually, I wouldn't call it optimism," Henwood responds with a wry smile. "For me it's pessimism, since I want capitalism to end."
Despite these sentiments, Henwood has spent more than a decade devoting himself to an intensive study of why capitalism and its ruling class are stronger than ever. His newsletter, the Left Business Observer, founded in 1986, is so packed with detailed research and insights about the goings-on of the free market that it's read by everyone from radical Marxists to rabidly pro-capitalist libertarians. Norman Pearlstine, former executive editor of the Wall Street Journal, has been roused enough by Henwood's work to characterize him as "scum."
Pearlstine's invective is proudly blurbed on the dust jacket of Henwood's latest book, titled simply "Wall Street" (Verso Press, 1997). A mind-bendingly exhaustive account of the market in that most fictive and fetishized of commodities, money itself, "Wall Street" is a masterful overview (and indictment) of big finance and the wealthy rentier class whose "labor" consists of trading stocks, bonds, futures, currencies and the latest mutant spawn of the derivatives market. Written in the language of finance theory, statistics and political economy, "Wall Street" is like a "Satanic Verses" for the creditor set. Henwood speaks a kind of financial blasphemy, using the sacred wisdom of capital against itself.
Between lectures at UC-Berkeley and Seattle, Henwood took some time to relax and chat with me about how he came to be one of the few Marxist economists ever to appear on CNN. "I hope my work is participating in cultural subversion," he cracks, "because I've spent all this time studying stuff that I hate -- I have to read IMF reports and bourgeois economists. Wall Street is populated by some of the most cynical, greedy bastards on earth. But it's not enough just to say that. The last thing I want to do is sound like a guy on a soapbox moralizing. It's not their personal moral characteristics that create the system they populate. Capitalism is essentially an amoral system based on exploitation. And Wall Street is part of the class struggle, to use an unfashionable term. But most people don't realize this, so the market looks incomprehensible to them."
Henwood came to be the renegade conscience of the bull market by a rather unusual route. Growing up with the baby boom in a quiet New Jersey suburb, he became infatuated with conservatism his senior year in high school. "Bill Buckley and Milton Freedman were my heroes," he recalls. "When I got to Yale in 1971, I joined the Party of the Right, which at the time seemed very exciting." But after a year of intense conservatism and what Henwood calls "caveman sexual politics," he grew disenchanted with the right wing. "Basically I fell in with a gang of corrupt hedonists and became an English major."
Despite his predilection for American literature, Henwood couldn't seem to stray far from the politics of the marketplace. "After college, I got a job at a crappy little brokerage firm on Wall Street, formed by a Bell Labs physicist who wanted to apply mathematical models to the stock market. He and his gang of reject brokers were running this place, which eventually went under." In the introduction to "Wall Street'," Henwood describes how his experience at this firm formed his first impression of Wall Street as a place run not by the rules of freedom, but by force. "One morning riding the elevator up to work, I noticed a cop standing next to me, a gun on his hip," Henwood writes. "I realized in an instant that all the sophisticated machinations that went on upstairs and around the whole Wall Street neighborhood rested ultimately on force. Financial power, too, grows out of the barrel of a gun."
But Henwood did not begin to record his thoughts on the coercive power of money until he dropped out of a Ph.D. program in English, where he had been tackling a dissertation project about narcissism in American literature. Fascinated by psychoanalysis, and intrigued by the idea that modernist poet Wallace Stevens was an insurance executive, Henwood kept trying to draw parallels between the worlds of aesthetics and speculative finance.
Finally, after working for several years in New York writing indexes for medical textbooks, Henwood was struck by an idea. "I was reading Rock 'n Roll Confidential, an eight-page newsletter, and I thought, "I could do one of these!" While I had been doing my dissertation, I read the business press a lot, along with Marxian economics, so I had spent quite a few years immersing myself in financial matters. I thought I had developed enough expertise to tell the world." A friend designed a logo for the Left Business Observer (whose masthead reads "accumulation and its discontents"), and Henwood sent out the first 200 copies for free -- "some to famous people," he grins.
Although he is a self-taught economist, Henwood immediately gained attention for his outspoken, educated perspective on topics so murky that even high-paid investors find them difficult to articulate. "Within two days I got a call from Victor Navasky [publisher of the Nation], who wanted me to come down and meet him," Henwood recalls. Later, with favorable reviews from progressive journalist Christopher Hitchens and a plug from Alan Abelson of Barron's, the Left Business Observer hit its stride. Henwood became the media pundit to call when markets were collapsing. "If the TV producers start calling me," he laughs, "it's time to buy."
"One of the reasons I started the newsletter was that I thought most leftist economic theory was really dull or out-of-touch. But then the journalism was all of a moral exhortatory style. I wanted some combination of being aware of history and theory, mixed with a journalistic engagement with the present. I really do admire the scientific method; I admire the whole mode of investigation which you might call institutionalized skepticism." It's this devotion to scientific rigor and skepticism that shapes the LBO's content, which is often illustrated by charts, graphs and statistical calculations. You won't find any foamy predictions of spontaneous revolution in its pages, nor will you find wishful screeds about how the stock market is just a weird but irrelevant growth on the body of the "real" economy. You will, however, find clear explanations of why bonds become more valuable when interest rates drop; investigative reports on the so-called "social investment" strategies of firms like Working Assets; and informed coverage of everything from why the Mexican stock market collapsed to the latest census statistics on race and work.
Henwood is skeptical of accepted wisdom on both the left and the right. "One of the most embarrassing inheritances of Marxism is the idea that the system has to collapse inevitably into our waiting arms. It's a substitute for politics. If you assume there's a scientific inevitability, then you don't have to do anything." This lesson -- that there will probably be no inevitable flaming demise for capitalism in our near future -- became hair-raisingly obvious to Henwood during the 1980s savings and loan disaster and accompanying stock market crash. "In 1987, I thought that the crash was the end of the world," Henwood says ruefully. "I thought it was the beginning of another depression. That's why I'm so measured now. When the depression didn't happen in the late '80s, that made me really rethink why it didn't, and I came to appreciate the power of state bailouts."
Bailouts are on Henwood's mind right now, as he prepares a series of his recent essays for a possible new book with Verso Press. "Wall Street" has sold more than 20,000 copies, a gargantuan run for the small, progressive publishing house, and Henwood's editor is eager for more.
Although he's leery of making market predictions -- it would make him too much like the market analysts he loathes -- Henwood is clear about what he thinks are bad economic choices. Privatizing Social Security, as he explains in "Wall Street," is a "horrible" idea; it will likely result in smaller Social Security checks for the poor, which will get even smaller when the market is shrinking.
And the idea that we can improve the financial market through socially conscious investing (à la Ben & Jerry's or the Body Shop) is also flawed. There is almost no way to engage in large-scale corporate production and not deal with supposedly "bad" industries like logging and steel. After all, to choose just one example, Ben & Jerry's needs cardboard for its ice cream containers and metal for the chairs in its shops. Ben & Jerry's may be buying brownies from Vermont collectives, but ultimately it's also dealing with clear cutters when it buys thousands of yards of cardboard containers for Chocolate Brownie ice cream.
"Back in the '80s I used to play the market in stocks and options," Henwood admits. "I actually made quite a lot of money in the crash, but after that I sold all my stocks. What money I've got now -- which isn't much -- is in government bonds. Ethical investment is just like military justice. It's a contradiction in terms."
"No activity under capitalism is undertaken unless you can make money at it," Henwood notes. "Markets are political institutions in the broadest sense -- they're about organizing ownership and control. Through the bond markets, a small number of investors control public policy, and through the stock markets, the same small group exercises control over corporate policy. One might conclude wrongly that you can separate 'virtuous production' out of all this. But you can't."
As for the future of capitalism as we know it, Henwood is cautious. He admits we're in a time of unprecedented flux, but isn't about to suggest where this might lead us. "The great bull market of 1982 is at best in its late phases. Earlier this year it had reached a phase of total wackiness, with speculative manias and a kind of Ponzi structure. But then Asia just fell apart. And it's very hard to point to an external cause, unlike Mexico a few years ago when interest rates rose and so Mexico collapsed. You could understand that by traditional methods. Asia collapsed out of nowhere," he says. "It shouldn't have had such a radical collapse, just a minor adjustment. We can see empirically that something went wrong. And yet financial leaders still can't figure out that unregulated markets are simply by their nature destructive. They want to blame cronyism, not the nature of markets themselves."
Henwood leans back on the sofa and sighs. My roommate wanders into the room where we're talking and offers the latest news about his leftist punk band, the Christal Methodists. He and Henwood swap tales of the music underground. This is just another of Henwood's contradictions: He's respected in the worlds of finance and punk rock.
But what about the next stage of the free market, of capitalism itself?
Henwood shrugs. "People have realized that something is fundamentally wrong, but they don't want to take the next step and control capital and regulate. No one really knows what re-regulation would look like, who would do it or what political forces would be mobilized. There's a sense that the old order is dying but there's nothing new being born yet."
