Steve Fraser en From the San Francisco Earthquake to Superstorm Sandy, How Disaster Capitalism Makes Money off of Tragedy <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">Doesn&#039;t matter if the disaster is man-made or natural, wealth always triumphs.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p><i>To stay on top of important articles like these, sign up to receive the latest updates from </i><a href=";id=1e41682ade"><span class="s1"><i> here</i></span></a>.</p><p>In 2007, a financial firestorm ravaged Wall Street and the rest of the country.  In 2012, Hurricane Sandy obliterated a substantial chunk of the Atlantic seaboard.  We think of the first as a man-made calamity, the second as the malignant innocence of nature.  But neither the notion of a man-made nor natural disaster quite captures how the power of a few and the vulnerability of the many determine what is really going on at ground level.  Causes and consequences, who gets blamed and who leaves the scene permanently scarred, who goes down and who emerges better positioned than before: these are matters often predetermined by the structures of power and wealth, racial and ethnic hierarchies, and despised and favored forms of work, as well as moral and social prejudices in place before disaster strikes. </p><p>When it comes to our recent financial implosion, this is easy enough to see, although great efforts have been expended trying to deny the self-evident.  “Man” did not bring the system to its knees; the country’s dominant financial institutions and a complicit government did that.  They’ve recovered, the rest of us haven’t.</p><p>Sandy seems a more ambiguous case.  On the one hand, it’s obvious enough that an economy resting on fossil fuels played a catalytic role in intensifying the storm.  Those corporate interests profiting from that form of energy production and doing all they can to defend it are certainly culpable, not the rest of mankind which has no other choice but to depend on the energy system we’re given. </p><p>On the other hand, rich and poor, big businesses and neighborhood shops suffered; some, however, more than others.  Among them were working class communities; public-housing residents; outer borough homeowners; communities in Long Island, along the New Jersey shore, and inland as well; workers denied unemployment compensation; and the old, the sick, and the injured abandoned for days or weeks in dark and dangerous high-rises without medical help or access to fresh food or water.  Help, when it came to these “disadvantaged” worlds, often arrived late, or last, or not at all.</p><p>Cleaning up and rebuilding New York City and other places hit by the storm will provide a further road map of who gets served and whose ox gets gored.  It’s ominous, if hardly shocking, that Mayor Bloomberg has already <a href="" target="_blank">appointed</a>Mark Ricks of Goldman Sachs to the business-dominated team planning the city’s future.  Where would this billionaire mayor turn other than to his fraternity brothers, especially in this era when, against all the odds, we still worship at the altar of the deal-makers, no matter their malfeasances and fatal ineptitudes?</p><p>Still, it is early days and the verdict is not in on the post-Sandy future.  However, an <a href="" target="_blank">incisive analysis</a> by sociologists Kevin Fox Gotham and Miriam Greenberg of what happened after the 9/11 attacks in New York and in New Orleans after Hurricane Katrina offers some concrete forebodings.  Everyone knows that, as soon as Katrina made landfall, the racial divisions of New Orleans became the scandal of the month when it came to which communities were drowned and which got helped, who got arrested (and shot), and who left town forever.  To be poor in New Orleans during and after Katrina was a curse.  To be poor and black amounted to excommunication. </p><p>Gotham and Greenberg prove that, post-9/11 and post-Katrina, reconstruction and rehabilitation was also skewed heavily in favor of the business community and the wealthier.  In both cities, big business controlled the redevelopment process -- and so where the money landed and where it didn’t. </p><p>Tax breaks and private sector subsidies became channels for federal aid.  “Public benefit” standards, which once accompanied federal grants and tax exemptions to insure that projects served some public purpose, especially to “benefit persons of low and moderate income,” were eliminated, leaving poorer people out in the cold, while exacerbating existing inequalities.  Governments scurried around inventing ways to auction off reconstruction projects to private interests by issuing tax exempt “Private Activity Bonds.”  These were soon gloriously renamed “Liberty Bonds,” though the unasked question was: Whose liberty?</p><p>The lion’s share of grants and exemptions went, of course, to the biggest corporations.  In New York, more than 40% of all bonds, or $2.4 billion, went to a single developer, Larry Silverstein.  Second to Silverstein was -- don’t be shocked -- Goldman Sachs.  Yet these institutions and their inhabitants represented at best a mere 15% of those affected, most of whom were low-wage workers who, in some cases, ended up getting evicted from their homes thanks to those business-oriented tax breaks.  Federal aid, hypothetically tied to building affordable housing and the creation of living-wage jobs ended up as just that: hypothetical.</p><p>Naturally, these mechanisms proved lucrative.  More than that they are the means by which elites use disasters as opportunities to turn wrecked cities or regions into money-making centers and playlands for what in the nineteenth century was called “the upper tendom” and what we now call “the 1%.”</p><p>Indeed, the original “upper tendom” faced its own “natural” disasters during the Gilded Age.  Then, too, such catastrophes exposed the class and racial anatomy of America to public view.  Then, too, one man’s disaster was another’s main chance.  Whether you focus on the cause of the calamity, the way people reacted to it, or the means and purposes that drove the reclamation afterwards, disasters and capitalism metabolized together long before “<a href="" target="_blank">disaster capitalism</a>” became the nom de jour. </p><p><strong>Fire                                        </strong></p><p>Mrs. O’Leary’s infamously rambunctious cow did not kick a lantern into a batch of hay and start the Chicago fire of 1871. To this day, however, many probably still believe the story, even though the journalist who first reported it admitted a mere 20 years later that he’d made it up. </p><p>It was a story that stuck because it <a href="" target="_blank">meshed with</a> the ethnic and social fears and prejudices of bourgeois Chicago.  Irish and German immigrants then filled up the congested warrens of that Midwestern center of industry and commerce.  Their customs, religions, languages, political beliefs, and proletarian status were alien and alarming -- especially because that was the year of the Paris Commune, when proletarians took over the French national capital for two months.  It was an event that scared the daylights out of the “upper tendom” and broad stretches of the middle classes as well in cities and towns throughout the U.S.</p><p>Chicago’s papers were full of stories about “petroleuses,” “amazon-like women” with “long flaming hair” coursing through the streets of Paris hurling the equivalent of Molotov cocktails at the French National Guard.   Could it happen here?  That was the question.  Impoverished immigrant workers were already raising a ruckus in mines and on railroads.  Perhaps as in France, so in Chicago they would become conspirators and incendiaries.  Perhaps the great fire that gutted the city was no accident.  Even if it was, weren’t there those prepared to make malevolent use of it?</p><p>Rumors of secret societies, revolutionary arsonists, and mass assaults on property circulated widely by word of mouth and through the Chicago media.  So Mrs. O’Leary proved an especially apt scapegoat for the conflagration, fitting perfectly the temper of the time.  She was, after all, “low class” Irish at a moment when her immigrant countrymen were still despised as rustic potato eaters, bestial and good for nothing but back-breaking labor.  It was also known that they were all too Catholic, notoriously fond of alcohol, and quite capable of terrorizing British landlords back home. </p><p>Less talked about was the likelier cause of the fire: namely, the unimaginably congested neighborhoods of the poor, made entirely out of wood -- houses, signs, and sidewalks, too.  These had for years been the sites of frequent fires (two a day in 1870).  Such frail structures became kindling for the flames that would in 1871 end up leveling downtown banks, businesses, and the homes of the rich.</p><p>These fears leaped with the flames that were burning up the city, killing 3,000 and leaving 100,000 homeless, and in the days and weeks that followed they hardly subsided.  Immigrant, poor, and proletarian, Chicago’s working class was held in deep moral suspicion.  Believing is often seeing, so when an upper-class eyewitness looked here’s what he saw: “Vice and crime had got the first scorching.  The district where the fire got firm foothold was the Alsatia of Chicago. Fleeing before it was a crowd of blear-eyed, drunken and diseased wretches, male and female, half naked, ghastly with painted cheeks cursing, uttering ribald jests.” </p><p>Relief agencies, mainly privately run, were charged with aiding only the “worthy,” and they were “deserving” of help only after close inspection of their work habits, family arrangements, home economics, drinking customs, and so on.  Civil War General Phillip Sheridan established martial law and was quick to fire on suspected looters, while enforcing a curfew to keep the “twilight population” in check. </p><p>At the same time, Chicago’s business elite, its civic leaders, and a remarkable roster of first-rate architects went about <a href="" target="_blank">reshaping downtown Chicago</a> into a modern hub of commerce and culture that they hoped would rival New York.  Real-estate speculators made a fortune, although none were known to have been shot for looting.  For some, in other words, the fire functioned as a fortuitous slum clearance/urban renewal program on speed.</p><p>Angry working people marched against new restrictions on cheaper building materials, seeing them as discriminatory against labor and immigrants, as attempts to force them out of their city.  They paraded to the Common Council, where they threw bricks through the windows while it dutifully passed the ordinances.  For their efforts, the protesters were denounced as the “scum of the community,” “mongrel firebugs,” and likened to the Parisian communards, intent on establishing a “reign of terror.” </p><p>The fire was out but only for the time being. The fires of social insurrection were still smoldering and would flame up again and again in the streets of Chicago throughout the rest of the century.</p><p><strong>Flood</strong></p><p>An unnatural disaster!  With a “roar like thunder,” a <a href="" target="_blank">wall of water</a> 60 feet high from Lake Conemaugh, believed then to be the largest artificial body of water in the world, came racing down a canyon near Johnstown, Pennsylvania, at 40 miles an hour.  Everything in its path was swept away, starting with Woodvale, a company town run by the Cambria Iron Works.  Johnstown itself was next as the tidal wave rushed on relentlessly drowning and destroying bridges, oil tankers, and factories.  It tossed locomotives, railroad cars, and even houses into the air.  It ended the lives of more than 2,200 people.  Seven hundred and seventy-seven were never identified and are buried in the “Plot of the Unknown.”  Johnstown has been memorialized ever since in song and story.</p><p>Was it fate as well as an especially rainy spring that did the trick in 1889?  At the top of the canyon, members of the South Fork Fishing and Hunting Club, men like iron and steel magnates Andrew Carnegie, Henry Clay Frick, and Andrew Mellon, as well as the crème de la crème of Pittsburgh high society (the city was only 60 miles away) <a href="" target="_blank">had long enjoyed</a> the pleasures of that man-made lake.  They had gone fishing, paddle boating, and sailing there for years.  And for years, engineers kept informing the iron and steel barons that the earthen dam holding back its waters was defective.  The spillway was both too small and clogged with fencing materials meant to keep the expensive sports fish stocked in the lake from escaping into a nearby river.  Auxiliary discharge pipes had decayed and leaks had been routinely noticed at the base of the dam even when the weather was especially dry. </p><p>The club’s sportsmen did nothing.  In fact, they ordered several feet shaved off the top of the dam to make way for a road so members could get to their “cottages” faster from the nearby railroad station.  After the horror, there were lawsuits aplenty, but no one was ever held responsible for what quickly became a legendary tragedy.  In 1989, on the centennial of the disaster, an article in the Journal of Civil Engineering <a href="" target="_blank">confirmed</a> that the actions of the South Fork Club were the proximate cause of this “natural disaster.” </p><p>All was not lost, however.  Some years after Johnstown was rebuilt, Andrew Carnegie donated one of his libraries for which he would become <a href="" target="_blank">so widely celebrated</a>.</p><p><strong>Earthquake</strong></p><p>Bubonic plague returned to San Francisco when the earthquake of 1906 sent<a href="" target="_blank">hordes of rats</a> racing through the rubble, chasing through the raw sewage spilling into the streets as the city’s sewer pipes crumpled.  Anyone was potentially susceptible.  In one way the earthquake had been an <a href="" target="_blank">equal-opportunity destroyer</a>.  Chinatown, with its masses of poor living in squalid wooden shacks, was razed to the ground by the quake and subsequent fire.  Other working class precincts were similarly leveled and burnt.  But so, too, was Nob Hill, where the city’s gilded elite lived.</p><p>A mythic memory of communal suffering, self-sacrifice, and mutual aid emerged in the immediate aftermath of the San Francisco disaster, as it still does in the wake of many similar collective traumas.  After 9/11, as after Superstorm Sandy, stories of how people from all walks of life banded together to help one another were commonplace.  This was even true in Chicago after the fire, notwithstanding the white-hot hostilities between the classes and the masses.  These are not fables, but moving accounts drawn from real life.  They offer a kind of hope in disaster and, consoling as they are meant to be, linger on, sometimes forever.  Meanwhile, interred and resting in peace are often the disaster’s darker doings.</p><p>Looking back on earthquake-ravaged San Francisco, a well-off refugee remembered that the calamity “did not discriminate between tavern and tabernacle, bank and brothel.”  Yet the wife of the president of Levi-Strauss and Co. drove up to one of the relief centers in her limousine (in those early days cars were still mainly luxury machines and she owned one of the handful of limos in the city).  She was, of course, ushered right to the head of its endless line. </p><p>Even in these immediate post-quake reports, one could detect other motivations at work.  So, for example, while San Francisco was ravaged, the death toll was calculated at only about 375 people.  For a savage firestorm coursing through the most densely packed of neighborhoods, that low figure surprised people and left some wondering.  The answer turned out to be this: the city fathers were determined to cite a low number so as not to discourage San Francisco’s rebuilding and the outside investments that would require.  For many years, the figure was nonetheless accepted as accurate.  Recently, however, through the<a href="" target="_blank">diligent efforts</a> of researchers, we know that the numbers of dead were probably 10 times higher.  News of the bubonic plague was suppressed for similar reasons.</p><p>Calculations of that kind informed many aspects of the tragedy.  While sitting atop the San Andreas Fault is not ideal, should the underlying tectonic plates move a bit, not much was said about other contributory causes.  Minor earthquakes had erupted for decades and these had been set off, at least in part, due to the hydraulic mining that accompanied the California gold rush in its later years. </p><p>The operation to relieve the distress of hundreds of thousands of homeless people after the quake was tainted by class and ethnic biases not unlike those in Chicago.  Relief camps segregated refugees by class as well as race and gender.  Firefighters pooled water and equipment to save the homes of the wealthy first.  In working class districts, fire-fighting focused on commercial properties like a Folger’s Coffee warehouse and freight sheds, not on saving homes.  Seventeen hundred troops under General Frederick Funston guarded richer precincts because, as he explained, “San Francisco had its class of people no doubt who would take advantage of any opportunity to plunder the banks and rich jewelry…”  Chinatown did not die an entirely natural death either.  It was dynamited to create firebreaks and so prevent the fires already raging there from spreading to tonier neighborhoods.</p><p>Two years after the event, poor people were still living in “relief cottages,” tents, and other makeshift accommodations which, at rental rates of six dollars a month, many couldn’t afford.  To get relief required a letter from a clergyman testifying to one’s moral worthiness.  Working class women took to the streets to protest.</p><p>Meanwhile, former residents of Nob Hill had moved into equally luxurious digs elsewhere in the city.  However, they did have a problem in those early months.  There was a crying lack of domestic help.  As the San Francisco Chronicle reported, “Everyone had wondered where the cooks had gone.  They had been lost since the fire.”  So working women, who were bending all their efforts to restoring their devastated families by making use of what relief was available, were chastised for not returning to the kitchens of the elect.  One paper claimed that the women “were loafing… when families needed help,” or as a Red Cross matron observed, “Women [domestics] prefer to live… in relief camps.” </p><p>Help was, however, on the way.  Special rehabilitation funds were reserved for single women so they could resume their lives of domestic service. </p><p>Being solicitous about the needs of the rich could reach heights of absurdity.  It was recommended, for instance, that special philanthropic pawn shops be established for the upper classes where “people who saved their jewels could be rehabilitated by having such a place to go where they would not have to pay too much interest.”</p><p>If rehabilitation and recovery was on the civic mind, certain minds counted more than others.  Everybody knew that the city’s wood-frame buildings could not stand up to the pressures of another earthquake, which -- they also knew -- was a reasonable future possibility.  So new building codes were adopted calling for the use of reinforced concrete and steel in structures over six stories high.  They lasted a year.  Pressures from the business community and builders<a href="" target="_blank">caused the city</a> to relax those rules, except in the new downtown which was urgently readying itself for the Panama Pacific International Exposition of 1915, where the city’s boosters hoped to eradicate the last pungent odors of the calamity.</p><p>A $500 “bonus plan” to help rebuild homes favored the native-born and two-parent households.  Housing rehabilitation began with the wealthy and worked its way very slowly to the poor.  There were lots of jobs for “earthquake mechanics,” but at wages that could never keep up with escalating rents driven by real-estate speculators. </p><p>Insurance companies had by then rewritten their home-owner policies to exempt earthquakes from coverage.  Fire was covered, however, and it’s clear that people deliberately set fire to their own homes, already ruined by the tremors, since without insurance money there was no way they could recover and rebuild.  Not surprisingly, pay-offs were highest for the wealthy.  The insurance companies worked at delaying payments to the hardest hit, the poor.  This fit with the mood of the moment -- that those working class shacks were “no loss to the city.”    </p><p>Neither was Chinatown.  San Francisco’s upper crust, as well as large portions of its white middle and working classes, had never been fond of the Chinese in their midst, even though they depended on their labors.  The quake struck the city’s burghers as an opportunity to funnel them out of the center of the city -- the old Chinatown had largely been destroyed -- to some enclave on its outskirts.  (“Fire has reclaimed civilization and cleanliness from the Chinese ghetto.”) Their plans were, however, successfully thwarted by the concerted resistance of the Chinese community.</p><p>Resistance notwithstanding, Chicago and San Francisco emerged from their trials by fire as bustling centers of capitalist enterprise.  Disaster capitalism has a long history.  One of the last remaining “relief cottages” built by Funston’s army at the cost of $100 and rented for $2 was just recently sold for $600,000.</p><p>Recently, when the Republican majority in Congress temporarily blocked funds for Sandy relief and rehabilitation efforts, it was a chilling reminder that no matter how universal a calamity is, we live in times when the commonwealth regularly takes a backseat to wealth.  Appeals to fellowship, to mutual assistance and shared sacrifice seem to give way with scandalous speed to the commanding imperatives of a warped economy and political plutocracy.</p><p>More Sandys are surely <a href="" target="_blank">headed our way</a>, more climate-driven disasters of all sorts than we can now fully imagine. And rest assured, they will be no more “natural” than the Chicago fire, the Johnstown flood, or the San Francisco earthquake.  More than fire itself what we need to deal with now is the power of the finance, insurance, and real estate -- or FIRE -- sector whose leading corporations now effectively run our economy.  Without doing that, the “nature” these interests have helped create will punish us all while providing a ghoulish boondoggle for a few. </p><div> </div> Thu, 04 Apr 2013 06:14:00 -0700 Steve Fraser, Tom Dispatch 819594 at News & Politics Hurricane Sandy wall street political plutocracy capitalism Chicago Fire America Is Turning Into One Big Prison for People in Debt <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">From debtor’s prison to debtor nation.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p><em>To stay on top of important articles like these, sign up to receive the <a href="http://;id=1e41682ade">latest updates from here.</a></em></p><p>Shakespeare’s Polonius offered this classic advice to his son: “neither a borrower nor a lender be.”  Many of our nation’s Founding Fathers emphatically saw it otherwise.  They often lived by the maxim: always a borrower, never a lender be.  As tobacco and rice planters, slave traders, and merchants, as well as land and currency speculators, they depended upon long lines of credit to finance their livelihoods and splendid ways of life.  So, too, in those days, did shopkeepers, tradesmen, artisans, and farmers, as well as casual laborers and sailors.  Without debt, the seedlings of a commercial economy could never have grown to maturity.</p><p>Ben Franklin, however, was wary on the subject. “Rather go to bed supperless than rise in debt” was his warning, and even now his cautionary words carry great moral weight.  We worry about debt, yet we can’t live without it.</p><p>Debt remains, as it long has been, the Dr. Jekyll and Mr. Hyde of capitalism.  For a small minority, it’s a blessing; for others a curse.  For some the moral burden of carrying debt is a heavy one, and no one lets them forget it.  For privileged others, debt bears no moral baggage at all, presents itself as an opportunity to prosper, and if things go wrong can be dumped without a qualm.</p><p>Those who view debt with a smiley face as the royal road to wealth accumulation and tend to be forgiven if their default is large enough almost invariably come from the top rungs of the economic hierarchy.  Then there are the rest of us, who get scolded for our impecunious ways, foreclosed upon and dispossessed, leaving behind scars that never fade away and wounds that disable our futures. </p><p>Think of this upstairs-downstairs class calculus as the politics of debt.  British economist John Maynard Keynes put it like this: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”</p><p>After months of an impending “<a href="" target="_blank">debtpocalypse</a>,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private.  Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt -- mortgages gone bad<strong>,</strong>student loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living.<strong> </strong></p><p>The world economy almost came apart in 2007-2008, and still may do so under the whale-sized carcass of debt left behind by financial plunderers who found in debt the leverage to get ever richer.  Most of them still live in their mansions and McMansions, while other debtors live outdoors, or in cars or shelters, or doubled-up with relatives and friends -- or even in debtor’s prison. Believe it or not, a version of <a href="" target="_blank">debtor’s prison</a>, that relic of early American commercial barbarism, is back. </p><p>In 2013, you can’t actually be jailed for not paying your bills, but <a href="" target="_blank">ingenious corporations</a>, collection agencies, cops, courts, and lawyers have devised ways to insure that debt “delinquents” will end up in jail anyway.  With one-third of the states now allowing the jailing of debtors (without necessarily calling it that), it looks ever more like a <a href="" target="_blank">trend</a> in the making.</p><p>Will Americans tolerate this, or might there emerge a politics of resistance to debt, as has happened more than once in a past that shouldn’t be forgotten?  </p><p><strong>The World of Debtor’s Prisons</strong></p><p>Imprisonment for debt was a <a href="" target="_blank">commonplace</a> in colonial America and the early republic, and wasn’t abolished in most states until the 1830s or 1840s, in some cases not until after the Civil War.  Today, we think of it as a peculiar and heartless way of punishing the poor -- and it was.  But it was more than that.</p><p>Some of the richest, most esteemed members of society also ended up there, men like Robert Morris, who helped finance the American Revolution and ran the Treasury under the Articles of Confederation; John Pintard, a stock-broker, state legislator, and founder of the New York Historical Society; William Duer, graduate of Eton, powerful merchant and speculator, assistant secretary in the Treasury Department of the new federal government, and master of a Hudson River manse; a Pennsylvania Supreme Court judge; army generals; and other notables.</p><p>Whether rich or poor, you were there for a long stretch, even for life, unless you could figure out some way of discharging your debts.  That, however, is where the similarity between wealthy and impoverished debtors <a href="" target="_blank">ended</a>.</p><p>Whether in the famous Marshalsea in London where Charles Dickens had Little Dorritt’s father incarcerated (and where Dickens’s father had actually languished when the author was 12), or in the New Gaol in New York City, where men like Duer and Morris did their time, debtors prisons were segregated by class.  If your debts were large enough and your social connections weighty enough (the two tended to go together) you lived comfortably.  You were supplied with good food and well-appointed living quarters, as well as books and other pleasures, including on occasion manicurists and prostitutes. </p><p>Robert Morris entertained George Washington for dinner in his “cell.” Once released, he resumed his career as the new nation’s richest man.  Before John Pintard moved to New Gaol, he redecorated his cell, had it repainted and upholstered, and shipped in two mahogany writing desks.</p><p>Meanwhile, the mass of petty debtors housed in the same institution survived, if at all, amid squalor, filth, and disease.  They were often shackled, and lacked heat, clean water, adequate food, or often food of any kind.  (You usually had to have the money to buy your own food, clothing, and fuel.)  Debtors in these prisons frequently found themselves quite literally dying of debt.  And you could end up in such circumstances for trivial sums.  Of the 1,162 jailed debtors in New York City in 1787, 716 owed less than twenty shillings or one pound.  A third of Philadelphia’s inmates in 1817 were there for owing less than $5, and debtors in the city’s prisons outnumbered violent criminals by 5:1.  In Boston, 15% of them were women.  Shaming was more the point of punishment than anything else.</p><p>Scenes of public pathos were commonplace.  Inmates at the New Gaol, if housed on its upper floors, would lower shoes out the window on strings to collect alms for their release.  Other prisons installed “beggar gates” through which those jailed in cellar dungeons could stretch out their palms for the odd coins from passersby.</p><p>Poor and rich alike wanted out.  Pamphleteering against the institution of debtor’s prison began in the 1750s.  An Anglican minister in South Carolina denounced the jails, noting that “a person would be in a better situation in the French King’s Gallies, or the Prisons of Turkey or Barbary than in this dismal place.”  Discontent grew.  A mass escape from New Gaol of 40 prisoners armed with pistols and clubs was prompted by extreme hunger. </p><p>In the 1820s and 1830s, as artisans, journeymen, sailors, longshoremen, and other workers organized the early trade union movement as well as workingmen’s political parties, one principal demand was for the abolition of imprisonment for debt.  Inheritors of a radical political culture, their complaints echoed that <a href="" target="_blank">Biblical tradition of Jubilee</a> mentioned in Leviticus, which called for a cancellation of debts, the restoration of lost houses and land, and the freeing of slaves and bond servants every 50 years.</p><p>Falling into debt was a particularly ruinous affliction for those who aspired to modest independence as shopkeepers, handicraftsmen, or farmers.  As markets for their goods expanded but became ever less predictable, they found themselves taking out credit to survive and sometimes going into arrears, often followed by a stint in debtor’s prison that ended their dreams forever. </p><p>However much the poor organized and protested, it was the rich who got debt relief first.  Today, we assume that debts can be discharged through bankruptcy (although even now that option is either severely restricted or denied to certain classes of less favored debt delinquents like <a href="" target="_blank">college students</a>).  Although the newly adopted U.S. Constitution opened the door to a national bankruptcy law, Congress didn’t walk through it until 1800, even though many, including the well-off, had been lobbying for it.</p><p>Enough of the old moral faith that frowned on debt as sinful lingered.  The United States has always been an uncharitable place when it comes to debt, a curious attitude for a society largely settled by absconding debtors and indentured servants (a form of time-bound debt peonage).  Indeed, the state of Georgia was founded as a debtor’s haven at a time when England’s jails were overflowing with debtors.</p><p>When Congress finally passed the Bankruptcy Act, those in the privileged quarters at New Gaol threw a party.  Down below, however, life continued in its squalid way, since the new law only applied to people who had sizable debts.  If you owed too little, you stayed in jail. </p><p><strong>Debt and the Birth of a Nation</strong></p><p>Nowadays, the conservative media inundate us with warnings about debt from the Founding Fathers, and it’s true that some of them like Jefferson -- himself an inveterate, often near-bankrupt debtor -- did moralize on the subject.  However, Alexander Hamilton, an idol of the conservative movement, was the architect of the country’s first national debt, insisting that “if it is not excessive, [it] will be to us a national blessing.”</p><p>As the first Secretary of the Treasury, <a href="" target="_blank">Hamilton’s goal</a> was to transform the former 13 colonies, which today we would call an underdeveloped land, into a country that someday would rival Great Britain.  This, he knew, required liquid capital (resources not tied up in land or other less mobile forms of wealth), which could then be invested in sometimes highly speculative and risky enterprises.  Floating a national debt, he felt sure, would attract capital from well-positioned merchants at home and abroad, especially in England.</p><p>However, for most ordinary people living under the new government, debt aroused anger.  To begin with, there were all those veterans of the Revolutionary War and all the farmers who had supplied the revolutionary army with food and been paid in notoriously worthless “continentals” -- the currency issued by the Continental Congress -- or equally valueless state currencies.</p><p>As rumors of the formation of a new national government spread, speculators roamed the countryside buying up this paper money at a penny on the dollar, on the assumption that the debts they represented would be redeemed at face value.  In fact, that is just what Hamilton’s national debt would do, making these “sunshine patriots” quite rich, while leaving the yeomanry impoverished.</p><p>Outrage echoed across the country even before Hamilton’s plan got adopted.  Jefferson denounced the currency speculators as loathsome creatures and had this to say about debt in general: “The modern theory of the perpetuation of debt has drenched the earth with blood and crushed its inhabitants under burdens ever accumulating.”  He and others denounced the speculators as squadrons of counter-revolutionary “moneycrats” who would use their power and wealth to undo the democratic accomplishments of the revolution.</p><p>In contrast, Hamilton saw them as a disinterested monied elite upon whom the country’s economic well-being depended, while dismissing the criticisms of the Jeffersonians as the ravings of Jacobin levelers.  Soon enough, political warfare over the debt turned founding fathers into fratricidal brothers.  </p><p>Hamilton’s plan worked -- sometimes too well.  Wealthy speculators in land like Robert Morris, or in the building of docks, wharves, and other projects tied to trade, or in the national debt itself -- something William Duer and grandees like him specialized in -- seized the moment.  Often enough, however, they over-reached and found themselves, like the yeomen farmers and soldiers, in default to their creditors. </p><p>Duer’s attempts to corner the market in the bonds issued by the new federal government and in the stock of the country’s first National Bank represented one of the earliest instances of insider trading.  They also proved a lurid example of how speculation could go disastrously wrong.  When the scheme collapsed, it caused the country’s first Wall Street panic and a local depression that spread through New England, <a href="" target="_blank">ruining</a> “shopkeepers, widows, orphans, butchers... gardeners, market women, and even the noted Bawd Mrs. McCarty.”   </p><p>A mob chased Duer through the streets of New York and might have hanged or disemboweled him had he not been rescued by the city sheriff, who sent him to the safety of debtor’s prison.  John Pintard, part of the same scheme, fled to Newark, New Jersey, before being caught and jailed as well.</p><p>Sending the Duers and Pintards of the new republic off to debtors’ prison was not, however, quite what Hamilton had in mind.  And leaving them rotting there was hardly going to foster the “enterprising spirit” that would, in the treasury secretary’s estimation, turn the country into the Great Britain of the next century.  Bankruptcy, on the other hand, ensured that the overextended could start again and keep the machinery of commercial transactions lubricated.  Hence, the Bankruptcy Act of 1800.</p><p>If, however, you were not a major player, debt functioned differently. Shouldered by the hoi polloi, it functioned as a mechanism for funneling wealth into the mercantile-financial hothouses where American capitalism was being incubated.</p><p>No wonder debt excited such violent political emotions.  Even before the Constitution was adopted, farmers in western Massachusetts, indebted to Boston bankers and merchants and in danger of losing their ancestral homes in the economic hard times of the 1780s, rose in armed rebellion.  In those years, the number of lawsuits for unpaid debt doubled and tripled, farms were seized, and their owners sent off to jail.  Incensed, farmers led by a former revolutionary soldier, Daniel Shays, closed local courts by force and liberated debtors from prisons.  Similar but smaller uprisings erupted in Maine, Connecticut, New York, and Pennsylvania, while in New Hampshire and Vermont irate farmers surrounded government offices. </p><p>Shays' Rebellion of 1786 alarmed the country’s elites.  They depicted the unruly yeomen as “brutes” and their houses as “sties.”  They were frightened as well by state governments like Rhode Island’s that were more open to popular influence, declared debt moratoria, and issued paper currencies to help farmers and others pay off their debts.  These developments signaled the need for a stronger central government fully capable of suppressing future debtor insurgencies.</p><p>Federal authority established at the Constitutional Convention allowed for that, but the unrest continued.  Shays' Rebellion was but part one of a trilogy of uprisings that continued into the 1790s.  The Whiskey Rebellion of 1794 was the most serious.  An excise tax (“whiskey tax”) meant to generate revenue to back up the national debt threatened the livelihoods of farmers in western Pennsylvania who used whiskey as a “currency” in a barter economy.  President Washington sent in troops, many of them Revolutionary War veterans, with Hamilton at their head to put down the rebels. </p><p><strong>Debt Servitude and Primitive Accumulation</strong></p><p>Debt would continue to play a vital role in national and local political affairs throughout the nineteenth century, functioning as a form of capital accumulation in the financial sector, and often sinking pre-capitalist forms of life in the process. </p><p>Before and during the time that capitalists were fully assuming the prerogatives of running the production process in field and factory, finance was building up its own resources from the outside.  Meanwhile, the mechanisms of public and private debt made the lives of farmers, craftsmen, shopkeepers, and others increasingly insupportable.</p><p>This parasitic economic metabolism helped account for the riotous nature of Gilded Age politics. Much of the high drama of late nineteenth-century political life circled around “greenbacks,” “free silver,” and "the gold standard."  These issues may strike us as arcane today, but they were incendiary then, threatening what some called a “second Civil War.”  In one way or another, they were centrally about debt, especially a system of indebtedness that was driving the independent farmer to extinction.</p><p>All the highways of global capitalism found their way into the trackless vastness of rural America.  Farmers there were not in dire straits because of their backwoods isolation.  On the contrary, it was because they turned out to be <a href="" target="_blank">living at Ground Zero</a>, where the explosive energies of financial and commercial modernity detonated.  A toxic combination of railroads, grain-elevator operators, farm-machinery manufacturers, commodity-exchange speculators, local merchants, and above all the banking establishment had the farmer at their mercy.  His helplessness was only aggravated when the nineteenth-century version of globalization left his crops in desperate competition with those from the steppes of Canada and Russia, as well as the outbacks of Australia and South America.</p><p>To survive this mercantile onslaught, farmers hooked themselves up to long lines of credit that stretched back to the financial centers of the East.  These lifelines allowed them to buy the seed, fertilizer, and machines needed to farm, pay the storage and freight charges that went with selling their crops, and keep house and home together while the plants ripened and the hogs fattened.  When market day finally arrived, the farmer found out just what all his backbreaking work was really worth.  If the news was bad, then those credit lines were shut off and he found himself dispossessed.</p><p>The family farm and the network of small town life that went with it were being washed into the rivers of capital heading for metropolitan America.  On the “sod house” frontier, poverty was a “badge of honor which decorated all.”  In his <a href="" target="_blank"><em>Devil’s Dictionary</em></a>, the acid-tongued humorist Ambrose Bierce defined the dilemma this way: “Debt. n. An ingenious substitute for the chain and whip of the slave-driver.”</p><p>Across the Great Plains and the cotton South, discontented farmers spread the blame for their predicament far and wide.  Anger, however, tended to pool around the strangulating system of currency and credit run out of the banking centers of the northeast. Beginning in the 1870s with the emergence of the Greenback Party and Greenback-Labor Party and culminating in the 1890s with the People’s or Populist Party, independent farmers, tenant farmers, sharecroppers, small businessmen, and skilled workers directed ever more intense hostility at “the money power.”</p><p>That “power” might appear locally in the homeliest of disguises.  At coal mines and other industrial sites, among “coolies” working to build the railroads or imported immigrant gang laborers and convicts <a href="" target="_blank">leased to private concerns</a>, workers were typically compelled to buy what they needed in company scrip at company stores at prices that left them perpetually in debt.  Proletarians were so precariously positioned that going into debt -- whether to pawnshops or employers, landlords or loan sharks -- was unavoidable.  Often they were paid in kind: wood chips, thread, hemp, scraps of canvas, cordage: nothing, that is, that was of any use in paying off accumulated debts.  In effect, they were, as they called themselves, “debt slaves.” </p><p>In the South, hard-pressed growers found themselves embroiled in a crop-lien system, dependent on the local “furnishing agent” to supply everything needed, from seed to clothing to machinery, to get through the growing season.  In such situations, no money changed hands, just a note scribbled in the merchant’s ledger, with payment due at “settling up” time.  This granted the lender a lien, or title, to the crop, a lien that never went away.</p><p>In this fashion, the South became “a great pawn shop,” with farmers perpetually in debt at interest rates exceeding 100% per year.  In Alabama, Georgia, and Mississippi, 90% of farmers lived on credit.  The first lien you signed was essentially a life sentence.  Either that or you became a tenant farmer, or you simply left your land, something so commonplace that everyone knew what the letters “G.T.T.” on an abandoned farmhouse meant: “Gone to Texas.”  (One hundred thousand people a year were doing that in the 1870s.) </p><p>The merchant’s exaction was so steep that African-Americans and immigrants in particular were regularly reduced to peonage -- forced, that is, to work to pay off their debt, an illegal but not uncommon practice.  And that neighborhood furnishing agent was often tied to the banks up north for his own lines of credit.  In this way, the sucking sound of money leaving for the great metropolises reverberated from region to region.</p><p>Facing dispossession, farmers formed alliances to set up cooperatives to extend credit to one another and market crops themselves.  As one Populist editorialist remarked, this was the way “mortgage-burdened farmers can assert their freedom from the tyranny of organized capital.”  But when they found that these groupings couldn’t survive the competitive pressure of the banking establishment, politics beckoned.</p><p>From one presidential election to the next and in state contests throughout the South and West, irate grain and cotton growers demanded that the government expand the paper currency supply, those “greenbacks,” also known as “the people’s money,” or that it monetize silver, again to enlarge the money supply, or that it set up public institutions to finance farmers during the growing season.  With a passion hard for us to imagine, they railed against the “gold standard” which, in Democratic Party<strong></strong>presidential candidate William Jennings Bryan’s famous cry, should no longer be allowed to “crucify mankind on a cross of gold.”</p><p>Should that cross of gold stay fixed in place, one Alabama physician prophesied, it would “reduce the American yeomanry to menials and paupers, to be driven by monopolies like cattle and swine.”  As Election Day approached, populist editors and speakers warned of an approaching war with “the money power,” and they meant it.  “The fight will come and let it come!”</p><p>The idea was to force the government to deliberately inflate the currency and so raise farm prices.  And the reason for doing that?  To get out from under the sea of debt in which they were submerged.  It was a cry from the heart and it echoed and re-echoed across the heartland, coming nearer to upsetting the established order than any American political upheaval before or since. </p><p>The passion of those populist farmers and laborers was matched by that of their enemies, men at the top of the economy and government for whom debt had long been a road to riches rather than destitution.  They dismissed their foes as “cranks” and “calamity howlers.”  And in the election of 1896, they won.  Bryan went down to defeat, gold continued its pitiless process of crucifixion, and a whole human ecology was set on a path to extinction.</p><p><strong>The Return of Debt Servitude</strong></p><p>When populism died, debt -- as a spark for national political confrontation -- died, too.  The great reform eras that followed -- Progessivism, the New Deal, and the Great Society -- were preoccupied with inequality, economic collapse, exploitation in the workplace, and the outsized nature of corporate power in a consolidated industrial capitalist system.</p><p>Rumblings about debt servitude could certainly still be heard.  Foreclosed farmers during the Great Depression mobilized, held “penny auctions” to restore farms to families, hanged judges in effigy, and forced Prudential Insurance Company, the largest land creditor in Iowa, to suspend foreclosures on 37,000 farms (which persuaded Metropolitan Life Insurance Company to do likewise).  A Kansas City realtor was shot in the act of foreclosing on a family farm, a country sheriff kidnapped while trying to evict a farm widow and dumped 10 miles out of town, and so on.</p><p>Urban renters and homeowners facing eviction formed neighborhood groups to stop the local sheriff or police from throwing families out of their houses or apartments. Furniture tossed into the street in eviction proceedings would be restored by neighbors, who would also turn the gas and electricity back on.  New Deal farm and housing finance legislation bailed out banks and homeowners alike.  Right-wing populists like the Catholic priest Father Charles Coughlin carried on the war against the gold standard in tirades tinged with anti-Semitism.  Signs like one in Nebraska -- “The Jew System of Banking” (illustrated with a giant rattlesnake) -- showed up too often.</p><p>But the age of primitive accumulation in which debt and the financial sector had played such a strategic role was drawing to a close. </p><p>Today, we have entered a new phase.  What might be called <a href=",_the_national_museum_of_industrial_homicide/" target="_blank">capitalist underdevelopment</a> and once again debt has emerged as both the central mode of capital accumulation and a principal mechanism of servitude.  Warren Buffett (of all people) has <a href="" target="_blank">predicted</a> that, in the coming decades, the United States is more likely to turn into a “sharecropper society” than an “ownership society.”</p><p>In our time, the financial sector has enriched itself by <a href="" target="_blank">devouring</a> the productive wherewithal of industrial America through debt, starving the public sector of resources, and <a href="" target="_blank">saddling</a> ordinary working people with every conceivable form of consumer debt.</p><p>Household debt, which in 1952 was at 36% of total personal income, had by 2006 hit 127%.  Even financing poverty became a lucrative enterprise.  Taking advantage of the low credit ratings of poor people and their need for cash to pay monthly bills or simply feed themselves, some check-cashing outlets, payday lenders, tax preparers, and others levy interest of 200% to 300% and more.  As recently as the 1970s, a good part of this would have been considered illegal under usury laws that no longer exist.  And these poverty creditors are often tied to the largest financiers, including Citibank, Bank of America, and American Express.</p><p>Credit has <a href="" target="_blank">come to function</a> as a “plastic safety net” in a world of job insecurity, declining state support, and slow-motion economic growth, especially among the elderly, young adults, and low-income families.  More than half the pre-tax income of these three groups goes to servicing debt.  Nowadays, however, the “company store” is headquartered on Wall Street.</p><p>Debt is driving this system of auto-cannibalism which, by every measure of social wellbeing, is relentlessly turning a developed country into an underdeveloped one.  </p><p>Dr. Jekyll and Mr. Hyde are back.  Is a political resistance to debt servitude once again imaginable?</p> Tue, 29 Jan 2013 10:31:00 -0800 Steve Fraser, TomDispatch 785389 at Economy Economy Labor News & Politics debt debtors prison Financial Firms Have Been Hollowing Out America for Decades -- Now We're on the Verge of a Debtpocalypse <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">40 years of austerity politics have hollowed out the heartland, as financial wizards of Wall Street gobbled up ever more of the nation&#039;s resources.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p>To stay on top of important articles like these, sign up to receive the <a href=";id=1e41682ade">latest updates from here. </a></p><p>“<a href="">Debtpocalypse</a>” looms.  Depending on who wins out in Washington, <a href="">we’re told</a>, we will either free fall over the fiscal cliff or take a terrifying slide to the pit at the bottom.  Grim as these scenarios might seem, there is something confected about the mise-en-scène, like an un-fun Playland.  After all, there is <a href=",_it%27s_the_politics,_stupid/">no fiscal cliff</a>, or at least there was none -- until the two parties built it.</p><p>And yet the pit exists.  It goes by the name of “austerity.” However, it didn’t just appear in time for the last election season or the lame-duck session of Congress to follow.  It was dug more than a generation ago, and has been getting wider and deeper ever since.  Millions of people have long made it their home.  “Debtpocalypse” is merely the latest installment in a tragic, 40-year-old story of the dispossession of American working people.</p><p>Think of it as the archeology of decline, or a tale of two worlds. As a long generation of austerity politics hollowed out the heartland, the quants and traders and financial wizards of Wall Street gobbled up ever more of the nation's resources. It was another Great Migration -- instead of people, though, trillions of dollars were being sucked out of industrial America and turned into “financial instruments” and new, exotic forms of wealth.  If blue-collar Americans were the particular victims here, then high finance is what consumed them.  Now, it promises to consume the rest of us.</p><p><strong>Scenes from the Museum</strong></p><p>In the mid-1970s, Hugh Carey, then governor of New York, was already noting the hollowing out of his part of America.  New York City, after all, was threatening to go bankrupt.  Plenty of other cities and states across what was then known as the “Frost Belt” were in similar shape.  Yankeedom, in Carey’s words, was turning into “a great national museum” where tourists could visit “the great railroad stations where the trains used to run.”  </p><p>As it happened, the tourists weren’t interested.  Abandoned railroad stations might be fetching in an eerie sort of way, but the rest of the museum was filled with artifacts of recent ruination that were too depressing to be entertaining.  True, a century earlier, during the first Gilded Age, the upper crust used to amuse itself by taking guided tours of the urban demi-monde, thrilling to sites of exotic depravity or ethnic strangeness. They traipsed around “rag-pickers alley” on New York’s Lower East Side or the opium dens of Chinatown, or ghoulishly watched poor children salivate over toys in store window displays they could never hope to touch.<br />Times have changed.  The preference now is to entirely remove the unsightly.  Nonetheless, the national museum of industrial homicide has, city by city, decade by decade, grown more grotesque.</p><p>Camden, New Jersey, for example, had long been a robust, diversified small industrial city.  By the early 1970s, however, its reform mayor Angelo Errichetti was describing it this way: “It looked like the Vietcong had bombed us to get even.  The pride of Camden... was now a rat-infested skeleton of yesterday, a visible obscenity of urban decay.  The years of neglect, slumlord exploitation, tenant abuse, government bungling, indecisive and short-sighted policy had transformed the city’s housing, business, and industrial stock into a ravaged, rat-infested cancer on a sick, old industrial city.” </p><p>That was 40 years ago and yet, today, news stories are <a href="">still being written</a> about Camden’s never-ending decline into some bottomless abyss.  Consider that a measure of how long it takes to shut down a way of life.</p><p>Once upon a time, Youngstown, Ohio, was a typical smokestack city, part of the steel belt running through Pennsylvania and Ohio.  As with Camden, things there started turning south in the 1970s.  From 1977 to 1987, the city lost 50,000 jobs in steel and related industries.  By the late 1980s, the years of Ronald Reagan’s presidency when it was “<a href="">morning again in America</a>,” it was midnight in Youngstown: foreclosures, an epidemic of business bankruptcies, and everywhere collapsing community institutions including churches, unions, families, and the municipal government itself. </p><p>Burglaries, robberies, and assaults doubled after the steel plants closed.  In two years, child abuse rose by 21%, suicides by 70%. One-eighth of Mahoning County went on welfare.  Streets were filled with dead storefronts and the detritus of abandoned homes: scrap metal and wood shingles, shattered glass, stripped-away home siding, canning jars, and rusted swing sets.  Each week, 1,500 people visited the Salvation Army’s soup line. </p><p>The Wall Street Journal called Youngstown “a necropolis,” noting miles of “silent, empty steel mills” and a pervasive sense of fear and loss.  Bruce Springsteen would soon memorialize that loss in “<a href="">The Ghost of Tom Joad</a>.”</p><p>If you were unfortunate enough to live in the small industrial city of Mansfield, Ohio, for the last 40 years, you would have witnessed in microcosm the dystopia of destruction unfolding in similar places everywhere.  For a century, workshops there had made a kaleidoscope of goods: stoves, tires, steel, machinery, refrigerators, and cars. Then Mansfield’s rust belt started narrowing as one plant after another went shut down: Dominion Electric in 1971, Mansfield Tire and Rubber in 1978, Hoover Plastics in 1980, National Seating in 1985, Tappan Stoves in 1986, a Westinghouse plant and Ohio Brass in 1990, Wickes Lumber in 1997, Crane Plumbing in 2003, Neer Manufacturing in 2007, and Smurfit-Stone Container in 2009.  In 2010, General Motors closed its largest, most modern U.S. stamping factory, and thanks to the Great Recession, Con-way Freight, Value City, and Card Camera also shut down. </p><p>“Good times” or bad, it didn’t matter.  Mansfield shrank relentlessly, becoming the urban equivalent of skin and bones.  Its poverty rate is <a href="">now at 28%</a>, its median income $11,000 below the national average of $41,994.  What manufacturing remains is non-union and $10 an hour is considered a good wage.</p><p>Midway through this industrial auto-da-fé, a journalist watching the Campbell Works of Youngstown Sheet and Tube go dark, mused that “the dead steel mills stand as pathetic mausoleums to the decline of American industrial might that was once the envy of the world.” This dismal record is particularly impressive because it encompasses the “boom times” presided over by Presidents Reagan and Clinton.</p><p><strong>The “Pit” Deepens </strong></p><p>In 1988, in the iciest part of the Frost Belt, a Wall Street Journal reporter noted, “There are two Americas now, and they grow further apart each day.”  He was referring to Eastport, Maine.  Although the deepest port on the East Coast, it hosted few ships, abandoned sardine factories lined its shore, and its bars were filled with the under- and unemployed.  The reporter pointed out that he had seen similar scenes from a collapsing rural economy “coast to coast, border to border”: shuttered saw mills, abandoned mines, closed schools, rutted roads, ghost airports.</p><p>Closing up, shutting down, going out of business: last one to leave please turn out the lights! </p><p>Such was the case in cities and towns around the country. Essential public services -- garbage collection, policing, fire protection, schools, street maintenance, health-care -- were atrophying.  So were the people who lived in those places.  High blood pressure, cardiac and digestive problems, and mortality rates were generally rising, as was doubt, self-blame, guilt, anxiety, and depression.  The drying up of social supports, even among those who once had been friends and workmates, haunted the inhabitants of these places as much as the industrial skeletons around them. </p><p>In the 1980s, when Jack Welch, soon to be known as <a href="">“Neutron Jack”</a> for his ruthlessness, became CEO of General Electric, he set out to raise the company’s stock price by gutting the workforce.  It only took him six years, but imagine what it was like in Schenectady, New York, which lost 22,000 jobs; Louisville, Kentucky, where 13,000 fewer people made appliances; Evendale, Ohio, where 12,000 no longer made lights and light fixtures; Pittsfield, Massachusetts, where 8,000 plastics makers lost their jobs; and Erie, Pennsylvania, where 6,000 locomotive workers got green slips. </p><p>Life as it had been lived in GE’s or other one-company towns ground to a halt. Two travelling observers, Dale Maharidge and Michael Williamson, <a href="">making their way</a> through the wasteland of middle America in 1984 spoke of “medieval cities of rusting iron” and a largely invisible landscape filling up with an army of transients, moving from place to place at any hint of work.  They were camped out under bridges, riding freight cars, living in makeshift tents in fetid swamps, often armed, trusting no one, selling their blood, eating out of dumpsters.</p><p>Nor was the calamity limited to the northern Rust Belt.  The South and Southwest did not prove immune from this wasting disease either.  Empty textile mills, often originally runaways from the North, dotted the Carolinas, Georgia, and elsewhere.  Half the jobs lost due to plant closings or relocations occurred in the Sunbelt.</p><p>In 2008, in the sunbelt town of Colorado Springs, Colorado, one-third of the city’s street lights were extinguished, police helicopters were sold, watering and fertilizing in the parks was eliminated from the budget, and surrounding suburbs closed down the public bus system. During the recent Great Recession one-industry towns like <a href="">Dalton</a>, Georgia (“the carpet capital of the world”), or Blakely, Georgia (“the peanut capital of the world”), or <a href="">Elkhart, Indiana</a> (“the RV capital of the world”) were closing libraries, firing police chiefs, and taking other desperate measures to survive.</p><p>And no one can forget Detroit. Once, it had been a world-class city, the country’s fourth largest, full of architectural gems.  In the 1950s, Detroit had a population with the highest median income and highest rate of home ownership in urban America.  Now, the “motor city” haunts the national imagination as a <a href="">ghost town</a>. Home to two million a quarter-century ago, its decrepit hulk is now “home” to 900,000.  Between 2000 and 2010 alone, the population hemorrhaged by 25%, nearly a quarter of a million people, almost as many as live in post-Katrina New Orleans.  There and in other core industrial centers like Baltimore, “death zones” have emerged where whole neighborhoods verge on medical collapse.</p><p>One-third of Detroit, an area the size of San Francisco, is now little more than empty houses, empty factories, and fields gone feral.  A whole industry of demolition, waste-disposal, and scrap-metal companies arose to tear down what once had been. With a jobless rate of 29%, some of its citizens are so poor they can’t pay for funerals, so bodies pile up at mortuaries.  Plans are even afoot to let the grasslands and forests take over, or to give the city to private enterprise.</p><p>Even the public zoo has been privatized.  With staff and animals reduced to the barest of minimums and living wages endangered by its new owner, an associate curator working with elephants and rhinos went in search of another job.  He found it with the city -- chasing down feral dogs whose population had skyrocketed as the cityscape returned to wilderness.  History had, it seemed, abandoned dogs along with their human compatriots.</p><p><strong>Looking Backward</strong></p><p><br />But could this just be the familiar story of capitalism’s penchant for “creative destruction”?  The usual tale of old ways disappearing, sometimes painfully, as part of the story of progress as new wonders appear in their place?</p><p>Imagine for a moment the time traveler from <a href="">Looking Backward</a>, Edward Bellamy’s best-selling utopian novel of 1888 waking up in present-day America.  Instead of the prosperous land filled with technological wonders and egalitarian harmony Bellamy envisioned, his protagonist would find an unnervingly familiar world of decaying cities, people growing ever poorer and sicker, bridges and roads crumpling, sweatshops a commonplace, the largest prison population on the planet, workers afraid to stand up to their bosses, schools failing, debts growing more onerous, and inequalities starker than ever.</p><p> A recent grim statistic suggests just how Bellamy’s utopian hopes have given way to an increasingly dystopian reality.  For the <a href="">first time</a> in American history, the life expectancy of white people, men and women, has actually dropped.  Life spans for the least educated, in particular, have fallen by about four years since 1990.  The steepest decline: white women lacking a high school diploma.  They, on average, lost five years of life, while white men lacking a diploma lost three years.</p><p>Unprecedented for the United States, these numbers come close to the catastrophic decline Russian men experienced in the desperate years following the collapse of the Soviet Union.  Similarly, between 1985 and 2010, American women fell from 14th to 41st place in the United Nation’s ranking of international life expectancy. (Among developed countries, American women now rank last.)  Whatever combination of factors produced this social statistic, it may be the rawest measure of a society in the throes of economic anorexia.</p><p>One other marker of this eerie story of a developed nation undergoing underdevelopment and a striking reproach to a cherished national faith: for the first time since the Great Depression, the social mobility of Americans is <a href="">moving in reverse</a>.  In every decade from the 1970s on, fewer people have been able to move up the income ladder than in the previous 10 years.  Now Americans in their thirties earn 12% less on average than their parents’ generation at the same age.  Danes, Norwegians, Finns, Canadians, Swedes, Germans, and the French now all enjoy higher rates of upward mobility than Americans.  Remarkably, 42% of American men raised in the bottom one-fifth income cohort remain there for life, as compared to 25% in Denmark and 30% in notoriously class-stratified Great Britain.</p><p><strong>Eating Our Own</strong></p><p>Laments about “the vanishing middle class” have become commonplace, and little wonder.  Except for those in the top 10% of the income pyramid, everyone is on the <a href="">down escalator</a>.  The United States now has the <a href="">highest percentage</a> of low-wage workers -- those who earn less than two-thirds of the median wage -- of any developed nation. George Carlin once mordantly quipped, “It’s called the American Dream because you have to be asleep to believe it.” Now, that joke has become our waking reality.</p><p>During the “long nineteenth century,” wealth and poverty existed side by side.  So they do again.  In the first instance, when industrial capitalism was being born, it came of age by ingesting what was valuable embedded in pre-capitalist forms of life and labor, including land, animals, human muscle power, tools and talents, know-how, and the ways of organizing and distributing what got produced.  Wealth accumulated in the new economy by extinguishing wealth in the older ones. </p><p>“Progress” was the result of this economic metabolism.  Whatever its stark human and ecological costs, its achievements were also highly visible.  America’s capacity to sustain a larger and larger population at rising levels of material well-being, education, and health was its global boast for a century and half.</p><p>Shocking statistics about life expectancy and social mobility suggest that those days are over.  Wealth, great piles of it, is still being generated, and sometimes displayed so ostentatiously that no one could miss it.  Technological marvels still amaze.  Prosperity exists, though for an ever-shrinking cast of characters.  But a new economic metabolism is visibly at work.</p><p>For the last 40 years, prosperity, wealth, and “progress” have rested, at least in part, on a grotesque process of auto-cannibalism -- it has also been called “dis-accumulation” by David Harvey -- of a society that is devouring its own.</p><p>Traditional forms of primitive accumulation still exist abroad.  Hundreds of millions of former peasants, fisherman, craftspeople, scavengers, herdsmen, tradesmen, ranchers, and peddlers provide the labor power and cheap products that buoy the bottom lines of global manufacturing and retail corporations, as well as banks and agribusinesses.  But here in “the homeland,” the very profitability and prosperity of privileged sectors of the economy, especially the bloated financial arena, continue to depend on slicing, dicing, and stripping away what was built up over generations. </p><p>Once again a new world has been born.  This time, it depends on liquidating the assets of the old one or shipping them abroad to reward speculation in “fictitious capital.”  Rates of U.S. investment in new plants, technology, and research and development began declining during the 1970s, a fall-off that only accelerated in the gilded 1980s.  Manufacturing, which accounted for nearly 30% of the economy after the Second World War, <a href="">had dropped</a> to just over 10% by 2011.  Since the turn of the millennium alone, 3.5 million more manufacturing jobs have vanished and 42,000 manufacturing plants were shuttered.</p><p>Nor are we simply witnessing the passing away of relics of the nineteenth century. Today, <a href="">only one</a> American company is among the top ten in the solar power industry and the U.S. accounts for a mere 5.6% of world production of photovoltaic cells.  Only GE is among the top ten companies in wind energy. In 2007, a mere 8% of all new semi-conductor plants under construction globally were located in the U.S.  Of the 1.2 billion cell phones sold in 2009, none were made in the U.S.  The share of semi-conductors, steel, cars, and machine tools made in America has declined precipitously just in the last decade.  Much high-end engineering design and R&amp;D work has been offshored.  Now, there are more people dealing cards in casinos than running lathes, and almost three times as many security guards as machinists.</p><p><strong>The FIRE Next Time </strong></p><p>Meanwhile, for more than a quarter of a century the fastest growing part of the economy has been the finance, insurance, and real estate (FIRE) sector.  Between 1980 and 2005, profits in the financial sector <a href="">increased by 800%</a>, more than three times the growth in non-financial sectors. </p><p>In those years, new creations of financial ingenuity, rare or never seen before, bred like rabbits.  In the early 1990s, for example, there were a couple of hundred hedge funds; by 2007, 10,000 of them.  A whole new species of mortgage broker roamed the land, supplanting old-style savings and loan or regional banks.  Fifty thousand mortgage brokerages <a href="">employed 400,000 brokers</a>, more than the whole U.S. textile industry.  A hedge fund manager put it <a href=";pg=PA211&amp;lpg=PA211&amp;dq=%E2%80%9CThe+money+that%E2%80%99s+made+from+manufacturing+stuff+is+a+pittance+in+comparison+to+the+amount+of+money+made+from+shuffling+money+around.%E2%80%9D&amp;source=bl&amp;ots=79TxQnakkA&amp;sig=m2pvAmGi-DRXyi47t-OvQe2XZSY&amp;hl=en&amp;sa=X&amp;ei=aIi3UIf2LJCx0QGY1oHYDw&amp;ved=0CDEQ6AEwAA#v=onepage&amp;q=%E2%80%9CThe%20money%20that%E2%80%99s%20made%20from%20manufacturing%20stuff%20is%20a%20pittance%20in%20comparison%20to%20the%20amount%20of%20money%20made%20from%20shuffling%20money%20around.%E2%80%9D&amp;f=false">bluntly</a>, “The money that’s made from manufacturing stuff is a pittance in comparison to the amount of money made from shuffling money around.”</p><p>For too long, these two phenomena -- the eviscerating of industry and the supersizing of high finance -- have been treated as if they had nothing much to do with each other, but were simply occurring coincidentally.</p><p>Here, instead, is the fable we’ve been offered: Sad as it might be for some workers, towns, cities, and regions, the end of industry is the unfortunate, yet necessary, prelude to a happier future pioneered by “financial engineers.” Equipped with the mathematical and technological know-how that can turn money into more money (while bypassing the messiness of producing anything), they are our new wizards of prosperity! </p><p>Unfortunately, this uplifting tale rests on a categorical misapprehension.  The ascendancy of high finance didn’t just replace an industrial heartland in the process of being gutted; it initiated that gutting and then lived off it, particularly during its formative decades.  The FIRE sector, that is, not only supplanted industry, but grew at its expense -- and at the expense of the high wages it used to pay and the capital that used to flow into it.</p><p>Think back to the days of junk bonds, leveraged buy-outs, megamergers and acquisitions, and asset stripping in the 1980s and 1990s.  (Think, in fact, of Bain Capital.)  What was getting bought and stripped and closed up supported windfall profits in high-interest-paying junk bonds.  The stupendous fees and commissions that went to those “engineering” such transactions were being picked from the carcass of a century and a half of American productive capacity. The hollowing out of the United States was well under way long before anyone dreamed up the “fiscal cliff.”  </p><p>For some long time now, our political economy has been driven by investment banks, hedge funds, private equity firms, real estate developers, insurance goliaths, and a whole menagerie of ancillary enterprises that service them.  But high times in FIRE land have depended on the downward mobility of working people and the poor, cut adrift from more secure industrial havens and increasingly from the lifelines of public support. They have been living instead in the “pit of austerity.”  Soon many more of us will join them.</p><p>Copyright 2012 Steve Fraser</p><p>© 2012 TomDispatch. All rights reserved.</p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter--><p><b style="color: rgb(0, 0, 0); font-family: Times; font-size: medium; font-weight: normal;"><span style="font-size: 13px; background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">Steve Fraser is a historian, writer, and editor-at-large for </span><span style="font-size: 13px; background-color: transparent; vertical-align: baseline; white-space: pre-wrap;">New Labor Forum</span><span style="font-size: 13px; background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">, co-founder of the </span><a href=""><span style="font-size: 13px; color: rgb(0, 0, 255); background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">American Empire Project</span></a><span style="font-size: 13px; background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">, and </span><a href=""><span style="font-size: 13px; color: rgb(0, 0, 255); background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">TomDispatch regular</span></a><span style="font-size: 13px; background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">. He is, most recently, the author of </span><a href=""><span style="font-size: 13px; color: rgb(0, 0, 255); background-color: transparent; vertical-align: baseline; white-space: pre-wrap;">Wall Street: America’s Dream Palace</span></a><span style="font-size: 13px; background-color: transparent; font-style: italic; vertical-align: baseline; white-space: pre-wrap;">. He teaches at Columbia University. </span></b></p> </div></div></div> Sun, 02 Dec 2012 13:22:00 -0800 Steve Fraser, 753905 at World decline austerity Getting Paid 93 Cents a Day in America? Corporations Bring Back the 19th Century <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">Nearly a million prisoners are working in call centers, working in slaughterhouses, or manufacturing textiles while getting paid somewhere between 93 cents and $4.73.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p><em>To stay on top of important articles like these, sign up to receive the </em><a href=""><em>latest updates from here.</em></a><em>  </em></p> <div>Sweatshop labor is back with a vengeance. It can be found across broad stretches of the American economy and around the world.  Penitentiaries have become a niche market for such work.  The <a target="_blank" href="">privatization of prisons</a> in recent years has meant the creation of a small army of workers too coerced and right-less to complain.</div> <p>Prisoners, whose ranks increasingly consist of those for whom the legitimate economy has found no use, now make up a virtual brigade within the <a target="_blank" href="">reserve army of the unemployed</a><strong> </strong>whose ranks have ballooned along with the U.S. incarceration rate.  The <a target="_blank" href="">Corrections Corporation of America</a> and <a target="_blank" href="">G4S</a> (formerly Wackenhut), two prison privatizers, <a target="_blank" href="">sell inmate labor</a> at subminimum wages to Fortune 500 corporations like Chevron, Bank of America, AT&amp;T, and IBM.</p> <p>These companies can, in most states, lease factories in prisons or prisoners to work on the outside.  All told, nearly a million prisoners are now making office furniture, working in call centers, fabricating body armor, taking hotel reservations, working in slaughterhouses, or manufacturing textiles, shoes, and clothing, while <a target="_blank" href="">getting paid</a> somewhere between 93 cents and $4.73 per day. </p> <p>Rarely can you find workers so pliable, easy to control, stripped of political rights, and subject to martial discipline at the first sign of recalcitrance -- unless, that is, you traveled back to the nineteenth century when convict labor was commonplace nationwide.  Indeed, a sentence of “confinement at hard labor” was then the essence of the American penal system.  More than that, it was one vital way the United States became a modern industrial capitalist economy -- at a moment, eerily like our own, when the mechanisms of capital accumulation were in crisis.</p> <p><strong>A Yankee Invention</strong></p> <p>What some historians call “the long Depression” of the nineteenth century, which lasted from the mid-1870s through the mid-1890s, was marked by frequent panics and slumps, mass bankruptcies, deflation, and self-destructive competition among businesses designed to depress costs, especially labor costs.  So, too, we are living through a twenty-first century age of panics and austerity with similar pressures to shrink the social wage. </p> <p>Convict labor has been and once again is an appealing way for business to address these dilemmas.  Penal servitude now strikes us as a barbaric throwback to some long-lost moment that preceded the industrial revolution, but in that we’re wrong.  From its first appearance in this country, it has been associated with modern capitalist industry and large-scale agriculture. </p> <p>And that is only the first of many misconceptions about this peculiar institution.  Infamous for the brutality with which prison laborers were once treated, indelibly linked in popular memory (and popular culture) with images of the black chain gang in the American South, it is usually assumed to be a Southern invention.  So apparently atavistic, it seems to fit naturally with the retrograde nature of Southern life and labor, its economic and cultural underdevelopment, its racial caste system, and its desperate attachment to the “lost cause.” </p> <p>As it happens, penal servitude -- the leasing out of prisoners to private enterprise, either within prison walls or in outside workshops, factories, and fields -- was originally known as a <a target="_blank" href="">“Yankee invention.”</a></p> <p>First used at Auburn prison in New York State in the 1820s, the system spread widely and quickly throughout the North, the Midwest, and later the West.  It developed alongside state-run prison workshops that produced goods for the public sector and sometimes the open market. </p> <p>A few Southern states also used it.  Prisoners there, as elsewhere, however, were mainly white men, since slave masters, with a free hand to deal with the “infractions” of their chattel, had little need for prison.  The Thirteenth Amendment abolishing slavery would, in fact, make an exception for penal servitude precisely because it had become the dominant form of punishment throughout the free states. </p> <p>Nor were those sentenced to “confinement at hard labor” restricted to digging ditches or other unskilled work; nor were they only men.  Prisoners were employed at an enormous range of tasks from rope- and wagon-making to carpet, hat, and clothing manufacturing (where women prisoners were sometimes put to work), as well coal mining, carpentry, barrel-making, shoe production, house-building, and even the manufacture of rifles.  The range of petty and larger workshops into which the felons were integrated made up the heart of the new American economy. </p> <p>Observing a free-labor textile mill and a convict-labor one on a visit to the United States, novelist Charles Dickens couldn’t tell the difference.  State governments used the rental revenue garnered from their prisoners to meet budget needs, while entrepreneurs made outsized profits either by working the prisoners themselves or subleasing them to other businessmen. </p> <p><strong>Convict Labor in the ‘New South’</strong></p> <p>After the Civil War, the convict-lease system metamorphosed.  <a target="_blank" href="">In the South</a>, it became ubiquitous, one of several grim methods -- including the black codes, debt peonage, the crop-lien system, lifetime labor contracts, and vigilante terror -- used to control and fix in place the newly emancipated slave.  Those “freedmen” were eager to pursue their new liberty either by setting up as small farmers or by exercising the right to move out of the region at will or from job to job as “free wage labor” was supposed to be able to do.</p> <p>If you assumed, however, that the convict-lease system was solely the brainchild of the apartheid all-white “Redeemer” governments that overthrew the Radical Republican regimes (which first ran the defeated Confederacy during Reconstruction) and used their power to introduce Jim Crow to Dixie, you would be wrong again.  In Georgia, for instance, the Radical Republican state government took the initiative soon after the war ended.  And this was because the convict-lease system was tied to the modernizing sectors of the post-war economy, no matter where in Dixie it was introduced or by whom.</p> <p>So convicts were leased to coal-mining, iron-forging, steel-making, and railroad companies, including Tennessee Coal and Iron (TC&amp;I), a major producer across the South, especially in the booming region around Birmingham, Alabama.  More than a quarter of the coal coming out of Birmingham’s pits was then mined by prisoners.  By the turn of the century, TC&amp;I had been folded into J.P. Morgan’s United States Steel complex, which also relied heavily on prison laborers.</p> <p>All the main extractive industries of the South were, in fact, wedded to the system.  Turpentine and lumber camps deep in the fetid swamps and forest vastnesses of Georgia, Florida, and Louisiana commonly worked their convicts until they dropped dead from overwork or disease.  The region’s plantation monocultures in cotton and sugar made regular use of imprisoned former slaves, including women.  Among the leading families of Atlanta, Birmingham, and other “New South” metropolises were businessmen whose fortunes originated in the dank coal pits, malarial marshes, isolated forests, and squalid barracks in which their unfree peons worked, lived, and died.</p> <p>Because it tended to grant absolute authority to private commercial interests and because its racial make-up in the post-slavery era was overwhelmingly African-American, the South’s convict-lease system was distinctive.  Its caste nature is not only impossible to forget, but should remind us of the unbalanced <a target="_blank" href=",_the_age_of_obama_as_a_racial_nightmare/">racial profile of America’s bloated prison population</a> today. </p> <p>Moreover, this totalitarian-style control invited appalling brutalities in response to any sign of resistance: whippings, water torture, isolation in “dark cells,” dehydration, starvation, ice-baths, shackling with metal spurs riveted to the feet, and “tricing” (an excruciatingly painful process in which recalcitrant prisoners were strung up by the thumbs with fishing line attached to overhead pulleys).  Even women in a hosiery mill in Tennessee were flogged, hung by the wrists, and placed in solitary confinement.</p> <p>Living quarters for prisoner-workers were usually rat-infested and disease-ridden.  Work lasted at least from sunup to sundown and well past the point of exhaustion.  Death came often enough and bodies were cast off in unmarked graves by the side of the road or by incineration in coke ovens.  Injury rates averaged one per worker per month, including respiratory failure, burnings, disfigurement, and the loss of limbs.  Prison mines were called “nurseries of death.”  Among Southern convict laborers, the mortality rate (not even including high levels of suicides) was eight times that among similar workers in the North -- and it was extraordinarily high there.</p> <p>The Southern system also stood out for the intimate collusion among industrial, commercial, and agricultural enterprises and every level of Southern law enforcement as well as the judicial system.  Sheriffs, local justices of the peace, state police, judges, and state governments conspired to keep the convict-lease business humming.  Indeed, local law officers depended on the leasing system for a substantial part of their income.  (They pocketed the fines and fees associated with the “convictions,” a repayable sum that would be added on to the amount of time at “hard labor” demanded of the prisoner.) </p> <p>The arrest cycle was synchronized with the business cycle, timed to the rise and fall of the demand for fresh labor.  County and state treasuries similarly counted on such revenues, since the post-war South was so capital-starved that only renting out convicts assured that prisons could be built and maintained.</p> <p>There was, then, every incentive to concoct charges or send people to jail for the most trivial offenses: vagrancy, gambling, drinking, partying, hopping a freight car, tarrying too long in town.  A “pig law” in Mississippi assured you of five years as a prison laborer if you stole a farm animal worth more than $10. Theft of a fence rail could result in the same. </p> <p><strong>Penal Servitude in the Gilded Age North</strong><br /><br /> All of this was only different in degree from prevailing practices everywhere else: the sale of prison labor power to private interests, corporal punishment, and the absence of all rights including civil liberties, the vote, and the right to protest or organize against terrible conditions.</p> <p>In the North, where 80% of all U.S. prison labor was employed after the Civil War and which accounted for over $35 billion in output (in current dollars), the system was reconfigured to meet the needs of modern industry and the pressures of “the long Depression.”  Convict labor was increasingly leased out only to a handful of major manufacturers in each state.  These textile mills, oven makers, mining operations, hat and shoe factories -- one in Wisconsin leased that state’s entire population of convicted felons -- were then installing the kind of mass production methods becoming standard in much of American industry.  As organized markets for prison labor grew increasingly oligopolistic (like the rest of the economy), the Depression of 1873 and subsequent depressions in the following decades wiped out many smaller businesses that had once gone trawling for convicts.</p> <p><a target="_blank" href=";pf_rd_s=lpo-top-stripe-1&amp;pf_rd_t=201&amp;pf_rd_i=0300117558&amp;pf_rd_m=ATVPDKIKX0DER&amp;pf_rd_r=1D2AFFJ0HHS2QX53HQF0"><img alt="" hspace="6" vspace="6" width="140" height="226" align="left" style="border-top-width: 0px; border-right-width: 0px; border-bottom-width: 0px; border-left-width: 0px; " src="" /></a>Today, we talk about a newly “flexible economy,” often a euphemism for the geometric growth of a precariously positioned, insecure workforce.  The convict labor system of the nineteenth century offered an original specimen of perfect flexibility.</p> <p>Companies leasing convicts enjoyed authority to dispose of their rented labor power as they saw fit.  Workers were compelled to labor in total silence.  Even hand gestures and eye contact were prohibited for the purpose of creating “silent and insulated working machines.”</p> <p>Supervision of prison labor was ostensibly shared by employers and the prison authorities.  In fact, many businesses did continue to conduct their operations within prison walls where they supplied the materials, power, and machinery, while the state provided guards, workshops, food, clothing, and what passed for medical care.  As a matter of practice though, the foremen of the businesses called the shots.  And there were certain states, including Nebraska, Washington, and New Mexico, that, like their Southern counterparts, ceded complete control to the lessee.  As one observer put it, “Felons are mere machines held to labor by the dark cell and the scourge.”</p> <p>Free market industrial capitalism, then and now, invariably draws on the aid of the state.  In that system’s formative phases, the state has regularly used its coercive powers of taxation, expropriation, and in this case incarceration to free up natural and human resources lying outside the orbit of capitalism proper.</p> <p>In both the North and the South, the contracting out of convict labor was one way in which that state-assisted mechanism of capital accumulation arose.  Contracts with the government assured employers that their labor force would be replenished anytime a worker got sick, was disabled, died, or simply became too worn out to continue.</p> <p>The Kansas Wagon Company, for example, signed a five-year contract in 1877 that prevented the state from raising the rental price of labor or renting to other employers.  The company also got an option to renew the lease for 10 more years, while the government was obliged to pay for new machinery, larger workshops, a power supply, and even the building of a switching track that connected to the trunk line of the Pacific Railway and so ensured that the product could be moved effectively to market. </p> <p>Penal institutions all over the country became auxiliary arms of capitalist industry and commerce.  Two-thirds of all prisoners worked for private enterprise.</p> <p>Today, strikingly enough, government is again providing <a target="_blank" href="">subsidies</a> and tax incentives as well as <a target="_blank" href="">facilities</a>, utilities, and free space for corporations making use of this same category of abjectly dependent labor.</p> <p><strong>The New Abolitionism</strong></p> <p>Dependency and flexibility naturally assumed no resistance, but there was plenty of that all through the nineteenth century from workers, farmers, and even prisoners.  Indeed, a principal objective in using prison labor was to undermine efforts to unionize, but from the standpoint of mobilized working people far more was at stake.</p> <p>Opposition to convict labor arose from workingmen’s associations, labor-oriented political parties, journeymen unions, and other groups which considered the system an insult to the moral codes of egalitarian republicanism nurtured by the American Revolution.  The specter of proletarian dependency haunted the lives of the country’s self-reliant handicraftsmen who watched apprehensively as shops employing wage labor began popping up across the country.  Much of the earliest of this agitation was aimed at the use of prisoners to replace skilled workers (while unskilled prison labor was initially largely ignored).</p> <p>It was bad enough for craftsmen to see their own livelihoods and standards of living put in jeopardy by “free” wage labor.  Worse still was to watch unfree labor do the same thing.  At the time, employers were turning to that captive prison population to combat attempts by aggrieved workers to organize and defend themselves.  On the eve of the Civil War, for example, an iron-molding contractor in Spuyten Duyvil, north of Manhattan in the Bronx, locked out his unionized workers and then moved his operation to Sing Sing penitentiary, where a laborer cost 40 cents, $2.60 less than the going day rate.  It worked, and Local 11 of the Union of Iron Workers quickly died away.</p> <p>Worst of all was to imagine this debased form of work as a model for the proletarian future to come.  The workingman’s movement of the Jacksonian era was deeply alarmed by the prospect of “wage slavery,” a condition inimical to their sense of themselves as citizens of a republic of independent producers.  Prison labor was a sub-species of that dreaded “slavery,” a caricature of it perhaps, and intolerable to a movement often as much about emancipation as unionization.</p> <p>All the way through the Gilded Age of the 1890s, convict labor continued to serve as a magnet for emancipatory desires.  In addition, prisoners’ rebellions became ever more common -- in the North particularly, where many prisoners turned out to be Civil War veterans and dispossessed working people who already knew something about fighting for freedom and fighting back.  Major penitentiaries like Sing Sing became sites of repeated strikes and riots; a strike in 1877 even took on the transplanted Spuyten Duyvil iron-molding company.</p> <p>Above and below the Mason Dixon line, political platforms, protest rallies, petition campaigns, legislative investigations, union strikes, and boycotts by farm organizations like the Farmers Alliance and Grange cried out for the abolition of the convict-lease system, or at least for its rigorous regulation.  Over the century’s last two decades, more than 20 coal-mine strikes broke out because of the use of convict miners.</p> <p>The Knights of Labor, that era’s most audacious labor movement, was particularly exercised.  During the Coal Creek Wars in eastern Tennessee in the early 1890s, for instance, TC&amp;I tried to use prisoners to break a miners’ strike.  The company’s vice president noted that it was “an effective club to hold over the heads of free laborers.” </p> <p>Strikers and their allies affiliated with the Knights, the United Mine Workers, and the Farmers Alliance launched guerilla attacks on the prisoner stockade, sending the convicts they freed to Knoxville.  When the governor insisted on shipping them back, the workers released them into the surrounding hills and countryside.  Gun battles followed.</p> <p><strong>The Death of Convict Leasing</strong></p> <p>In the North, the prison abolition movement went viral, embracing not only workers' organizations, sympathetic rural insurgents, and prisoners, but also widening circles of middle-class reformers.  The newly created American Federation of Labor denounced the system as “contract slavery.”  It also demanded the banning of any imports from abroad made with convict labor and the exclusion from the open market of goods produced domestically by prisoners, whether in state-run or private workshops.  In Chicago, the construction unions refused to work with materials made by prisoners.</p> <p>By the latter part of the century, in state after state penal servitude was on its way to extinction.  New York, where the "industry" was born and was largest, killed it by the late 1880s.  The tariff of 1890 prohibited the sale of convict-made wares from abroad.  Private leasing continued in the North, but under increasingly restrictive conditions, including Federal legislation passed during the New Deal.  By World War II, it was virtually extinct (although <a target="_blank" href="">government-run prison workshops</a> continued as they always had).</p> <p>At least officially, even in the South it was at an end by the turn of the century in Tennessee, Louisiana, Georgia, and Mississippi.  Higher political calculations were at work in these states.  Established elites were eager to break the inter-racial alliances that had formed over abolishing convict leasing by abolishing the hated system itself.  Often enough, however, it ended in name only.</p> <p>What replaced it was the state-run chain gang (although some Southern states like Alabama and Florida continued private leasing well into the 1920s). Inmates were set to work building roads and other infrastructure projects vital to the flourishing of a mature market economy and so to the continuing process of capital accumulation.  In the North, the system of “hard labor” was replaced by a system of “hard time,” that numbing, brutalizing idleness where masses of people extruded from the mainstream economy are pooled into mass penal colonies.  The historic link between labor, punishment, and economic development was severed, and remained so... until now.</p> <p><strong>Convict Leasing Rises Again</strong></p> <p>"Now," means our second Gilded Age and its aftermath.  In these years, the system of leasing out convicts to private enterprise was reborn.  This was a perverse triumph for the law of supply and demand in an era infatuated with the charms of the free market.  On the supply side, the U.S.<a target="_blank" href="">holds captive</a> 25% of all the prisoners on the planet: 2.3 million people.  It has the <a target="_blank" href="">highest incarceration rate</a> in the world as well, a figure that began skyrocketing in 1980 as Ronald Reagan became president.  As for the demand for labor, since the 1970s American industrial corporations have found it increasingly unprofitable to invest in domestic production.  Instead, they have sought out the hundreds of millions of people abroad who are willing to, or can be pressed into, working for far less than American workers.</p> <p>As a consequence, those back home -- disproportionately African-American workers -- who found themselves living in economic exile, scrabbling to get by,  began showing up in <a target="_blank" href="">similarly disproportionate numbers</a> in the country’s rapidly expanding prison archipelago. It didn’t take long for corporate America to come to view this as another potential foreign country, full of cheap and subservient labor -- and better yet, close by. </p> <p>What began in the 1970s as an end run around the laws prohibiting convict leasing by private interests has now become an industrial sector in its own right, employing <a target="_blank" href="">more people</a> than any Fortune 500 corporation and operating in 37 states.  And here’s the ultimate irony: our ancestors found convict labor obnoxious in part because it seemed to prefigure a new and more universal form of enslavement.  Could its rebirth foreshadow a future ever more unnervingly like those past nightmares?</p> <p>Today, we are being reassured by the president, the mainstream media, and economic experts that the Great Recession is over, that we are in “recovery” even though most of the recovering patients haven’t actually noticed significant improvement in their condition.  For those announcing its arrival, “recovery” means that the mega-banks are <a target="_blank" href="">no longer on the brink</a> of bankruptcy, the stock market has made up lost ground, corporate profits are <a target="_blank" href="">improving</a>, and notoriously unreliable employment numbers have improved by several tenths of a percent.</p> <p>What accounts for that peculiarly narrow view of recovery, however, is that the general costs of doing business are falling off a cliff as the economy eats itself alive.  The recovery being celebrated owes thanks to local, state, and Federal austerity budgets, the starving of the social welfare system and public services, rampant <a target="_blank" href="">anti-union campaigns</a> in the public and private sector, the spread of sweatshop labor, the coercion of desperate unemployed or underemployed workers to accept lower wages, part-time work, and temporary work, as well as the relinquishing of healthcare benefits and a financially secure retirement -- in short, to surrender the hope that is supposed to come with the American franchise.</p> <p>Such a recovery, resting on the stripping away of the hard won material and cultural achievements of the past century, suggests a new world in which the prison-labor archipelago could indeed become a vast gulag of the downwardly mobile. </p> <p><em>Steve Fraser is Editor-at-Large of New Labor Forum, co-founder of the</em><a target="_blank" href=""><em>American Empire Project</em></a><em> (Metropolitan Books), and a </em><a target="_blank" href=",_taps_for_the_unemployed/"><em>TomDispatch regular</em></a><em>.  He is, most recently, the author of </em><a target="_blank" href="">Wall Street: America’s Dream Palace</a><em>. He teaches history at Columbia University.</em></p> <p><em>Joshua B. Freeman, a</em><em> </em><a target="_blank" href=",_taps_for_the_unemployed/"><em>TomDispatch regular</em></a><em>, teaches history at Queens College and at the Graduate Center of the City University of New York and is affiliated with its Joseph S. Murphy Labor Institute. His forthcoming book, </em>American Empire<em>, will be the final volume of the </em>Penguin<em> </em>History of the United States<em>.</em></p> <p>[<strong>Further Reading:</strong> For those interested in learning more about the history of prison labor and the convict-leasing system, we highly recommend three books that were crucial to us in writing this essay: Rebecca M. McLennan’s <em><a target="_blank" href="">The Crisis of Imprisonment: Protest, Politics, and the Making of the American Penal State, 1776-1941</a></em>, Alex Lichtenstein’s <em><a target="_blank" href="">Twice the Work of Free Labor: The Political Economy of Convict Labor in the New South</a></em>, and Douglas A. Blackmon’s <em><a target="_blank" href="">Slavery by Another Name: The Re-Enslavement of Black Americans from the Civil War to World War II</a></em>.]</p> <p><em>This piece is an adaptation of an “In the Rearview Mirror” column that will be published in a forthcoming issue of the magazine </em><a target="_blank" href="">New Labor Forum</a><em>.</em></p> <p>Follow TomDispatch on Twitter @TomDispatch and join us on <a target="_blank" href="">Facebook.</a></p> <p>Copyright 2012 Steve Fraser and Joshua B. Freeman</p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter--> </div></div></div> Thu, 19 Apr 2012 06:00:01 -0700 Steve Fraser, Joshua B. Freeman, 670508 at Civil Liberties Labor Civil Liberties Visions labor prison America Returns to Our Proud History of Hating -- and Fighting -- Wall Street <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">Only weeks ago, an eerie unprotesting silence still blanketed the country. That&#039;s all over now.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p> </p> <p><em>To stay on top of important articles like these, sign up to receive the </em><em><a href="">latest updates from here.</a></em> </p> <div>Occupy Wall Street, the ongoing demonstration-cum-sleep-in that began a month ago not far from the New York Stock Exchange and has since spread like wildfire to cities around the country, may be a game-changer.  If so, it couldn’t be more appropriate or more in the American grain that, when the game changed, Wall Street was directly in the sights of the protesters.</div> <p> </p> <p>The fact is that the end of the world as we’ve known it has been taking place all around us for some time.  Until recently, however, thickets of political verbiage about cutting this and taxing that, about the glories of “job creators” and the need to preserve “the American dream,” have obscured what was hiding in plain sight -- that street of streets, known to generations of our ancestors as “the street of torments.”</p> <p>After an absence of well over half a century, Wall Street is back, center stage, as the preferred American icon of revulsion, a status it held for a fair share of our history.  And we can thank a small bunch of campers in Manhattan’s Zuccotti Park for hooking us up to a venerable tradition of resistance and rebellion.</p> <p><strong>The Street of Torments</strong></p> <p>Peering back at a largely forgotten terrain of struggle against “the Street,” so full of sound and fury signifying quite a lot, it’s astonishing -- to a historian of Wall Street, at least -- that the present movement didn’t happen sooner.  It’s already hard to remember that only weeks ago, three years into the near shutdown of the world financial system and the Great Recession, an eerie unprotesting silence still blanketed the country. </p> <p>Stories accumulated of Wall Street greed and arrogance, astonishing tales of incompetence and larceny.  The economy slowed and stalled.  People <a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href="">lost</a> their homes and jobs.<strong> </strong>Poverty <a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href="">reached</a> record levels<strong>. </strong> The political system proved as bankrupt as the big banks.  Bipartisan consensus emerged -- but only around the effort to save “too big to fail” financial goliaths, not the legions of victims their financial wilding had left in its wake. </p> <p>The political class then prescribed what people already had plenty of: yet another dose of austerity plus a faith-based belief in a “recovery” that, for 99% of Americans, was never much more than an optical illusion.  In those years, the hopes of ordinary people for a chance at a decent future withered and bitterness set in.   </p> <p>Strangely, however, popular resistance was hard to find.  In the light of American history, this passivity was surpassingly odd.  From decades before the Gilded Age of the late nineteenth century through the Great Depression, again and again Wall Street found itself in the crosshairs of an outraged citizenry mobilized thanks to political parties, labor unions, or <a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href="">leagues of the unemployed</a>.  Such movements were filled with a polyglot mix of middle-class anti-trust reformers, bankrupted small businessmen, dispossessed farmers, tenants and sharecroppers, out-of-work laborers, and so many others. </p> <p>If Occupy Wall Street signals the end of our own, atypical period of acquiescence, could a return to a version of “class warfare” that would, once upon a time, have been familiar to so many Americans be on the horizon?  Finally!</p> <p>What began as a relatively sparsely attended and impromptu affair has displayed a staying power and magnetic attractiveness that has taken the country, and above all the political class, by surprise.  A recent rally of thousands in lower Manhattan, where demonstrators marched from the city’s government center to Zuccotti Park, the location of the “occupiers” encampment, was an extraordinarily diverse gathering by any measure of age, race, or class.  Community organizations, housing advocates, environmentalists, and even official delegations of trade unionists not normally at ease hanging out with anarchists and hippies gave the whole affair a social muscularity and reach that was exhilarating to experience.</p> <p>Diversity, however, can cut both ways.  Popular protest, to the degree that there’s been much during the recent past -- and mainly over the war in Iraq -- has sometimes been criticized for the chaotic way it assembled a grab-bag of issues and enemies, diffuse and without focus.  Occupy Wall Street embraces diverse multitudes but this time in the interest of convergence.  In its targeting of “the street of torments,” this protean uprising has, in fact, found common ground. To a historian’s ear this echoes loudly.</p> <p>Karl Marx described high finance as “the Vatican of capitalism,” its <em>diktat</em> to be obeyed without question. We’ve spent a long generation learning not to mention Marx in polite company, and not to use suspect and nasty phrases like “class warfare” or <a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href="">“the reserve army of labor,”</a> among many others.   </p> <p>In times past, however, such phrases and the ideas that went with them struck our forebears as useful, even sometimes as true depictions of reality.  They used them regularly, along with words like <a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href="">“plutocracy,”</a> “robber baron,” and “ruling class,” to identify the sources of economic exploitation and inequality that oppressed them, as well as to describe the political disenfranchisement they suffered and the subversion of democracy they experienced.   </p> <p>Never before, however, has “the Vatican of capitalism” captured quite so perfectly the specific nature of the oligarchy that’s run the country for a generation and has now run it into the ground.  Even political consultant and pundit James Carville, no Marxist he, confessed as much during the Clinton years when he said the bond market “intimidates everybody.” </p> <p>Perhaps that era of everyday intimidation is finally ending.  Here are some of the signs of it -- literally -- from that march I attended: “Loan Sharks Ate My World” (illustrated with a reasonable facsimile of the Great White from <em>Jaws</em>), “End the Federal Reserve,” “Wall Street Sold Out, Let’s Not Bail-Out,” “Kill the Over the Counter Derivative Market,” “Wall Street Banks Madoff Well,” “The Middle Class is Too Big To Fail,”  “Eat the Rich, Feed the Poor,” “Greed is Killing the Earth.”  During the march, a pervasive chant -- “We are the 99%” -- resoundingly reminded the bond market just how isolated and vulnerable it might become.   </p> <p>And it is in confronting this elemental, determining feature of our society’s predicament, in gathering together all the multifarious manifestations of our general dilemma right there on “the street of torments,” that Occupy Wall Street -- even without a program or clear set of demands, as so many observers lament -- has achieved a giant leap backward, summoning up a history of opposition we would do well to recall today.</p> <p><strong>A Century of Our Streets and Wall Street</strong></p> <p>One young woman at the demonstration held up a corrugated cardboard sign roughly magic-markered with one word written three times: “system,” “system,” “system.”  That single word resonates historically, even if it sounds strange to our ears today.  The indictment of presumptive elites, especially those housed on Wall Street, the conviction that the system over which they presided must be replaced by something more humane, was a robust feature of our country’s political and cultural life for a long century or more.</p> <p>When in the years following the American Revolution, Jeffersonian democrats raised alarms about the “moneycrats” and their counterrevolutionary intrigues -- they meant Alexander Hamilton and his confederates in particular -- they were worried about the installation in the New World of a British system of merchant capitalism that would undo the democratic and egalitarian promise of the Revolution. </p> <p>When followers of Andrew Jackson inveighed against the Second Bank of the United States -- otherwise known as “the Monster Bank” -- they were up in arms against what they feared was the systematic monopolizing of financial resources by a politically privileged elite.  Just after the Civil War, the Farmer-Labor and Greenback political parties freed themselves of the two-party runaround, determined to mobilize independently to break the stranglehold on credit exercised by the big banks back East.</p> <p>Later in the nineteenth century, Populists decried the overweening power of the Wall Street “devil fish” (shades of Matt Taibbi’s <a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href="">“giant vampire squid” metaphor</a> for Goldman Sachs). Its tentacles, they insisted, not only reached into every part of the economy, but also corrupted churches, the press, and institutions of higher learning, destroyed the family, and suborned public officials from the president on down.  When, during his campaign for the presidency in 1896, the Populist-inspired “boy orator of the Platte” and Democratic Party candidate William Jennings Bryan vowed that mankind would not be “crucified on a cross of gold,” he meant Wall Street and everyone knew it. </p> <p>Around the turn of the century, the anti-trust movement captured the imagination of small businessmen, consumers, and working people in towns and cities across America.  The trust they worried most about was “the Money Trust.”  Captained by J.P. Morgan, “the financial Gorgon,” the Money Trust was skewered in court and in print by future Supreme Court justice Louis Brandeis, subjected to withering Congressional investigations, excoriated in the exposés of “muckraking” journalists, and depicted by cartoonists as a cabal of prehensile Visigoths in death-heads.</p> <p>As the twentieth century began, progressive reformers in state houses and city halls, socialists in industrial cities and out on the prairies, strikebound workers from coast to coast, working-class feminists, antiwar activists, and numerous others were still vigorously condemning that same Money Trust for turning the whole country into a closely-held system of financial pillage, labor exploitation, and imperial adventuring abroad.  As the movements made clear, everyone but Wall Street was suffering the consequences of a system of proliferating abuses perpetrated by “the Street.”</p> <p>The tradition the Occupy Wall Street demonstrators have tapped into is a long and vibrant one that culminated during the Great Depression.  Then as now, there was no question in the minds of "the 99%” that Wall Street was principally to blame for the country’s crisis (however much that verdict has since been challenged by disputatious academics). </p> <p>Insurgencies by industrial workers, powerful third-party threats to replace capitalism with something else, rallies and marches of the unemployed, and, yes, occupations, even seizures of private property, foreclosures forestalled by infuriated neighbors, and a pervasive sense that the old order needed burying had their lasting effect. In response, the New Deal attempted to unhorse those President Franklin Roosevelt termed “economic royalists,” who were growing rich off “other people’s money” while the country suffered its worst trauma since the Civil War.  “The Street” trembled.</p> <p>“System, System, System”: It would be foolish to make too much of a raggedy sign -- or to leap to conclusions about just how lasting this Occupy Wall Street moment will be and just where (if anywhere) it’s heading.   It would be crazily optimistic to proclaim our own pitiful age of acquiescence ended.</p> <p>Still, it would be equally foolish to dismiss the powerful American tradition the demonstrators of this moment have tapped into.  In the past, Wall Street has functioned as an icon of revulsion, inciting anger, stoking up energies, and summoning visions of a new world that might save the New World. </p> <p>It is poised to play that role again.  Remember this: in 1932, three years into the Great Depression, most Americans were more demoralized than mobilized.  A few years later, all that had changed as “Our Street, Not Wall Street” came alive.  The political class had to scurry to keep up.  Occupy Wall Street may indeed prove the opening act in an unfolding drama of renewed resistance and rebellion against “the system.”</p> <p> </p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter--> </div></div></div> Thu, 13 Oct 2011 03:00:01 -0700 Steve Fraser, 668102 at Occupy Wall Street Occupy Wall Street economy banks financial system occupy wall street Massive Unemployment: Proof That Global Capitalism Doesn't Work <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">We may be witnessing the birth of a new permanent class of the marginalized.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p> </p> <p><em>To stay on top of important articles like these, sign up to receive the </em><em><a href="">latest updates from here.</a></em></p> <div>Not long ago, the city council of Ventura, California, passed an ordinance making it legal for the unemployed and homeless to sleep in their cars.  At the height of the Great Recession of 2008, one third of the capital equipment of the American economy lay idle.  Of the women and men idled along with that equipment, only 37% got a government unemployment check and that check, on average, represented only 35% of their weekly wages. </div> <p> </p> <p>Meanwhile, there are now two million ”99ers” -- those who have maxed out their supplemental unemployment benefits because they have been out of work for more than 99 weeks. Think of them as a full division in “the reserve army of labor.”  That “army,” in turn, accounts for 17% of the American labor force, if one includes part-time workers who need and want full-time work and the millions of unemployed Americans who have grown so discouraged that they’ve given up looking for jobs and so aren’t counted in the official unemployment figures.  As is its historic duty, that force of idle workers is once again driving down wages, lengthening working hours, eroding on-the-job conditions, and adding an element of raw fear to the lives of anyone still lucky enough to have a job.</p> <p>No one volunteers to serve in this army.  But anyone, from Silicon Valley engineers to Florida tomato pickers, is eligible to join what, in our time, might be thought of as the all-involuntary force.  Its mission is to make the world safe for capitalism. Today, with the world spiraling into a second “Great Recession” (even if few, besides the banks, ever noticed that the first one had ended), its ranks are bound to grow.</p> <p><a name="more" style="color: rgb(153, 51, 0); text-decoration: none; " id="more"></a></p> <p><strong>The All-Involuntary Army (of Labor)</strong></p> <p> </p> <p>As has always been true, the coexistence of idling workplaces and cast-off workers remains the single most severe indictment of capitalism as a system for the reproduction of human society.  The arrival of a new social category -- “the 99ers” -- punctuates that grim observation today. </p> <p>After all, what made the Great Depression “great” was not only the staggering level of unemployment (no less true in various earlier periods of economic collapse), but its duration.  Years went by, numbingly, totally demoralizingly, without work or hope.  When it all refused to end, people began to question the fundamentals, to wonder if, as a system, capitalism hadn’t outlived its usefulness. </p> <p>Nowadays, the 99ers notwithstanding, we don’t readily jump to such a conclusion.  Along with the “business cycle,” including stock market bubbles and busts and other economic perturbations, unemployment has been normalized.  No one thinks it’s a good thing, of course, but it’s certainly not something that should cause us to question the way the economy is organized.</p> <p>Long gone are the times when unemployment was so shocking and traumatic that it took people back to the basics.  We don’t, for instance, even use that phrase “the reserve army of labor” anymore.  It strikes many, along with “class struggle” and “working class,” as embarrassing.  It’s too “Marxist” or anachronistic in an age of post-industrial flexible capitalism, when we’ve grown accustomed to the casualness and transience of work, or even anointed it as a form of “free agency.” </p> <p>However, long before leftists began referring to the unemployed as a reserve army, that redolent metaphor was regularly wielded by anxious or angry nineteenth century journalists, government officials, town fathers, governors, churchmen, and other concerned citizens.  Something new was happening, they were sure, even if they weren’t entirely clear on what to make of it.</p> <p>Unemployment as a recurring feature of the social landscape only caught American attention with the rise of capitalism in the pre-Civil War era.  Before that, even if the rhythms of agricultural and village life included seasonal oscillations between periods of intense labor and downtime, farmers and handicraftsmen generally retained the ability to sustain their families. </p> <p>Hard times were common enough, but except <em>in extremis</em> most people retained land and tools, not to speak of common rights to woodlands, grazing areas, and the ability to hunt and fish.  They were -- we would say today -- “self-employed.”  Only when such means of subsistence and production became concentrated in the hands of merchant-capitalists, manufacturers, and large landowners did the situation change fundamentally.  A proletariat -- those without property of any kind except their own labor power -- made its appearance, dependent on the propertied to employ them.  If, for whatever reason, the market for their labor power dried up, they were set adrift.</p> <p>This process of dispossession lasted more than a century.  In the early decades of the nineteenth century, its impact remained limited.  The farmers, handicraftsmen, fishermen, and various tradespeople swept into the new textile or shoe factories, or the farm women set to work out in the countryside spinning and weaving for merchant capitalists still held onto some semblance of their old ways of life. They maintained vegetable gardens, continued to hunt and fish, and perhaps kept a few domestic animals. </p> <p>When the first commercial panics erupted in the 1830s and 1850s and business came to a standstill, many could fall back on pre-capitalist ways of making a living, even if a bare one.  Still, the first regiments of the reserve army of the unemployed had made their appearance.  Jobless men were already roaming the roads, an alarming new sight for townspeople not used to such things.</p> <p><strong>Demobilizing the Workforce Becomes the New Norm</strong></p> <p>When industrial capitalism exploded after the Civil War, unemployment suddenly became a chronic and frightening aspect of modern life affecting millions.  Panics and depressions now occurred with distressing frequency. Their randomness, severity, and duration (some lasted half a decade or more) only swelled the ranks of the reserve army.  Crushing helplessness in the face of unemployment would be a devastating new experience for the great waves of immigrants just landing on American shores, many of them peasants from southern and eastern Europe accustomed to falling back on their own meager resources in fields and forests when times were bad.</p> <p>The very presence of this “army” of able-bodied but destitute workers seemed to catch the essential savagery of the new economy and it stunned onlookers.  The “tramp” became a ubiquitous figure, travelling the roads and rails, sometimes carrying his tools with him, desperate for work.  He proved a threatening specter for villagers and city people alike. </p> <p>Just as shocking was a growing realization -- made undeniable by each dismal repetition of the business cycle -- that the new industrial economy wasn’t just producing that reserve army, but depended on its regular mobilization and demobilization to carry on the process of capital accumulation. It was no passing phenomenon, no natural disaster that would run its course.  It was the new normal. </p> <p>Initial reactions were varied and dramatic.  Local governments rushed to pass punitive laws against tramping and vagrancy, mandating terms of six months to two years of hard labor in workhouses.  Meanwhile, the orthodox thinking of that moment raised steep barriers to government aid for those in need.  During the devastating depression of the 1870s, for instance, President Ulysses Grant’s Secretary of the Treasury put things succinctly: “It is not part of the business of government to find employment for people.”</p> <p>Punishment and studied indifference were, however, by no means the only responses as emergency relief efforts -- some private, some public -- became common.  The ravaging effects of unemployment, the way it spread like a plague, and its chronic reappearance also put more radical measures on the agenda, proposals that questioned the viability and morality of what was then termed the “wages system.”</p> <p>Calls went out to colonize vacant land and establish state-run factories and farms to productively re-employ the idled.  Infuriated throngs occupied state houses demanding public works. Elements of the labor and populist movements advocated manufacturing and agricultural cooperatives as a way around the ruthlessness of the Darwinian free market. Business “trusts” or monopolies were often decried for driving other businesses under and so exacerbating the unemployment dilemma.  In some cases, their nationalization was called for.   Militants of the moment began to demand work not as a sop to the indigent, but as a right of citizenship, as precious and inviolable as anything in the Bill of Rights.</p> <p>The greatest and most prolonged mass mobilization of the mid-1880s was the national movement for the eight-hour work day.  It was animated partly by a desire for more leisure time, but also by a vain hope that its passage by Congress might effectively raise wages. (Industrialists, however, had no intention of paying the same amount for eight hours of work as they had for 12.)  Its main impetus, though, was a belief that mandating a national reduction in the hours of work would spread jobs around and so diminish the ranks of the reserve army. </p> <p>Some were convinced that capitalism’s appetite for human labor was too voracious for business ever to agree to such limits.  So long as the business cycle was on its upward arc, the compulsion to exploit labor power was insatiable.  When the market went south, all that surplus humanity could be left to fend for itself.  Its partisans nonetheless believed that the movement for an eight-hour day would expose the barbarism of the economic system for all to see, opening the door to something more humane.</p> <p>In other words, a wide spectrum of responses to unemployment was enfolded within a broad and growing anti-capitalist culture.  Within the organized labor movement, that proto<strong>-</strong>union, the Knights of Labor, was immersed in the idea of an anti-capitalist insurgency.  Most trade unions of the time, however, accepted that the “wages system” was here to stay and focused instead on the issues of job security, fighting for unemployment benefit funds for members, seniority, prohibitions against overtime, and the shortening of working hours. </p> <p><a target="_blank" style="color: rgb(153, 51, 0); text-decoration: none; " href=";pf_rd_s=lpo-top-stripe-1&amp;pf_rd_t=201&amp;pf_rd_i=0300117558&amp;pf_rd_m=ATVPDKIKX0DER&amp;pf_rd_r=1D2AFFJ0HHS2QX53HQF0"><img alt="" hspace="6" vspace="6" width="140" height="226" align="left" style="border-top-width: 0px; border-right-width: 0px; border-bottom-width: 0px; border-left-width: 0px; " src="" /></a>Even agitation to ban child labor and limit female employment was motivated in part by a desire to temper the pervasiveness of unemployment by curtailing the pool of available labor.  Other trade union procedures and proposals were more mean-spirited, including attempts to ban immigration or exclude African-American and other minorities or the unskilled from membership in the movement.  That insularity bedevils trade unionism to this day.</p> <p>As part of this tumultuous season of upheaval, which lasted from the 1870s through the Great Depression, the unemployed themselves organized demonstrations.  A gathering in Tomkins Square Park of thousands of New Yorkers left destitute by the panic and depression of 1873 was dispersed with infamous brutality by the police.  Local newspapers labeled the protestors “communards.” (The recently defeated Paris Commune had ignited a hysterical fear of “un-American” radicalism, a toxin that has never since left the American bloodstream.) </p> <p>Although the Tomkins Square rally was mainly a plea for relief and public works, there was some talk of marching on Wall Street.  Such radical rhetoric, not to speak of actual violence, was hardly unusual in such confrontations then, a measure of how raw class relations were and how profoundly disturbed people had become by the haunting presence of mass unemployment.</p> <p>Just as telling, the unemployed and those still at work but at loggerheads with their bosses frequently displayed their solidarity in public.  During the “Great Insurrection” of 1877, when railroad strikers from coast to coast faced off against state militias, federal troops, and the private armies of the railroad barons, they were joined by regiments of the “reserve army.”  Often these were their neighbors and family members, but also strangers who, feeling an affinity for their beleaguered brethren, preferred setting fire to railroad engine houses than going to work in them as scabs.  Amid the awful depression of the 1890s, a cigar maker caught the temper of the times simply: “I believe the working men themselves will have to take action.  I believe those men that are employed will have look out for the unemployed that work at the same business they do.”</p> <p><strong>Marching Armies (of the Unemployed)</strong></p> <p>Demonstrations of the unemployed resurfaced with each major economic downturn.  In the depression winter of 1893-1894, for example, ragged “armies” of the desperate gathered in various parts of the country, 40 of them in all. (Eighteen-year-old future novelist Jack London joined one in California.)  The largest commandeered a train in an effort to get to Washington, D.C., and was chased for 300 miles across Montana by federal troops. </p> <p>The most famous of them was led by Jacob Coxey, a self-made Ohio businessman.  “Coxey’s Army” (more formally known as “the Commonwealers” or the “Commonwealth of Christ Army”) made it all the way to the capital, a “living petition” to Congress.  It was led by his 17-year-old daughter as “the Goddess of Peace” riding a white horse.</p> <p>In the nation’s capital, the “Army” lodged its plea for relief, work, and an increase in the money supply. (Jacob’s son was called “Legal Tender Cox.”)  President Grover Cleveland wasn’t hearing any of it, having already made his views known in 1889 during his first term in office: “The lessons of paternalism ought to be unlearned and the better lesson taught that while the people should patriotically and cheerfully support their government, its functions do not include support of the people.” </p> <p>Christian charity was not Cleveland’s long suit.  Others of the faith, however, believers in the social gospel and Christian socialism especially, staged spectacular public dramas on behalf of the “shorn lambs of the unemployed” -- even a mock “slave auction” in Boston in 1921 during a severe post-World War I slump, in which the jobless were offered to the highest bidders as evidence of what “wage slavery” really meant.</p> <p>The Great Depression brought this protracted period of labor turmoil to a climax and to an end. In its early years, the ethos of “mutualism” and solidarity between the employed and unemployed was strengthened.  In those years, railroads began to report startling jumps in the numbers of Americans engaged in “train hopping” -- the rail equivalent of hitchhiking.  On one line, the “hoppers” went from 14,000 in 1929 to 186,000 in 1931.  </p> <p>In 1930, when the unemployment rate was at about today’s level, in cities across the country the first rallies of the unemployed began with demands for work and relief.  Later, there were food riots and raids on delivery trucks and packinghouses, as well as the occupations of shuttered coalmines and bankrupt utility companies by the desperate who began to work them.</p> <p>“Leagues” and “councils” of the unemployed, sometimes organized by the Communist Party, sometimes by the Socialist Party, and sometimes by a group run by radical pacifist A.J. Muste, marshaled their forces to stop home evictions, support strikes, and make far-reaching proposals for a permanent system of public works and unemployment insurance.  Muste’s groups, strong in the Midwest, set up bartering arrangements and labor exchanges among the jobless. </p> <p>In support of striking workers, unemployed protestors shut down the Briggs plant in Highland Park, Michigan -- it manufactured auto bodies for Ford -- pledging that they would not scab on the striking workers.  A march of former and current employees of the Ford facilities in Dearborn, Michigan, made the unusual demand that the company (not the government) provide work for the jobless.  For their trouble, they were bloodied by Ford’s hired thugs and five of them were killed. </p> <p>President Herbert Hoover took similar action.  In a move that shocked much of the nation, he ordered Army Chief of Staff General Douglas MacArthur to use troops to disperse the Bonus Expeditionary Army, World War I jobless veterans gathered in tents on Anacostia Flats in Washington asking for accelerated payments of their war-time pensions.  They were routed at bayonet point and MacArthur’s troops burned down their tent city.</p> <p><strong>How the New Deal Dealt</strong></p> <p>The Great Depression was, however, so profoundly unsettling that the unemployed finally became a political constituency of national proportions.  The pressure on mainstream politicians to do something grew ever more intense.  The Conference of Mayors that meets to this day was founded then to lobby Washington for federal relief for the jobless.  Even segments of the business community had begun to complain about the “costs” of unemployment when it came to workplace efficiency.</p> <p>Unemployment insurance, work relief, welfare, and public works -- all of which had surfaced in public debate since the turn of the twentieth century -- made up the basic package of responses offered by President Franklin Roosevelt’s New Deal to the inherent insecurity of proletarian life.  None were exactly expansive either in what they provided or in their execution, and yet all of them found themselves under chronic assault from birth (as they are today).  </p> <p>The most daring legislation under consideration, the Lundeen bill (authored by a Minnesota congressman), would have provided unemployment insurance equal to prevailing wages for anyone over 18 working part or full time.  Though it never became law<strong>,</strong> it was to be financed by a tax on incomes exceeding $5,000, and administered by elected worker representatives.  It was not atypical in its most basic assumption which once would have been thought intolerable -- that unemployment at significant levels would continue into the indefinite future. </p> <p>Unemployment was now to be ameliorated, but also accepted.  Harry Hopkins, who ran the New Deal’s relief efforts, was typical in predicting that “a probable minimum of four to five million” Americans would remain out of work “even in future ‘prosperity’ periods.”  Consequently, the new relief reforms were to be considered defense mechanisms designed to recharge the batteries of a stalled economy and to minimize the political fallout from outsized joblessness.  This menu of “solutions” has constituted the core of the labor and progressive movement’s approach to unemployment ever since.</p> <p><strong>“The Natural Rate of Unemployment”</strong></p> <p>After World War II, unemployment became, for the most part, a numerical and policy issue rather than a social phenomenon.  By the 1960s, what once struck most Americans as unnatural and ghastly had been fully transformed by economists and political elites into “the natural rate of unemployment” -- a level of joblessness that should never be tampered with because it was futile to do so and to try would induce inflation. </p> <p>More recently matters have turned truly perverse.  Neo-liberals, who during the Reagan era of the 1980s eclipsed Keynesians as the dominant thinkers when it came to economic policy, were worried that unemployment might not be high enough.  It was increasingly feared that, if the ranks of the jobless were not large indeed, both labor costs and inflation would rise, threatening the future value of capital investments. The world, in other words, had turned upside down.</p> <p>As official society adapted to the permanence of unemployment, the unemployed themselves subsided into political quiescence. There were exceptions, however. </p> <p>Perhaps the most massive unemployment demonstration in the nation’s history took place in 1963 when 100,000 Americans marched on Washington for “Jobs and Freedom.”  It is a telling commentary on the political sensibilities of the last half-century that the March on Washington, recalled mainly for Martin Luther King’s famed “I Have a Dream” speech, is rarely if ever remembered as an outpouring of righteous anger about a system that consigned much of a whole race to the outcast status first experienced by the young women of New England textile mills in antebellum America.</p> <p>Today, the question is: As the new unemployment “norm” rises, will the “99ers” remain just a number, or will anger and systemic dysfunction lead to the rebirth of movements of the unemployed, perhaps allied, as in the past, with others suffering from the economy’s relentless downward arc?  Keep in mind that the extent of organized protest by the unemployed in the past should not be exaggerated.  Not even the Great Depression evoked their sustained mass mobilization.  That’s hardly surprising.  By its nature, unemployment demoralizes and isolates people.  It makes of them a transient and chronically fluctuating population with no readily discernable common enemy and no obvious place to coalesce.</p> <p>Another question might be: In the coming years, might we see the return of a basic American horror at the phenomenon of joblessness?  And might it drive Americans to begin to ask deeper questions about the system that lives and feeds on it? </p> <p>After all, we now exist in an under-developing economy.  What new jobs it is creating are poor paying, low skill, and often temporary, nor are there enough of them to significantly reduce the numbers of those out of work.  The 99ers are stark evidence that we may be witnessing the birth of a new permanent class of the marginalized.  (The percentage of the unemployed who have been out of work for more than six months has grown from 8.6% in 1979 to 19.6% today.)  Moreover, our mode of “flexible capitalism” has made work itself increasingly transient and precarious. </p> <p>Until now, ideologues of the new order have had remarkable success in dressing this up as a new form of freedom.  But our ancestors, who experienced frequent and distressing interruptions in their work lives, who migrated thousands of miles to find jobs which they kept or lost at the whim of employers, and who, in solitary search for work, tramped the roads and hopped the freight cars (even if they could not yet roam Internet chat rooms), were not so delusional. </p> <p>We have a choice: Americans can continue to accept large-scale unemployment as “natural” and permanent, even -- a truly grotesque development -- as a basic feature on a bipartisan road to “recovery” via austerity.  Or we can follow the lead of the jobless young in the Arab Spring and of protestors beginning to demonstrate en masse in Europe.  Even the newly minted proletarians of Ventura, California, sleeping in their cars, may decide that they have had enough of a political and economic order of things so bankrupt it can find no use for them at any price.</p> <p> </p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter-->Steve Fraser is Editor-at-Large of New Labor Forum and co-founder of the American Empire Project (Metropolitan Books). He is, most recently, the author of Wall Street: America’s Dream Palace. He teaches history at Columbia University. Joshua B. Freeman teaches history at Queens College and the Graduate Center of the City University of New York and is affiliated with its Joseph S. Murphy Labor Institute. His forthcoming book, American Empire, will be the final volume of the Penguin History of the United States. </div></div></div> Sun, 11 Sep 2011 14:00:01 -0700 Steve Fraser, Joshua B. Freeman, 667701 at Economy Economy work economy unemployment austerity 99ers The Strange History of the Tea Party Crowd & America's Right Wing Know-Nothings <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">Today’s Tea Party movement is a bewildering network of crosscutting political emotions, ideas, and institutions -- just like its 18th century predecessors.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p><em>[To stay on top of important articles like these, sign up to receive the latest <a href="">updates from here</a>.]</em></p> <p>On a winter’s day in Boston in 1773, a rally of thousands at Faneuil Hall to protest a new British colonial tax levied on tea turned into an iconic moment in the pre-history of the American Revolution.  Some of the demonstrators -- Sons of Liberty, they called themselves -- left the hall and boarded the <em>Dartmouth</em>, a ship carrying tea, and dumped it overboard. </p> <p>One of the oddest features of the Boston Tea Party, from which our current crop of Tea Party populists draw their inspiration, is that a number of those long-ago guerilla activists dressed up as Mohawk Indians, venting their anger by emitting Indian war cries, and carrying tomahawks to slice open the bags of tea.  This masquerade captured a fundamental ambivalence that has characterized populist risings ever since.  After all, if in late eighteenth century America, the Indian already functioned as a symbol of an oppressed people and so proved suitable for use by others who felt themselves put upon, it was also the case that the ancestors of those Boston patriots had managed to exterminate a goodly portion of the region’s Native American population in pursuit of their own self-aggrandizement. </p> <p>Today’s Tea Party movement, like so many of its “populist” predecessors, is a house of contradiction, a bewildering network of crosscutting political emotions, ideas, and institutions.  What connects it powerfully to a populist past stretching all the way back to Boston Harbor is, however, a sense of violation: “Don’t Tread on Me.”  </p> <p>Despite a recurring resistance to the impositions of powerful outside forces -- anti-elitism has been axiomatic for all such insurgencies -- populist movements have differed greatly on just what those forces were and what needed to be done to free people from their yoke.  It’s worth noting, for instance, that an earlier invocation of the Boston Tea Party took place at a 1973 rally on a replica of the <em>Dartmouth</em>-- a rally called to promote the impeachment of President Richard Nixon.</p> <p><a name="more" id="more"></a></p> <p><strong>From the Know-Nothings to the People’s Party</strong></p> <p>Over the course of American history, the populist instinct, now resurgent in the Tea Party movement, has oscillated between a desire to transform, and so create a new order of things, and a desire to restore a yearned-for (or imagined) old order. </p> <p>Before the Civil War, one such movement that caught both these urges was colloquially dubbed the “Know-Nothings” (not for any anti-intellectualism, but because its members deliberately conducted much of their business in secret -- hence, if questioned, were instructed to say, “I know nothing”).  Know-nothing-ism exuded the desire to move forward and backward at the same time.  During the 1840s and 1850s, it swept across much of the country, North and South.  There were “know-nothing” candies, “know-nothing” toothpicks, and “know-nothing” stagecoaches. </p> <p>Soon enough, the movement evolved into a national political party, the American Party, that appealed to small farmers, small businessmen, and working people.  Its attraction was two-fold.  The party vociferously opposed Irish and German Catholic immigration to the U.S. (as well as that of Chinese and Chilean immigrants working in the gold fields of California).  Yet, in the North, it also denounced slavery.  As planks in a political program, nativism <em>and</em> anti-slavery might seem like an odd couple, but in the minds of the party’s followers they were joined at the hip.  As Know-Nothings saw it, the Papacy and the South’s slave-owning planter elite were both conspiring to undermine a democratic society of masterless men.</p> <p>Keep in mind that conspiratorial thinking has long been deeply embedded in American populist movements (as in the Tea Party today).  In nineteenth century protestant America, alleged plots by Vatican hierarchs were a recurrent feature of political life.  In the North, a wave of crime and the rise of “poor relief” and other forms of dependency -- including wage labor, which accompanied the arrival of a flood of impoverished Catholic immigrants -- seemed to threaten an American promise of a society of free, equal, and self-reliant individuals (supposedly so noxious to the priestly elite of the Catholic Church).  In the slave South, where the master class was believed to be hard at work subverting the Constitution, conspiratorial machinations were self-evidently afoot.  By the mid-1850s, most “Know-Nothings” in the North had found their way into the newborn Republican Party which combined hostility to slavery with a milder form of anti-Catholicism.</p> <p><a href=";pf_rd_s=lpo-top-stripe-1&amp;pf_rd_t=201&amp;pf_rd_i=0300117558&amp;pf_rd_m=ATVPDKIKX0DER&amp;pf_rd_r=1D2AFFJ0HHS2QX53HQF0"><img width="140" vspace="6" hspace="6" height="226" align="left" alt="" src="" /></a>Populism with a capital “P,” the great economic and political insurgency of the last third of the nineteenth century that blanketed rural America from the cotton South to the grain-growing Great Plains and the Rocky Mountain West, would bear its own distinctive ambivalence.  The People’s Party indicted corporate and finance capitalism for destroying the livelihoods and lives of independent farmers and handicraftsmen.  It also attacked big business for subverting the foundations of democracy by capturing all three branches of government and transforming them into coercive instruments of rule by a new plutocracy.  Populists sometimes attributed what they termed an American “counterrevolution” to the conspiratorial plots of the “great Devil Fish of Wall Street,” suspected of colluding with Great Britain’s elite to undo the American Revolution.</p> <p>The remedies proposed, however, were hardly those of Luddites.  These instead anticipated many of the fundamental reforms of the next century, including government subsidies for farmers, the graduated income tax, direct election of the Senate, the eight-hour day, and even the public ownership of railroads and public utilities.  A tragic movement of the dispossessed, the Populists yearned to restore a society of independent producers, a world without a proletariat and without corporate trusts.  Yet they also envisioned something new and transformative, a “cooperative commonwealth” that would escape the barbaric competitiveness and exploitation of free market capitalism. </p> <p><strong>The Great Plains of Resentment</strong></p> <p>For the next four decades, populism remained emphatically against corporate capitalism and held on tightly to its resentment of powerful outsiders as well as a penchant for conspiracy mongering.  During the 1930s, however, the location of Conspiracy Central began to shift from Wall Street and the City of London to Moscow -- and even New Deal Washington.  Anti-communism added a new ingredient to an already roiling American politics of fear and paranoia, a toxic element which still inflames the Tea Party imagination two decades after the Berlin Wall was torn down.</p> <p>During the 1936 presidential campaign, in the midst of the Great Depression, three populist movements -- Louisiana Senator Huey Long’s “Share Our Wealth” clubs, the Union for Social Justice formed by the charismatic “radio priest” Father Charles E. Coughlin, and Francis Townsend’s campaign for government pensions for the elderly -- coalesced, albeit briefly and uneasily, to form the Union Party.  It ran from the left against President Franklin Roosevelt, nominating as its presidential candidate North Dakota Congressman William Lemke, a one-time spokesman for radical farmers. (The vice-presidential candidate was a labor lawyer from Boston.) </p> <p>The Union Party expressed a broad dissatisfaction with the failure of Roosevelt’s New Deal to relieve economic distress and injustice.  Senator Long, the latest in a long line of Southern populist demagogues, had been decrying the power of land barons, “moneycrats,” and big oil since his days as Louisiana’s governor.  His “Share Our Wealth” plan called for pensions and public education for all, as well as confiscatory taxes on incomes over $1 million, a minimum wage, and public works projects to give jobs to the unemployed.  Townsend’s scheme was designed to solve unemployment and the penury of old age by offering monthly government pensions of $200, financed by taxes on business, to everyone over the age of 60.  Coughlin, an early supporter of Roosevelt, trained his fire on finance capitalism, inveighing against its usurious, unchristian “parasitism.”</p> <p>But Long and especially Coughlin were at pains to distinguish their form of radicalism from the collectivism and atheism of the Red menace.  Father Coughlin expressed support for labor unions and a just wage.  He was, however, an inveterate foe of the left-leaning United Automobile Workers union, and roundly condemned the sit-down strikes which spread like a prairie fire following Roosevelt’s triumphal landslide victory in the 1936 presidential election, as workers across the country occupied everything from auto plants to department stores demanding union recognition. </p> <p>Indeed, in his radio addresses and his newspaper, <em>Social Justice,</em>the priest ranted about an incongruous conspiracy of Bolsheviks and bankers whose aim was to betray America.  He would eventually add a tincture of anti-Semitism to his warnings about a Wall Street cabal.  His growing sympathy for Nazism was not so shocking.  Fascism, after all, had its roots in a European version of populism that conveyed a post-World War I disgust with the selfishness and incompetence of cosmopolitan ruling elites, a virulent racial nationalism, and a hatred of bankers and especially Bolsheviks.    </p> <p>Followers of Long and Coughlin loathed big business <em>and</em> big government, even though big government -- back then anyway -- was taking on big business.  For them, “Don’t Tread on Me” meant a defense of local economies, traditional moral codes, and established ways of life that seemed increasingly endangered by national corporations as well as the state bureaucracies that began to proliferate under the New Deal.  Union Party campaign oratory was filled with references to the “forgotten man,” an image first invoked by Roosevelt on behalf of the working poor. </p> <p>In the years ahead, kindred images would resurface during a time of turmoil in the late 1960s in Nixon’s appeals to the “silent majority” of “Middle America,” and more recently in the Tea Party’s wounded sense of exclusion.  “Forgotten man” populism conveyed the irate politics of resentment of precariously positioned Americans against the organized power blocs of modern industrial society: Big Business, Big Labor, and Big Government.</p> <p><strong>Race, Resentment, and the Rise of Conservative Populism</strong></p> <p>Over the last half century populism has drifted steadily rightward, becoming ever more restorationist and ever less transformative, ever more anti-collectivist and ever less anti-capitalist.  What were subordinate themes in the older style populism -- religious orthodoxy, national chauvinism, phobic racism, and the politics of fear and paranoia -- have come to the fore in our time.  At least in broad terms, both the Barry Goldwater and the George Wallace insurgencies of the 1960s displayed this trajectory.</p> <p>Goldwater, the Arizona senator and 1964 Republican candidate for president, an “insurgent”?  Yes, if you keep in mind his condemnation of the too-liberal elite running the Republican Party, who, in his eyes, represented a clubby world of Ivy League bankers, corrupt politicians, media lords, and “one-worlders.”  Or consider the way he flirted with the freakish John Birch Society (which called President Dwight Eisenhower a “dedicated, conscious agent of the Communist Party” and warned of a Red plot to weaken the minds of Americans by fluoridating the water supply).  Or the Senator’s alarming readiness to threaten to push the nuclear button in defense of “freedom,” which could be thought of as the Cold War version of “Don’t Tread on Me.” </p> <p>Above all, Goldwater was the avatar of today’s politics of limited government.  In his opposition to civil rights legislation, he might be called the original “tenther” -- that is, a serial quoter of the Tenth Amendment to the Constitution, which reserves for the states all powers not expressly granted to the Federal government, with which he justified hamstringing all efforts by Washington to rectify social or economic injustice. For Goldwater the outlawing of Jim Crow was an infringement of constitutionally protected states’ rights.  Moreover, he was an inveterate enemy of all forms of collectivism, including of course unions and the welfare state.</p> <p>As the Goldwater opposition sank its grassroots into the lush soil of the Sunbelt, its desire to restore an older order of things was palpable.  At a time when New Deal liberalism was the reigning orthodoxy, the senator’s reactionary impulses seemed startlingly adrift from the mainstream, and so strange indeed.  </p> <p>Goldwater's rebellious constituents were an oddly positioned band of rebels.  Unlike the declining middling sorts attracted to the Union Party, they came mainly from a rising Sunbelt stratum, a new middle class significantly nourished by the mushrooming military-industrial complex: technicians and engineers, real-estate developers, middle managers, and mid-level entrepreneurs who resented the intrusion of Big Government while in fact being remarkably dependent on it. </p> <p>They could be described as reactionary modernists for whom liberalism had become the new communism.  How shocking when this Arizona “maverick” -- he deserved the label far more than John McCain ever did (if he ever did) -- won the Republican nomination in a knock-down brawl with the presidium, led by New York Governor Nelson Rockefeller, that had run the party until then.  Might the Tea Party accomplish something similar today? </p> <p>Think of Alabama Governor George Wallace as the other missing link between the economic populism of yesteryear and the cultural populism of the late twentieth century.  He was all at once an anti-elitist, a populist, a racist, a chauvinist, and a tribune of the politics of revenge and resentment.  “Segregation now, segregation tomorrow, segregation forever”: a line spoken at his inauguration as governor in 1963 that would be his signature defiance of the civil rights revolution and its alliance with the federal government.  In no uncertain terms, it signaled the militant racism of his bed-rock supporters.</p> <p>His appeal, however, ran far deeper than that.  The whole tenor of his politicking involved a down-home defense of blue-collar America.  Like Huey Long, he was sensitive to the economic predicament of his lower-class constituents.  As governor he favored expanded state spending on education and public health, pay raises for school teachers, and free textbooks.  When he ran for president as a third party candidate in 1968, he called for increases in social security and Medicare.  As late as 1972, Wallace increased retirement pensions and unemployment compensation in Alabama.</p> <p>Yet he championed the hard-hat American heartland by hailing its ethos of hard work and what today would be known as “family values” far more than by proposing concrete measures to assure its economic well-being.  Wallace railed against the know-it-all arrogance of “pointy-headed” Washington bureaucrats, the indolence of “welfare queens,” and the impiety, moral decadence, and disloyalty of privileged long-haired, pot-smoking, anti-war college students. </p> <p>Bellicose calls for law and order, states' rights, and a muscular patriotism fueled the revanchist emotions that made Wallace into more than a regional figure.  When he ran in the Democratic primaries in 1964 (with the support of the John Birch Society and the White Citizens Council), he won significant numbers of votes not only in the Deep South, but in states like Indiana, Wisconsin, and Maryland, a sign of the Southernization of American politics at a time when the spread of NASCAR, country music, and the blues were Southernizing its culture as well.</p> <p>Wallace’s venture into third-party politics (on the predictably named American Independent Party ticket) terrified the Democrats, who feared the loss of part of their blue-collar base.  He called Vice President Hubert Humphrey, then running for president against Richard Nixon, as well as Northern liberals generally, a “group of god-damned, mealy-mouthed sissy-britches” -- shades of Senator Joe McCarthy and the 1950s -- and he promised to take the gloves off, if elected, and bomb North Vietnam back to the Stone Age. </p> <p>Wallace’s popularity revealed a possibility to Nixon and the Republicans denied them since the end of Reconstruction: that, on the road to an Electoral College victory, they might begin to develop a “southern strategy.”  In the meantime, his populist cry that there “was not a dime’s worth of difference between the Democratic and Republican parties” won him 10 million votes, 13.5% of the total and 46 votes in the Electoral College.  And remember this: a crowd of 20,000 attended a Wallace rally in 1968 at a sold-out Madison Square Garden in New York City.</p> <p><strong>Don’t Tread on My Taxes</strong></p> <p>So what does this episodic and checkered history of American populism have to do with the Tea Party?</p> <p>As a start, the Tea Party movement reminds us that the moral self-righteousness, sense of dispossession, anti-elitism, revanchist patriotism, racial purity, and “Don’t Tread on Me” militancy that were always at least a part of the populist admixture are alive and well.  For all the fantastical paranoia that often accompanies such emotional stances, they speak to real experiences -- for some, of economic anxiety, insecurity, and loss; for others, of deeper fears of personal, cultural, political, or even national decline and moral disorientation. </p> <p>Though such fears and feelings are, in part, legacies of the corporate liberal order -- one of the dark sides of “progress” under capitalism -- in this new populist moment, anti-capitalism itself barely lingers on.  Though outrage at the bank bailout did help propel the Tea Party explosion, anti-big-business sentiment is now a pale shadow of its former self, a muted sub-theme in the movement when compared to the Wallace moment, not to mention those of Huey Long or the Populists. </p> <p>This is hardly surprising since, at least economically, capitalism has, according to recent surveys of Tea Party membership, served many of them reasonably well.  Like Goldwater supporters of the 1960s, those who identify with the Tea Party movement are generally wealthier than the population as a whole, and more likely to be employed.  They are also apparently better educated, so their fondness for Sarah Palin’s intellectual debilities may be more a case of resentment of bicoastal cultural snobbery than eye-popping ignorance.  </p> <p>Alongside an exalted rhetoric about threats to liberty lies a sour, narrow-minded defensiveness against any possible threat of income redistribution that might creep into the body politic… and so into their pockets.  “Don’t Tread on Me,” once a rebel war cry, has morphed into: “I’ve got mine.  Don’t dare tax it.”  The state, not the corporation, is now the enemy of choice.    </p> <p>Tea Party populism should also be thought of as a kind of identity politics of the right.  Almost entirely white, and disproportionately male and older, Tea Party advocates express a visceral anger at the cultural and, to some extent, political eclipse of an America in which people who looked and thought like them were dominant (an echo, in its own way, of the anguish of the Know-Nothings).  A black President, a female Speaker of the House, and a gay head of the House Financial Services Committee are evidently almost too much to bear.  Though the anti-immigration and Tea Party movements so far have remained largely distinct (even if with growing ties), they share an emotional grammar: the fear of displacement.</p> <p>But identity politics aside, Tea Party anger reaches far beyond the ranks of the modest Tea Party movement.  It resonates with other Americans who understandably feel that political and economic elites, serving themselves at the expense of everyone else, have failed Americans.  The big question is just exactly how (or even if) that private and personal rage gets transformed into moral and political outrage.  If the heirs of George Wallace and Barry Goldwater, or the Sarah Palins of today, have their way, the outcome won’t be a tea party. </p> <p><em><em>This piece is an adaptation of an article that will be published in the Fall 2010 issue of the magazine</em><a target="_blank" href="">New Labor Forum</a>.</em></p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter--><p><em>Steve Fraser is editor-at large of </em><a href="">New Labor Forum</a><em>, co-founder of <a href="">the American Empire Project</a>, a writer, <a href=",_a_tale_of_two_presidents__/">TomDispatch contributor</a>, and an historian.  His latest book is </em><a href="">Wall Street: America’s Dream Palace</a><em>. </em></p> <p><em>Joshua B. Freeman teaches history at the City University of New York.  He is currently completing a history of the United States since World War II as part of the Penguin History of the U.S.</em> </p><p><em>To stay on top of important articles like these, sign up to receive the latest <a href="">updates from here</a>.</em></p> </div></div></div> Wed, 05 May 2010 12:00:01 -0700 Steve Fraser, Joshua B. Freeman, 662665 at News & Politics News & Politics Tea Party and the Right populism right wing conservative tea party Is Obama Trying to Dismantle Roosevelt's New Deal? <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">FDR, he is not. Obama and his team read the lesson of humiliating defeat in Massachusetts and conservative hostility as an advisory to move further to the right.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p>On March 4, 1933, the day he took office, Franklin Roosevelt excoriated the "money changers" who "have fled from their high seats in the temples of our civilization [because...] they know only the rules of a generation of self-seekers.  They have no vision and where there is no vision, the people perish."</p> <p>Rhetoric, however, is only rhetoric.  According to one skeptical congressional observer of FDR's first inaugural address, "The President drove the money-changers out of the Capitol on March 4th -- and they were all back on the 9th."</p> <p>That was essentially true.  It was what happened after that, in the midst of the Great Depression, which set the New Deal on a course that is the mirror image of the direction in which the Obama administration seems headed. </p> <p>Buoyed by great expectations when he assumed office, Barack Obama has so far revealed himself to be an unfolding disappointment.  On arrival, expectations were far lower for FDR, who was not considered extraordinary at all -- until he actually did something extraordinary. </p> <p>The great expectations of 2009 are, only a year later, beginning to smell like a pile of dead fish with new rhetoric -- including populist-style attacks on villainous bankers that sound fake (or cynically pandering) when uttered by Obama's brainiacs -- layered on top of the pile like deodorant.  Meanwhile, the country is suffering through a recovery that isn't a recovery unless you happen to be a banker, and the administration stands by, too politically or intellectually inhibited or incapacitated to do much of anything about it.  A year into "change we can believe in" and the new regime, once so flush with power and the promise of big doings, seems exhausted, vulnerable, and afraid.  A year into the New Deal -- indeed a mere 100 days into Roosevelt's era -- change, whether you believed in it or not, clearly had the wind at its back. </p> <p><b>A Tale of Two Presidencies</b></p> <p>If, a few days after Roosevelt pronounced them ex-communicant, the "money-changers" were back inside the temple -- "temple," by the way, was how the Federal Reserve used to be known before its recent fall from grace -- no one was too surprised.  He, like Obama, was initially worried about alienating big business and high finance.  He arrived in the Oval Office, in fact, still a prisoner of his own past and the country's.  He believed, for example, in the then-orthodox wisdom of balancing the budget and would never entirely abandon that faith. </p> <p>Not long before he assumed office, his predecessor, Herbert Hoover, vetoed a bill calling for the accelerated payment of bonuses to World War I veterans.  Many of them had only recently gathered in makeshift tents on Anacostia Flats in Washington D.C., an army of the destitute, to plead their case.  Hoover, to his lasting dishonor, ordered Army Chief of Staff General Douglas McArthur to have their tents set on fire and drive them away at bayonet point.  Not long after FDR took the oath of office, he vetoed the same bill.  He shared, as well, in a broad cultural repugnance for what was then called "the dole," and today is known as "welfare."</p> <p>The legendary first 100 days of the Roosevelt administration, memorable for a raft of reform and recovery legislation, also prominently featured an Economy Act designed to reduce government expenditures.  Fearing the possibility of a break with the commercial elite, the president tried forging a partnership with them, much as Hoover had.  As a matter of fact, the first two pieces of recovery legislation his administration submitted to Congress -- the National Industrial Recovery Act and the Agricultural Adjustment Act -- were formulated and implemented in a way that would seem familiar today.  They gave the country's major corporations and largest agricultural interests the principal authority for re-starting the country's stalled economic engines. </p> <p>However, even as the administration tried to maintain its ties to powerful business interests and a traditional fiscal conservatism, it broke them -- and it severed those connections in ways, and for reasons, that are instructive today.</p> <p><b>*</b><i>The Glass-Steagall Act:</i> This emergency banking legislation passed during those extraordinary first 100 days separated commercial from investment banking.  It was meant to prevent the misuse of commercial bank deposits (other people's money like yours and mine) in dangerous forms of speculation, which many at the time believed had helped cause the Great Wall Street Crash of 1929, prelude to the Great Depression.  Today, ever more people wish Glass-Steagall had never been repealed (as it was in 1999), as its absence helped open the door to the financial misadventures that brought us the Great Crash of '08. </p> <p>The bill infuriated what was called, in those days, "the Money Trust," especially the once omnipotent house of Morgan, the dominant member of an elite group of Wall Street firms that had run the financial system since the turn of the century when J.P. Morgan, America's most famous banker, was revered and feared around the world.  (Jack, the patriarch's son, was so incensed by New Deal financial reform that he banned all pictures of the President from the bank's premises.)  Glass-Steagall, as well as the two Securities Acts of 1933 and 1934 which created the Securities and Exchange Commission and left the doyens of the New York Stock Exchange apoplectic, represented real reform, and so were different in kind from TARP and all the other contraptions designed by the Bush and Obama Treasury Departments simply to bail out the financial sector.</p> <p><b>*</b><i>The Tennessee Valley Authority (TVA): </i>Offspring also of those first 100 days, the TVA uplifted a vast, underdeveloped, and impoverished rural region of the country by bringing it electric power, irrigation, soil conservation, and flood control.  It introduced the then-alien (and once again alien) idea of government-directed economic planning and development.  It left the private utility industry irate at the prospect of having to compete with effective, publicly owned electrical-power-generating facilities.  Fast-forward to today when, on the contrary, the private health insurance and pharmaceutical industries, conniving behind closed doors with Obama's people, proved triumphant in a similar confrontation, leaving government competition in the dust.</p> <p><b>*</b><i>Jobs:</i> And then there was, as there is again, the question of jobs and how to create them.  In 1933, American politicians still took the notion of balancing the budget each year with deadly seriousness.  In our present era, every president from Ronald Reagan and Bill Clinton to George W. Bush and now, apparently, Barack Obama talks the talk without any intention of walking the walk.  What made the Roosevelt moment remarkable was this: balanced-budget orthodoxy notwithstanding, the new administration soon forged ahead with a set of jobs programs that not only implied deficit spending but an even more radical departure from business as usual.</p> <p>Initially, the Public Works Administration (PWA), created as part of the National Industrial Recovery Act, relied on large-scale infrastructure projects farmed out to private enterprise.  Undertaking such projects inevitably entailed government borrowing and deficits.  Partly for that reason, the PWA proceeded at a glacial pace, put few to work right away, and -- in the way it looked to the private sector to take the lead -- resembled the latest thinking of the Obama administration whose newest tepid suggestions for creating jobs depend almost solely on funneling tax relief to business. </p> <p>Simultaneously, however, the New Deal pursued a more daring alternative.  FDR diverted a third of the PWA's budget to the Civil Works Administration (CWA), out of which was born the legendary Civilian Conservation Corps, an agency that deployed hundreds of thousands of unemployed young men to restore the country's forests and parklands.  The CWA skipped the private sector entirely and simply put people to work: four million people in the summer and fall of 1933.  (That would be the equivalent, today, of ten million Americans back on the job.) </p> <p>During the first nine months of the Roosevelt administration manual laborers, clerks, architects, book-binders, teachers, actors, white and blue collar workers alike became Federal employees.  They laid millions of feet of sewer pipe, improved hundreds of thousands of miles of roads, and built thousands of schools, playgrounds, and airports. Harry Hopkins, who ran the CWA, was authorized to seize tools, equipment, and materials from Army warehouses to get the new system up and running.  (The Works Progress Administration, a subsequent incarnation of the CWA, would later create eight million jobs on the same principle of public employment.)</p> <p>This isn't even within hailing distance of where the current Administration is now as it frets about the deficit and pledges to freeze domestic spending (and implies, without having the courage to say so, that Medicare, Medicaid, and Social Security had better watch out).  Coming from a regnant Democratic Party this is change we can't or don't want to believe in.</p> <p><b>Heading Backwards</b></p> <p>Like Obama, Roosevelt was denounced by his enemies in the Republican Party and the business community as a closet socialist (not to mention a cripple, a Jew, and a homosexual).  While the administration would sometimes trim its sails considerably to weather the right wing storm, its general reaction to Republican opposition was the opposite of Obama's.  Even during that first year, and at an accelerating pace afterwards, the momentum of the New Deal carried it irresistibly to the left. </p> <p>This was true, in fact, of the whole Democratic Party.  The Congress elected in the off-year of 1934 was not only more overwhelmingly Democratic, but the Democrats who won were considerably more progressive-minded.  They were far readier to jettison the shibboleths of the old order and press a still cautious President in their direction.  By 1936, the essentials of the social welfare and regulatory state were in place, an insurgent labor movement had won the elementary right to organize (while becoming the New Deal's most muscular constituency), and the president was denouncing "economic royalists" and "tories of industry" whose "hatred" for him he "welcomed."</p> <p>Today the Obama administration and the Democratic Party are visibly moving in the opposite direction.  They read the lesson of humiliating defeat in Massachusetts and the voluble hostility of the populist right as an advisory to move further to the right.  Tacking rightward, tailoring policy to match the tastes of business and finance, cautioning Americans that they'll need to tighten their belts (as if they hadn't already been doing so), adopting the parsimonious sanctimony of the balanced budget, slimming down their great expectations until what little is left mocks the hopes of so many who elected them -- all of this is seen as smart politics.</p> <p>Smart like a chicken.  This is the same cleverness that, beginning with Ronald Reagan's triumph, turned the Democratic Party into Republican-lite. Shrewdness like this helps explain, in part, why Obama's inner circle and Democratic leaders took the early, fateful steps that were bound to land them where they find themselves today. </p> <p>Would the Republican right and its tea-party populists -- marginal, mockable political freaks less than a year ago -- have enjoyed their current growth spasm if the administration hadn't been committed to bailing out the very institutions most people considered the villains responsible for running this country into a ditch?  Would the Democratic Party have been in imminent danger of losing its faltering grip on Congress had it found the will to pursue serious health-care reform and environmental legislation, or wrestled the financial oligarchy to the mat as Roosevelt did?  A long generation spent cowering in the shadows of the conservative ascendancy has left the newly empowered Democrats congenitally incapable of seizing their own historic moment.</p> <p>After a year of feinting to the left without meaning it, how seriously is anyone going to take the administration's latest call to tax the banks or break their addiction to reckless speculation?  Even if Obama now means to push ahead with some sort of health-care reform or put some teeth into new financial regulations, he has spent so much political capital moving in the opposite direction and seeking partners where there never were any that his quest, even if genuine, may now be purely quixotic.  As for the surge in Afghanistan and the endless war that goes with it, by election time 2010, it's an even bet that it will have further undermined any hopes of a late-inning Democratic Party revival. </p> <p>Conventional wisdom notwithstanding, off-year elections do not always favor the minority party.  Indeed, 1934 may be the best example of the opposite effect.  Exactly because the New Deal showed itself ever readier to junk the <i>ancien r</i><i>é</i><i>gime</i>, break with economic orthodoxy, and above all say goodbye to its erstwhile corporate friends, it was rewarded handsomely at the polls.  None of that apparently will be repeated in 2010, given an administration that seems to be running a New Deal in reverse.</p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter--><i>Steve Fraser is the co-editor of </i><a href=";camp=0&amp;creative=0&amp;linkCode=as1&amp;creativeASIN=0691006075&amp;adid=1TSV96EM7REBQZ7FJ1C2&amp;" target="_blank">The Rise and Fall of the New Deal Order</a><i> and author, most recently, of </i><a href=";camp=0&amp;creative=0&amp;linkCode=as1&amp;creativeASIN=0300151438&amp;adid=0BVB9QJMJ146PPSTAS4V&amp;" target="_blank">Wall Street: America's Dream Palace</a><i>.  He is Research Associate at the Joseph Murphy Center for Labor and Community Studies at the Graduate Center of the City of New York. (To catch him in an exclusive TomDispatch audio interview discussing why Obama has ignored the public-works job model Franklin D. Roosevelt pioneered, click <a href="" target="_blank">here</a>.)</i> </div></div></div> Thu, 11 Feb 2010 07:00:01 -0800 Steve Fraser, 660996 at News & Politics democrats obama new deal fdr To End This Financial Crisis, Americans Are Going to Have to Get Angry <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">FDR alone didn&#039;t pull America out of the Great Depression. The passion of ordinary citizens did. Can we do it again?</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><p><em>Editor's note:</em> Sometimes it's the small gesture that defines the end of an age. Richard Fuld, CEO of Lehman Brothers, the single financial firm the Bush administration allowed to collapse into bankruptcy in what may someday be thought of as the slow-motion Crash of '09, made one of those gestures recently. Just to be clear, we're talking about a man who, <a href="" linkindex="11" set="yes">between 1993 and 2007</a>, took home a tidy $466 million in pay. (That's no misprint, though it's a pay level that it would take factories of workers cumulative lifetimes to reach.) Then, in 2008, the year his firm would collapse, Fuld was awarded another $22 million in what was called "retirement pay."</p><p>But that's the big picture. Here's the small one that catches our shape-shifting moment perfectly. Fuld was recently <a href="" linkindex="12">outed</a> for "selling" his wife their jointly held $14 million, 3.3 acre Florida beach-front mansion -- one of five houses the two of them owned, including their 8-bedroom main domicile in Greenwich, Connecticut -- and the lovely touch is the selling price: $100. That's right, one hundred bucks "in a possible attempt," <a href="" linkindex="13">writes</a> the British <i>Times</i>, "to move assets beyond the reach of infuriated investors of the collapsed bank." Smooth move, Dick! Just petty and sleazy enough for a $488 million man.</p><p>Fuld and the other CEOs, who lived fabulous lives in their many mansions and passed out money as if it were sand, have been slow to grasp changing times. After all, as late as last December, according to the <i>Wall Street Journal</i>, John Thain, CEO of Merrill Lynch, "let it be known" that he expected a <a href="" linkindex="14">$10 million bonus</a> in a year in which the company he oversaw had a nifty $28 billion in losses. Like Fuld, these men have proven remarkably tin-eared as well as lead-fingered and, in a season of catastrophe for their firms and for so many Americans, they still managed to pass out a staggering $18.4 billion in bonuses.</p><p>It helps, of course, to have a memory. I mean a real memory, a deep sense of what happened once upon a time. Steve Fraser, TomDispatch regular and <a href="" linkindex="15">expert on American Gilded Ages</a>, who has written <a href="" linkindex="16" set="yes">Wall Street: America's Dream Palace</a>, a superb history of our country's kaleidoscopic range of attitudes toward Wall Street, knows that this country went through such a moment with just such a set of tin-eared former titans once before. And while the two moments, 1929 and 2009, differ in striking ways, it's instructive to know how it all fell out for the Richard Fulds of another age. <i>-- TomDispatch editor, Tom Engelhardt<br /></i></p><h2>The "Best Men" Fall</h2><p><b>How Popular Anger Grew, 1929 and 2009</b></p><p>By Steve Fraser</p><p>Obtuse hardly does justice to the social stupidity of our late, unlamented financial overlords. John Thain of Merrill Lynch and <a href="" linkindex="17">Richard Fuld</a> of Lehman Brothers, along with an astonishing number of their fraternity brothers, continue to behave like so many intoxicated toreadors waving their capes at an enraged bull, oblivious even when gored.</p><p>Their greed and self-indulgence in the face of an economic cataclysm for which they bear heavy responsibility is, unsurprisingly, inciting anger and contempt, as daily news headlines indicate. It is undermining the last shreds of their once exalted social status -- and, in that regard, they are evidently fated to relive the experience of their predecessors, those Wall Street "lords of creation" who came crashing to Earth during the last Great Depression.</p><p>Ever since the bail-out state went into hyper-drive, popular anger has been simmering. In fact, even before the meltdown gained real traction, a sign at a mass protest outside the New York Stock Exchange advised those inside: "Jump, You Fuckers."</p><p>You can already buy <a href="" linkindex="18">"I Hate Investment Banking"</a> T-shirts on line. All the Caesar-sized salaries and the Caligula-like madness as the economy crashes and burns, all the bonuses, dividends, princely consulting fees for learning how to milk the Treasury, not to speak of those new corporate jets, as well as the government funds poured down the black hole of mega-mergers, moneys that might otherwise have spared citizens from foreclosure -- all of this is making ordinary Americans apoplectic.</p><p>Nothing, however, may be more galling than the rationale regularly offered for so much of this self-indulgence. Asked about why he had given out $4 billion in bonuses to his Merrill Lynch staff in a quarter in which the company had lost a staggering $15 billion dollars, ex-CEO John Thain typically <a href="" linkindex="19">responded</a>: "If you don't pay your best people, you will destroy your franchise. Those best people can get jobs other places, they will leave."</p><p>Apparently it never occurs to those who utter such perverse statements about rewarding the "best people," or "the best men," that we'd all have been better off, and saved some serious money, if they had hired the worst men. After all, based on the recent record, who could possibly have done more damage than the "best" Merrill Lynch, Wachovia, Wamu, Citigroup, A.I.G., Bank of America, and so many other top financial crews had to offer?</p><p><b>The "Best Men" Fall</b></p><p>Now even the new powers in Washington are venting. Vice President Biden has suggested that our one time <i>masters of the universe</i> be thrown <a href=";sid=anzJooSeABDM&amp;refer=us" linkindex="20">"in the brig"</a>; Missouri Senator Claire McKaskill has <a href="" linkindex="21">denounced them</a> as "idiots… that are kicking sand in the face of the American taxpayer," and even the new president, a man of exquisite tact with an instinct for turning the other cheek, labeled Wall Street's titans as reckless, irresponsible, and shameful.</p><p>To those who remember the history, all this bears a painfully familiar ring. Soon enough, that history tells us, Congressional investigators will start hauling such people into the public dock and the real fireworks will begin. It happened once before -- a vital chapter in the ongoing story of how an old regime dies and a new one is born.</p><p><a href="" linkindex="22"><img hspace="6" height="226" width="140" vspace="6" align="left" src="" alt="" /></a>After the Great Crash of 1929, those at the commanding heights of the economy who had enriched themselves and deluded others into believing that, under their leadership, the United States had achieved "a permanent plateau of prosperity" -- sound familiar? -- were subject to a whirlwind of anger, public shaming, and withering ridicule. Like the John Thain's of today, Jack Morgan, Charles Mitchell, Richard Whitney, Albert Wiggins, and others who headed the country's chief investment and commercial banks, trusts, insurance companies, and the New York Stock Exchange never knew what hit them. They, too, had been steeped in the comforting bathwaters of self-delusion for so long that they believed, like Thain and his compadres, that they were indeed the "best," the wisest, the most entitled, and the most impregnable men in America. Even amid the ruins of the world they had made, they were incapable of recognizing that their day was done.</p><p>Under the merciless glare of Congressional hearings, above all the Senate's Pecora Committee (named after its bulldog chief counsel <a href="" linkindex="23">Ferdinand Pecora</a>), it was revealed that Jack Morgan and his partners in the House of Morgan hadn't paid income taxes for years; that "Sunshine" Charlie Mitchell, head of National City Bank (the country's largest), had been short-selling his own bank's stock and transferring assets into his wife's name to escape taxes; that other financiers just like him, who had been hero-worshiped for a decade or more as financial messiahs, had regularly engaged in insider-trading schemes that made them wealthy and fleeced legions of unknowing investors.</p><p>The Pecora Committee was not the only scourge of the old financial elite. Franklin Delano Roosevelt, as publicly mild-mannered as and perhaps even more amiable and charming than President Obama, began excoriating them from the moment of his <a href="" linkindex="24" set="yes">first inaugural address</a>. He condemned them in no uncertain terms for misusing "other people's money" and for their reckless speculations; he blamed them for the sorry state of the country; he promised to chase these "unscrupulous money changers" from their "high seats in the temples of American civilization."</p><p>Jack Morgan, called to testify by yet another set of Congressional investigators, had a circus midget plopped in his lap to the delight of a swarm of photo-journalists who memorialized the moment for millions. It was an <a href="" linkindex="25">emblematic photo</a>, a visual metaphor for a once proud, powerful elite, its gravitas gone, reduced to impotence, ridiculed for its incompetence, and no longer capable of intimidating a soul.</p><p>What happened to Jack Morgan or later Richard Whitney -- a crowd of 6,000 <a href="" linkindex="26">turned out</a> at New York's Grand Central Station in 1938 to watch the handcuffed former president of the New York Stock Exchange be escorted onto a train for Sing Sing, having been convicted of embezzlement -- was the political and social equivalent of a great depression. It represented, that is, a catastrophic deflation of the legitimacy of the <i>ancien régime</i>. It was part of what made possible the advent of something entirely new.</p><p><b>Speculators and Con Men</b></p><p>Under normal circumstances, most Americans have been perfectly willing to draw a relatively sharp distinction between the misguided speculator and the confidence man's outright felonious behavior. One is a legitimate banker gone astray, the other an outlaw.</p><p>Under the extraordinary circumstances of terminal systemic breakdown, that distinction grows ever hazier. That was certainly true in the early years of the first Great Depression, when a damaging question arose: just exactly what was the difference between the behavior of Charles Mitchell, Jack Morgan, and Richard Whitney, lions of that era's Establishment, and outliers like "Sell-em" Ben Smith, Ivar Kreuger, "the match king," Jesse Livermore, "the man with the evil eye," William Crappo Durant, maestro of investment pool stock kiting, or the one-time Broadway ticket agent and stock manipulator Michael Meehan, men long barred from the walnut-paneled inner sanctums of white-shoe Wall Street?</p><p>Admittedly, their dare-devil escapades had often left them on the wrong side of the law and they would end their days in jail, as suicides, or in penury and disgrace. Nonetheless, as is true today, many Americans then came to accept that between the speculating banker and the confidence man lay a distinction without a meaningful difference. After all, by the early 1930s, the whole American financial system seemed like nothing but a confidence game deserving of the deepest ignominy.</p><p>In that sense, Bernie Madoff, a former chairman of the NASDAQ stock exchange, already seems like a synecdoche for a whole way of life. Technically speaking, he ran a Ponzi scheme out of his brokerage firm, as strictly fraudulent as the original one invented by Charles Ponzi, that Italian vegetable peddler, smuggler, and after he got out of an American jail, minor fascist official in Mussolini's Italy.</p><p>Ponzi, however, was a small-timer. He gulled ordinary folks out of their five and ten dollar bills. Madoff's $50 billion game was something else again. It was completely dependent on his ties to the most august circles of our financial establishment, to major hedge funds and funds of funds, to top-drawer consulting firms, to blue-ribbon nonprofits, and to a global aristocracy of the super-rich. True enough, people of middling means, as well as public and union pension funds, got taken too. At the end of the day, however, Madoff's scheme, unlike Ponzi's, was premised on a pervasive insiderism which had everything to do with the way our financial system has been run for the past quarter century.</p><p>Once Madoff was exposed, everybody questioned the credulousness of those who invested with him: why didn't they grow suspicious of such consistently high rates of return? But the equally reasonable question was: why should they have? Not only did you practically need an embossed invitation before you could entrust your loot to Madoff, but the whole financial sector had been enjoying extraordinary returns for a very long time (admittedly, with occasional major hiccups like the Dot-com bust of 1999-2000, which somehow seemed to fade quickly from memory).</p><p>Keep in mind as well that these lucrative dealings were based on speculative investments in securities so far removed from anything tangible or comprehensible that they seemed to be floating in thin air. The whole system was a Ponzi-like scheme which, like the Energizer Bunny, just kept on going and going and going… until, of course, it didn't.</p><p><b>Locked into the Bailout State</b></p><p>After 1929, when the old order went down in flames, when it commanded no more credibility and legitimacy than a confidence game, there was an urgent cry to regulate both the malefactors and their rogue system. Indeed, new financial regulation was at the top of, and made up a hefty part of, Roosevelt's New Deal agenda during its first year. That included the Bank Holiday, the creation of the Federal Deposit Insurance Corporation, the passing of the Glass-Steagall Act, which separated commercial from investment banking (their prior cohabitation had been a prime incubator of financial hanky-panky during the Jazz Age of the previous decade), and the first Securities Act to monitor the stock exchange.</p><p>One might have anticipated an even more robust response today, given the damage done not only to our domestic economy, but to the global one upon which any American economic recovery will rely to a very considerable degree. At the moment, however, financial regulation or re-regulation -- given the last 30 years of Washington's fiercely deregulatory policies -- seems to have a surprisingly low profile in the new administration's stated plans. Capping bonuses, pay scales, and stock options for the financial upper crust is all well and good and should happen promptly, but serious regulation and reform of the financial system must strike much deeper than that.</p><p>Instead, the new administration is evidently locked into the bail-out state invented by its predecessors, the latest version of which, the creation of a government "bad bank" (whether called that or not) to buy up toxic securities from the private sector, commands increasing attention. A "bad bank" seems a strikingly lose-lose proposition: either we, the tax-paying public, buy or guarantee these securities at something approaching their grossly inflated, largely fictitious value, in which case we will be supporting this second gilded age's financial malfeasance for who knows how long, or the government's "bad bank" buys these shoddy assets at something close to their real value in which case major banks will remain in lock-down mode, if they survive at all. Worse yet, the administration's latest "bad bank" plan does not even compel rescued institutions to begin lending to anybody, which presumably is the whole point of this new financial welfare system.</p><p>Why this timidity and narrowness of vision, which seems less like reform than capitulation? Perhaps it comes, in part, from the extraordinary economic and political throw-weight of the FIRE (finance, insurance, and real estate) sector of our national economy. It has, after all, grown geometrically for decades and is now a vital part of the economy in a way that would have been inconceivable back when the U.S. was a real industrial powerhouse.</p><p>Naturally, FIRE's political influence expanded accordingly, as politicians doing its bidding dismantled the regulatory apparatus installed by the New Deal. Even today, even in ruins, many in that world no doubt hope to keep things more or less that way; and unfortunately, spokesmen for that view -- or at least people who used to champion that approach during the Clinton years, including Larry Summers and Robert Rubin (who <a href=",dwp_uuid=fce0dcea-3017-11da-ba9f-00000e2511c8,print=yes.html" linkindex="27" set="yes">"earned" more than a $115 million dollars</a> at Citigroup from 1999 to 2008), occupy enormously influential positions in, or as informal advisors to, the new Obama administration.</p><p>Still, popular anger and ridicule of the sort our New Deal era ancestors once let loose are growing more and more common, which explains, of course, the newly discovered voice of righteous anger of some of our leading politicians who are feeling the heat. Certain observers have dismissed popular resistance to the bail-out state as nothing more than right-wing, Republican-inspired hostility to government intervention of any sort. No doubt that may account for some of it, but much of the anger is indeed righteous, reasonable, and coming from ordinary Americans who simply have had enough.</p><p>Progressive-minded people in and outside of government must find a way to make re-regulation urgent business, and to do so outside the imprisoning, politically self-defeating confines of the bail-out state. Just weeks ago, the notion of nationalizing the banks seemed irretrievably un-American. Now, it is <a href="" linkindex="28">part of the conversation</a>, even if, for the moment, Obama's savants have ruled it out.</p><p>The old order <i>is</i> dying. Let's bury it. The future beckons.</p> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter-->Steve Fraser is a visiting professor at New York University, co-founder of the American Empire Project, and the author, most recently, of Wall Street: America's Dream Palace. </div></div></div> Tue, 10 Feb 2009 21:00:01 -0800 Steve Fraser, 653521 at Economy Economy economy depression recession financial crisis Is the 'Good Life' as America Knows It Over? <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">The relationship between Washington and Wall Street has changed fundamentally, and as a result, the road ahead is dark and unknown.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><i>Introduction by Tom Engelhardt: Among the many media spectacles of the moment, the most unnerving is undoubtedly the crisis on Wall Street that has already essentially toppled Bear Stearns, Lehman Brothers, Fannie Mae and Freddie Mac, Merrill Lynch, and -- probably not last and certainly not least -- the gigantic insurance company AIG, which has just been given $85 billion in taxpayer moneys to liquidate itself. Before we're done, that hoary old oxymoron of the Left, "late capitalism," may gain new life.<br /><br />Elsewhere on the planet, it turns out, it was more obvious that the U.S. was in crisis. One small sign of the changing state of the globe's "sole superpower" is that, even before banking institutions started to tumble off walls like so many Humpty Dumpties, the International Monetary Fund, that dominatrix of global capital, was planning to pay Washington a working visit. This is the sort of thing you expect, with great trepidation, if you're Haiti, or <a linkindex="13" href="">Pakistan</a>, or <a linkindex="14" href="">Malawi</a>, or Argentina on the brink of financial meltdown -- but the United States? Nonetheless, <a set="yes" linkindex="15" href="">according to NPR's David Kestenbaum</a>, "The U.S. Treasury says America has now agreed to get a stability assessment from the IMF. The announcement didn't get much attention, but officials at the IMF expect to start examining U.S. finances in the next couple [of] months."<br /><br />Welcome to the Third World, America. Now, <a linkindex="16" href="">hold your hats</a> while the <a linkindex="17" href="">whirlwind blows</a> and the stock market goes into heart-attack mode. Steve Fraser, an expert on Gilded Ages (and how they end), as well as the author of a superb new book on our financial "masters of the universe" from the eighteenth century to the present, <a linkindex="18" href="">Wall Street: America's Dream Palace</a>, brought up the <a set="yes" linkindex="19" href="">dreaded "D" word</a> (for depression) this April at TomDispatch when, in the mainstream, pundits were still wondering whether we might possibly, actually, really be edging toward, or near, a recession. He wrote at the time: "The current breakdown of the financial system is portentous. It threatens a general economic implosion more serious than anyone has witnessed for many decades.<br /><br />Depression, if that is what it turns out to be, together with the agonies of a misbegotten and lost war no one believes in any longer, could undermine whatever is left of the threadbare credibility of our Gilded Age elite." Now he's being <a linkindex="20" href="">quoted</a> on the front page of the <i>New York Times</i>. How times (of every sort) have changed in just the space of a few months... Drawing on his knowledge of the history of Wall Street and Washington, now let him offer you now a little perspective for the months to come. -- Tom Engelhardt </i><br /><br />What is Washington to do as the financial system collapses? Clearly, stark differences in approach as well as in public policy have already emerged. Bail-out Bear Stearns and pump up the brokerage and investment business with new lines of credit. Nationalize Fannie Mae and Freddie Mac on the backs of the taxpayer -- but let Lehman drown. Tell the financial community to save itself, after which Bank of America salutes and buys Merrill Lynch. Then, the Fed gets cold feet and decides it can't let an institution the size of the insurance giant AIG go under as well. Washington is left staring into the abyss. The old rules no longer apply.<br /><br />And that's the point. At moments of crisis since the mid-1980s, the relationship between Washington and Wall Street has changed fundamentally, at least when compared to anything that would have been recognizable in the previous century. As a result, the road ahead is dark and unknown.<br /><br />During the nineteenth century, Washington was generally happy to do favors for Wall Street financiers. Railroad tycoons, who often used those railroads as vehicles of extravagant speculation, enjoyed subsidies, tax exemptions, loans, and a whole smorgasbord of financial fringe benefits supplied by pliable Congressmen and Senators (not to mention armadas of state and local officials).<br /><br />Since the political establishment was committed to <i>laissez-faire</i>, legerdemain by greedy bankers was immune from public scrutiny, which was also useful (for them). But when panic struck, the mighty, as well as the meek, went down with the ship. Washington felt no obligation to rush to the rescue of the reckless. The bracing, if merciless, discipline of the free market did its work and there was blood on the floor.<br /><br />By early in the twentieth century, however, the savage anarchy of the financial marketplace had been at least partially domesticated under the reign of the greatest financier of them all, J.P. Morgan. Ever since the panic of 1907, the legend of Morgan's heroics in single-handedly stopping a meltdown that threatened to become worldwide, the iron discipline he imposed on more timorous bankers, has been told and re-told each time an analogous implosion looms.<br /><br />Indeed, last week's news carried its fair share of 1907-Morgan stories, trailing in their wake an implicit wistfulness. They all asked, in effect: Where is the old boy when we need him?<br /><br />Back then, with Morgan performing his role as the nation's unofficial private central banker, Teddy Roosevelt's administration continued to keep its distance from Wall Street, still unready to offer salvation to desperate financial oligarchs. Not normally chummy with Morgan and his crowd, Roosevelt did cheer from the sidelines as the <i>Ã¼ber</i>-banker performed his rescue operation.<br /><br />As it turned out, though, the days of Washington agnosticism about Wall Street were numbered. The economy had become too complex and delicate a mechanism and, in 1907, had come far too close to meltdown -- even Morgan's efforts couldn't prevent several years of recession -- to leave financial matters entirely in the hands of the private sector.<br /><br /><a set="yes" linkindex="21" href=""><img src="" align="left" height="226" hspace="6" vspace="6" width="140" /></a>First came the Federal Reserve. It was established in 1913 under President Woodrow Wilson as a quasi-public authority meant to regulate the country's credit markets -- albeit one heavily influenced by the viewpoints and interests of the country's principal bankers. That worked well enough until the Great Crash of 1929 and the Great Depression that followed and lasted until World War II. The depth of the country's trauma in those long years vastly expanded the scope of Washington's involvement in the financial marketplace.<br /><br />President Franklin D. Roosevelt's New Deal did, as a start, engage in some bail-out operations. The Reconstruction Finance Corporation, actually created by President Herbert Hoover, continued to rescue major railroads and other key businesses, while some of the New Deal's efforts to help homeowners also rewarded real estate interests. The main emphasis, however, now switched to regulation. The Glass-Steagall Banking Act, the two laws of 1933 and 1934 regulating the stock exchange, the creation of the Securities and Exchange Commission, and other similar measures subjected the financial sector to fairly rigorous public supervision.<br /><br />This lasted for at least two political generations. Wall Street, after all, had been convicted in the court of public opinion of reckless, incompetent, self-interested, even felonious behavior with consequences so devastating for the rest of the country that government was licensed to make sure it didn't happen again.<br /><br />The undoing of that New Deal regulatory regime, and its replacement, largely under Republican administrations (although Glass-Steagall was repealed on Clinton's watch), with what some have called the "socialization of risk" has contributed in a major way to the mess we're in today. Beginning most emphatically with the massive bail-out of the savings and loan industry in the late 1980s, Washington committed itself, at least under conditions of acute crisis, to off-loading the risks taken by major financial institutions, no matter how irrationally speculative and wasteful, onto the backs of the American taxpaying public.<br /><br />Despite free market/anti-big-government rhetoric, real-life Washington has tacitly acknowledged the degree to which our national economy has become dependent on the financial sector (Finance, Insurance, and Real Estate -- or FIRE). It will do whatever it takes to keep it afloat.<br /><br />This applies not only to particular institutions like Bear Stearns, or even to mortgage mega-firms like Fannie and Freddie, but to finance in general. When it seemed necessary, public monies were indeed funneled in the general direction of the banking/brokerage community to shore up the whole rickety structure. This allowed one burst bubble -- the dot-com debacle -- to be replaced by another, namely our late, lamented mortgage/collaterized-debt-obligation bonanza, just now dramatically going down the tubes.<br /><br />Backstopping the present bail-out is the ever-credulous, put-upon American public with its presumably inexhaustible resources. Even while Washington was instituting the periodic "socialization" of bad debts, it was systematically abandoning the New Deal's commitment to regulation. That, of course, was in the very period when financial markets became ever more arcane, ever less comprehensible even to their Frankenstein-ian inventors, and ever more in need of monitoring. So the "socialization of risk" was accompanied by the "privatization of reward," which now is likely to prove a truly deadly combination.<br /><br />That the crisis has now reached a newly terrifying stage is suggested by Washington's sudden willingness to depart from the new orthodoxy and let the huge investment bank, Lehman Brothers, go under. Some may see in this a steely return to a <i>laissez-faire</i> faith. More likely, it represents wholesale confusion on the part of Bush administration and Federal Reserve policymakers about what to do, even as all endangered businesses have come to take it for granted that Washington will toss them a life-preserver when they need it.<br /><br />The times call for a new departure. The next administration, which will surely enter office under the greatest economic pressure in memory, must confront reality. The financial system is out of control and has led the economy into a wildly turbulent sea of heavily leveraged speculation.<br /><br />It's time for a reversal of course. Stringent re-regulation of FIRE is not enough anymore. Washington's mission may, at this late date, be an even greater one than Roosevelt's New Deal faced. The government must figure out how to deploy its power to shift the flow of investment capital out of the mine-fields of speculative paper transactions and back into productive channels that will help meet the material needs of American society. Real value must be created in place of chimeras. In the meantime, we all have ringside seats -- in fact, far too close to the action for comfort -- as another gilded age is ending. What comes after is, in part, up to us.<br /><br /><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter-->Steve Fraser is working on a book about the two gilded ages. A TomDispatch regular and co-director of <a set="yes" linkindex="22" href="">the American Empire Project series</a> at Metropolitan Books, he is the author of, among other works, the recently published <a set="yes" linkindex="23" href="">Wall Street: America's Dream Palace</a>. </div></div></div> Thu, 18 Sep 2008 21:00:01 -0700 Steve Fraser, 649891 at Economy Economy economy poverty washington wall street financial crisis In the Last Gilded Age, People Stood Up to Greed -- Why Arenâ€™t We? <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">Why don&#039;t Americans rise up against the kleptocracy like they did in the late nineteenth century?</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><i>Note: Steve Fraserâ€™s book on our financial "masters of the universe" from the eighteenth century to the present, <i><a href="â€â€">Wall Street: America's Dream Palace</a></i>, has just been published.</i><br /><br />Google "second Gilded Age" and you will get ferried to 7,000 possible sites where you can learn more about what you already instinctively know. That we are living through a gilded age has become a journalistic commonplace. The unmistakable drift of all the talk about it is a Yogi Berra-ism: it's a matter of <i>dÃ©jÃ  vu</i> all over again. But is it? Is turn-of-the-century America a replica of the world Mark Twain first christened "gilded" in his debut bestseller back in the 1870s?<br /><br />Certainly, Twain would feel right at home today. Crony capitalism, the main object of his satirical wit in <i>The Gilded Age</i>, is thriving. Incestuous plots as outsized as the one in which the Union Pacific Railroad's chief investors conspired with a wagon-load of government officials, including Ulysses S. Grant's vice president, to loot the federal treasury once again lubricate the machinery of public policy-making. A cronyism that would have been familiar to Twain has made the wheels go round in these terminal years of the Bush administration. Even the invasion and decimation of Iraq was conceived and carried out as an exercise in grand-strategic cronyism; call it cronyism with a vengeance. All of this has been going on since Ronald Reagan brought back morning to America.<br /><br />Reagan's America was gilded by design. In 1981, when the New Rich and the New Right paraded in their sumptuous threads in Washington to celebrate at the new president's inaugural ball, it was called a "bacchanalia of the haves." Diana Vreeland, style guru (as well as Nancy Reagan confidante), was stylishly blunt: "Everything is power and money and how to use them both... We mustn't be afraid of snobbism and luxury."<br /><br />That's when the division of wealth and income began polarizing so that, by every measure, the country has now exceeded the extremes of inequality achieved during the first Gilded Age; nor are our elites any more embarrassed by their Mammon-worship than were members of the "leisure class" excoriated a century ago by that take-no-prisoners social critic of American capitalism Thorstein Veblen.<br /><br />Back then, it was about masquerading as European nobility at lavish balls in elegant hotels like New York's Waldorf-Astoria, locked down to forestall any unpleasantness from the street (where ordinary folk were in a surly mood trying to survive the savage depression of the 1890s). Today's "leisure class" is holed up in gated communities or houseoleums as gargantuan as the imported castles of their Gilded Age forerunners, ready to fly off -- should the natives grow restless -- to private islands aboard their private jets.<br /><br /><b>The Free Market as Melodrama</b><br /><br />At the height of the first Gilded Age, William Graham Sumner, a Yale sociologist and the most famous exponent of Herbert Spencer's theory of dog-eat-dog Social Darwinism, asked a good question: What do the social classes owe each other? Virtually nothing was the professor's answer.<br /><br />As in those days, there is today no end to ideological justifications for an inequality so pervasive that no one can really ignore it entirely. In 1890, reformer Jacob Riis published his book <i>How the Other Half Lives</i>. Some were moved by his vivid descriptions of destitution. In the late nineteenth century, however, the preferred way of dismissing that discomfiting reality was to put the blame on a culture of dependency supposedly prevalent among "the lower orders," particularly, of course, among those of certain complexions and ethnic origins; and the logical way to cure that dependency, so the claim went, was to eliminate publicly funded "outdoor relief."<br /><br />How reminiscent of the "welfare to work" policies cooked up by the Clinton administration, an exchange of one form of dependency -- welfare -- for another -- low-wage labor. Poverty, once turned into the cultural and moral problem of the impoverished, exculpated Gilded Age economics in both the nineteenth and twenty-first centuries (and proved profitable besides).<br /><br />Even now, there remains a trace of the old Social Darwinian rationale -- that the ascendancy of "the fittest" benefits the whole species -- and the accompanying innuendo that those consigned to the bottom of the heap are fated by nature to end up there. To that must be added a reinvigorated belief in the free market as the fairest (not to mention the most efficient) way to allocate wealth. Then, season it all with a bravura elevation of risk-taking to the status of spiritual, as well as economic, tonic. What you end up with is an intellectual elixir as self-congratulatory as the conscience-cleansing purgative that made Professor Sumner so sure in his cold-bloodedness.<br /><br />Then, as now, hypocrisy and self-delusion were the final ingredients in this ideological brew. When it came to practical matters, neither the business elites of the first Gilded Age, nor our own "liquidators," "terminators," and merger and acquisition Machiavellians ever <i>really</i> believed in the free market or the enterprising individual. Then, as now, when push came to shove (and often way earlier), they relied on the government: for political favors, for contracts, for tax advantages, for franchises, for tariffs and subsidies, for public grants of land and natural resources, for financial bail-outs when times were tough (see Bear Stearns), and for muscular protection, including the use of armed force, against all those who might interfere with the rights of private property.<br /><br />So too, while industrial and financial tycoons liked to imagine themselves as stand-alone heroes, daring cowboys on the urban-industrial-financial frontier, as a matter of fact the first Gilded Age gave birth to the modern, bureaucratic corporation -- and did so at the expense of the lone entrepreneur. To this day, that big business behemoth remains the defining institution of commercial life. The reigning melodrama may still be about the free market and the audacious individual, but backstage, directing the players, stands the state and the corporation.<br /><br />Crony capitalism, inequality, extravagance, Social Darwinian self-justification, blame-the-victim callousness, free-market hypocrisy: thus it was, thus it is again!<br /><br />At the end of the Reagan years, public intellectuals Kevin Phillips and Gary Wills prophesied that this state of affairs was insupportable and would soon end. Phillips, in particular, anticipated a populist rising. It did not happen. Instead, nearly 20 years later, the second Gilded Age is alive, if not so well. Why such longevity? The answer tells us something about how these two epochs, for all their striking similarities, are also profoundly unalike.<br /><br /><b>Missing Utopias and Dystopias</b><br /><br />As a title, <i>Apocalypse Now</i> could easily have been applied to a movie made about late nineteenth century America. Whichever side you happened to be on, there was an overwhelming dread that the nation was dividing in two and verging on a second civil war, that a final confrontation between the haves and have-nots was unavoidable.<br /><br />Irate farmers mobilized in cooperative alliances and in the Populist Party. Farmer-labor parties in states and cities from coast to coast challenged the dominion of the two-party system. Rolling waves of strikes, captained by warriors from the Knights of Labor, enveloped whole communities as new allegiances extended across previously unbridgeable barriers of craft, ethnicity, even race and gender.<br /><br />Legions of small businessmen, trade unionists, urban consumers, and local politicians raged against monopoly and "the trusts." Armed workers' militias paraded in the streets of many American cities. Business and political elites built massive urban fortresses, public armories equipped with Gatling guns (the machine guns of their day), preparing to crush the insurrections they saw headed their way.<br /><br />Even today the names of Haymarket (the square in Chicago where, in 1886, a bombing at a rally of rebellious workers led to the legal lynching of anarchist leaders at the most infamous trial of the nineteenth century), Homestead (where, in 1892, the Monongahela River ran red with the blood of Pinkerton thugs sent by Andrew Carnegie and Henry Clay Frick to crush the strike of their steelmaking employees), and Pullman (the company town in Illinois where, in 1894, President Grover Cleveland ordered Federal troops to put down the strike of the American Railway Union against the Pullman Palace Car Company) evoke memories of a whole society living on the edge.<br /><br />The first Gilded Age was a moment of Great Fears, but also of Great Expectations -- a period infatuated with a literature of utopias as well as dystopias. The two most successful novels of the nineteenth century, after <i>Uncle Tom's Cabin</i>, were Edward Bellamy's utopian <i>Looking Backward</i> and the horrific dystopia <i>Caesar's Column</i> by Populist tribune Ignatius Donnelly. The latter reached its denouement when Donnelly's fictional proletarian underground movement, the "Brotherhood of Destruction," marked its "triumph" with the erection of a giant pyramid composed of a quarter-million corpses of its enemy, "the Oligarchy" and its minions, cemented together and laced with explosives so that no one would dare risk removing them and destroying this permanent memorial to the barbarism of American industrial capitalism.<br /><br />This end-of-days foreboding <i>and</i> the thirst for utopian release were not, moreover, confined to the ranks of agrarian or industrial trouble-makers. Before "Pullman" became a word for industrial serfdom and the Federal government's bloody-mindedness, it was built by its owner, George Pullman, as a model industrial city, a kind of capitalist utopia of paternal benevolence and confected social harmony.<br /><br />Everyone was seeking a way out, something wholly new to replace the rancor and incipient violence of Gilded Age capitalism. The Knights of Labor, the Populist Party, the anti-trust movement, the cooperative movements of town and country, the nation-wide Eight-Hour Day uprisings of 1886 which culminated in the infamy of the Haymarket hangings, all expressed a deep yearning to abolish the prevailing industrial order.<br /><br />Such groups weren't just angry; they weren't merely resentful -- although they were that, too. They were disturbed enough, naÃ¯ve enough, desperate enough, inventive enough, desiring enough, deluded enough -- some still drawing cultural nourishment from the fading homesteads and workshops of pre-industrial America -- to believe that out of all this could come a new way of life, a cooperative commonwealth. No one really knew what exactly that might be. Still, the great expectation of a future no longer subservient to the calculus of the marketplace and the capitalist workshop lent the first Gilded Age its special fission, its high (tragic) drama.<br /><br />Fast-forward to our second Gilded Age and the stage seems bare indeed. No great fears, no great expectations, no looming social apocalypses, no utopias or dystopias -- just a kind of flat-line sense of the end of history. Where are all the roiling insurgencies, the break-away political parties, the waves of strikes and boycotts, the infectious communal upheavals, the chronic sense of enough is enough? Where are the earnest efforts to invoke a new order which, no matter how sketchy and full of unanswered questions, now seem as minutely detailed as the blueprints for a Boeing 747 compared to "yes we can"?<br /><br />What's left of mainstream populism exists on life-support in some attic of the Democratic Party. Even the language of our second Gilded Age is hollowed out. In a society saturated in Christian sanctimony, would anyone today describe "mankind crucified on a cross of gold" as William Jennings Bryan once did, or let loose against "Mammon worship," condemn aristocratic "parasites," or excommunicate "vampire speculators" and the "devilfish" of Wall Street? If nineteenth century evangelical preachers once pronounced anathema on capitalist greed, twenty-first century televangelists deify it. Tempers have cooled, leaving God, like many Americans, with only part-time employment.<br /><br /><b>The Great Silence</b><br /><br />I exaggerate, of course. Movements do exist today to confront the inequities and iniquities of our own Gilded Age. Wall Street bandits are, once in a while, arrested by a sheriff. Some ministers, even born-again ones, do still preach the Social Gospel. But all this seems a pale shadow of what was. Something fundamental about the metabolism of capitalism has changed.<br /><br />Perhaps the answer is simple and basic: The first Gilded Age rested on industrialization; the second on de-industrialization. In our time, a new system of dis-accumulation looted American industry, liquidating its assets to reward speculation in "fictitious capital." After all, the rate of investment in new plant, technology, and research and development all declined during the 1980s. For a quarter-century, the fastest growing part of the economy has been the finance, insurance, and real estate (FIRE) sector.<br /><br />De-industrialization has set off an avalanche whose impact is still being felt in the economy, in the country's political culture, and in everyday life. It laid the industrial working class and the labor movement low, killing it twice over. This, more than anything else, may account for the great silence of the second Gilded Age, when measured, at least, against the raucous noise of the first. Labor was mortally wounded by direct assault, beginning with President Reagan's decision in 1981 to fire all the striking air traffic controllers. His draconian act licensed American business to launch its own all-out attack on the right to organize, which continues to this day.<br /><br />In itself, however, resorting to coercion to deal with the opposition hardly distinguishes our own gilded elite from the first one. If anything, we live in less savage times, at least here at home. More fatal by far was the arrival of a new mode of capital accumulation, starkly different from the one that had prevailed a century ago. It eviscerated towns, cities, regions, and whole ways of life. It demoralized people, hollowed out popular institutions that had once offered resistance, and stoked the fires of resentment, racism, and national revanchism. Here was the raw material for mean-spirited division, not solidarity.<br /><br />Dis-accumulation transformed the working class into a disaggregated pool of contingent labor, contract labor, temporary labor, and part-time labor, all in the interests of a new "flexible capitalism." Ideologues gussied-up this floating workforce by anointing it "free agent" labor, a euphemism designed to flatter the free market homunculus in each of us -- and, for a time, it worked. But the resulting reality has proved a bitter pill to swallow. To be a "free agent" today is to be free of health care, pensions, secure jobs, security in every sense. In our gilded era, downward mobility, lasting a quarter-century and still counting, has marked the social trajectory of millions of people living in the American heartland.<br /><br />Dis-accumulating capitalism also undermined the political gravitas of poverty. In the first Gilded Age, poverty was a function of exploitation; in the second, of exclusion or marginalization. When we think about poverty, what comes to mind is welfare and race. The first gilded age visualized instead coal miners, child labor, tenement workshops, and the shantytowns that clustered around the steel mills of Aliquippa and Homestead.<br /><br />Poverty arising out of exploitation ignited widespread moral revulsion and a robust political assault on the power of the exploiters. The perpetrators of the poverty of exclusion of our own time have been trickier to identify. In his 1962 book <i>The Other America</i>, Michael Harrington noted the invisibility of poverty. That was half a century ago and misery still lives in the shadows. Helped along by an ingrained racism, poverty in the second Gilded Age was politically neutered... or worse.<br /><br />Decline, dispossession, and marginalization: a grim scenario. Yet the new political economy of finance-based dis-accumulation also announced itself as the second coming of democratic capitalism. And in the realm of the collective imaginary, if not in reality, it convinced millions.<br /><br /><b>The Myth of Democratic Capitalism</b><br /><br />Aristocrats don't exist anymore, but it is remarkable how long they lasted as major actors in the country's political dramaturgy. Franklin Delano Roosevelt was still denouncing "economic royalists" and "tories of industry" at the height of the New Deal. The struggle against the counter-revolutionary aristocrat, seen to be subverting the institutions of democratic life, piling up unearned riches, supplied the energy powering American reform for generations. In real life, the robber baron industrialists and financiers of Wall Street were no more aristocrats than my grandma from the <i>shtetl</i>. They were parvenus.<br /><br />For their own good reasons, however, they actively conspired in this popular misperception by playing the aristocratic role for all it was worth. In hindsight, what looks like one of the silliest utopias of the first Gilded Age was enacted by these <i>nouveaux riches</i>, performing in <i>tableaux vivants</i> at gala balls dressed in aristocratic drag, or cavorting in the castles and villas they had transported stone by stone from France and Italy, or showing off at the weddings of their daughters to the offspring of bankrupt European nobility, or parading to New York's Metropolitan Opera in coaches driven by liveried servants and embossed with their family's "coat of arms," complete with hijacked insignia and faked genealogies that concealed their owners' homelier origins.<br /><br />We may laugh at all this now. Back then, for millions, these aristocratic pretensions confirmed an ancient Jeffersonian suspicion: Capitalists were nothing more or less than camouflaged aristocrats. And mobilizing to rescue the republic and democracy from such a danger was practically an indigenous instinct. However, pushing beyond this horizon of political democracy in the direction of social democracy is a different matter entirely, arousing anxiety about threatening the understructure of private property which is, after all, also part of the American dream. Having an aristocracy to kick around, even an ersatz one, can be politically empowering.<br /><br />Minus the oddball exception or two, the new tycoonery of the second Gilded Age does not fancy itself an aristocracy. It does not dress up like one or marry off its daughters to fortune-hunting European dukes and earls. On the contrary, its major figures regularly dress down in blue jeans and cowboy hats, affecting a down-home populism or nerdy dishevelment. However addicted to the paraphernalia of flamboyant excess they may be, the new capitalist elite does not pretend these are the insignia of ruling class entitlement.<br /><br />Once upon a gilded time, the lower orders aped the fashions and manners of their putative betters; today it's the other way around. Indeed, it is no longer even apt to talk of a "leisure class," since our moguls of the moment are workaholics, Olympians of the merger-and-acquisition all-nighter.<br /><br />Although the economic and political throw-weight of our gilded elite is at least as great as that of its predecessors in the days of J.P. Morgan and John D. Rockefeller, an American fear of a moneyed aristocracy has subsided accordingly. Instead, from the Reagan era on, Americans have been captivated by businessmen who took on the rebel role against a sclerotic corporate order and an ossified government bureaucracy that, together, were said to be blocking access to a democracy of the bold.<br /><br />Often men from the middling classes, lacking in social pedigree, the overnight elevation of people like Michael Milken, Carl Ichan, or "greed is healthy" Ivan Boesky, flattered and confirmed a popular faith in the American dream. These irreverent new "revolutionaries," intent on overthrowing capitalism in the interests of capitalism, made fun of the men in pin-striped suits.<br /><br />When the captains of industry and finance lorded it over the country in the late nineteenth century, no one dreamed of calling them rebels against an overweening government bureaucracy or an entrenched set of "interests." There was then no government bureaucracy, and tycoons like Russell Sage and Jay Gould were "the interests." They worried about being overthrown, not overthrowing someone else.<br /><br />Our corporate elite are much more adept than their Gilded Age predecessors were at playing the democracy game. The old "leisure class" was distinctly averse to politics. If they needed a tariff or tax break, they called up their kept Senator. When mortally challenged by the Populists and William Jennings Bryan in 1896, they did get involved; but, by and large, they didn't muck about in mass party politics which they saw as too full of uncontrollable ethnic machines, angry farmers, and the like. They relied instead on the Federal judiciary, business-friendly Presidents, constitutional lawyers, and public and private militias to protect their interests.<br /><br />Beginning in the 1970s, our age's business elite became acutely politically-minded and impressively well-organized, penetrating deeply all the pores of party and electoral democracy. They've gone so far as to craft strategic alliances with elements of what their nineteenth century predecessors -- who might have blanched at the prospect -- would have termed the <i>hoi polloi</i>. Calls to dismantle the federal bureaucracy now carry a certain populist panache, while huffing and puffing about family values has -- so far -- proven a cheap date for a gilded elite that otherwise generally couldn't care less.<br /><br />Moreover, the ascendancy of our <i>faux</i> revolutionaries has been accompanied by media hosannas to the stock market as an everyman's Oz. America's long infatuation with its own democratic-egalitarian ethos lent traction to this illusion.<br /><br />Horace Greely's inspirational admonition to "go West young man" echoed through all the channels of popular culture in the 1990s -- from cable TV shows and mass circulation magazines to baseball stadium scoreboards and Internet chat rooms. Only now Greeley's frontier of limitless opportunity had migrated back East to the stock exchange and into the ether of virtual or reality. The culture of money released from all ancient inhibitions enveloped the commons.<br /><br />"Shareholder democracy" and the "ownership society" are admittedly more public relations slogans than anything tangible. Nonetheless, you can't ignore the fact that, during the second Gilded Age, half of all American families became investors in the stock market. Dentists and engineers, mid-level bureaucrats and college professors, storekeepers and medical technicians -- people, that is, from the broad spectrum of middle class life who once would have viewed the New York Stock Exchange with a mixture of awe, trepidation, and genuine distaste, and warily kept their distance -- now jumped head first into the marketplace carrying with them all their febrile hopes for social elevation.<br /><br />As Wall Street suddenly seemed more welcoming, fears about strangulating monopolies died. Dwindling middle-class resistance to big business accounts for the withering away of the old anti-trust movement, a telling development in the evolution of our age's particular form of "big-box" capitalism. Once, that movement had not only expressed the frustrated ambitions of smaller businessmen, but of all those who felt victimized by monopoly power. It embodied not just the idea of breaking up the trusts, but of competing with or replacing them with public enterprises.<br /><br />Long before the Reagan counter-revolution defanged the whole regulatory apparatus, however, the "anti-trust" movement was over and done with. Its absence from the political landscape during the second Gilded Age marks the demise of an older middle-class world of local producers, merchants, and their customers who were once bound together by the ties of commerce and the folk truths of small town Protestantism.<br /><br />Big-box capitalism, the capitalism of Wal-Mart, still incites local uproars that carry a hint of that anti-trust past, but oppositional forces are divided. The capitalism of which Wal-Mart is emblematic generates a dissonant universe of political and cultural desires. It appeals, first of all, to instincts of individual and family material wellbeing which may run up against calls for a wider social solidarity. Moreover, in its own everyday way consumer culture -- more far-reaching than anything imaginable a century ago -- channels desire into forms of expressive self-liberation. Grand narratives that tell a story of collective destiny -- Redemption, Enlightenment, and Progress, the Cooperative Commonwealth, Proletarian Revolution -- don't play well in this refashioned political theater.<br /><br /><b>The End of the Age of Acquiescence?</b><br /><br />However, the wheel turns. The capitalism of the Second Gilded Age now faces a systemic crisis and, under the pressure of impending disaster, may be headed back to the future. Old-fashioned poverty is making a comeback. Arguably, the global economy, including its American branch, is increasingly a sweatshop economy. There is no denying that brute fact in Thailand, China, Vietnam, Central America, Bangladesh, and dozens of other countries and regions that serve as platforms for primitive accumulation. Hundreds of millions of peasants have become proletarians virtually overnight.<br /><br />Here at home, something analogous has been happening, but with an ironic difference and bearing within it a new historic opportunity. One might call it the unhorsing of the middle class.<br /><br />During the first Gilded Age, the sweatshop seemed a noxious aberration. It lawlessly offered irregular employment at sub-standard wages for interminable hours. It was ordinarily housed helter-skelter in a make-shift workshop that would be here today, gone tomorrow. It was an underground enterprise that regularly absconded with its workers' paychecks and made chiseling them out of their due into an art form.<br /><br />Today, what once seemed abnormal no longer does. The planet's peak corporations depend on this system. They have thrived on it. True enough, it has also encouraged the proliferation of petty enterprises -- sub-contractors, consulting firms, domestic service companies -- fertilizing the soil in which our age of democratic capitalism is rooted. But the ubiquity of the sweated economy promises to alter the nation's political chemistry.<br /><br />Many of the newly flexible proletarians working for Wal-Mart, for auto parts or construction company sub-contractors, on the phones at direct mail call centers, behind the counters at mass market retailers, earn a dwindling percentage of what they used to. Even new hires at the Big Three automobile manufacturers will now make a smaller hourly wage than their grandfathers did in 1948. So too, the relative job security such employees once enjoyed is gone, leaving them vulnerable to the "lean and mean" dictates of the new capitalism: double or triple work loads; or, even worse, part-time work, work always shadowed by indignity and fear; or, worse yet, no work at all.<br /><br />Meanwhile, the white collar Tomorrowland of "free agent" techies, software engineers, and the like -- not to mention a whole endangered species of middle management -- lives a precarious existence, under intense stress, chronically anticipating the next round of lay-offs. Yet many of them were once upon a time members in good standing of the "middle class." Now, they find themselves on the down escalator, descending into a despised state no one could mistake for middle class life.<br /><br />"Flexible accumulation" joins this dispossession of the middle class to the super-exploitation of millions who never laid claim to that status. Many of these sweated workers are women, laboring away as home health care aides, in the food services industry, in meat processing plants, at hotels and restaurants and hospitals, because the arithmetic of "flexible accumulation" demands two workers to add up to the livable family wage not so long ago brought home by a single wage earner.<br /><br />Millions more are immigrants, legal as well as undocumented, from all over the world. They live, virtually defenseless, in a twilight underworld of illegality and prejudice. Thanks to all this, the category of the "working poor" has reentered our public vocabulary. Once again, as during the first Gilded Age, poverty seems a function of exploitation at work, not only the lot of those excluded from work.<br /><br />Might these developments augur the end of our second Gilded Age; or rather the end of the age of acquiescence? No one can know. Yet anger and resentment over insecurity, downward mobility, exploitation, second-class citizenship, and the ill-gotten gains of our Gilded Age mercenaries and their political enablers already rippled the political waters during the mid-term elections of 2006. This primary season has witnessed a discernable leftward shift of the center of gravity within even the cowed leadership ranks of the Democratic Party, a shift driven in large measure by the sub-prime mortgage collapse and the ominous rumblings of severe recession.<br /><br />Anger and resentment, however, do not by themselves comprise a visionary alternative. Nor is the Democratic Party, however restive, a likely vehicle of social democratic aspirations. Much more will have to happen outside the precincts of electoral politics by way of mass movement building to translate these smoke signals of resistance into something more muscular and enduring. Moreover, nasty competition over diminishing economic opportunities can just as easily inflame simmering racial and ethnic antagonisms.<br /><br />Nonetheless, the current break-down of the financial system is portentous. It threatens a general economic implosion more serious than anyone has witnessed for many decades. Depression, if that is what it turns out to be, together with the agonies of a misbegotten and lost war no one believes in any longer, could undermine whatever is left of the threadbare credibility of our Gilded Age elite.<br /><br />Legitimacy is a precious possession; once lost it's not easily retrieved. Today, the myth of the "ownership society" confronts the reality of the "foreclosure society." The great silence of the second Gilded Age may give way to the great noise of the first. <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter-->A Tomdispatch regular, Steve Fraser is the author of, among other works, the just published <a href="">Wall Street: America's Dream Palace</a>. He is Editor-at-Large of New Labor Forum magazine. </div></div></div> Sun, 27 Apr 2008 21:00:01 -0700 Steve Fraser, 646470 at Economy Economy inequality protests political culture new gilded age steve fraser The Perfect Storm of Campaign 2008 <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">War, economic collapse, and the political implosion of the Republican Party will make 2008 a year to remember.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><br /><br />Will the presidential election of 2008 mark a turning point in American political history? Will it terminate with extreme prejudice the conservative ascendancy that has dominated the country for the last generation? No matter the haplessness of the Democratic opposition, the answer is yes.<br /><br /><br /><br />With Richard Nixon's victory in the 1968 presidential election, a new political order first triumphed over New Deal liberalism. It was an historic victory that one-time Republican strategist and now political critic Kevin Phillips memorably anointed the "emerging Republican majority." Now, that Republican "majority" finds itself in a systemic crisis from which there is no escape.<br /><br /><br /><br />Only at moments of profound shock to the old order of things -- the Great Depression of the 1930s or the coming together of imperial war, racial confrontation, and de-industrialization in the late 1960s and 1970s -- does this kind of upheaval become possible in a political universe renowned for its stability, banality, and extraordinary capacity to duck things that matter. The trauma must be real and it must be perceived by people as traumatic. Both conditions now apply.<br /><br /><br /><br />War, economic collapse, and the political implosion of the Republican Party will make 2008 a year to remember.<br /><br /><br /><br /><b>The Politics of Fear in Reverse</b><br /><br /><br /><br /><br />Iraq is an albatross that, all by itself, could sink the ship of state. At this point, there's no need to rehearse the polling numbers that register the no-looking-back abandonment of this colossal misadventure by most Americans. No cosmetic fix, like the "surge," can, in the end, make a difference -- because large majorities decided long ago that the invasion was a fiasco, and because the geopolitical and geo-economic objectives of the Bush administration leave no room for a genuine Iraqi nationalism which would be the only way out of this mess.<br /><br /><br /><br />The fatal impact of the President's adventure in Iraq, however, runs far deeper than that. It has undermined the politics of fear which, above all else, had sustained the Bush administration. According to the latest polls, the Democrats who rate national security a key concern has shrunk to a percentage bordering on the statistically irrelevant. Independents display a similar "been there, done that" attitude. Republicans do express significantly greater levels of alarm, but far lower than a year or two ago.<br /><br /><br /><br />In fact, the politics of fear may now be operating in reverse. The chronic belligerence of the Bush administration, especially in the last year with respect to Iran, and the cartoonish saber-rattling of Republican presidential candidates (whether genuine or because they believe themselves captives of the Bush legacy) <i>is</i> scary. Its only promise seems to be endless war for purposes few understand or are ready to salute. To paraphrase Franklin Delano Roosevelt, for many people now, the only thing to fear is the politics of fear itself.<br /><br /><br /><br />And then there is the war on the Constitution. Randolph Bourne, a public intellectual writing around the time of World War I, is remembered today for one trenchant observation: that war is the health of the state. Mobilizing for war invites the cancerous growth of the bureaucratic state apparatus and its power over everyday life. Like some over-ripe fruit this kind of war-borne "healthiness" is today visibly morphing into its opposite -- what we might call the "sickness of the state."<br /><br /><br /><br />The constitutional transgressions of the executive branch and its abrogation of the powers reserved to the other two branches of government are, by now, reasonably well known. Most of this aggressive over-reaching has been encouraged by the imperial hubris exemplified by the invasion of Iraq. It would be short-sighted to think that this only disturbs the equanimity of a small circle of civil libertarians. There is a long-lived and robust tradition in American political life always resentful of this kind of statism. In part, this helps account for wholesale defections from the Republican Party by those who believe it has been kidnapped by political elites masquerading as down-home, "live free or die" conservatives.<br /><br /><br /><br />Now, add potential economic collapse to this witches brew. Even the soberest economy watchers, pundits with PhDs -- whose dismal record in predicting anything tempts me not to mention this -- are prophesying dark times ahead. Depression -- or a slump so deep it's not worth quibbling about the difference -- is evidently on the way; indeed is already underway. The economics of militarism have been a mainstay of business stability for more than half century; but now, as in the Vietnam era, deficits incurred to finance invasion only exacerbate a much more embracing dilemma.<br /><br /><br /><br />Start with the confidence game being run out of Wall Street; after all, the subprime mortgage debacle now occupies newspaper front pages day after outrageous day. Certainly, these tales of greed and financial malfeasance are numbingly familiar. Yet, precisely that sense of <i>dÃ©jÃ  vu</i> all over again, of Enron revisited, of an endless cascade of scandalous, irrational behavior affecting the central financial institutions of our world suggests just how dire things have become.<br /><br /><br /><br /><b>Enronization as Normal Life</b><br /><br /><br /><br /><br />Once upon a time, all through the nineteenth century, financial panics -- often precipitating more widespread economic slumps -- were a commonly accepted, if dreaded, part of "normal" economic life. Then the Crash of 1929, followed by the New Deal Keynesian regulatory state called into being to prevent its recurrence, made these cyclical extremes rare.<br /><br /><br /><br />Beginning with the stock market crash of 1987, however, they have become ever more common again, most notoriously -- until now, that is -- with the implosion of 2000 and the Enronization that followed. Enron seems like only yesterday because, in fact, it was only yesterday, which strongly suggests that the financial sector is now increasingly out of control. At least three factors lurk behind this new reality.<br /><br /><br /><br />Thanks to the Reagan counterrevolution, there is precious little left of the regulatory state -- and what remains is effectively run by those who most need to be regulated. (Despite bitter complaints in the business community, the Sarbanes-Oxley bill, passed after the bubble burst, has proven weak tea indeed when it comes to preventing financial high jinks, as the current financial meltdown indicates.)<br /><br /><br /><br />More significantly, for at least the last quarter-century, the whole U.S. economic system has lived off the speculations generated by the financial sector -- sometimes given the acronym FIRE for <i>f</i>inance, <i>i</i>nsurance, and <i>r</i>eal <i>e</i>state). It has grown exponentially while, in the country's industrial heartland in particular, much of the rest of the economy has withered away. FIRE carries enormous weight and the capacity to do great harm. Its growth, moreover, has fed a proliferation of financial activities and assets so complex and arcane that even their designers don't fully understand how they operate.<br /><br /><br /><br />One might call this the sorcerer's apprentice effect. In such an environment, the likelihood and frequency of financial panics grows, so much so that they become "normal accidents" -- an oxymoron first applied to highly sophisticated technological systems like nuclear power plants by the sociologist Charles Perrow. Such systems are inherently subject to breakdowns for reasons those operating them can't fully anticipate, or correctly respond to, once they're underway. This is so precisely because they never fully understood the labyrinthine intricacies and ramifying effects of the way they worked in the first place.<br /><br /><br /><br />Likening the current subprime implosion to such a "normal accident" is more than metaphorical. Today's Wall Street fabricators of avant-garde financial instruments are actually called "financial engineers." They got their training in "labs," much like Dr. Frankenstein's, located at Wharton, Princeton, Harvard, and Berkeley. Each time one of their confections goes south, they scratch their heads in bewilderment -- always making sure, of course, that they have financial life-rafts handy, while investors, employees, suppliers, and whole communities go down with the ship.<br /><br /><br /><br />What makes Wall Street's latest "normal accident" so portentous, however, is the way it is interacting with, and infecting, healthier parts of the economy. When the bubble burst many innocents were hurt, not just denizens of the Street. Still, its impact turned out to be limited. Now, via the subprime mortgage meltdown, Main Street is under the gun.<br /><br /><br /><br />It is not only a matter of mass foreclosures. It is not merely a question of collapsing home prices. It is not simply the shutting down of large portions of the construction industry (inspiring some of those doom-and-gloom prognostications). It is not just the born-again skittishness of financial institutions which have, all of sudden, gotten religion, rediscovered the word "prudence," and won't lend to anybody. It is all of this, taken together, which points ominously to a general collapse of the credit structure that has shored up consumer capitalism for decades.<br /><br /><br /><br /><b>Campaigning Through a Perfect Storm of Economic Disaster</b><br /><br /><br /><br />The equity built up during the long housing boom has been the main resource for ordinary people financing their big-ticket-item expenses -- from college educations to consumer durables, from trading-up on the housing market to vacationing abroad. Much of that equity, that consumer wherewithal, has suddenly vanished, and more of it soon will. So, too, the life-lines of credit that allow all sorts of small and medium-sized businesses to function and hire people are drying up fast. Whole communities, industries, and regional economies are in jeopardy.<br /><br /><br /><br />All of that might be considered enough, but there's more. Oil, of course. Here, the connection to Iraq is clear; but, arguably, the wild escalation of petroleum prices might have happened anyway. Certainly, the energy price explosion exacerbates the general economic crisis, in part by raising the costs of production all across the economy, and so abetting the forces of economic contraction. In the same way, each increase in the price of oil further contributes to what most now agree is a nearly insupportable level in the U.S. balance of payments deficit. That, in turn, is contributing to the steady withering away of the value of the dollar, a devaluation which then further ratchets up the price of oil (partially to compensate holders of those petrodollars who find themselves in possession of an increasingly worthless currency). As strategic countries in the Middle East and Asia grow increasingly more comfortable converting their holdings into euros or other more reliable -- which is to say, more profitable -- currencies, a speculative run on the dollar becomes a real, if scary, possibility for everyone.<br /><br /><br /><br />Finally, it is vital to recall that this tsunami of bad business is about to wash over an already very sick economy. While the old regime, the Reagan-Bush counterrevolution, has lived off the heady vapors of the FIRE sector, it has left in its wake a de-industrialized nation, full of super-exploited immigrants and millions of families whose earnings have suffered steady erosion. Two wage-earners, working longer hours, are now needed to (barely) sustain a standard of living once earned by one. And that doesn't count the melting away of health insurance, pensions, and other forms of protection against the vicissitudes of the free market or natural calamities. This, too, is the enduring hallmark of a political economy about to go belly-up.<br /><br /><br /><br />This perfect storm will be upon us just as the election season heats up. It will inevitably hasten the already well-advanced implosion of the Republican Party, which is the definitive reason 2008 will indeed qualify as a turning-point election. Reports of defections from the conservative ascendancy have been emerging from all points on the political compass. The Congressional elections of 2006 registered the first seismic shock of this change. Since then, independents and moderate Republicans continue to indicate, in growing numbers in the polls, that they are leaving the Grand Old Party. The <i>Wall Street Journal</i> reports on a growing loss of faith among important circles of business and finance. Hard core religious right-wingers are airing their doubts in public. Libertarians delight in the apostate candidacy of Ron Paul. Conservative populist resentment of immigration runs head on into corporate elite determination to enlarge a sizeable pool of cheap labor, while Hispanics head back to the Democratic Party in droves. Even the Republican Party's own elected officials are engaged in a mass movement to retire.<br /><br /><br /><br />All signs are ominous. The credibility and legitimacy of the old order operate now at a steep discount. Most telling and fatal perhaps is the paralysis spreading into the inner councils at the top. Faced with dire predicaments both at home and abroad, they essentially do nothing except rattle those sabers, captives of their own now-bankrupt ideology. Anything, many will decide, is better than this.<br /><br /><br /><br />Or will they? What if the opposition is vacillating, incoherent, and weak-willed -- labels critics have reasonably pinned on the Democrats? Bad as that undoubtedly is, I don't think it will matter, not in the short run at least.<br /><br /><br /><br />Take the presidential campaign of 1932 as an instructive example. The crisis of the Great Depression was systemic, but the response of the Democratic Party and its candidate Franklin Delano Roosevelt -- though few remember this now -- was hardly daring. In many ways, it was not very different from that of Republican President Herbert Hoover; nor was there a great deal of militant opposition in the streets, not in 1932 anyway, hardly more than the woeful degree of organized mass resistance we see today despite all the Bush administration's provocations.<br /><br /><br /><br />Yet the New Deal followed. And not only the New Deal, but an era of social protest, including labor, racial, and farmer insurgencies, without which there would have been no New Deal or Great Society. May something analogous happen in the years ahead? No one can know. But a door is about to open.<br /><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter-->Steve Fraser is a writer and editor, as well as the co-founder of <a set="yes" linkindex="14" href="">the American Empire Project</a>. He is the author of <a set="yes" linkindex="15" href="">Every Man a Speculator: A History of Wall Street in American Life</a>. His latest book, <b>Wall Street: America's Dream Palace</b>, will be published by Yale University Press in March 2008. </div></div></div> Sun, 09 Dec 2007 21:00:01 -0800 Steve Fraser, 643171 at Election 2008 Election 2008 election 2008 Why the Mad Rush to the '08 Elections? <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-teaser field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">We&#039;ve already been swamped by 2008 presidential madness -- by Hillary, by Obama(mania), by Fox News smears and Republican pandering to religious extremists -- which suggests that a turning-point election is on the way.</div></div></div><!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-story-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even"><img typeof="foaf:Image" src="" alt="" /></div></div></div><!-- BODY --> <!--smart_paging_autop_filter--><i>Note from editor Tom Engelhardt:</i><br />Have you already been swamped by 2008 presidential madness -- by Hillary, and her swiftboaters, and Obama(mania), and Edwards, and McCain hawking his wares in Iowa, and Hagel, and a gaggle (or maybe a gagel) of lesser presidential candidates, wannabes, and thought-abouts haggling over their prospects, and the latest definitively meaningless polls on the candidates, and whether various giant states are going to beat out smaller states in the race to be first in the primaries, and which of the candidates are ahead in the mad dash to the various moneybags who finance both parties?<br /><br />It's a miracle that the initial votes for president aren't being pushed forward to the spring of 2007. If this is the electoral "horse race," the nags are going to be dead by summer.<br /><br />Why this wild media rush to next year's election? You won't find out from reading your morning paper or catching the nightly news on TV. Sometimes a dash of history, a bit of historical context, not to speak of a little informed speculation is just what the media rush to the polls is lacking. Fortunately, here at Tomdispatch we have the antidote to the already headlong race to 2008. Author Steve Fraser considers just what might be made of last year's November midterm elections and the upcoming one in the great sweep of American history. -- <i>Tom</i><br /><br /><b>On the Road to 2008</b><br />By Steve Fraser<br /><br />All media eyes have turned toward the presidential election of 2008. Like the headlights of an onrushing train, it mesmerizes. Every news bulletin about the latest bloodbath in Iraq, each ominous forewarning of a face-off with Iran, the endless dirge of abandonment and despair issuing from New Orleans, the daily register of those cut loose from any semblance of a social safety net, public or private, each new official confirmation that the Earth is reaching a boiling point compels us to anticipate the 2008 election with fear and trembling, and with the greatest expectations. Something momentous might happen <i>then</i>. Haven't we already seen the first signs of that in the extraordinary electoral outcome of November 2006?<br /><br />All elections are, in some sense, turning points. They register, however murkily, shifts in popular sentiment. But this recent off-year election has excited more than the normal number of pregnant speculations and, of course, put one question in particular in boldface type: Did it signal the end -- or at least the beginning of the end -- of the conservative counter-revolution that first gained traction with Ronald Reagan's presidential victory in 1980?<br /><br />A turning-point election is something special indeed. Everything about the country's political chemistry changes as its geopolitical make-up is reshuffled, as cities, towns, and whole regions start voting in a new way. Suddenly, the normal fault lines in political demography no longer apply as ethnic, racial, gender, and socio-economic groups simply stop voting the way everyone expects them to.<br /><br />Turning-point elections can inaugurate new distributions of wealth and power. Social classes and elites accustomed to rule find themselves struggling to hold on to, or compelled to share power, they once felt entitled to wield unilaterally. The whole political economy becomes subject to serious reordering. With so much at stake, such elections can ultimately be the occasions for revolutions in the country's moral tone, its basic cultural and ideological orientation.<br /><br />Upheavals of this magnitude make up part of our relatively recent history. Here are a few examples: Pittsburgh and the state of Pennsylvania were fiefdoms of the Republican Party, and of the industrial elite which controlled that Party, from the end of the Civil War through the stock-market crash of 1929; nor did the GOP electorate there consist solely of industrialists and the middle classes. Hundreds of thousands of industrial workers -- Italians, Slavs, and other immigrants working the steel mills, coke ovens, and coal mines -- belonged to that cohort of Republican loyalists as well. Then, in four short years, between 1932 and 1936, both city and state became bastions of the New Deal Democratic Party.<br /><br />At just this same time, Afro-Americans, who since Emancipation had been steadfast supporters of the party of Lincoln, began voting (where they could) in overwhelming numbers for Franklin Delano Roosevelt and have remained steadfast Democrats ever since. Meanwhile, the South, which had emerged as a one-party region after the Civil War, stayed loyal to the Democratic Party for a century until, in the election of 1968, it began its mass defection to the Republicans.<br /><br />As late as the 1929 crash and Great Depression, free market ideology, social Darwinian morality, and the political and social preeminence of the country's business elite made up the legitimate foundations of the Republic. Within the historical blinking of an eye, however, that legitimacy vaporized in the presidential election of 1932 -- replaced by the regulatory and social-welfare state of the New Deal with its ethos of social obligation, economic security, and industrial democracy.<br /><br />Turning-point elections that register -- and help usher in -- such remarkable transformations are rare in American history. Arguably, there have only been three: 1860, 1932, and 1980. The elections of Abraham Lincoln, Franklin Delano Roosevelt, and Ronald Reagan -- each in its own way -- opened the door to fundamental reform. Clearly the abolition of slavery, the overthrow of industrial autocracy, and the triumphant counter-revolution against the New Deal with which these three elections are associated qualify as turning points in the grand sense.<br /><br />Rare as they are, one might ask why turning-point elections happen at all. Marking as they do the emergence of a new political order, they are, it seems, brought on by a general crisis in the old order, an impasse or breakdown so severe it can no longer be addressed by the conventional wisdom of the political <i>status quo</i>. The secession of the southern states in 1860 was, of course, such a crisis. So was the Great Depression. So, too, was the convergence of imperial defeat in Vietnam, the overthrow of the racial order of the <i>ancien rÃ©gime</i>, and the de-industrialization of the American heartland. Secession, depression, defeat, these have been the "big bangs" ushering in new political universes.<br /><br />System-wide crises prove fatal, first of all, because they exhaust the repertoire of political solutions available (or imaginable) to the ruling circles of the old order. Elites become increasingly defensive and inflexible, so much so that their actions aggravate rather than alleviate the crisis at hand. In the early years of the Great Depression, for example, Andrew Mellon, President Herbert Hoover's Secretary of the Treasury, suggested that the way out of the cataclysm was to "liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." In doing so, he was falling back on the orthodoxy of his robber-baron ancestors and exposing not only the callousness of the old regime, but its incapacity to do anything constructive about the national calamity.<br /><br />An exhausted political order does not, however, fall apart and exit the scene simply by virtue of its own downward momentum and social stupidity. Alternatives, embryonic but visible, usually gestate within the old political organism even before its weaknesses become disabling. Before one of the two major political parties emerges to represent a new political dispensation -- we are, after all, talking about the United States where generally everything happens within the claustrophobic confines of the two-party system -- battles rage internally for the soul of the party.<br /><br />So it was that the pre-New Deal Democrats were still run by John Jacob Raskob of the DuPont-General Motors interests and kindred <i>laissez-faire</i> circles among the country's business elite in the North (together with the Bourbon landlords and new industrialists of the South). But even before the Depression hit, reform-minded elements in the business community and the labor movement were challenging the Party's old guard, coalescing around a program of government regulation, industrial democracy, and the development of a mass-consumption economy underwritten by Keynesian-inspired fiscal policy.<br /><br />Likewise, several years before President Lyndon Baines Johnson abdicated the presidency in 1968 and long before Ronald Reagan's 1980 triumph, the Barry Goldwater right-wing of the Republican Party overthrew, at least temporarily, the Rockefeller moderates who had made their peace with New Deal liberalism and controlled the party since the end of World War II. Goldwater's vitriolic victory and presidential nomination at the 1964 Republican Party convention made clear that this was far more than an intramural squabble. It pre-figured the end of the New Deal order and signaled that a minority within the Grand Old Party was already prepared to wage an uncompromising struggle against apostates from the conservative credo.<br /><br />Turning-point elections then are not natural events like hurricanes or tsunamis, occurring in the course of some impersonal cycle of political evolution. Old political orders are supplanted by a willingness to risk party disunity in order to achieve some higher purpose.<br /><br />When Does the Bell Toll -- and for Whom?<br /><br />Turning-point elections have invariably been presidential elections. (Two others are often included on the short list by scholars -- Andrew Jackson's victory in 1828 and William McKinley's in 1896.) This is commonsensical enough. A vote for a president is, after all, a more straightforward national referendum than voting for hundreds of congressional representatives and senators.<br /><br />Of course, in everyday life, things seldom prove quite so straightforward. While it is convenient to bookmark change according to the year in which a new president takes office, some of the most decisive changes in political demography and geography, in public policy, in the balance of power, or in the moral-ideological profile of the new order have come in subsequent elections, both presidential and off-year.<br /><br />This is more than an academic point at the moment, because 2006 was, of course, a midterm election. Does this automatically disqualify it as a turning point one or can a Congressional election measure up too? The short answer is: sometimes.<br /><br />Arguably, to take one example still in memory, 1966 might be seen that way. Although President Lyndon Johnson and the Democrats had won a staggeringly overwhelming victory in 1964, the subsequent off-year vote for Congress demonstrated a significant shift to the Republicans in the South, and parts of the West, regions that were absolutely critical to the dominance of the old political order.<br /><br />Southern disaffection with the Democrats had, in fact, already been apparent in the 1964 presidential primary campaign of Alabama's notorious segregationist governor, George Wallace. It would make itself felt decisively in the presidential election of 1968 when the combined votes for Republican candidate Richard Nixon and Wallace, running on a third party, states-rights ticket, would account for 57% of the popular vote, sending Hubert Humphrey and the Democratic Party to an unexpected defeat. (Indeed, historians might have landmarked 1968 as a turning-point election except for one thing -- Watergate -- which functioned as a kind of 7-year political <i>coitus interruptus</i>.)<br /><br />Sometimes, however, off-year elections that looked significant at the time -- for example, the Republican capture of both houses of Congress in 1946 -- end up leaving the political fundamentals in tact. In that case, the New Deal order would remain hegemonic for another quarter-century or more.<br /><br />So too, a mere shift in presidential party affiliation need augur little. Republican President Dwight D. Eisenhower presided for two terms in the 1950s, but never thought to challenge the fundamentals of the New Deal. Indeed, it was an Eisenhower era <i>bon mot</i> that Social Security constitutes the "third rail" of American politics, that tampering with it would be an act of political suicide.<br /><br />Similarly, Democratic President Bill Clinton served twice but accepted the basics of Reagan-era conservatism, memorialized in his boast (which was also a confession) that the "era of big government is over with." Eisenhower was a Republocrat, Clinton a Democratan. If anything, their administrations indicated just how firmly entrenched the political order of the moment remained, so solidly it could be entrusted to the putative opposition.<br /><br />What, then, about 2006? At first blush (and lacking a crystal ball), it would certainly be safer to conclude that it <i>wasn't</i> a turning-point election. The Democratic Congressional victory was a slim one, particularly in the Senate; but even in the House, the present thirty-one seat margin conceals a remarkable number of extremely close individual races that were, in the end, Democratic victories. Moreover, the media, before and after the election, has made much of the fact that a significant number of Democratic winners in both houses belonged to the "Blue Dog" wing of the party; that they were recruited by the Party's leadership and won exactly because they were social conservatives, Republican-lite candidates, only make-believe Democrats.<br /><br />Nor did the victorious Democrats display a coherent programmatic alternative, however much they emphasized their opposition to Bush administration foreign and domestic policies and the atmosphere of sleaze that surrounded the White House. Differences within the Democratic Party on many issues were visible for all to see.<br /><br />It would, however, be a gross exaggeration to see in those tensions an embryonic Goldwater-style civil war pitting one form of political economy and world view -- say that of the Democratic Leadership Council -- against an insurgency ready to break with the past. There was no Goldwater-like faction armed with its own ideological vision and itching for a fight. You would have to throw into this mix the open question of whether the prevailing political order -- the one presaged by Goldwater and inaugurated by Ronald Reagan -- actually verges on a more general crisis of legitimacy, the sort of system-wide breakdown that has, in the past, opened the door to something truly new.<br /><br /><b>The beginning of the end?</b><br /><br />Despite serious doubts about the deeper significance of the 2006 election, there is, in fact, a good case to be made that it may turn out to be one of those rare turning points, or at least a signal that one is looming on the near horizon.<br /><br />To begin with, polls indicate that the election represented an explicit repudiation of the Republican Party as a party; at least, as explicit as one could possibly expect in a midterm election. Try as they did to argue beforehand that all elections are local, Republican leaders knew that not to be the case, not this time; indeed, that's precisely why they traipsed around the country vociferously denying what they deeply feared was true.<br /><br />Under normal circumstances and by its very nature, in the American electoral system -- monopolized by two amorphously constituted parties of little distinct ideological or programmatic identity, and with its multiple disincentives to any kind of independent party representation -- it is usually excruciatingly hard to register voter sentiment on behalf of a party rather than a candidate. But the election of 2006 was not normal in this regard. There are indications that significant numbers of Americans voted <i>against</i> the Republican Party and, with less enthusiasm to be sure, <i>for</i> the Democratic Party.<br /><br />Perhaps most tellingly, in numerous races moderate Republicans, who remained quite popular with their constituents and had enjoyed long tenure in office -- the best known case is Lincoln Chafee in Rhode Island -- succumbed to Democrats who were often no more to the "left" than they were. Notwithstanding the inherent fuzziness of what either of the parties stands for, voters seemed ready to conclude that the Republican Party and the administration of George Bush could be fairly associated with the disaster in Iraq, the shameful incompetence and callousness of the response to Hurricane Katrina, the rank and systemic corruption associated with lobbyist Jack Abramoff, and the crony capitalism of the oil companies and Halliburton. Voting for the Democratic Party was a way of repudiating all that, even if any particular Republican candidate might be blameless.<br /><br />Then, there is the matter of the "Blue Dogs." It turns out that rumors of their ascendancy were not so much exaggerated as mischaracterized. True enough Senate candidates like William Casey in Pennsylvania or James Webb in Virginia were well-known supporters of such social conservative causes as gun ownership or the "right to life." But these were hardly the issues they ran on. On the contrary, the campaigns of Webb and Casey, not to mention Sherrod Brown's Senate campaign in Ohio and those of many fellow "Blue Dogs" running for House seats, stressed opposition to the war in Iraq and anger directed at big pharma, big oil, tax breaks for the rich, and free-trade globalization agreements like NAFTA.<br /><br />Far more often than not, economic populism, not social conservatism, is what lent the Democrats, and in particular the Blue Dogs, an edge. This same sentiment could be felt, both before and immediately after the election, in the overwhelming support for a quick Congressional move to raise the minimum wage and to empower Medicare to lower prescription drug prices by bargaining with the big pharmaceuticals. Even more remarkable, given the perilous state of the labor movement, is the emergence of a House majority in favor of the Employee Free Choice Act, a bill that would make it easier for millions of workers to join unions, a development critical to shifting the balance of political and economic power.<br /><br />It would be premature to speak of a fully formed populist/New Deal-like alternative within the Democratic Party or to suggest that people were voting for such a possibility in 2006. Nonetheless, when the Democratic leadership anointed its opening agenda as the new governing party in Congress with the resonant phrase "the first 100 hours," echoing FDR's first 100 days, there was nothing accidental about it.<br /><br />So, too, certain demographic and geopolitical trends that showed up in 2006 are suggestive of changes to come. The Latino vote, which in the 2004 presidential election was relatively evenly divided between George Bush and John Kerry, went a whopping 70% for the Democrats this time. And that wasn't even the biggest percentage shift in voting behavior from the 2004 election in favor of the Democrats. That took place among white, non-college-educated working people who, for some time, have made up the core of the conservative populist constituency of the Reagan counter-revolution. Although all the numbers are not yet in, estimates suggest that about one-half of the shift toward the Democrats came from white working-class voters.<br /><br />Regionally, the Democratic Party made significant gains in the Rocky Mountain West, while clearing away the remnant outposts of Republicanism in much of the Northeast and driving Republicans from Rustbelt outposts in Ohio and Missouri. The logic of that trend -- which doesn't, of course, mean that it will be realized -- is to regionalize the Republican Party in the South. In this way, the southernization of national politics, which was the great accomplishment of the Reagan political order, might be replaced by the southernization of the Republican Party.<br /><br />Even the early talk about presidential candidates seems portentous. On the Democratic side there is no one to the right of Hillary Clinton, certainly a sign of a shift in the Party's center of gravity. But odder than that is the candidacy of Barack Obama. It seems to signal a thirst for a messiah. Such a quest can be symptomatic of many things, some bad, some not as bad.<br /><br />Obamaism is a real mystery. Others have already noted that messiahs don't normally come from the middle as he most emphatically does. Moreover, the charisma that surrounds the prince of banality from Illinois is even harder to decipher, attached as it is to nothing tangible or providential as was Robert Kennedy's lightning 1968 ascension before his assassination, his candidacy held aloft, rightly or wrongly, by the energies of the antiwar and civil rights upheavals.<br /><br />Something -- though it's hard to tell what -- may be blowin' in the wind.<br /><br /><b>Breakdown and paralysis</b><br /><br />Perhaps the better question, then, is: Will the presidential election of 2008 turn out to be a turning-point election of historic proportions. The greatest unknown is whether or not the <i>status quo</i> is headed for a breakdown crisis severe enough to clear the ground for such a transformative moment.<br /><br />Signs certainly point in that direction. The convergence of imperial defeat, economic insecurity, and rampant corporate malfeasance might be enough all by themselves. But the sudden change in the political status of global warming -- once the dim, background hum of some far distant disturbance, now more like the heart-stopping premonitory theme music from the soundtrack of <i>Jaws</i> -- magnifies the crisis of the whole global order, at home and abroad. Anatole Lieven has called it global capitalism's "existential challenge." Life as we've known it may be beginning to end. Congress is already holding hearings about the natural apocalypse to come, and all but the most ostrich-like politicians acknowledge global warming as an urgent reality; a fact-on-the-ground, so to speak, no longer a debatable theory.<br /><br />The Bush administration -- and so the old order -- has staked a lot on Iraq, not just its geopolitical and global economic ambitions. Its already severely diminished status as a moral exemplar of democracy and civil liberties won't survive this latest plunge into military mayhem.<br /><br />Moreover, the President's "surge" plan is a mortal threat to the secret source of the regime's strength at home. The politics of fear and imperial bravado, which once won it legions of followers, may, in the aftermath of the surge, reach its own turning point as those voters abandon ship as fast as they once climbed aboard. Can the administration or the old order survive a fiasco of such proportions?<br /><br />Iraq is also the equivalent of a budgetary bunker-busting nuclear device. It exacerbates an already aggravated economic dilemma. Despite a Noah's flood of statistics that seem to support a Pollyana-ish view that we live today in the best of economic good times, millions of Americans experience the opposite -- a yawning gulf of insecurity affecting their health, retirement, and employment prospects. They share a gloomy sense of moving backwards, of decline.<br /><br />Once upon a time, poverty was associated with the super-exploitation of those who toiled for meager reward. Then, in mid-twentieth century America, poverty came to be associated with the lack of work, with those so marginalized they were shut-out of the main avenues of modern commerce and industry. Nowadays, we are rushing back to the nineteenth century. Today, 30 million people in the United States work long and hard and still live in poverty.<br /><br />Insecurity even more pervasive than this once supplied the energy responsible for supplanting <i>laissez-faire</i> capitalism with the New Deal. Might we be approaching something of that scale and scope today? Though there can be no definitive answer to this, there also can be no question that a general crisis of economic insecurity confronts the old order. All of its self-serving and adventitious rhetoric about the heroics of risk fall on increasingly deaf ears.<br /><br />Not incidentally, since we live in the age of the global sweatshop, that older order is now global in scope; and the international financial mechanisms that so far have kept the global system humming for the U.S. are themselves under great and increasing strain. The system is, at present, being kept aloft by the needs of China, Japan, and other major economic powers. One day soon they may find the burden of swallowing gargantuan amounts of U.S. debt insupportable.<br /><br />Are we heading toward a breakdown like the one which, in the early 1970s, forced the Nixon administration to scrap the Bretton Woods financial system, the defining economic institution of the post-war <i>Pax Americana</i>? Together with defeat in Vietnam, the devaluation of the dollar, and the end of fixed exchange rates for international currencies exacerbated the general impasse in which the New Deal order then found itself.<br /><br />When it comes to the social reputation of our corporate elite, is it necessary to say anything more than Enron? The litany of shameless profiteering, felonious behavior, cronyism, and corruption at the apex of the private economy has arguably called into question the "right to rule" of those presiding over the country's key economic institutions. Even at the regime's hubristic height following Bush's presidential victory in 2004, he discovered he'd crossed a bridge too far in his attempt to turn over the Social Security System to Wall Street. Trust in the corporate elite has only grown frailer since then. Cynicism mixed with rage is a potentially explosive brew that fuels the economic populism even someone as "establishment" as James Webb articulated in his alternate State of the Union Address.<br /><br />What may make these converging dilemmas over-ripe for change is the response of the old order itself. One sign that some decisive crisis has arrived is the growing incapacity of those in charge to adapt -- as if the dire nature of what's happening dries up the springs of their political imaginations, forcing them to fall back on brittle orthodoxies. Andrew Mellon's notion of liquidating everything in sight as a way out of the Great Depression was one case of mental paralysis, a retreat to what had once "worked"; after all, the periodic busts endemic to the <i>laissez-faire</i> capitalist life-cycle had, in the past, always cured themselves, even if the "cure" included a great deal of what we would today call "collateral damage." The Bush administration is similarly falling back on its own orthodoxies, each move only betraying just how out of touch its top officials are with the new political and social realities forming around them.<br /><br />Take its reaction to the stunning electoral defeat it suffered last November. The President's new "surge" plan, the self-destructive decision to forge ahead in Iraq without a scintilla of reasonable hope of success, even from the standpoint of the most cynical imperialist, is such a reaction: instinctive, unreflective, inflexible, and probably deeply believed in. In other words, there is a resort to the ideological fixations which have long-driven this regime -- and the larger political order from which it rose - but which only become ever more rigidified as reality bites back.<br /><br />So, for another example, the administration's response to the crisis of economic insecurity has amounted to an ideological provocation shoved right in the teeth of its own electoral repudiation. Bush proposed a massive cut in Medicare and Medicaid and, even more in-your-face than that, a tax on the health insurance of those dwindling remnants of the New Deal order who still enjoy some decent level of employer-funded health care.<br /><br />Everything the old regime can imagine to defend itself ends up making things worse. With some poetic license, one is reminded of an inversion of that old Marxist axiom in which the capitalists, not the proletariat, become the gravediggers of capitalism.<br /><br /><b>The open door</b><br /><br />Of course, that is a gross exaggeration. The question of the moment is not: Will 2008 be a turning-point election, but rather can it be one? Here, everything depends not on what the old order does on its own behalf, no matter how bone-headed, but on how the gathering forces of opposition respond to the system's crisis. Is there a willingness to build a clear, programmatic alternative inside the Democratic Party? It is, after all, an institution deeply infected with free market/free trade ideology and most of the imperial presumptions of the conservative counter-revolution.<br /><br />Is there a readiness to mobilize around non-market solutions to the general crisis: To fight openly for the re-regulation of the economy and its planned re-industrialization; for its re-unionization; for redistributive policies to supplant the <i>idÃ©e fixe</i> of economic growth; for the dismantling of the petro-industrial complex and its replacement by a new, non-fossil-fuel system of energy production; for a global assault on the global sweatshop?<br /><br />Will there be a new era of polarization rather than centrism, partisanship rather than bi-partisanship, a head-on confrontation with the Democratic Leadership Council, like the guerilla wars once waged against the John Jacob Raskob and Al Smith elite of the pre-New Deal Democratic Party or the one waged by the Goldwater legions against the silk-stocking Rockefeller Republicans? Once upon a time, someone as mild-mannered as Franklin Delano Roosevelt found it within himself to "welcome the hatred" of those he labeled "economic royalists." Might there be someone equally unafraid waiting in the wings today?<br /><br />Is there a new order being born, ready to challenge the old one where it is both weakest and also strongest: namely, in the imperial arena? Not only has global aggression proved deadly to all, depraved in its moral consequences, and life-threatening to basic democratic principles and institutions at home, but it has also been the most fruitful, life-giving incubator of the conservative cultural populism which the old order has relied on for a generation. Anti-World War I intellectual Randolph Bourne's prophetic aperÃ§u -- "War is the health of the State" -- needs to be made even more embracing: War has become the health of a whole political culture, not to mention the vast, hard-wired military-industrial apparatus with which it lives in symbiotic bliss. Is there a will to take on that system of cherished phobias, delusional consolations, and implacable interests?<br /><br />Finally, there is the X factor, most unknowable of all, but also most critical in converting a mere election into something more transformative. Might a social movement or movements emerge from outside the boundaries of conventional politics, catalytic enough to fundamentally alter the prevailing metabolism of political life? Might the mass demonstrations of immigrants portend something of that kind? Might the anti-war movement soon enter a period of more sustained and varied opposition in the face of this administration's barbaric obtuseness? Straws in the wind as we race toward 2008.<br /><br /><i>Copyright 2007 Steve Fraser</i> <!-- All divs have been put onto one line because of whitespace issues when rendered inline in browsers --> <div class="field field-name-field-bio field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <!--smart_paging_autop_filter-->Steve Fraser is co-founder of the <a href="">American Empire Project</a> and Editor-at-Large of the journal <a href=""><i>New Labor Forum</i></a>. He is the author of <i><a href="">Every Man a Speculator, A History of Wall Street in American Life</a></i>, and most recently co-editor of <i><a href="">Ruling America: A History of Wealth and Power in a Democracy</a></i>. </div></div></div> Fri, 23 Feb 2007 21:00:01 -0800 Steve Fraser, 638331 at News & Politics election election06 election08 presidential campaign