Letter to the Millennials 7
Pandemics have a way of radically altering societies. The Renaissance came on the heels of The Black Death, a plague that killed millions in Europe in 1348 and 1349. We cannot make the mistake to believe that Covid-19 is some sort of 1000 year flood that will not come again. As John Gray, wrote recently in The New Statesman,
Yet the notion persists that pandemics are blips rather than an integral part of history. Lying behind this is the belief that humans are no longer part of the natural world and can create an autonomous ecosystem, separate from the rest of the biosphere. Covid-19 is telling them they cannot.
We must realize that the world we inhabit is about to undergo a once in a century change. The very foundation of Maslow’s Hierarchy of Needs (food, shelter, employment and health) has been attacked. We need to understand that a willingness to embrace radical change in the midst of disaster could lead to our own societal rebirth. In 1360 the renaissance humanists believed that citizens need not just listen to the priests, but rather learn to speak and write and engage in civic life. 70 years later Gutenberg would invent the printing press. It was the beginning of what would eventually be called representative democracy.
But this pandemic has also ripped off the illusions about our own priesthood, the prophets of American Exceptionalism as Jennifer Scheussler recently wrote.
“It can’t happen here” is an enduring refrain in American culture, a reflection of the idea — whether invoked ironically or in earnest — that the United States has a special destiny, and stands apart from the forces shaping the rest of the world.
Now, with a devastating global pandemic definitely happening here, much of the nation is asking how and why and what it means that a country that sees itself as the world’s wealthiest, most powerful and most scientifically advanced leads the world in both cases and confirmed deaths.
The gulf between the fiction of American Exceptionalism and the reality was huge. This picture of 10,000 cars lined up outside a San Antonio food bank reinforced the notion that most of the American working class were one pay check away from starvation.
And yet, day after day a delusional President is allowed to get up in front of the American public and spew dangerous misinformation about drugs or injecting disinfectant and the media continues to report this as if it were normal. Certainly there is a skepticism from some of the press, but there is a general unwillingness to state the obvious, that the emperor has no clothes. Perhaps it is only the checks and balances of the Constitution that has kept us from disaster. The Founders understood selfish strivers like Donald Trump and so as the historian John P. Diggins wrote, they “postulated a citizenry incapable of or unwilling to defer to the general good, and the Constitution’s mechanisms were so structured as to render men not so much virtuous as harmless.”
The next six months will tell us if a man like Trump has been rendered harmless, but it won’t tell us how we arrived at a situation where almost 40% of American adults wouldn’t be able to cover a $400 emergency with cash, savings or a credit-card charge that they could quickly pay off, as a Federal Reserve survey found. In other words it won’t explain this chart from DB Research.
You will notice that around 1983 the share of wealth in America held by the top 1% began to dramatically increase and the share held by the bottom 90% began to fall. This was because the Reagan tax cuts passed in late 1981 dramatically lowered the top income tax rate and cut capital gains tax on investment earnings. Subsequent tax cuts for the rich in the Bush and Trump administrations increased inequality. This rise in inequality has continued for almost forty years, through both Democratic and Republican presidencies.
How We Got Here
Let us be clear, the vice grip on American economic policy by the very rich has not let up over the course of six presidencies. As Jared Yates Sexton recently wrote,
Since the reign of Ronald Reagan, who was a puppet for market forces he couldn’t even begin to hope to understand, our economic system has been toppled and rebuilt to serve those at the top and to exploit everyone else.
Reagan was not the only puppet. Both Bush 1 and 2 followed the supply side bible (if you cut taxes on the rich, income to the government will increase), even though H.W. had denounced it as “voodoo economics” in the 1980 primary against Reagan. More disturbingly, both Clinton and Obama deferred to Wall Street sycophants like Robert Rubin and Larry Summers in forming their economic policies.
One of the key strategies of the right since Reagan was to destroy unions, and their ability to help finance the campaigns of Democratic candidates. Mitch McConnell’s suggestion that states declare bankruptcy is just the latest part of that plan. By the end of the Clinton administration the total Democratic Party embrace of Wall Street, driven by the party’s desperate need for funds (with union finances in decline) to reelect Clinton in 1996, led to the overturn of the Glass-Steagall Act. Glass-Steagall, signed by Franklin Roosevelt, had separated commercial from investment banking in the wake of the Great Depression. The notion that bank depositors money should not be used for speculative investment seemed to be an obvious reaction to the near failure of the U.S. banking system in 1932.
The decision to kill Glass-Steagall, driven by Robert Rubin’s future employer Citibank, would come back to haunt the country during the Great recession of 2008 when Citibank received a grand total of $476.2 billion in cash and guarantees from the Federal Government to keep the bank solvent. Much as Democrats tried to put the blame for the bank bailout on the George W. Bush administration, it was obvious to many that the roots of the failure were in the crony capitalism of the Clinton administration. This adherence of Democrats to the neo-liberal deregulation mantra was also reflected in antitrust policy where in media, telecommunications, defense and consumer products major anti-competitive mergers were approved. Of course the money flowed from corporations and billionaires into the DNC coffers as the benefits of globalization and deregulation flowed to the 1%, so few complained.
In the wake of the Great Recession of 2008 Obama chose Rubin allies Tim Geithner and Larry Summers to clean up the mess they had created. Instead of hiring aggressive regulators who would have put Wall Street executives on trial for the extraordinary abuses of the mortgage market, the Democrats sought to sweep the problem under the rug. Writing in the New York Times, Gretchen Morgenson points to this issue as the reason for Hillary Clinton’s defeat: “There are many facets to the populist, anti-establishment anger that swept Donald J. Trump into the White House in Tuesday’s election. A crucial element fueling the rage, in my view, was this: Not one high-ranking executive at a major financial firm was held to account for the crisis of 2008.”
Of course the arrival of Trump in the White House was the ultimate triumph of the plutocrats. When Charles Koch founded the Cato Institute in 1977, his mission (in words from Cato’s journal) was “protecting capitalism from government.” That meant the end of public education, Social Security, Medicare, Medicaid, the Environmental Protection Agency, as well as cutting taxes on the rich and government regulations on business. It was a tall order — but now, for the first time in 44 years, Koch and his billionaire libertarian friends like Robert Mercer and Peter Thiel have reached their goal of building a true oligarchy (Aristotle’s “rule by the rich”). The Trump tax cut delivered billions of dollars into the pockets of the Kochs, the Mercers, the Trumps, and their heirs. Trump deregulation made it easier for Koch to pollute and for Mercer to make billions without being taxed for his carried interest.
Creating a political economy in which the wealthy minority rule over the middle and lower class majority is a hard task. It requires mechanisms that suppress voting and mechanisms for propaganda that convince middle class voters that cultural divisions are more important than economic equality. How to do this has been a fifty year project. In 1971, the corporate lawyer Lewis Powell (who would go on to be appointed to the Supreme Court) wrote a memo to the President of the U.S. Chamber of Commerce stating that, “the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts.” Powell went on to note, “The painfully sad truth is that business, including the boards of directors’ and the top executives of corporations great and small and business organizations at all levels, often have responded — if at all — by appeasement, ineptitude and ignoring the problem.” He proposed that the business establishment needed to raise millions of dollars to combat the progressive assault. They should fund think tanks to put out conservative talking points on every issue and they needed to have their own media channels to support conservative ideas. By 1973 The Heritage Foundation was up and running and by 1977 the Koch Brothers had founded the Cato Institute. And of course the killing of the Fairness Doctrine by the Reagan Administration allowed the entrance of Rush Limbaugh and Fox News to fill the media propaganda role Powell had imagined.
Once the right had it’s own think tanks and media organs, their ability to force their agenda on the federal government was assured, because the business class also had far more money to be used to support political candidates. As the venture capitalist Marc Andreessen recently pointed out, the rise of the political right in America favored, “crony capitalism, regulatory capture, ossified oligopolies, risk-inducing offshoring, and investor-friendly buybacks in lieu of customer-friendly (and, over a longer period of time, even more investor-friendly) innovation.”
What is to Be Done
To break the hold of the Oligarchy on American politics will not be easy. Most of the forces of the government in a crisis are being deployed to support the 1%. This picture tells the story.
The stock market was seen by many to be a fool’s game, driven by companies buying back their own stock and a Federal Reserve, cowed by President Trump into constantly lifting share prices with “Quantitative Easing”. The Federal Reserve sees its role as rescuing the investor class.The trenchant financial analyst Ben Hunt recently wrote that, “emergency government action to rescue the financial system (in 2008) from political ruin becomes permanent government policy to use the financial system for political gain.”
And if you thought the recent emergency bailout packages were for small business and working class unemployed, I’ve got a bridge in Brooklyn to sell you.
As part of the economic rescue package that became law last month, the federal government is giving away $174 billion in temporary tax breaks overwhelmingly to rich individuals and large companies, according to interviews and government estimates.
But the billionaire bailouts won’t last long. We are entering a depression, with all the downward pull of delation that we saw in the 1930’s. As Neil Irwin wrote in the New York Times, the pandemic, “points to a deflationary collapse — a glut of supply of goods and services, and consequently falling prices — that surpasses anything seen in most people’s lifetimes.”
I don’t think this deflationary spiral is well understood. It is obvious the stock market is ignoring the real economy, believing Trump has the Fed so intimidated that they will keep pouring trillions in to support the markets, at least until the 2020 election is over. The conventional Wall Street opinion assumes some sort of V shape recovery in the third quarter. This is pure fantasy. The Commercial real estate business will be in a full-scale depression by August as companies realize they can actually be more productive by having a lot of their people work from home and subsidize their rent and broadband. The President of Morgan Stanley noted they went through one of the highest volume weeks in stock market history with 90% of their employees working from home. No HR department is going to demand a one hour commute to a potentially dangerous virus Petri dish for these kind of workers. The airline business will also be in a crash. The notion that you had to personally travel to Chicago to close a deal, went out the window in the last month. At best, airlines will not sell middle seats. How long can they operate at 60% capacity? The same goes for restaurants. Its fairly simple to push the tables six feet apart and have waiters wear gloves and masks. It’s not so simple to run a restaurant on half the nightly turnover without raising prices significantly. Same goes for Disneyland, the NFL and Macy’s. It’s not hard to create six foot separation, it’s just expensive.
The department stores, which have been failing slowly for a very long time, really don’t get over this,” said Mark A. Cohen, the director of retail studies at Columbia University’s Business School. “The genre is toast, and looking at the other side of this, there are very few who are likely to survive.”
Thirty years ago we were celebrating American Exceptionalism in Francis Fukuyama’s essay, The End of History. Fukuyama proposed that with the events of 1989 we had reached the end of history because the victory of free market capitalist democracy was complete and it was only a matter of time before the remaining autocracies vanished in the face of US hegemony.
That turned out to be tragically wrong. While everyone else was heralding an emergent globalist world that would take on the best values of America, some glimpsed the terrible risk of the opposite: that the principles of the kleptocrats would become America’s own. This grim vision is now coming true in the person of Trump, his family and their business cronies. As Paul Krugman recently noted, “Donald Trump, a grifter president whose whole political strategy is based on catering to white male grievance, and who both disdains expertise and always values loyalty above competence.”
To confront Trump’s crony capitalism will require two things. First, we must ensure that an election in the middle of a pandemic can be fair and inclusive of all people who want to vote. In the next month, every state could pass a vote by mail law. Since states control elections, the fact that Trump and McConnell oppose vote by mail is irrelevant. Even if only the 24 states with Democratic governors passed vote by mail bills, it would afford more than 65% of the citizens that right.
Second, Biden must break with forty years of establishment economic orthodoxy and pledge to take on the oligarchs tooth and nail. In that fight I believe the addition of Elizabeth Warren as his Vice President would signal a break from the past. Warren had made fighting plutocrat corruption her life’s work. The rumors floating around last week that Larry Summers would join Biden as an advisor is just the wrong move and would be a tragic signal that we were back to business as usual.
The election in November will be fought over whether our President and his government provided the basics that every citizen of the United States expects: security, justice, order, economic and physical well-being. I believe Trump will be found lacking in that regard, though one can never discount his ability to pass the blame to China, the W.H.O. or even Barack Obama and Joe Biden. But if Democrats, Independants and never Trump Republicans unite in November, Trump can be soundly defeated. For Biden in January of 2021, will have a huge task rebuilding America. In that rebuilding he should take Thomas Paine’s challenge written in 1775— “We have it in our power to begin the world over again”
The second part of this series can be found here