Part 1 (1/2)

Pity the Billionaire

Thoes of s ood use for them

-C WRIGHT MILLS, White Collar

Introduction: Signs and Wonders

This book is a chronicle of a confused tiinary threats and rallied to econoauziest terms It is about a country where fears of a radical takeover beca since ceased to play any role in the national life; a land where ideological nightmares conjured by TV entertainers ca than the contents of the news pages

Seen from another perspective, this is a chronicle of a ,” of a revival crusade preaching the old-tirassroots rebellion and the incredible recovery of the conservative loomy depths of defeat Inevitably the words ”populist” and ”revolt” are applied to it, or the all-out phrase chosen by dick Arnifico who heads one of the anizations: a ”true bottom-up revolution”2 Let us confess that there is indeed so, about all this Consider the barest facts: this is the fourth successful conservative uprising to happen in the last half century, each one more a-puff with populist bluster than the last, each one standing slightlyto co chapter in the historical epoch that I call ”the Great Backlash,” and that others call the ”Age of Reagan” (the historian Sean Wilentz), the ”Age of Greed” (the journalist Jeff Madrick), the ”Conservative Ascendancy” (the journalist Godfrey Hodgson), or the ”Washi+ngton Consensus” (various economists)

Think about it this way It has now been more than thirty years since the supply-side revolution conquered Washi+ngton, since laissez-faire becae numbers of Deh decades of deregulation, deunionization, privatization, and free-trade agreements; the neoliberal ideal has been projected into every corner of the nation's life Universities try to put the these days; so do hospitals, electric utilities, churches, and museums; so does the Post Office, the CIA, and the US Ar on for decades, we have a people's uprising de that n before the altar of the free h priests of that very cosreatest econoht ”Unlikely” would also be right ”Preposterous” would be even righter

In 2008, the country's financial systeely the result-as nearly every credible observer agrees-of the decades-long effort to roll back bank supervision and encourage financial experied the nation and the world into the worst recession since the thirties This was no ordinary business-cycle downturn Millions of Ae number of their banks, became insolvent in a matter of weeks Sixteen trillion dollars in household wealth was incinerated on the pyre Wall Street had kindled And yet, as I write this, the n to roll back regulation, to strip governain, and to claive the rebels their due Let us acknowledge that the conservative co unique in the history of American social movements: a mass conversion to free-market theory as a response to hard times Before the present economic slu a wholesale taste for neoclassical economics or a spontaneous hostility to the works of Franklin Roosevelt Before this recession, people who had been cheated by bankers almost never took that occasion to demand that bankers be freed from ”red tape” and the scrutiny of the law Before 2009, the man in the bread line did not ordinarily weep for theon his yacht

The Consensus Speaks

The achieve is evenopinion clie W Bush presidency had culhts of the Beltway consensus had dee in a new direction They had seen this o The plates were shi+fting Conservatisn was at an end An era of liberal ascendancy was at hand This was the unaantic crowds that gathered to hear Barack Oban trail You could no more defy this plotline than you could write checks on an ee Death of Republican America, by the veteran journalist Sidney Blumenthal, appeared in April of 2008-even before the Wall Street crash-and announced that the ”radical conservative” George W Bush had made the GOP ”into a minority party”3 In Novee of Reagan,” took to the pages of US News & World Report to herald that age's ”collapse” The conservative intellectual Francis fukuya in Neeek the ot specific and noted the dean-era term that had been ulated) Wall Street4 The thinking behind all this was straight cause-and-effect stuff The 2008 financial crisis had clearly discredited the conservative nature free-market ideas; political scandal and incompetence in the Republican Party had rendered itsabsurd; and conservatisnant to a new generation of postpartisan, postracial voters Besides, there was the obvious historical analogy that one encountered everywhere in 2008: we had just been through an uncanny replay of the financial disaster of 192931, and now, murmured the pundits, the automatic left turn of 1932 was at hand, with the part of Franklin Roosevelt played by the newly elected Barack Obama

For the Republican Party, the pundit-approved script went as follows: it had toperiod of irrelevance And as it failed to take the prescribed steps, the wise e When the radio talker Rush Li that the inco President Obama would ”fail,” the former Bush speechwriter David Frum slapped hied by the standards of ould coh's wish sounds quaint, even civil; at the ti that Fru the GOP nationally” Venoht entertain the party's bitter-enders, Fru in that direction was the loss of the ”educated and affluent,” who increasingly found ”that the GOP had becoe drive toward self-destruction was a favorite pundit theme When former vice president dick Cheney announced that he preferred Lih's way to the route of hed that Cheney was ”on a political suicide e, so be it” When certain conservatives proposed a test to detect and punish heresy aton Post columnist Kathleen Parker called it a ”suicide pact” The respected political forecaster Stu Rothenberg concluded in April 2009 that ”the chance of Republicans winning control of either chamber in the 2010 ht' or 'small' Zero”5 Dustbin? No Thanks

What the polite-thinking world expected froht was repentance They assumed that conservative leaders would be hue W Bush; that Republicans would confess their errors and make haste for the political center The world expected contrition

What it got was the opposite, delivered on the point of a bayonet Instead of coht hit the gas Instead of tacking for the center, they sailed hard to the right Instead of seeking accoical purity Instead of elevating their reed them

Now, the idea that the disasters of the Bush years spelled the end for conservatish if you accepted assuht to be obvious in those days: When a political group screwed up, people didn't vote for it any longer When elected officials wandered too far into the fields of ideology, soravity always pulled theht, under its beloved leader, George W Bush, had disgraced itself; noas the other team's turn at bat Political epochs were supposed to run in thirty-year cycles or so, and the GOP's thirty years were up

That Republicanstheir back on the center and peddling an even more concentrated version of their creed was not, by the conventional thinking of those innocent days, a viable option And there were famous examples to tell us why, too Back in 1983, to nay, the British Labour Party had reacted to the rise of Margaret Thatcher by convincing itself that what the public really wanted fro alternative; the strategy fetched theeometric calculations did not take into consideration were the contents of the politics themselves Conservatives had been repudiated before, they had bounced back before, and they knew that voters don't judge an idea by placing it on soree to which it deviates froe of accepted Beltway opinion Whether Republicans chose to ht” was less important than how they addressed the econo the nation And their conservative wing had a coherent theory Everywhere you looked, they declared, you saw a colossal struggle between average people and the ”elites” ould strip away the people's freedoe bailouts that followed the financial crisis, they said, were evidence of a design on our savings by both governulation, too, was ainst the little So while one side sat back and waited for the s out, conservatives acted They reached deep into their own tradition and carab the opportunities that hard tie that they had enjoyed thirty years behind the wheel, they declared that they had never really got their turn in the first place The true believers had never actually been in charge, the ”Conservative Ascendancy” never really existed-and therefore, the disastrous events of recent years cast no discredit on conservative ideas theetically for the laissez-faire utopia

Pure idealism of this sort is unusual in American politics, however, and the jaded men of the commentariat sat back and waited for the systenetic pull of the ”center” to work its corrective ic But this time the Gods didn't intervene in the usual way In 2010, a radicalized GOP scored its greatest victory in congressional elections in many decades

Little Man, What Now?

The simplest explanation for the conservative comeback is that hard times cause people to lash out at whoever is in power In 2010, that happened to be Deed a coeable, like coke and Pepsi They are able to control their own fate to soree, to differentiate theh exa consistently in a particular direction to show that it need not always flop aimlessly back and forth

Another widely held view attributes the conservative resurgence to white racism, which is supposed to have been whipped into flames by the election of a black president Indeed, one ainst the president and his party But individual prejudice and a handful of nah to indict an entire nant we find that prejudice and those naardless of the racial fears some partisans hold in their heart of hearts, the new conservatisenerate racist statements or policies, and its leaders take pains to converse in the polite language of diversity6 Yet other co to the ways it has ”leveraged” the Internet, just as Barack Oba the web to recruit followers; they are blogging like eful tweets In this view, the , and you could probably get King George III hiot all clickety-click interactive

Old ways of thinking about conservatism have proved equally unsatisfactory in the new situation For years, it was possible to understand the laissez-faire revival of recent decades by noting the various forms of mystification in which the debate was always cloaked-namely, the culture wars Froreat econouans; they were resolved by a consensus of political insiders in Washi+ngton while the public fought over abortion and the theory of evolution

But the conservative flowering that has taken place since early 2009 is different For the first tirand econo of the culture wars has ten up for the online discussion foruanizations of the revived Right, you will see a warning that ”no discussions on social issues are allowed”; that participants are to restrict theovernment, fiscal responsibility, [and] free markets” The conservative movement's manifesto for 2010, the ”Contract fro decades' culture-war issues When the Washi+ngton Post conducted a poll of nearly every Tea Party group in the nation, it discovered that ”social issues, such as saister as concerns”7 And although I attended a number of Tea Party rallies over the last few years, I never once saw an antiabortion appeal on a protestor's sign or heard one froht proceeds about its hile renouncing confusion or”capitalis don't really bother with the actually existing capitalish capitalises of every newspaper in the land They generally do not discuss credit default swaps or the deregulatory triumphs that made them so destructive They do not have much to say about the massive oil spill in the Gulf of Mexico-the news story that shared the front pages with conservative prih the suate,” the revelation a few al corners in order to hustle borrowers in default out of their houses as quickly as possible

Instead, the battle is joined at the level of pure abstraction The issue, the newest Right tells us, is freedos of the subpriencies were compromised over the course of the last decade Details like that ht they are aliven politician's disposition toward free markets and, by extension, toward the common people of the land, whose faithful vicar thereally novel about the idea that free lorification of this idea at the precise moment when free-market theory has proven itself to be a philosophy of ruination and fraud The revival of the Right is as extraordinary as it would be if the public had demanded dozens of new nuclear power plants in the days after the Three Mile Island disaster; if we had reacted to Watergate byRichard Nixon a national hero

So disjunctive does this spectacle appear that onlookers naturally assuht's motivations must lie elsewhere, as we have noted The movement's positions bear so little relation to lived reality that observers sometimes feel they need pay its actual statements no mind at all

But this is atriuht actually says at its rallies, and prints on its signs, and shouts frole of conspiracy drea renaissance And by all means, we must read the conservative texts themselves-the words of the politicized TV newsmen, the orotund phrases of the radio talkers, the end-of-the-world rhetoric that one noticed at the Tea Parties

This is a book that seeks to explain hard-ti-goes econoement that persists in spite of all the failures and bank-breaking catastrophes that our previous efforts to achieve such an arrangement have inflicted upon us

Free-market capitalism is not the sort of system for which people rally in the streets, even in prosperous times That they would do so in the months after the freest part of the market deposited so many of their fellow citizens onto the scrap heaps of uneust abroad in the land, about the raw need to raise one's voice

It also tells us ht has capitalized on the nation's anguish to create a protest uish worse This is the story of a swindle that will have terrible consequences down the road And though it sounds curious to say so, the newest Right has h there has been a great deal of this-but by offering an idealism so powerful that it clouds its partisans' perceptions of reality

Now, constructing an alternative reality would normally put a worldly political e But this case is different The reborn Right has succeeded because of its idealisrand sense is precisely what our fallen economic world calls for

CHAPTER 1

End Times

For the people of the most prosperous nation in the world, recessions are often existential crises, ti we believe is called into question In fat years we think of our econoical ter crowds, the brand spirit that is supposed to inhabit our sneakers-but in hard tiround, and the awful reality is thatdreams that preceded it

In 2008 and 2009, the middle-class world came apart Every time we checked, the value of our retirement fund had fallen by another third; friends lost their jobs; industries like construction and autoca feeling, that ed far e than our house orth The land around us General Motors and Chrysler declared bankruptcy; Merrill Lynch, broker to the common man, desperately sold itself one weekend in 2008; IndyMac, Wachovia, Washi+ngton Mutual, Bear Stearns, and Lehman Brothers disappeared It looked like society itself was disintegrating, and for the first time in our comfortable suburban lives, we felt the atavistic touch of panic

For our parents and grandparents, however, these events may have seemed a little more familiar The country went down virtually the sa, banks failing, factories closing, and foreclosuresSo similar were the two disasters that comparisons to the Great Depression became a media commonplace in 2008, the inevitableto make sense of the current debacle

The literary critic Edmund Wilson called his book of Depression essays The Ah I've read it several times over the course of my life it wasn't until 2009 that I really understood what he meant by that phrase Had you been one of the s in stocks in the twenties, you would have watched your investments lose half their value, then lose half of what rein, you would have lost it all at the very beginning

Had you been one of the responsible ones who kept your savings in the bank, you may well have lost it anyway Financial institutions were exposed to the disaster by definition, and when your local bank failed-as almost half of American banks did in the years after the 1929 crash1-it was a pretty sure bet that no nice man from the FDIC would show up to s And when your town bank went down, your toent down, too

In 1933, the fear aovernors tried to stop the runs on the banks by forcing theht econo and construction were moribund by that tied off about a third of the labor force A huge part of the population now had no way of earning a living no matter how hard they tried; and, as the once-fa Bernstein pointed out in a once-famous history of the period, ”no one knohat proportion of the others were on part ti jobs voluntarily, regardless of how badly their boss treated theestures like that We know that es declined, as did the birthrate; that the suicide rate rose, and that newspapers published sensational stories on starvation in America2 Unemployment relief, back then, was an entirely local matter, and after the first year or so of the downturn it essentially no longer existed There was ”organized looting of food” in the big cities, Bernstein tells us, and in a number of places unemployed people set up econoh the dollars of the day were fully backed by gold and no one feared inflation Per capita income fell so far that by 1933 it was lower than it had been in 19003 What's s would ever return to ”normal” Economists of the ti day when the free fall would stop and supply and demand resume their happy orbits-but it slowly dawned on them that economies could find a kind of equilibrium with 33 percent unemployment just as naturally as they could with 3 percent unemployment4 And so the catastrophe of 192933 did to the certainties of laissez-faire econoion and what the slaughter of World War I did to old-fashi+oned patriotis loose,” people used to say back then: The Depression stocks and transformed economic orthodoxy into so many fairy tales5 It flattened a century of bankerly wisdoe, the sacred principles upon which everyone froreed ”Like the forces of war,” wrote Peter Drucker in his 1939 classic, The End of Econo in a senselessly whirlingand has ceased to serve any purpose but its own”6 When we recall that Drucker was an eement theorist, his statement can be read as a fairly harsh indictements But it was scarcely the harshest That was supplied by the headlines of the day: Bankers who contrived to reward their friends and rescue themselves as the floor caved in Wall Street heroes ent to prison Men of substance whose reassuring predictions were alration was the great literary theery of desolation and hopelessness: Express trains ers while arround in the countryside while people starved in the cities Settlements built of trash down at the city dump The economist John Maynard Keynes faes The editor of Nation's Business saw ”fear, bordering on panic, loss of faith in everything, our fellowovernurehead of the business civilization, gave up Once he had been so confident in the old system that he had declared, ”The man who builds a factory builds a tee pondered the panora him and told a friend, ”In other periods of depression it has always been possible to see sos which were solid and upon which you could base hope, but as I look about, I now see nothing to give ground for hope-nothing of man”8 The Hard-Times Scenario