Scraping By, Economic Tyranny, and the American Dream

That very word freedom, in itself and of necessity, suggests freedom from some restraining power. In 1776 we sought freedom from the tyranny of a political autocracy-from the eighteenth-century royalists who held special privileges from the crown…Political tyranny was wiped out at Philadelphia on July 4, 1776. Since that struggle, however, man’s inventive genius released new forces in our land which reordered the lives of our people. The age of machinery, of railroads; of steam and electricity; the telegraph and the radio; mass production, mass distribution-all of these combined to bring forward a new civilization and with it a new problem for those who sought to remain free

-FDR, 1936 Democratic National Convention

In his book Scraping By, Seth Rockman identifies that the position held by contemporary Americans concerned with economic social justice is neither radical nor progressive. Rockman examines the history of the early Republic, in particular the City of Baltimore, thereby revealing the political-economic tension between those who controlled capital, those who contracted their labor or the labor of their slaves, and how said tension was mitigated. He exposes two widely-held myths perpetuated in the highly cultural and dominant American narrative: (1) that wage labor was merely a temporary condition in which one was compelled to engage a priori to eventual, inevitable financial independence; and (2) that the racial politics of the early Republic gave preferential consideration to white workers, at the expense of blacks, free or enslaved. Rockman provides analysis and the identification of the economic, political, and legal disenfranchisement of wage laborers in early Republic Baltimore. In his sixth chapter entitled, ‘The Hard Work of Being Poor’, he offers two sentences that describe the life of the American worker, both past and present. Rockman states, In Atlantic seaports from Boston to Baltimore, the cost of living far outstripped what a single worker could earn through the most diligent labor[1], and that finding a job did not secure men, women, and children from the pangs of hunger or the shivers of winter, though it might postpone the threat of real privation for a time[2]. Our purpose here is to examine how the dominant theoretical narrative of America, its way of life, is so diametrically opposed from the practical reality offered by Rockman. As stated previously, the two sentences offered in the sixth chapter is a reality that has echoed throughout the United States via the Occupy movement. In short, they were relevant during the lives of the Founders as they are in our contemporary time. Since its inception, the United States of America has held a truly bipolar national character. Indeed, over its 236 years, it has taken and refused to imbibe the medicines of moderation, parrhesia, and practical wisdom into its body politic and thus its policies. In order for the American Dream to be restored in the minds of the People, economic tyranny must be conquered. Economic tyranny can only be conquered through Aristotelian practical wisdom. This is our purpose here.

Privation, or its threat, provides the preconditions of the Hobbesian state of nature. It has long been held that Thomas Hobbes created a mere theoretical concept, envisioned to offer some explanation as to the necessity of a social contract between ruler and ruled. For the political philosophers who have taught of the mythical nature of this concept, life through the command of birth have belonged to the social class of ease, wealth, and abundant political power. All too often it is the political philosopher who has been leading the process of acculturation which links his worldview to the canon he has learned, mastered, and taught. Most Americans in an academic position to encounter Rockman’s two, sixth chapter sentences would most likely respond with the notions of individualism, free enterprise, liberty, self-reliance, and again hard work. They have not known privation, and even more likely have incapacitated themselves in engaging in self-critical inquiry. Economic tyranny for these individuals is a political-economic impossibility. It is only a lack of capital or other form of necessity in which one can purchase food, clothing, shelter which creates, and continues to create, a practical reality where life is short, brutish, nasty. Yet the American political philosopher has been acculturated to accept the theoretical concept of John Locke as truth. He idealizes his nation, stating that in the state of nature, a community of property owners, each and individually, saw the necessity of codified law in government-the social contract. Now there exist American political philosophers, historians, and other social scientists that have another perspective that challenges the dominant, American narrative. These individuals know that privation creates a climate that seemingly invalidates the very idea of a social contract.

These new voices speak of Rockman’s reality. They know the lengths men and women will extend, with an incredible and determined energy merely to earn enough money to reside in dilapidated, unsanitary housing. They know that human beings will work to feed themselves the worst, the cheapest, and/or most available food. They will seek solace in whiskey, beer, ale, and the human touch of those willing to offer a paid expression of love. Others will concern themselves with nothing save of acquiring the necessary capital to improve their conditions, and that of their descendants, by any means necessary. Men will travel from distant places and kill their unknown brothers in humanity in order to claim his lands as their own. They will travel over oceans to enslave other members of their human family, and then create myths of the savagery of the murdered and the innate inferiority of the slave. Women will encourage, indeed compel, their daughters to engage in the most tedious forms of work for the lowest rate of compensation. Children are hardened by life, learning that it is their needs that matter more than family or the Natural Laws of Morality. Rockman writes working households teetered on the brink of disaster when one prolonged illness, one spell of unemployment, one brush with the law, one encounter with a slave trader, one particularly cold week, one accidental fire could mean the difference between staying afloat and dissolution[3]. And yet, with this being stated, far too many of this new perspective class of American political philosopher have found the correct answer to the wrong question, which subsequently leads to a true miscarriage of economic and political justice. As if man’s enterprising, resource accumulative nature is a product of the Enlightenment and in a truly sophomoric fashion, those of us from the humblest of origins, advocate the destruction of capitalism as a means of operating a political economy. A trend has developed that is often hateful of the United States in its entirety, which is merely a reaction that exacerbates our National Sickness.

Capitalism is not the great evil of the American society. It is the lack of the American Moral Economy, or as it is termed in our contemporary time, social democracy that lies at our societal ills. Rockman explores the methods within the early Republic that mitigated the tensions between capitalists and labor that are foreign to us today. For example, he states that it was the antithesis of Anglo-American culture for the market to set a ‘just price’ for necessities. It was the role of municipal governments to regulate the businesses that sold food, in particular that of bread.[4] Baltimore had a strictly regulated bread assize that ensured a fair profit to bakers, while ensuring that the poor would not be incapable of its purchase due to price. In another example, Rockman cites that in the harsh winter of 1805 wealthy citizens of Baltimore sent wagons into the countryside to be filled with wood, returned to the city, and distributed to the poor. Firewood was sold at the market price of five dollars per cord, yet due to it being one of the harshest winters; the wealthy understood it was their civic and religious duty to keep the less fortunate from freezing. The 21^st century scholar could potentially view this as mere altruism or a veiled attempt at capitalists simply ensuring they’d have workers. Rockman dismisses these cynical ideas. He argues that a great many of wealthy citizens throughout the early Republic were concerned with the plight of those who could not realize the so-called American Dream. Men like Mathew Carey, Joseph Tuckerman, and others used philanthropic and religious rhetoric in a host of publications to highlight injustices created by the capitalist political economy of the United States of America, while simultaneously affecting the policy debate to ensure that the means to social uplift were available. There is a true lesson here.

For those concerned about economic social justice the realization that mankind has always sought to acquire wealth and power since the beginning of human civilization must be held as fact. In ancient times, three millennia before the birth of Christ, Plato wrote extensively about a great many of these issues in which we are compelled to grapple today. His Republic highlights issues of wealth and the access to political power it creates within a democratic system, regardless of its imperfections. Even within the democratic socialist republics of the recent Communist past, Milovan Djilas’ 1957 text The New Class and ideas espoused by Trotsky serve as evidence of socially-constructed inequality. Djilas and Trotsky realized that those with greater power and higher status within the Communist Party ate, lived, had their children educated at superior standards than their comrades who worked in the factories or farms of the nation. What those seeking economic social justice in the United States must comprehend is that critique is comparable to asking the wrong question, ripe with political cowardice, as to why; without the all more important and correct question being answered of what shall be done. Men are born equal, endowed by their Creator with the inalienable rights of life, liberty, and the pursuit of happiness, but almost instantaneously their positions on the social hierarchy of any and all nations make them either superior or inferior to others. Simply stated: men will forever remain unequal. What shall be done?

Rockman provides a method by which those of us concerned with economic social justice in an American political context can move closer to the goal of caring for the least of us, while protecting and ensuring the right of the most fortunate of us to acquire wealth within the capitalist political economy. The Moral Economy that is Social Democracy must be codified within the United States Constitution. The Conservative Christian must be reminded that he cannot serve two masters. He either prays to the alter of free market capitalism, while simultaneously creating myths that accuse his less fortunate brothers because they live on the brink of privation, or he truly embraces the politics of Jesus, takes the Gospel seriously[5], and creates a system by which social uplift becomes the responsibility of all Americans; the Christian, the Jew, the Muslim, and atheist alike. For any American to merely scrap by is a reality detrimental to our supposed cherished principles of Republican government. Rockman reveals that in spite of the horrible reality that existed for millions of people in Baltimore, there is a true, American ideal founded in the early Republic, which seeks to improve the lives of its citizens. It therefore cannot be called ‘socialism’, ‘foreign’, or ‘un-American’, but merely a forgotten principle for the nation to remain intact.

---

[1] Rockman, Seth: Scraping By, pg. 158

[2] Ibid. 159

[3] Ibid p. 172

[4] Ibid p. 175

[5] Excerpt from Martin Luther King, Jr. ‘Why I Oppose the War in Vietnam’, 1968 speech, Riverside Church.

written by Isma'il ibn Bilal

A Rendezvous With Destiny - Speech before the 1936 Democratic National Convention

Speech before the 1936 Democratic National Convention

Philadelphia, Pennsylvania

June 27, 1936

A Rendezvous With Destiny

President Roosevelt:

"Senator Robinson, Members of the Democratic Convention, My Friends: Here, and in every community throughout the land, we are met at a time of great moment to the future of the nation. It is an occasion to be dedicated to the simple and sincere expression of an attitude toward problems, the determination of which will profoundly affect America.

I come not only as a leader of a party, not only as a candidate for high office, but as one upon whom many critical hours have imposed and still impose a grave responsibility.

For the sympathy, help and confidence with which Americans have sustained me in my task I am grateful. For their loyalty I salute the members of our great party, in and out of political life in every part of the Union. I salute those of other parties, especially those in the Congress of the United States who on so many occasions have put partisanship aside. I thank the governors of the several states, their legislatures, their state and local officials who participated unselfishly and regardless of party in our efforts to achieve recovery and destroy abuses. Above all I thank the millions of Americans who have borne disaster bravely and have dared to smile through the storm.

America will not forget these recent years, will not forget that the rescue was not a mere party task. It was the concern of all of us. In our strength we rose together, rallied our energies together, applied the old rules of common sense, and together survived.

In those days we feared fear. That was why we fought fear. And today, my friends, we have won against the most dangerous of our foes. We have conquered fear.

But I cannot, with candor, tell you that all is well with the world. Clouds of suspicion, tides of ill-will and intolerance gather darkly in many places. In our own land we enjoy indeed a fullness of life greater than that of most nations. But the rush of modern civilization itself has raised for us new difficulties, new problems which must be solved if we are to preserve to the United States the political and economic freedom for which Washington and Jefferson planned and fought.

Philadelphia is a good city in which to write American history. This is fitting ground on which to reaffirm the faith of our fathers; to pledge ourselves to restore to the people a wider freedom; to give to 1936 as the founders gave to 1776 - an American way of life.

That very word freedom, in itself and of necessity, suggests freedom from some restraining power. In 1776 we sought freedom from the tyranny of a political autocracy - from the eighteenth-century royalists who held special privileges from the crown. It was to perpetuate their privilege that they governed without the consent of the governed; that they denied the right of free assembly and free speech; that they restricted the worship of God; that they put the average man's property and the average man's life in pawn to the mercenaries of dynastic power; that they regimented the people.

And so it was to win freedom from the tyranny of political autocracy that the American Revolution was fought. That victory gave the business of governing into the hands of the average man, who won the right with his neighbors to make and order his own destiny through his own government. Political tyranny was wiped out at Philadelphia on July 4, 1776.

Since that struggle, however, man's inventive genius released new forces in our land which reordered the lives of our people. The age of machinery, of railroads; of steam and electricity; the telegraph and the radio; mass production, mass distribution - all of these combined to bring forward a new civilization and with it a new problem for those who sought to remain free.

For out of this modern civilization economic royalists carved new dynasties. New kingdoms were built upon concentration of control over material things. Through new uses of corporations, banks and securities, new machinery of industry and agriculture, of labor and capital - all undreamed of by the Fathers - the whole structure of modern life was impressed into this royal service.

There was no place among this royalty for our many thousands of small-businessmen and merchants who sought to make a worthy use of the American system of initiative and profit. They were no more free than the worker or the farmer. Even honest and progressive-minded men of wealth, aware of their obligation to their generation, could never know just where they fitted into this dynastic scheme of things.

It was natural and perhaps human that the privileged princes of these new economic dynasties, thirsting for power, reached out for control over government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service new mercenaries sought to regiment the people, their labor, and their property. And as a result the average man once more confronts the problem that faced the Minute Man.

The hours men and women worked, the wages they received, the conditions of their labor - these had passed beyond the control of the people, and were imposed by this new industrial dictatorship. The savings of the average family, the capital of the small-businessmen, the investments set aside for old age - other people's money - these were tools which the new economic royalty used to dig itself in.

Those who tilled the soil no longer reaped the rewards which were their right. The small measure of their gains was decreed by men in distant cities.

Throughout the nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise.

An old English judge once said: "Necessitous men are not free men." Liberty requires opportunity to make a living - a living decent according to the standard of the time, a living which gives man not only enough to live by, but something to live for.

For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor - other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.

Against economic tyranny such as this, the American citizen could appeal only to the organized power of government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people's mandate to end it. Under that mandate it is being ended.

The royalists of the economic order have conceded that political freedom was the business of the government, but they have maintained that economic slavery was nobody's business. They granted that the government could protect the citizen in his right to vote, but they denied that the government could do anything to protect the citizen in his right to work and his right to live.

Today we stand committed to the proposition that freedom is no half-and-half affair. If the average citizen is guaranteed equal opportunity in the polling place, he must have equal opportunity in the market place.

These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power. In vain they seek to hide behind the flag and the Constitution. In their blindness they forget what the flag and the Constitution stand for. Now, as always, they stand for democracy, not tyranny; for freedom, not subjection; and against a dictatorship by mob rule and the over-privileged alike.

The brave and clear platform adopted by this convention, to which I heartily subscribe, sets forth that government in a modern civilization has certain inescapable obligations to its citizens, among which are protection of the family and the home, the establishment of a democracy of opportunity, and aid to those overtaken by disaster.

But the resolute enemy within our gates is ever ready to beat down our words unless in greater courage we will fight for them.

For more than three years we have fought for them. This convention, in every word and deed, has pledged that the fight will go on.

The defeats and victories of these years have given to us as a people a new understanding of our government and of ourselves. Never since the early days of the New England town meeting have the affairs of government been so widely discussed and so clearly appreciated. It has been brought home to us that the only effective guide for the safety of this most worldly of worlds, the greatest guide of all, is moral principle.

We do not see faith, hope, and charity as unattainable ideals, but we use them as stout supports of a nation fighting the fight for freedom in a modern civilization.

Faith - in the soundness of democracy in the midst of dictatorships.

Hope - renewed because we know so well the progress we have made.

Charity - in the true spirit of that grand old word. For charity literally translated from the original means love, the love that understands, that does not merely share the wealth of the giver, but in true sympathy and wisdom helps men to help themselves.

We seek not merely to make government a mechanical implement, but to give it the vibrant personal character that is the very embodiment of human charity.

We are poor indeed if this nation cannot afford to lift from every recess of American life the dread fear of the unemployed that they are not needed in the world. We cannot afford to accumulate a deficit in the books of human fortitude.

In the place of the palace of privilege we seek to build a temple out of faith and hope and charity.

It is a sobering thing, my friends, to be a servant of this great cause. We try in our daily work to remember that the cause belongs not to us, but to the people. The standard is not in the hands of you and me alone. It is carried by America. We seek daily to profit from experience, to learn to do better as our task proceeds.

Governments can err, presidents do make mistakes, but the immortal Dante tells us that Divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted on different scales.

Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference.

There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.

In this world of our in other lands, there are some people, who, in times past, have lived and fought for freedom, and seem to have grown too weary to carry on the fight. They have sold their heritage of freedom for the illusion of a living. They have yielded their democracy.

I believe in my heart that only our success can stir their ancient hope. They begin to know that here in America we are waging a great and successful war. It is not alone a war against want and destitution and economic demoralization. It is more than that; it is a war for the survival of democracy. We are fighting to save a great and precious form of government for ourselves and for the world.

I accept the commission you have tendered me. I join with you. I am enlisted for the duration of the war."

A Banker Speaks, With Regret By NICHOLAS D. KRISTOF, NY Times Op-Ed

If you want to understand why the Occupy movement has found such traction, it helps to listen to a former banker like James Theckston. He fully acknowledges that he and other bankers are mostly responsible for the country’s housing mess. 


As a regional vice president for Chase Home Finance in southern Florida, Theckston shoveled money at home borrowers. In 2007, his team wrote $2 billion in mortgages, he says. Sometimes those were “no documentation” mortgages.

“On the application, you don’t put down a job; you don’t show income; you don’t show assets,” he said. “But you still got a nod.”

“If you had some old bag lady walking down the street and she had a decent credit score, she got a loan,” he added.

Theckston says that borrowers made harebrained decisions and exaggerated their resources but that bankers were far more culpable — and that all this was driven by pressure from the top.

“You’ve got somebody making $20,000 buying a $500,000 home, thinking that she’d flip it,” he said. “That was crazy, but the banks put programs together to make those kinds of loans.”

Especially when mortgages were securitized and sold off to investors, he said, senior bankers turned a blind eye to shortcuts.

“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.”

One memory particularly troubles Theckston. He says that some account executives earned a commission seven times higher from subprime loans, rather than prime mortgages. So they looked for less savvy borrowers — those with less education, without previous mortgage experience, or without fluent English — and nudged them toward subprime loans.

These less savvy borrowers were disproportionately blacks and Latinos, he said, and they ended up paying a higher rate so that they were more likely to lose their homes. Senior executives seemed aware of this racial mismatch, he recalled, and frantically tried to cover it up.

photo by Isma'il bin Bilal

Theckston, who has a shelf full of awards that he won from Chase, such as “sales manager of the year,” showed me his 2006 performance review. It indicates that 60 percent of his evaluation depended on him increasing high-risk loans.

In late 2008, when the mortgage market collapsed, Theckston and most of his colleagues were laid off. He says he bears no animus toward Chase, but he does think it is profoundly unfair that troubled banks have been rescued while troubled homeowners have been evicted.

When I called JPMorgan Chase for its side of the story, it didn’t deny the accounts of manic mortgage-writing. Its spokesmen acknowledge that banks had made huge mistakes and noted that Chase no longer writes subprime or no-document mortgages. It also said that it has offered homeowners four times as many mortgage modifications as homes it has foreclosed on.

Still, 28 percent of all American mortgages are “underwater,” according to Zillow, a real estate Web site. That means that more is owed than the home is worth, and the figure is up from 23 percent a year ago. That overhang stifles the economy, for it’s difficult to nurture a broad recovery unless real estate and construction revive.

All this came into sharper focus this week as Bloomberg Markets magazine published a terrific exposé based on lending records it pried out of the Federal Reserve in a lawsuit. It turns out that the Fed provided an astonishing sum to keep banks afloat — $7.8 trillion, equivalent to more than $25,000 per American.

The article estimated that banks earned up to $13 billion in profits by relending that money to businesses and consumers at higher rates.

The Federal Reserve action isn’t a scandal, and arguably it’s a triumph. The Fed did everything imaginable to avert a financial catastrophe — and succeeded. The money was repaid.

Yet what is scandalous is the basic unfairness of what has transpired. The federal government rescued highly paid bankers from their reckless decisions. It protected bank shareholders and creditors. But it mostly turned a cold shoulder to some of the most vulnerable and least sophisticated people in America. Last year alone, banks seized more than one million homes.

Sure, some programs exist to help borrowers in trouble, but not nearly enough. We still haven’t taken such basic steps as allowing bankruptcy judges to modify the terms of a mortgage on a primary home. Legislation to address that has gotten nowhere.

My daughter and I are reading Steinbeck’s “Grapes of Wrath” aloud to each other, and those Depression-era injustices seem so familiar today. That’s why the Occupy movement resonates so deeply: When the federal government goes all-out to rescue errant bankers, and stiffs homeowners, that’s not just bad economics. It’s also wrong.

http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html?_r=1&ref=opinion

Wanted: Worldly Philosophers By ROGER E. BACKHOUSE and BRADLEY W. BATEMAN Published: November 5, 2011

IT’S become commonplace to criticize the “Occupy” movement for failing to offer an alternative vision. But the thousands of activists in the streets of New York and London aren’t the only ones lacking perspective: economists, to whom we might expect to turn for such vision, have long since given up thinking in terms of economic systems — and we are all the worse for it.

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Alain Pilon

This wasn’t always the case. Course lists from economics departments used to be filled with offerings in “comparative economic systems,” contrasting capitalism and socialism or comparing the French, Scandinavian and Anglo-Saxon models of capitalism.

Such courses arose in the context of the cold war, when the battle with the Soviet Union was about showing that our system was better than theirs. But with the demise of the Soviet Union, that motivation disappeared. Globalization, so it is claimed, has created a single system of capitalism driven by international competition (ignoring the very real differences between, say, China and the United States). We now have an economics profession that hardly ever discusses its fundamental subject, “capitalism.”

Many economists say that what matters are questions like whether markets are competitive or monopolistic, or how monetary policy works. Using broad, ill-defined notions like capitalism invites ideological grandstanding and distracts from the hard technical problems.

There is a lot in that argument. Economists do much better when they tackle small, well-defined problems. As John Maynard Keynes put it, economists should become more like dentists: modest people who look at a small part of the body but remove a lot of pain.

However, there are also downsides to approaching economics as a dentist would: above all, the loss of any vision about what the economic system should look like. Even Keynes himself was driven by a powerful vision of capitalism. He believed it was the only system that could create prosperity, but it was also inherently unstable and so in need of constant reform. This vision caught the imagination of a generation that had experienced the Great Depression and World War II and helped drive policy for nearly half a century. He was, as the economist Robert Heilbroner claimed, a “worldly philosopher,” alongside such economic visionaries as Adam Smith, John Stuart Mill and Karl Marx.

In the 20th century, the main challenge to Keynes’s vision came from economists like Friedrich Hayek and Milton Friedman, who envisioned an ideal economy involving isolated individuals bargaining with one another in free markets. Government, they contended, usually messes things up. Overtaking a Keynesianism that many found inadequate to the task of tackling the stagflation of the 1970s, this vision fueled neoliberal and free-market conservative agendas of governments around the world.

THAT vision has in turn been undermined by the current crisis. It took extensive government action to prevent another Great Depression, while the enormous rewards received by bankers at the heart of the meltdown have led many to ask whether unfettered capitalism produced an equitable distribution of wealth. We clearly need a new, alternative vision of capitalism. But thanks to decades of academic training in the “dentistry” approach to economics, today’s Keynes or Friedman is nowhere to be found.

Another downside to the “dentistry” approach to economics is that important pieces of human experience can easily fall from sight. The government does not cut an abstract entity called “government spending” but numerous spending programs, from veterans’ benefits and homeland security to Medicare and Medicaid. To refuse to discuss ideas such as types of capitalism deprives us of language with which to think about these problems. It makes it easier to stop thinking about what the economic system is for and in whose interests it is working.

Perhaps the protesters occupying Wall Street are not so misguided after all. The questions they raise — how do we deal with the local costs of global downturns? Is it fair that those who suffer the most from such downturns have their safety net cut, while those who generate the volatility are bailed out by the government? — are the same ones that a big-picture economic vision should address. If economists want to help create a better world, they first have to ask, and try to answer, the hard questions that can shape a new vision of capitalism’s potential.

Roger E. Backhouse, a professor of economic history at the University of Birmingham, and Bradley W. Bateman, a professor of economics at Denison University, are the authors of “Capitalist Revolutionary: John Maynard Keynes.”

Why Aren't the Jobless Flocking to Zuccotti Park? - Louis Uchitelle, The Nation Magazine

photo by Isma'il ibn Bilal

Just a week into the Occupy Wall Street protest at Zuccotti Park in Manhattan, Gordon Stevenson, an unemployed aircraft pilot, declared that if only there were such a demonstration near his home in Boston, he would join it. “It would give me a way to focus my anger,” he said.

Well, the opportunity came. The protest, which started September 17, soon spread to other cities, including Boston, where demonstrators occupied Dewey Square, an easy commute from Stevenson’s suburban home. But he stayed away. As a registered Democrat, he was sympathetic but also skeptical that the protesters could harness their discontent to a political agenda, particularly one that zeroed in on unemployment as its chief concern. “I would want to know if there is a significant element down there compatible with what upsets me,” Stevenson said.

What upsets him is that he’s been without a job for two and a half years, and that at age 62, if a commercial pilot’s job at the controls of privately owned jets doesn’t materialize soon, he might never fly professionally again—cutting off his career half a decade short of his intended retirement. And yet rather than protest, he remains at home, getting by on his wife’s salary as the director of a music school (she earns 75 percent of the $100,000 he once earned) and settling into a passivity that is widespread among the nation’s unemployed.

“If I am angry at anything,” Stevenson says, suppressing his anger, “I am angry at the people on the right who have been stating, one after another, that if we reduced taxes, employers would hire. Well, look at the economic data; you see that does not happen.”

More than 25 million people in America are unemployed or stuck in part-time work or parked on the sidelines hoping for jobs, according to the Bureau of Labor Statistics. Roughly 6.2 million are classified as long-term unemployed, which means they have been seeking work for at least six months. Not since the severe recession of the early 1980s has the share of the population wanting jobs or more hours of work been so high. But the numerous rallies and protests that gave vent to the hardships of unemployment in the early ’80s are absent now.

Then, the manufacturing sector went through its first big shakeout since the 1930s, sidelining and shocking hundreds of thousands of workers who had thought their jobs were secure. In a climactic moment, an estimated 260,000 people marched on Washington in September 1981, protesting President Reagan’s mass dismissal of the nation’s air traffic controllers the month before because they had refused to heed his order to end a strike and return to work.

Nearly a generation later, the unemployed think differently. They join self-help and job-search groups, but they don’t see a route to employment through protest or through outspoken demand. Activism has given way to acquiescence, although unemployment is once again stubbornly high in the aftermath of a recession that has left the economy persistently weak.

“It is remarkable how passive the American people are about unemployment,” says Edward Wolff, a labor economist at New York University. He and others blame the passivity in large part on the decline in union clout after the failure of the air traffic controllers’ strike, which undermined the sympathy toward organized labor that had been characteristic of Americans since the ’30s. “People today,” Wolff says, “are more susceptible, as far as getting their emotions aroused, to issues like gay marriage or abortion, that kind of thing.”

Occupy Wall Street—the imagery of thousands of people quixotically occupying a downtown patch of land—has touched the right nerve, putting financial greed on a par with gay marriage and abortion as a public issue, and arousing greater emotion than joblessness. In Zuccotti Park, unemployed demonstrators aren’t hard to find, but they play down that aspect of their discontent. Certainly Tammy Bick does. A regular at the park in the early weeks, she has been out of work since November 2010, when she lost her job as a secretary at an HIV clinic, a position she had held for five years. She disclosed the layoff almost offhandedly during an interview, and made no mention of unemployment—hers or anyone else’s—in the hand-lettered pasteboard sign that she kept strapped across her chest while in the park. It decried Wall Street’s “manipulators.”

“This country is like a broken wheel, and there are a multitude of things that have to be fixed,” says Bick, who is 49. She lives in Hamden, Connecticut, but shifted to a friend’s apartment in Brooklyn to shorten the commute to Zuccotti Park. In mid-October she turned her attention to a smaller sit-in closer to home—at New Haven’s Green. She adds, by way of explaining her priorities, that in addition to the Wall Street “manipulators,” foreclosure is higher on her list of protest targets than unemployment, although the latter often results in the former. She gets by on extended unemployment benefits and help from her fiancé, who is employed. “If I had a job,” Bick insists, “I would have taken vacation time and still gone to the park.”

The passivity toward unemployment that Wolff describes and Stevenson and Bick illustrate might give way, in time, to anger and protest. Occupy Wall Street and its numerous iterations across the country could take on a second life, one that spurs the unemployed to finally speak out forcefully on their own behalf. Already there have been isolated outbursts. But for such incidents to spread and take hold, more confidence is required that speaking out would produce results—and confidence is lacking, says Richard Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers, a monthly national poll of 500 people.

“People are discouraged,” Curtin says. “They believe that the administration and Congress tried to do a lot to get the economy restarted and nothing happened. So they are gradually embracing the notion that government is incapable of creating jobs.”

The government has, arguably, invited this response by talking about creating jobs without yet doing so—echoing a similar reluctance in the past. Twice since World War II Congress has watered down bills that would have mandated full employment—once in 1946, although the Depression was still fresh in people’s minds, and again in the mid-’70s, in the midst of a severe recession. The bills became law—the second one, finally enacted in 1978, is famously known as the Humphrey-Hawkins Act—but without the provisions that would have required the government to either hire directly or subsidize hiring whenever the unemployment rate rose above a specified level. The laws, in sum, were toothless.

With the election of Ronald Reagan in 1980 and the rise of supply-side economics, the dynamics shifted drastically. Unemployment was no longer seen as a failure of the nation’s employers to generate enough demand for workers. That was and still is the reason, but it faded as an explanation and as a prod to action. Instead, the unemployed are persistently blamed for their own unemployment, which eases pressure on government to help them. If only they acquired enough education and skill, the argument goes—and it is endlessly repeated—they would be hired. Corporate executives, politicians and many prominent economists push this view, and the unemployed, encouraged to blame themselves, keep silent. Or as Richard Sennett, a New York University sociologist, puts it: “People don’t cooperate with each other. They’ve lost the desire to do so and the skill that cooperation requires, so when things fall apart, they react as if it were their individual failure and are passive about it.”

Income also plays a role, or rather the decline in median family income in this century—the first time that has happened since 1954, according to Census data. “That is just stunning, and a big piece of the puzzle,” says Heather Boushey, a senior economist at the Center for American Progress. “Why aren’t people angry about unemployment? Well, really, why aren’t people angry about declining living standards?”

Unions contribute to the passivity by focusing their energies on the already employed—mainly their members and those they seek to organize, although even here the rise of the two-tier wage in a significant number of new union agreements undercuts the incomes of thousands of new workers. Unions rarely focus on the unemployed or speak for them.

Neither does mainstream economics. “Some elites in the profession have basically popularized the view that high unemployment is one of those things that happens from time to time, and there is nothing we can do about it; it has to run its course,” says Robert D. Atkinson, president of the Information Technology and Innovation Foundation, an organization that decries the decline in manufacturing’s share of the economy and the workforce.

As for the unemployed, extended jobless pay (currently a maximum of fifty-three weeks, in most cases, well beyond the standard twenty-six) helps to relieve the hardship—and to silence the recipients, some of whom fear that the extra monthly checks might be cut off if they speak out. For its part, the Obama administration contributes to the forbearance, partly by holding out hope that the American Jobs Act, now before Congress, will bring relief.

“Obama has done an extraordinary job of dampening the potential unrest,” says Richard Freeman, an Independent and a labor economist at Harvard University, citing the president’s skilled oratory and his somewhat vague jobs proposal. “The unemployed,” Freeman adds, “have been unwilling so far to go against the president, and he is living on that, above the fray.”

Federal disability benefits also contribute to the passivity. They go now to more than 10 million people, a greater portion of the population than in the early ’80s, which means that many people who worked or clamored for work in those earlier hard times, despite their disabilities, now no longer do so, seeking safe harbor instead through disability insurance.

Still others without jobs find ways to make do. A higher percentage of the nation’s young people—25 to 34—are living with parents than in 2007, the last full year before the recession. And more families are sharing a house than in the recent past, shrinking their costs in the absence of jobs and sufficient income.

“What we are really doing is asking Americans to tough it out for the next two or three years,” says Lawrence Mishel, president of the Economic Policy Institute, a labor-oriented think tank. “And that is going to leave a scar on many people long after the jobs come back.”

Janet Veum in Milwaukee considers herself already scarred, along with many of the unemployed people she works with in her position as a recently hired coordinator for Wisconsin Jobs Now, a coalition of community groups. In this new job, Veum, 51, has begun to participate in demonstrations against unemployment—mainly marches and rallies that her organization sponsors. But that’s because protest is a bread-and-butter activity for Wisconsin Jobs Now. Veum went fifteen months without work after losing her last job, as a marketing manager for a paper company. “During all that time,” she says, “it didn’t occur to me to protest or speak out. I was focused on my own job search and didn’t think about the bigger situation.”

Public libraries are one venue that does bring the unemployed together, but in silence and in small numbers. Many companies require job applicants to file their applications electronically, using forms posted on a company website. That is particularly true for low-wage jobs at fast-food chains, shopping mall outlets and supermarkets. For applicants who don’t have computers in their homes—and many don’t—a public library’s computers become a substitute, and on any weekday morning small groups of men and women are seated intently at terminals in libraries across the country.

Franklyn Wylder, 24, was among the handful at the White Plains, New York, public library on a recent morning. He had hurt his knee in a pickup basketball game, an injury that cost him his job climbing ladders to stock shelves in a home furnishings store. With the knee almost healed, he wanted to work again, to help pay his expenses while he attended a local college. Filling out applications, he listed his computer skills and also his recent work as a busboy and grocery store custodian—jobs that paid $7.75 an hour or less. Needing that income, he scrambled to fill out and transmit applications to Walmart, Target and Sears plus a handful of small retailers.

“Protesting unemployment is all well and good,” Wylder says, “but it doesn’t pay the bills and it gets in the way of applying for jobs. You have to put yourself out to potential employers and not waste time.”

Absorbed in making enough to get by while he finishes his course work, Wylder does not yet connect his plight with the larger issue of joblessness in America, or the role government might have to play, even by hiring people, WPA-style, to absorb all those who want—indeed, need—jobs. Once that connection is broadly made, if it ever is, the cry for work at decent wages will certainly reverberate in Zuccotti Park.

Right Response to Unemployment Is Smart Stimulus Spending - John Nichols, The Nation Magazine

photo by Isma'il ibn Bilal

The new unemployment figures are damned disappointing -- from a social, economic and political standpoint.

The official jobless rate rose from 9.5 percent to 9.6 percent in august. That’s a modest increase, but the trajectory is in precisely the wrong direction for a country that fears a double-dip recession – not to mention an Obama White House that fears a big dip in Democratic majorities in the House and Senate after an election that is now just two months away.

The president says that there is "positive news" to be found in the fact that private sector employers created 67,000 new jobs. But that spin is not going to get very far at a point when the country must create twice that many jobs each month just to keep up with growth in the number of Americans who are entering the workforce.

And that does not begin to address the challenges posed by underemployment – Americ ans who have jobs but who can’t get enough hours or sufficient pay to support their families – and the growing number of long-term unemployed Americans who have given up looking for jobs.

An honest assessment of the real unemployment rate – taking in the underemployed and the long-term unemployed – takes the jobless figure closer to 17 percent, according to Department of Labor statistics.

So, while the president may want to concentrate on the “green shoots” of “positive news,” Obama is closer to the mark when he says the recovery that he promised would be robust by now is “not good enough."

Why?

The federal government has spent a lot of money for the purposes of avoiding a Depression and easing a recession. But it has not spent that money well or wisely.

Bailing out big banks, as the federal government continues to do, may help Wall Street. But it does not create jobs on Main Street. In fact, big banks and investors have for many years been more inclined to lend money to companies that promise to move jobs overseas than to create them at home – witness the pattern with regard to manufacturing-sector stocks, which rise in value when CEOs announce the shuttering of U.S. factories and the shifting of jobs overseas.

Bailing out multinational corporations is just as bad a project, as those corporations use the money to move jobs out of the country. Witness the moves made by GM and Chrysler, which took more than $50 billion in bailout money and used it to shut factories in the U.S. and lay off tens of thousands of auto workers and mechanics.

Bailing out the rich doesn’t work either. The so-called economic stimulus plan of 2009 was weighted heavily toward tax policy shifts that helped those Americans who were wealthy enough to worry about the alternative minimum tax. Like the Bush-era tax cuts for the super-rich, these trickle-down approaches are proven losers when it comes to job creation.

The stimulus money that went to job creation – less than half the total – may well have averted significantly higher unemployment. But it was not sufficient to move the numbers in the right direction.

Why? Laura Tyson, the chair of the Council of Economic Advisers and the National Economic Council in the Clinton administration and a member of President Obama’s Economic Recovery Advisory Board, is right when she says that “there is now a substantial gap between the supply of goods and services the economy is capable of producing and the demand for them. This gap is starkly reflected by the 23 million Americans who are looking for full-time jobs and the millions more who have left the labor force because they could not find one.”

What to do?

Tyson makes the case for a smarter and more focused investment in America, arguing that:

Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments. The federal government should pledge generous financing increases for both programs through 2011.

Federal aid to the states is especially important because they finance education. Although the jobs crisis is primarily a crisis of demand, it also reflects a mismatch between the education of the work force and the education required for jobs in today’s economy. Consider how the unemployment rate varies by education level: it’s more than 14 percent for those without a high school degree, under 10 percent for those with one, only about 5 percent for those with a college degree and even lower for those with advanced degrees. The supply of college graduates is not keeping pace with demand. Therefore, more investment in education could reduce both the cyclical unemployment rate, as more Americans stay in school, and the structural unemployment rate, as they graduate into the job market.

An increase in government investment in roads, airports and other kinds of public infrastructure would be cost-effective, too, as measured by the number of jobs created per dollar of spending. And it would help reduce the road congestion, airport delays and freight bottlenecks that reduce productivity and make the United States a less attractive place to do business. The American Society of Civil Engineers has identified more than $2.2 trillion in public infrastructure needs nationwide, and a 2008 study by the Congressional Budget Office found that, on strict cost-benefit grounds, it would make sense to increase annual spending on transportation projects alone by 74 percent.

Over the next five years, the federal government should work with state and local governments and the private sector to finance $1 trillion worth of additional investment in infrastructure. It should extend the Build America Bonds stimulus program, which in the past year has helped states finance $120 billion in infrastructure improvement.  

There is no reasonable argument against investing in infrastructure projects that actually put Americans back to work and that move money into local economies. Indeed, as Tyson notes, “Under (the current) circumstances, the economic case for additional government spending and tax relief is compelling.”

“ Sadly,” she adds in a recent New York Times op-ed, “polls indicate that the political case is not.”

That’s where leadership comes in.

President Obama has indicated that he will propose new stimulus measures next week. That's good news.

But the president has pulled his punches in the past. He needs to do a lot more than advance cautious proposals. He must get in front of the debate and start talking about the benefits that come from investing in American job growth -- as opposed to mumbling while the right screams about "big government."

And congressional Democrats are going to need some prodding.

Local officials around the country are must speak up, especially those who are on the frontlines in cities, counties and states where smart federal investments can be put to immediate use.

Madison, Wisconsin, Mayor Dave Cieslewicz, the organizer and key player in the national New Cities Project, has  the right response for those who argue against additional stimulus spending on the “grounds” that it puts the nation deeper in debt.

“There is an estimated $2.2 trillion in deferred infrastructure maintenance left to do in America.,” says Cieslewicz. “So, let's keep putting America to work. After all, tackling all that infrastructure need isn't putting us in debt at all. It's simply catching up on work that would need to be done anyway in the future. We're not putting our children deeper in debt; we're making investments now so they won't have to later on.”

Lenore Palladino, MoveOn.org Civic Action

photo by Isma'il ibn Bilal

They just don't get it. Ordinary people are rising up and demanding that our country work for the 99%, but Congress is still acting like nothing has changed.

In less than two weeks, the Super Committee will unveil their deficit reduction plan. And instead of focusing on creating jobs and making the rich pay their fair share, all indications are that Congress will once again protect the 1% at the expense of the 99%—unleashing up to $1.2 trillion in vicious, job-killing cuts that could hit Medicare, Social Security, and other programs the middle class relies on.

We've got just 12 days left to stop them—and our only chance is massive, coordinated action to let them know we will not stand for more of the same disastrous policies.

So we're joining with Occupy Wall Street, and progressive allies like SEIU, AFL-CIO, and many more for a "We Are the 99%" day of action on November 17. Together, we'll demand that Congress and the Super Committee tax Wall Street to create millions of jobs and rebuild our economy for the 99%. But if we're going to stop this terrible deal, these events need to be big—really big. Can you join us?

I'll stand up for the 99% on November 17 in Trenton.

I can't make this event, but keep me up-to-date on the campaign.

Democrats on the Super Committee have already offered $500 billion in cuts to Medicare and Medicaid, even though Republicans still refuse to raise taxes on the wealthy.¹ And any deal that the Super Committee reaches will be incredibly dangerous. Part of the debt ceiling deal this summer was that the Super Committee's report would get a straight up-or-down vote in both houses of Congress immediately—making it very hard to stop once the train has left the station.

Our plan for November 17 is to hold events at the very places where Congress could be creating jobs to get Americans back to work: crumbling bridges, understaffed schools, and other examples of critical infrastructure in disrepair. We need to remind Congress—and our fellow community members—that there's plenty of work that needs doing in America, if only Washington would focus on the right things. And we need to show Congress how huge the backlash will be if they push through yet another disastrous deal.

Can you join us in Trenton to stand up for the 99%?

I'll stand up for the 99% on November 17 in Trenton.

I can't make this event, but keep me up-to-date on the campaign.

Thanks for all you do.

–Lenore, Joan, Ryan, Wes, and the rest of the team

Source:

1. "Dems, GOP Play Super Committee Hot Potato As Talks Stall Over Taxes," Talking Points Memo, November 10, 2011
http://www.moveon.org/r?r=267546&id=32795-18989774-De5DLBx&t=6

Housing Policy’s Third Rail By Gretchen Morgenson, Published: August 7, 2010, New York Times

WHILE Congress toiled on the financial overhaul last spring, precious little was said about Fannie Mae and Freddie Mac, the mortgage finance companies that collapsed spectacularly two years ago. Indeed, these wards of the state got just two mentions in the 1,500-page law known as Dodd-Frank: first, when it ordered the Treasury to produce a study on ending the taxpayer-owned status of the companies and, second, in a “sense of the Congress” passage stating that efforts to improve the nation’s mortgage credit system “would be incomplete without enactment of meaningful structural reforms” of Fannie and Freddie.

No kidding.

With midterm elections near, though, there will be talk aplenty about dealing with the companies precisely because Dodd-Frank didn’t address them. Unfortunately, if past is prologue, this talk is likely to be more political than practical.

Fannie and Freddie amplified the housing boom by buying mortgages from lenders, allowing them to originate even more loans. They grew into behemoths because they lobbied aggressively and played the Washington political game to a T. But after both companies bought boatloads of risky mortgages, they required a federal rescue.

The Treasury’s study on Fannie, Freddie and housing finance must be delivered to Congress by the end of January 2011. In a speech last week, Timothy F. Geithner, the Treasury secretary, told a New York audience that resolving the companies isn’t “rocket science.”

But attaining genuine remedies for our housing finance system could actually be harder than rocket science. That’s because it would require an honest dialogue about the role the federal government should play in housing. It also requires a candid conversation about whether promoting homeownership through tax policy and other federal efforts remains a good idea, given the economic disaster we’ve just lived through.

Alas, honest dialogues on third-rail topics like housing have proved to be a bridge too far for many in Washington. So, what we may hear instead about Fannie and Freddie before the elections is a lot of sound and fury signifying a stealthy return to the status quo.

This would be unfortunate, not only because the financial crisis presents a rare opportunity to reassess the supposed benefits of homeownership but also because there was a lot not to like about the way these companies operated and the ways their friends in Congress enabled that behavior.

Outwardly, Fannie and Freddie wrapped themselves in the American flag and the dream of homeownership. But internally, they were relentless in their pursuit of profits from partners in the mortgage boom. One of their biggest and most steadfast collaborators was Countrywide, the subprime lending machine run by Angelo R. Mozilo.

Countrywide was the biggest supplier of loans to Fannie during the mania; in 2004, it sold 26 percent of the loans Fannie bought. Three years later, it was selling 28 percent. What Countrywide got out of the relationship was clear — a buyer for its dubious loans. Now the taxpayer is on the hook for those losses.

But what was in it for Fannie?

An internal Fannie document from 2004 obtained by The New York Times sheds light on this question. A “Customer Engagement Plan” for Countrywide, it shows how assiduously Fannie pursued Mr. Mozilo and 14 of his lieutenants to make sure the company continued to shovel loans its way.

Nine bullet points fall under the heading “Fannie Mae’s Top Strategic Business Objectives With Lender.” The first: “Deepen relationship at all levels throughout CHL and Fannie Mae to foster alignment and collaboration between our companies at every opportunity.” (CHL refers to Countrywide Home Loans.) No. 2: “Create barriers to exit partnership.” Next: “Disciplined Risk/Servicing Management” and “Achieve Fannie Mae Profitability Goals.”

(Later in 2004, by the way, the Securities and Exchange Commission found that Fannie had used improper accounting and ordered it to restate its earnings for the previous four years. Some $6.3 billion in profit was wiped out.)

The engagement plan also recommends ways that Fannie executives should mingle with Countrywide’s top management, because “fostering more direct senior level engagements with key influencers throughout their organization will be beneficial in ensuring strategic alignment and building organizational loyalty.”

RECOMMENDATIONS included conferring with Mr. Mozilo at Habitat for Humanity golf tournaments and Mortgage Bankers Association conventions. Franklin D. Raines, then Fannie’s C.E.O., and Daniel H. Mudd, then its chief operating officer, were advised to see Mr. Mozilo twice a year. “We will be successful when Angelo influences the industry or his organization on our behalf,” the document says. Mr. Raines didn’t respond to e-mails requesting comment last Friday; he left Fannie in December 2004.

The memo advised pursuing other Countrywide executives: “Deep Rapport” should be the goal with David E. Sambol, the lender’s president, but because he did not “heavily attend outside events” Fannie executives should “look for opportunities for meetings” at Countrywide headquarters.

“We will be successful if we can foster ongoing communication channels that allow us to understand and leverage Sambol’s priorities and demonstrate our commitment to making him successful,” the memo stated. Mr. Sambol and Mr. Mozilo could not be reached for comment.

For his part, Mr. Mudd, now the chief executive of the Fortress Investment Group, said Fannie’s courting of Countrywide was not unusual. “We tried to build a program that was based on having multiple strong relationships with our main customers,” he said. “You want to be sure that the first call is not the last call, that a customer is not doing business with you anymore.”

But Representative Darrell Issa, a California Republican and ranking member on the House Committee on Oversight and Government Reform, says he has concerns about such mating dances.

“Lost in the debate over how best to legislate the aftermath of the financial crisis has been the necessity to conduct an inward examination of the too-cozy relationship between government enterprises and private industry,” Mr. Issa said. “The true nature of this strategic partnership between Countrywide and Fannie-Freddie should be exposed so we can measure the extent to which it fostered the conditions leading to the financial meltdown.”

Understanding how these companies operated is crucial if we want to avoid repeating the mistakes of our recent past. So, when you hear about Fannie and Freddie reform this fall, remember that we still don’t know the half of it.

Photo by Isma'il ibn Bilal