How banks, government fail Americans: Investigating what went wrong
Monday, February 7th, 2011
Two decades ago, we wrote what turned out to be, in the words of others, one of the most successful newspaper series of all time. It was called America: What Went Wrong? Originally published in 1991 in The Philadelphia Inquirer, the newspaper where we worked for 27 years, it was republished in various forms in dozens of newspapers across the country. Simultaneously, The Inquirer mailed more than a half-million reprints of the series to residents who requested them. Finally, the series was expanded and converted early in 1992 into an instant paperback book of the same title, which remained on The New York Times best-seller list for eight months. Thousands of readers who had lost their jobs, pensions, health insurance and all the other supposedly guaranteed benefits made in life’s social contracts responded essentially with the same message: Finally, I understand what has happened.
The events of those years were widely misinterpreted by politicians, economists, the news media and others as nothing more than the unpleasant, albeit temporary, consequences of a recession that began in July 1990 and ended in March 1991. We said don’t believe it, and we wrote:
“Popular wisdom has it that the worst has passed, that it was all an aberration called the 1980s. The age of takeovers and leveraged buyouts. The decade of greed. And greed has been officially declared dead by trend-trackers. A higher economic morality is supposedly in for the 1990s.
“Popular wisdom is wrong. The declining fortunes of the middle class that began with the restructuring craze will continue through this decade and beyond.”
Sad to say, our pessimistic prediction proved to be grossly understated. Today, as in the early 1990s, the conventional experts — the people who run Washington, the Wall Street seers, the economists of both political stripes, the talking heads on television, the corporate and academic elites — have it wrong once more. Now they say falling wages, protracted unemployment and a perpetually widening income gap are nothing more than the fallout from what some call The Great Recession, which began in December 2007 and officially ended in June 2009. “Ended,” that is, if you ignore an unemployment rate comfortably in the teens when people who simply gave up looking for a job after months of a futile search are included in the count, and the economy fails to create anywhere near the number of jobs needed to satisfy new workers, let alone the displaced.
In some ways, it looks like the early 1990s all over again, except with a harder edge. That’s one reason, we believe, that we have been hearing again from distressed folks who had read America: What Went Wrong? when it was first published and others who recently discovered it. Their observations are eerily haunting:
“[You] outlined the problems and predicted this . . . No one listened and now we are paying.”
“It is ironic how we face many of the same issues nearly two decades later.”
“If everyone had read your book, today’s economy would not be a shock.”
Indeed not. But this time, Washington’s actions could prove fatal. Barring wholesale changes in policies that are undermining the future of all but a few — and definitely not the policies of deficit-crazed politicians and their patrons — the coming years will be grim. While there will be ups and downs in the economy, the future for middle-class America, along with the working poor who hoped to achieve that status — and in years gone by, would have—is over for tens of millions. As for the long-held mantra from the 1950s on, that children will enjoy a better life than their parents, only the delusional believe it today. Virtually no one says it.
It’s a sea change in American life without parallel. Where once we were told, over and over, that anyone could move up the economic ladder, now that movement is, with some exceptions, down. It’s going to continue in that direction with a vengeance until all that’s left is the upper end of what once was a thriving, broad-based middle class. Everyone else will be toiling on a treadmill. The working poor, instead of moving up, will spend their lives like hamsters on a wheel, mindlessly running round and round. “Retirement” will be a quaint term in the dictionary.
It is no accident of nature, no product of the legendary invisible hand, no result of supposed hard work that in 2007 there were 392,220 individuals and families who reported income of more than $1 million each. That was up sharply from 57,603 in 1989, when research on What Went Wrong? was underway. More significant than the increase in numbers was how RICH the rich became during this period. The cumulative adjusted gross income of those folks had soared from $151.5 billion in 1989 to $1.4 trillion in 2007. Just 15,956 of those people pocketed $35.2 million –- each -- in that one year. At the other end of the economic pile, during the same period the number of Americans living in poverty grew from 31.5 million to 37.3 million.
This grotesque inequality is the calculated result of deliberate government policies engineered by members of the American ruling class, which began seizing control of the country through its enablers several decades ago. They fervently believe in taking care of themselves at the expense of everyone else. They never possessed a moral compass. As for the moral compass that once guided the United States, especially so prominently through the 1940s, 1950s and 1960s, it disappeared long ago.
The recent transformation began innocently enough, when the ruling class assured everyone that blue-collar workers who were terminated when the corporate looters bought out their employers and moved jobs abroad would find new work in a high-tech revolution. They lied to keep alive the myth of future employment and upward mobility. While the high-tech revolution happened, the new jobs were created in other countries, not here. And the ruling class knew it would be so.
They assured people that a college degree would be the ticket to a continued middle-class future. Now many of those with their freshly minted degrees are engaged in work that once required merely a high school diploma, or in hock for much of their productive lives, or living in shared housing with parents or friends because they don’t earn enough to pay their own way.
They slashed wages of tens of millions of workers, cutting some from as much as $30 an hour to $15 — consigning these workers and their families to a dead-end future while the members of the ruling class themselves pocketed more money than any other group of human beings in history.
Now they are dismantling the economic support network that underpinned the world’s largest middle class. They started slowly, almost imperceptibly at first, hoping no one would notice. As only one example, they canceled the defined benefit pensions for workers in nearly all private businesses. These pensions were guaranteed for life. It was a system that once allowed even sales clerks at Sears Roebuck to retire with enough money, when coupled with Social Security, to maintain a middle-class lifestyle. The corporate raiders buried the old Sears years ago. The 1.4 million employees of Walmart have nothing comparable.
Now the ruling class is promoting austerity in government budgets and policies — austerity, that is, for everyone but themselves after they ripped off the government funds that ostensibly had been set aside for working people.
Over the course of the next year, we will explore on this website, as we did in our 1991 newspaper series, what is happening and why in a new project titled What Went Wrong: The Betrayal of the American Dream. As we did 20 years ago, we will look at the economy from the bottom up, rather than the traditional top-down approach used by politicians, their advisers and the news media — especially television, which remains the primary source of news for most Americans.
In the end, we will spell out our findings in a book to be published, like What Went Wrong?, during a presidential election year. That way you will be able to measure what the candidates and parties are saying against the conditions we have found and documented, and what you are experiencing in your own lives. We also will identify the people who are walking away with unprecedented wealth, their bank accounts fattened by rigged economic, legislative and legal systems –- all at your expense.