by Elisabeth Hellenbroich
Beginning of August Michael Brown, a black inhabitant of Ferguson (suburb in the city of St. Louis in the State of Missouri) was shot dead by a city policeman. Brown’s death led to a massive wave of protest, accompanied by street riots and clashes between inhabitants of Ferguson, whose majority is black and the police whose majority is white. The riots in Ferguson escalated to the point that President Obama had to intervene, calling for calm while his justice Minister Holder was sent to the city in order to deescalate.
It was not the first time that Afro- Americans like Brown got killed by the police whichin self-defense for its action claimed that Brown was engaged in shop lifting, when he was surprised by the police, while witnesses of Brown claim that he was not armed and had signaled willingness to give in.The tragic incident is a symptom that something is going awfully wrong in the U.S. under President Obama. Several commentators in Europe have pointed out that in a country which gave birth to the most impressive civil rights movement under Martin Luther King and in light of the growing gap between “winners” and “losers”, between rich and poor, the elementary civil rights are being eroded. This seems to bethe tip of the iceberg where the political leadership of the country despite massive “social control” methods which the state has applied in the last years to keep its population under control, is caught in a real dilemma. While they present themselves to the outside world as the one and only invincible power in the world,it seems that the population is losing its confidence in their leaders and in their own past.
The “unwinding” of America
From this point of view it is worthwhile to study a book which was recently published in German translation. The book was written in 2012 by the American author George Packer, a journalist and member of the editorial board of “The New Yorker”. By choosing the literary form of a novel, which is based on real facts, i.e. hundreds of interviews which the author conducted with people from different social layers in the U.S., as well as the study of secondary literature, the author describes in a “kaleidoscopic” way the creeping social transformation of the U.S. Hence the title of the book: “The unwinding.An inner history of the new America”. Packer confronts the reader with different biographies, which include leading layers, such as Colin Powell, Robert Rubin, Newt Gingrich,TV entertainer Oprah Winfrey, Sam Walton – (founder of Wal-Mart and at one point one of the richest man of America), as well as representativesand self – made men from the American middle class(Dennis Price) and the biographies of black Americans (Tammy Thomas) who lost everything as result of the deindustrialization and the burst of the real estate bubble.
Focusing on the period of the 1970ies to 2012, the author confronts us with a dilemma, and in that sense his novel remains ambivalent since it offers no solution. The term “unwinding” captures the deep social transformation which the U.S. has lived through in the last three decades.In that periodindustry began to see first signs of collapse, followedby three decades ofdeindustrialization that was accompanied by an expanding “service sector” in particular the financial service. Under the influence of greedy financiersin Wall Street this process resulted in the accumulation and burst of several speculative bubbles in the late 1990ies. The whole process reached its peak when in 2008 the global financial crisis broke out, leaving behind millions of citizens who lost most of their pension fund;millions went into personal bankruptcies as result of the real estate bubble burst, followed by forced foreclosures.Most of the big banks which had bought mortgage backed securities, turned them into equities, that were in turn sold to investors, came out of the crisis without being really held responsible. Even if there were attempts by some people under the Obama administration –for example people like Jeff Connaughton- a legal advisor to the staff of Joe Biden,(whom the author portrays)- he was not able push through any sensible bank reform, given the huge resistance in the Finance Ministry and Senate finance Commission as well as by Wall Street.
Medium sized entrepreneur Dean Price
Out of the kaleidoscopic narrativeof Parker some examples are chosen, which illustrate, how the United States, once called the “Beacon of hope” seems to have lost its soul from past time. One example is the story of the medium sized entrepreneur Dean Price from South Carolina. The son of a pastor and afamily who had been for generations involved in Tobacco cultivation, he in the beginning eighties worked in the Tobacco Company R. J.Reynolds George Packer describes how during the 19th century tobacco,textile and furniture production had been blossoming in cities like Piedmont in the South. However the decay began when Reynolds made a fusion with NabiscoFood inthe year 1988. In one of the biggest “leveraged buyout”in the history of the U.S.,the company was bought up by the investment company Kohlberg Kravis Robertsfor $ 25 Billion. The takeover meant that jobs were massively slashed in the region. Most farmers in the region stopped cultivating Tobacco inall of Rockingham County(NC). The same process occurred in the textile industry, when Tultex collapsed in 1999, followed by collapses in Martinsville and Greensboro 2003and 2005. The same occurred in the entire furniture industry.
A similar deindustrialization process occurred in the steel town Youngstown (Ohio) in the beginning 1980ies, most of the victims being the black people.In his book the author Packer underlined that “what happened in Youngstown also happened in Cleveland, in Toledo, Akron Buffalo,Syracuse,Pittsburgh, Bethlehem, Detroit, Flint, Milwaukee,Chicago,Gary,St. Louis and in other cities”- an area which from 1983 became known as “rust belt”. Nowhere else the catastrophe became as visible as in Youngstown. “The city became an icon of deindustrialization.” Youngstown collapsed and belonged to the cities with the highest murder rate.
Dean Price at that time on route 220, a four lane highway, leading to Roanoke, Virginia. Between Roanoke and Greensboro there were only two gasoline stations. As Packer narrates, Dean on the 2nd October 1997 opened a restaurant and a gasoline station. A gallon of fuel cost 89 Cents. In 2006 Price heard about “peak oil” namely a method how to produce Ethanol for 5 cents a gallon. The idea of producing “Biodiesel” becamereally important for Dean Price after the Hurricane Katrina had sent the prices of diesel soaring. In September 2006 Price founded a company, the Red Birch Energy (company) andestablished besidesa Truck Stop in Bassett (Virginia) a new Biodiesel Refinery. Hence Red Birch Energy became America’s first truck stop for Biodiesel. However, when the turnover of hisrestaurant collapsed by 20%, Price had to close his business as well as his gasoline station. In 2011 he was again confronted with a personal tax investigation,in the course of which he lost his house- the heritage of his family and incurred massive debts.Price went bankrupt similar to the 1.410.653people who at that time were suffering personal bankruptcy.
The alliance between Washington and Wall Street
Another interesting case study which the author presents to the reader is the case of Jeff Connaughtonwho in the 1980ies began to work as advisor to one of Joe Biden’s staff people, researching for Biden, writing speeches andin 1994 becoming assistant of the White HouseCounsel, Abner Mikva. At that time the Bill Clinton’spresidency wasfilled with scandals such as White-water– investigated by Attorney Kenneth Starr,the Paula Jones casefor sexualharassment, Travel gateetc.Connaughton during his stay got a true insight into the mechanism of power.He realized that there was a tight and well-functioning network of republicans and democrats working for Wall Street. Those people got President Clinton to the point to “repeal the Class Steagall Act” in 1999.Clinton also during his second term“loosened the regulation of banks” and prevented that banks involved in massive derivative trade were put under SEC surveillance, Packer reports.
For a couple of years- between 1998 and 2004, Connaughton became then Lobbyist, a job which almost 42 % of the not re-electedCongressmen and Senators engaged in. Washington during that period was like a small city “where everybody is connected to everybody and where one group of permanent financial expertswere formingthe axis between the White House in Washington and Wall Street, the Finance Ministry, the financial commissionsin the House and Senate and the SEC.”
After the financial meltdown in 2008, and after Obama got elected as president with Joe Biden as Vice president,Connaughton again worked on Capitol Hill as part of a legal team of advisors to Joe Biden. Connaughton slowlybegan to realize that the U.S. had been “taken over by the financial elite”,as Packer reportsand only a handful of insiders at the time knew what was being played. The rules which had kept the banking system intact were no more validfor them; there were no rules for collateralized debt obligations and credit swaps.
However any hope that something would change under the new President Obama was in vain. He was surrounded by advisors who were all top insiders of Wall Street: including
Michael Froman, Rubin’s office chairman (Citi group) , as well as Jacob Lew (City group), Mark Patterson, Lobbyist of Goldman Sachs,Timothy Geithner, closest friend of Rubin and author of a plan how to save the banks, who during Obamas first term became Finance Minister, as well as Larry Summers who became leading economic advisor of the White House.
All efforts made by Connaughton and his friend Senator Kaufmann to write and introduce a law that would change the banking practices, limit derivative trading and return to the Glass Steagall Act ( which had been introduced by Congress 1933 building a wall between investment business and accounts of private savers)- were torpedoed by people such as Senator Dodd ( Connecticut) who got the backing from Larry Summers and Timothy Geithner.Finally President Obama signed the “Dodd -Frank Wall Street reform and Consumer protection act”. Connaughton sold his townhouse in Georgetown and went to Costa Rica, deciding to write a book about “The Pay off. WallStreet always wins.”This line is at many points in the book echoed by the author who basically is convinced that nothing can be done.
The case of Robert Rubin
However something could be done if people in Washington were determined to prosecute those who were responsible for the meltdown and the seismic shift in the U.S. and the world in 2008.
Packer refers to the biography ofRobert Rubin, describing him as the man who had more influence on the deregulation of banks, derivative trading, than one could ever imagine: Former Finance Minister Robert Rubin( Finance Minister under President Bill Clinton from 1995 to 1999)came from a lawyer family. After his study in Harvard hewas introduced by his father to Lazard Frères and Goldman Sachs. He worked in the arbitrage department of Goldman Sachs and very early got involved in the risky take over business. In the seventies he also traded with derivatives,subscription warrants and raw materials, 1990 he became chairman of Goldman Sachs. When Bill Clinton was elected President, Rubin became chairman of the newly created “National economic council.”
In 1998 when Brooksley Born, chairwoman of the “U.S. Commodity Futures Trading Commission” suggested to regulate the more and more complex derivative trade market, Rubin became angry. Together with his vice Larry Summers and Federal Reserve chairman Alan Greenspan he convinced Congress to block the Nomination of Brooksley Born. In 2000 a law was signed (by Clinton) which would protect derivative trading from any institutional surveillance.(When the commodity Futures Modernization act went into action Rubin was no more in the government).
Packer notes that those years in which Rubin was the most powerful man of Wall Street and American policy were “the decade when a massive ‘redistribution’ of income occurred leading to an ‘inequality’ that the country had not seen since the 19th century.” Rubin never was held responsible for anything and rejected his responsibility when in 2010 he was heard as witness by an investigation commission under ChairwomanBrooksleyBorn.
[simpleazon-link asin=”0595191770″ locale=”it”]Beacon of Hope[/simpleazon-link]
[simpleazon-link asin=”B00M0DFMHQ” locale=”it”]The Unwinding: An Inner History of the New America by Packer, George (2014) Paperback[/simpleazon-link]