• Things fall apart
    June 30,2013
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    At left, former Alaska Gov. Sarah Palin speaks during the kickoff of the nationwide Tea Party Express bus tour iin October 2010. At right, hundreds of Occupy Wall Street demonstrators march from City Hall to the Statehouse in Montpelier in Oxctober 2011.
    The abandoned housing tracts of Tampa and the mansions of Silicon Valley; the crumbling factories of Youngstown and the echoing corridors of Congress — it is sometimes hard to look at the many faces of America and see one nation indivisible.

    The symptoms of trouble are everywhere to see, easily recognized by people from all parties and political persuasions: high unemployment, stagnating wages, hollowed out cities and towns, growing poverty and unprecedented levels of wealth. The voices telling us how to respond to these symptoms have become a clashing cacophony of competing interests and points of view.

    Two books published in the past year provide two lenses through which to see these conditions — one at the micro level, on the ground, among people at all sectors of society, the other at the macro level, with a sweeping historical view of the decline and fall of nations. Together they present a view that is not specifically political, though the political implications are there.

    The most recent of the two books is “The Unwinding” by George Packer in which the author gives closely observed portraits of individuals and places that define this moment in our history. In his prologue Packer offers a statement that may serve as a theme for both books. The decline of industry, the erosion of morality on Wall Street, the paralysis of Congress, the impoverishment of rural towns, the deterioration of cities have left a void. “The void,” he says, “was filled by the default force in American life, organized money.”

    The anger that has ignited the Tea Party and animated the Occupy Wall Street movement arises in part out of a perception that the flow of money in the nation is askew. The other recent book shows how over the centuries people have struggled, with mixed success, to affect the flow of money in ways that build healthy societies.

    The book is “Why Nations Fail” by Daron Acemoglu and James A. Robinson. Their view of history is comprehensive and global, and they have seen that when nations fail to create institutions that allow the broad population to share in the general prosperity, wealth and power naturally gravitate toward those with wealth and power. And nations fail when the corruption of wealth and power destroys the bonds that hold society together.

    Wealth and power are like water: Their flow is constant. Those who have the ability to shape the channels that guide their flow are likely to gain most of the benefits. The underlying anxiety and anger suffusing the nation today may well grow out of the perception that the flow is leaving vast segments of the nation parched and thirsting.

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    A turning point in history at the heart of Acemoglu and Robinson’s book was the Glorious Revolution in 1688 in England. They ask why it was that England became the cradle for the Industrial Revolution of the 19th century, leaving continental Europe and the United States to catch up.

    Their analysis goes back to an earlier era, when absolute monarchs and the land-owning nobility maintained control so that the wealth created by peasants working the land flowed upward into the coffers of dukes, earls and kings, leaving most of the people powerless and impoverished. How else to account for the grand castles and cathedrals that stand today as monuments of concentrated wealth? A modern-day equivalent would be the system of sharecropping that persisted into 20th century America by which the share of crops tenant farmers were bound to give to landowners was large enough that those working the land were left with barely enough to survive. Corporate farms that depend on battalions of low-paid, landless farm workers exact wealth from the land in a similar way.

    The Black Death of 14th century Europe changed these patterns, at least in England. About a third of the population died, creating an upheaval that led to peasant revolts and turmoil requiring the landed nobility and the monarchy to grant concessions to peasants and artisans. Those lower down on the ladder gained a stake in the system. On the continent rulers were able to re-establish absolutist rule that persisted into the 20th century.

    In England, by the time of the revolution of 1688, power centers separate from the nobility and the monarchy had grown strong enough that they were able to impose constraints on the absolute power of the king and create law that the entrepreneurial class could rely on. Commerce flourished, and England became a world power. By the time of the Industrial Revolution, the rule of law and the pluralist character of society allowed England to foster and take advantage of rapid technological changes.

    The authors make an important distinction between inclusive economies and extractive economies. They show how colonial settlement in North America was inclusive because it encouraged widely dispersed power among small land holders and a merchant class, supported by the rule of law and representative government. Colonial settlement in Central and South America was extractive in that it was based on rule from the top designed to extract wealth by means of coerced labor by native peoples and the exploitation of resources, such as gold and sugar. Dictatorship was the prevailing political pattern.

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    Fast forward to the United States in the 21st century. For his book George Packer visited the Piedmont region of North Carolina where he got to know a struggling businessman named Dean Price. Price had grown up on a tobacco farm, but tobacco growing was fading. So was the life of the small towns in the region.

    Price said, “The people that ran the hardware store, the shoe store, the little restaurant that was here, they were the fabric of the community. They were the leaders. They were the Little League baseball coaches, they were the town council members, they were the people everybody looked up to. We lost that.”

    Packer profiled Sam Walton, a genius at retail who understood that people would inevitably gravitate toward low prices. The people of the Piedmont now do most of their business with Walmart, as well as Lowe’s, CVS and other chains, and here is how Packer described the vicious circle created by Walton’s methods. “Over the years, America had become more like Wal-Mart. It had gotten cheap. Prices were lower, and wages were lower. There were fewer union factory jobs, and more part-time jobs as store greeters. The small towns where Mr. Sam had seen his opportunity were getting poorer, which meant that consumers there depended more and more on everyday low prices, and made every last purchase at Wal-Mart, and maybe had to work there, too. The hollowing out of the heartland was good for the company’s bottom line.”

    About 86 percent of the money spent at Walmart left the community, traveling upward. The pattern had become almost medieval. The Walton family had maintained a high percentage of the shares of the company, which meant, according to Packer, that six of the surviving Walton heirs eventually possessed as much money as the bottom 30 percent of Americans. The wealth that had previously been earned by the shoe store and hardware store owners had been extracted from the community and amassed in the hands of a small group of individuals.

    Kings no longer build cathedrals. But a Walton heir has done the modern equivalent, building an elegant museum for American art tucked away in the countryside of northwestern Arkansas. It is a generous philanthropic gesture, but the museum does not return wealth to the Piedmont of North Carolina or the hundreds of communities that have paid for it.

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    Americans know these processes are happening, but they remain confused about what to do about them. Packer profiled Joe Connaughton, a political professional who became a supporter of Joe Biden, and then a lobbyist, and then a staff assistant of Sen. Ted Kaufman of Delaware. In the wake of the banking collapse of 2008, Kaufman and Connaughton were determined to reform the banking industry.

    But Connaughton gained a harsh lesson about the ways of Washington. He saw that the linked interests of banks, lobbyists and politicians made it difficult to pass even watered down regulations. Eventually, Connaughton said, he became “radicalized by a stunning realization that our government has been taken over by a financial elite that runs the government for the plutocracy.” Neither Democrats nor Republicans were willing to challenge the banks in a significant way. As Packer wrote, “How could they not see things the way of the bankers with whom they’d studied and worked and ate and drunk and gotten rich? Social promotion and conflict of interest were built into the soul of the meritocracy.”

    President Obama thought he needed the help of people within the system to keep the system from collapse — the same people who had perpetrated the fraud and engineered the collapse.

    Connaughton recognized that the public did not have a voice. Lobbyists for the bankers were everywhere in the halls of Congress. But the meager power wielded in the public interest by consumer groups was invisible.

    Packer visited with Tea Party activists in Florida who were convinced that government was in league with the big bankers, and his experience in Washington more or less confirmed that suspicion. The Obama administration and the Democratic Party were more inclined to push for regulation than the Republicans were, but the power of the financial industry had grown so overwhelming that even establishing an agency to protect consumers was seen on the right as somehow socialist.

    The wealthy and powerful have successful purveyed the idea that imposing restraints on the power of wealth is illegitimate. In the eyes of the Tea Party the idea of channeling wealth amounts to “redistribution.” What they don’t see is that wealth is being channeled now in specific, particular ways. The flow of wealth to the top is not a phenomenon of nature. It is the result of rules and policy decisions designed to further the interests of those at the top. Connaughton saw the ruthless way that power was wielded for the benefit of the malefactors of Wall Street. Inequality is not an accident.

    n n n

    The encouraging message of Acemoglu and Robinson’s book is that the decisions that shape societies and economies are mainly political decisions. We are not governed by the immutable laws of economics. Economies flourish when the forces of pluralism assert themselves with sufficient strength to put limits on the concentration of wealth and to strengthen the institutions that build strong societies. The era from the 1930s to the 1970s in America saw the emergence of a strong middle class society because bankers followed the law and understood rudimentary ethics, society supported schools and invested in infrastructure, science and technology and unions defended the interests of workers.

    The unwinding that Packer describes in his book followed the erosion of these institutions: the defunding of schools, the concentration of industry, the abandonment of infrastructure and decisions to channel wealth upward through preferential tax treatment and myriad actions to facilitate the concentration of power. It was not a malevolent plot. Rather it was “the default” setting of American society, which can be countered only when the people form themselves into a political force capable of enlisting the government on their behalf.

    Society prospers only if the continuing tension between those with wealth and power and everyone else is sufficient to channel wealth somewhere other than to the few hands at the top. Without that tension, we revert to the default setting where “organized money” sets the agenda.

    Vermont stands apart from many regions where extractive economics have sapped the vitality from communities, and that’s partly because Vermonters have been willing to enact laws creating an inclusive economy: supporting schools, promoting health, protecting the environment. Vermonters have not sat back passively and allowed the default force, organized money, to govern how wealth and power are apportioned. Over the years Vermonters have taken steps to shape the laws that foster prosperity that is more widely shared. Our environmental laws have helped define a place where it is rewarding to live and gratifying to visit.

    These are the political decisions that change societies. The nation in previous eras — the progressive era, the Great Depression — had the will to put in place laws curbing the power of money and defending the interests of workers and the middle class. Since the onset of the Great Recession, we have begun to regain that will. It will take more than drum circles on Wall Street to reverse a trend 40 years in the making. It takes political awareness and community engagement. These two books point the way toward the political awareness needed to halt the unwinding of America.

    David Moats is editorial page editor of the Rutland Herald.
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