On May 21, 2010, Simon Schama published a commentary piece in the Financial Times. Its title, On the Brink of a New Age of Rage caught my attention, and my regular readers I’m quite sure will soon know why, if they don’t know already.
For anyone new to Mandelman Matters, let’s just say that I’m angry about what’s been allowed to go on in this country, angry at the bankers that have become our American oligarchy, angry that the people haven’t already done more to put the fear of God into our elected representatives, and angry that our government has done little in an attempt to reverse our course and stop the foreclosure crisis, and failed at what little they have attempted. But… I’m also fearful about the future.
I’m fearful that we have become a country so polarized by our media and our own beliefs, that we now require tragedy on at least the scale of 9/11 to bring us together to fight a common enemy. Anything less, and we’re as likely to direct our anger at sideline issues, as we are to become absorbed in who’s winning and losing on America Idol.
I’m also fearful that we’ve become a nation of people that doesn’t believe in our democracy anymore. A nation of people that no longer feels connected to our political process. A nation of people who will wait for things to happen to them, rather than trying to change what happens to them.
Because as we sit, complacent and subdued, hoping that our leaders will simply soon bring us back to the prosperity we’ve become accustomed to over the last thirty-odd years, we also know that it’s different this time. That there is no playbook that applies this time around. That the numbers are far larger, the gap between the haves and have-nots far wider, and that it’s not just us, but rather the entire world that is teetering on the precipice of a deflationary collapse not seen for 70 years and one that will endure. And that feeling, no matter how we try to ignore it, suppress it, hope it away… grows stronger as the months pass by. It’s getting worse, not better, and we all either know it, or at least know it’s possible.
Just as Europe is trying to do now, we masked our deep seeded financial problems that exist within our nation’s banks and financial system with TARP funds, and trillions in loans to banks… with accounting shenanigans that Treasury, the Federal Reserve, and the FDIC has convinced themselves are somehow okay… as long as they at least delay the inevitable.
We allow our banks not to “recognize” losses on commercial property that we all know has dropped in value by something like 44% as of a few months ago, because to require them to do so would render many of them insolvent. And we allow the same banks to not recognize losses on foreclosed homes, as long as they are classified as Level Three assets that will not be sold for an extended period, because to requires them to do so would result in them flooding the market with millions upon millions of properties that would only further the free fall in housing prices that began in 2007.
The administration knows that it cannot go back to Congress to ask for more money to bailout our banking system, so they are doing everything possible to funnel them literally trillions of dollars in order to keep up appearances that they are recovering and on solid ground. We all stand by and watch the entire concept of “transparency” be entirely ignored by our government. In terms of transparency, this administration that preached its virtues, now makes Dick Cheney look like an open book.
The banking industry lobbyists, as ex-Chief Economist of the International Monetary Fund, Simon Johnson phrased it in his brilliant article of last May, which appeared in “The Atlantic,” has effectively captured our government.” They now represent an actual oligarchy in this country, a group that uses its economic power to gain political power, and their influence unquestionably needs to be tempered, for it is they that are blocking essential reforms.
While the evidence of this and more is all around us, as a nation we remain almost entirely frozen in time, cheering anything in the headlines even remotely positive, regardless of whether true, and in fact… we do not want to know if it’s not.
Well, Simon Schama is a British historian, and art historian who I believe still teaches at Columbia, although when he first came across the pond to stay, he was at Harvard. He’s a brilliant person, and a absolutely wonderful writer, but he is nothing if not a student of history.
Schama wrote and hosted the 15-part BBC documentary series, “A History of Britain,” which if you didn’t see it, is absolutely awesome. He also wrote several books, including “The Embarrassment of Riches,” and “Dead Certainties,” among quite a few others, and he wrote a history of the French Revolution, titled “Citizens.”
So, as we watch Europe attempt to follow in our footsteps, attempting to bail out and delay that which could never be delayed, as we watch the deadly riots take place in Greece, and hear of Spain, only today losing its triple A credit rating, we want to feel like these things have an unrelated cause and are too far from us to ever touch our shores. But we should also know that’s not the case, because in fact they have long since been on our shores, for they were born here. We exported them to Europe; they did not grow them there.
And after Europe, we are sure to watch Asia follow a similar path. China’s largest customer, after all, is the EU, to say nothing of the bond market’s obvious instability. Our bankers committed crimes against out country, our regulators failed, and we allowed our political system to be compromised, all to be sure, but our financial institutions… Goldman, JPMorgan, Morgan Stanley, Citi and others, also took the disease we allowed them to contract and spread it around the globe.
Europe, just like us, will at some point have to face the reality that some debt will have to be renegotiated and that some of the fat cat friends of government on Wall Street will not be paid as agreed, regardless of their status as bond holders. There is no way around that, unless asset prices were to re-inflate in a year, which is not even remotely possible. But for now, we hear of bailouts and “austerity” programs, which mean that governments will raise taxes and reduce spending, to some degree causing widespread pain, but certainly placing the brunt of that pain on the poorest segment of society.
I wrote an article last year titled, “Where is the Outrage?” And then another titled: “There is the Outrage,” in response to a man bobby-trapping his foreclosed home with pipe bombs before leaving for the last time.
So, here is Professor Schama, from his piece that appeared in the Financial Times only one week ago, but before we knew of Spain’s downgraded credit status. I highly recommend it to be read slowly and with care, as it may prove itself prescient, because it may very well be, far later than any of us think.
“Far be it for me to make a dicey situation dicier but you can’t smell the sulphur in the air right now and not think we might be on the threshold of an age of rage.
The Spanish unions have postponed a general strike; the bloody barricades and the red shirts might have been in Bangkok not Berlin; and, for the moment, the British coalition leaders sit side by side on the front bench like honeymooners canoodling on the porch; but in Europe and America there is a distinct possibility of a long hot summer of social umbrage. Historians will tell you there is often a time-lag between the onset of economic disaster and the accumulation of social fury.
In Act One, the shock of a crisis initially triggers fearful disorientation; the rush for political saviours; instinctive responses of self-protection, but not the organised mobilisation of outrage. Whether in 1789 or now, an incoming regime riding the storm gets a fleeting moment to try to contain calamity. If it is seen to be straining every muscle to put things right it can, for a while, generate provisional legitimacy.
Act two is trickier. Objectively, economic conditions might be improving, but perceptions are everything and a breathing space gives room for a dangerously alienated public to take stock of the brutal interruption of their rising expectations. What happened to the march of income, the acquisition of property, the truism that the next generation will live better than the last? The full impact of the overthrow of these assumptions sinks in and engenders a sense of grievance that “Someone Else” must have engineered the common misfortune.
The stock epithet the French Revolution gave to the financiers who were blamed for disaster was “rich egoists”. Our own plutocrats may not be headed for the tumbrils but the fact that financial catastrophe, with its effect on the “real” economy, came about through obscure transactions designed to do nothing except produce short-term profit aggravates a sense of social betrayal.
At this point, damage control means pillorying the perpetrators: bringing them to book and extracting statements of contrition. This is why the psychological impact of financial regulation is almost as critical as its institutional prophylactics. Those who lobby against it risk jeopardising their own long-term interests.
Should governments fail to reassert the integrity of public stewardship, suspicions will emerge that, for all the talk of new beginnings, the perps and new regime are cut from common cloth. Both risk being shredded by popular ire or outbid by more dangerous tribunes of indignation.
At the very least, the survival of a crisis demands ensuring that the fiscal pain is equitably distributed.
In the France of 1789, the erstwhile nobility became regular citizens, ended their exemption from the land tax, made a show of abolishing their own privileges, turned in jewelry for the public treasury; while the clergy’s immense estates were auctioned for La Nation. It is too much to expect a bonfire of the bling but in 2010 a pragmatic steward of the nation’s economy needs to beware relying unduly on regressive indirect taxes, especially if levied to impress a bond market with which regular folk feel little connection.
At the very least, any emergency budget needs to take stock of this raw sense of popular victimisation and deliver a convincing story about the sharing of burdens. To do otherwise is to guarantee that a bad situation gets very ugly, very fast.
So we face a tinderbox moment; a test of the strength of democratic institutions in a time of extreme fiscal stress. On the one hand, we should be glad that the mobilisation of public energy in elections can channel mass unhappiness into change. That is what we must believe could yet happen in Britain. Elsewhere the outlook is more forbidding. In the sinkhole that is the Eurozone, animus is directed at unelected bodies – the European Central Bank and International Monetary Fund – and is bound to build on itself. Those on the receiving end of punitive corrections – in public sector wages or retrenched social institutions – will lash out at their remote masters. Those in the richer north, obliged to subsidise what they take to be the fecklessness of the Latins, will come to see not just the single currency but the European project as an historic error and will pine for the mark or franc. Chauvinist movements will be reborn, directed at immigrants and Brussels diktats, with more destructive fury than we have seen since the war.
The same kind of pre-lapsarian romanticism targeted at an elitist federal authority is raging through the US like a fever. The best way to understand the Tea Party, which has just scored its first victory with the libertarian Rand Paul defeating the choice of the official Republican party, is to see it as akin to the Great Awakenings and the Populist furies of the end of the 19th century. There are calls to abolish the Federal Reserve or in some cases Social Security, fuelled by the conspiratorial belief that it was an excess, not a deficit, of government regulation that brought on the financial meltdown.
Claims that Washington has been captured for socialism are preached on rightwing talk radio as gospel truth. As they did in the 1930s with Father Coughlin, the radio demonisers are pitch-perfect orchestrators of hatred for listeners in bewildered economic distress.
Against this tide, facts are feeble. When Senate Republicans succeed in briefly blocking financial regulation by representing it as an infringement on liberty rather than as a measure minimally needed for the security of the commonwealth, you know the truth needs help from the Presidential Communicator-in-Chief. He is back on the stump, but as with the case for healthcare reform, his efforts are belated and cramped by misplaced obligations of civility.
But if his government is to survive the November elections with a shred of authority, it will need Barack Obama to be more than a head tutor. It will need him to be a warrior of the word every bit as combative as the army of the righteous that believes it has the constitution on its side, and in its inchoate thrashings can yet bring down the governance of the American Republic.
Professor Schama’s words should frighten you, and if they do not, I can only suggest you read them again. He is not someone prone to hyperbole, nor is he someone who is writing in order to grind his personal political axe. He is an historian, of the first order, and his thoughts on this subject are to be both taken seriously and heeded. I realize and fear that we will choose to ignore them, and we will almost certainly do so at our own peril.
-Martin Andelman from ml-implode.com
