The American Prospect #314

THE RACIAL WEALTH GAP MEHRSA BARADARAN

THE GEORGE FLOYD MOMENT RANDALL KENNEDY

BIDEN’S CONFLICTED ADVISERS KUTTNER/GUYER

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contents

VOLUME 31, NUMBER 4 JUL /AUG 2020

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COLUMNS 4 A NATIONAL FAILURE TO PROTECT BY PAUL STARR

PROSPECTS 6 THE GEORGE FLOYD MOMENT: PROMISE AND PERIL BY RANDALL KENNEDY 9 MANAGING MONEY, CHANGING THE WORLD BY BRITTANY GIBSON 12 SINCE PEOPLE ON BUSES ARE KNOWN TO INHALE … BY GABRIELLE GURLEY

FEATURES 14 NO JUSTICE NO PEACE BY MEHRSA BARADARAN UNDERLYING THE NATIONWIDE PROTESTS FOR BLACK LIVES IS THE RACIAL WEALTH GAP. 18 HOW TO START CLOSING THE RACIAL WEALTH GAP BY ADAM J. LEVITIN 20 FALLING UPWARD BY ROBERT KUTTNER THE SURPRISING SURVIVAL OF A REBRANDED LARRY SUMMERS, WHO ONCE AGAIN IS COUNSELING A DEMOCRATIC PRESIDENTIAL CANDIDATE 28 3M: MONOPOLY, MISREPRESENTATION, AND MALPRACTICE BY OLIVIA WEBB HUNDREDS OF THOUSANDS OF TROOPS SUFFERED HEARING LOSS FROM 3M’S FAULTY BATTLEFIELD EARPLUGS. THEY ALLEGE THAT THE COMPANY AND ITS PRIVATE EQUITY–FUELED ACQUISITION FALSIFIED DATA AND KNOWINGLY HID EVIDENCE. 34 FOREIGN POLICY FOR HIRE BY JONATHAN GUYER STRATEGIC CONSULTANTS WILL DEFINE BIDEN’S RELATIONSHIP TO THE WORLD. 41 BUSTING THE GUILD IN CLEVELAND BY MARCIA BROWN ADVANCE PUBLICATIONS GUTTED THE UNIONIZED PLAIN DEALER WHILE BEEFING UP ITS NON-UNION ONLINE SUBSIDIARY. AN EXAMINATION OF OVER 50 YEARS OF UNION-BUSTING EFFORTS BY MANAGEMENT.

CULTURE 51 WHY WE’RE STILL FIGHTING THE SOUTH BY RICHARD R. JOHN 54 A LEADER WITHOUT LEADING BY DAVID DAYEN 58 CAN WE CREATE ALL THE MONEY WE NEED? BY J.W. MASON 61 THE ERA AND THE DYNAMIC OF DEAFNESS BY JANE MANSBRIDGE 64 PARTING SHOT THE GREATER QUIET BY STEVE BRODNER Cover art by David Plunkert

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from the Editor

I

’ve been at the helm of the Prospect for a year now, and if you were to bind and collect and read everything we’ve done in the magazine and at prospect.org over that time (and why haven’t you done that?), the overarching theme would be an analysis of power. Who is in charge in America, and what could we do if different people were in charge?

The importance of that theme has become even more evident in the weeks following the murder by asphyxiation of George Floyd on a street in Minneapolis. Much of the nation is now explicitly and publicly addressing the underlying power structures that have defined American life for centuries, and seeking to dismantle them. It’s a moment filled with potential amid a backdrop of crisis. And it’s a perfect time to look deep into those power dynamics, which shape our experience in virtually every respect.

Six years ago, RANDALL KENNEDY explained in these pages that he was a racial optimist; he explains why now, the people in charge of the protest movement to attack the dominant power structure fuel his continued hope, against all experience, for a better future.

MEHRSA BARADARAN highlights the primary means by which the racial power structure is cemented: the wealth gap, which by itself segregates and kettles and deprives Black lives.

The people in charge in our political system hold the key to whether we will root out the structural inequities that manifest in disproportionate racial poverty and police violence.

Our ROBERT KUTTNER offers the definitive study of the upside-down career of Larry Summers, who keeps making disastrous policy mistakes yet continues to influence the most important figures in the Democratic Party, including Democratic nominee Joe Biden.

Managing editor JONATHAN GUYER investigates Biden’s advisers in foreign policy, many of whom spend their days awaiting a Democratic restoration while parked at obscure yet powerful strategic consultancies, helping—for a fee—the world’s biggest businesses gain access to political decision-makers. I also survey the higher echelons of the Democratic leadership by reviewing a new book on the career of House Speaker Nancy Pelosi, whose legendary savvy hasn’t survived contact with the coronavirus pandemic.

The power of large corporations to dominate economics and politics is on display in an investigative piece from OLIVIA WEBB , who writes about 3M. These days, the company is lauded as a manufacturer of N95 masks and protector of essential workers. But for nearly a decade, 3M supplied battlefield earplugs to nearly all U.S. service members under a monopoly contract, without the company disclosing that it knew the product was faulty and likely to cause hearing loss.

Corporate power also can decimate workers, even when they collectively bargain to raise their voices. Prospect writing fellow MARCIA BROWN documents the long history of The Plain Dealer, Cleveland’s flagship daily, and how the oldest newspaper union in America was destroyed through a decades-long systematic campaign by its owner, Advance Publications.

Who is in charge of the money supply? JOSH MASON provides the answer in a review of the new book from Stephanie Kelton, The Deficit Myth. Who is in charge of keeping us safe? Co-founder PAUL STARR dissects the failure to protect us from our twin crises, and deputy editor GABRIELLE GURLEY reports on a veteran bus driver who is promoting a unique concept for airflow in buses. How can power be built outside of Washington?

Writing fellow BRITTANY GIBSON profiles one candidate trying to do that from the perch of the state treasurer’s office in North Carolina.

We’re in a transitional moment where power, to a degree we haven’t seen in many decades, is up for grabs, where the figures in charge could change dramatically, where muscle and clout could be exercised by previously obscure figures, and their benefits granted to people normally left off the list of recipients. Tracking these shifts is critical to the project of reorienting power. We are on the case, and I hope you enjoy our efforts in this issue. –DAVID DAYEN

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EXECUTIVE EDITOR DAVID DAYEN FOUNDING CO-EDITORS ROBERT KUTTNER, PAUL STARR CO-FOUNDER ROBERT B. REICH EDITOR AT LARGE HAROLD MEYERSON DEPUTY EDITOR GABRIELLE GURLEY ART DIRECTOR JANDOS ROTHSTEIN MANAGING EDITOR JONATHAN GUYER ASSOCIATE EDITOR SUSANNA BEISER STAFF WRITER ALEXANDER SAMMON WRITING FELLOWS MARCIA BROWN, BRITTANY GIBSON EDITORIAL INTERNS SHERA AVI-YONAH, BLAISE MALLEY, ALEX ROUHANDEH CONTRIBUTING EDITORS MARCIA ANGELL, GABRIEL ARANA, DAVID BACON, JAMELLE BOUIE, HEATHER BOUSHEY, JONATHAN COHN, ANN CRITTENDEN, GARRETT EPPS, JEFF FAUX, MICHELLE GOLDBERG, GERSHOM GORENBERG, E.J. GRAFF, BOB HERBERT, ARLIE HOCHSCHILD, CHRISTOPHER JENCKS, JOHN B. JUDIS, RANDALL KENNEDY, BOB MOSER, KAREN PAGET, SARAH POSNER, JEDEDIAH PURDY, ROBERT D. PUTNAM, RICHARD ROTHSTEIN, ADELE M. STAN, DEBORAH A. STONE, MICHAEL TOMASKY, PAUL WALDMAN, SAM WANG, WILLIAM JULIUS WILSON, MATTHEW YGLESIAS, JULIAN ZELIZER PUBLISHER ELLEN J. MEANY COMPTROLLER ANNE BEECH COMMUNICATIONS SPECIALIST STEPHEN WHITESIDE BOARD OF DIRECTORS MEHRSA BARADARAN, DAAIYAH BILAL-THREATS, CHUCK COLLINS, DAVID DAYEN, STANLEY B. GREENBERG, JACOB S. HACKER, AMY HANAUER, DERRICK JACKSON, ROBERT KUTTNER, ELLEN J. MEANY, MILES RAPOPORT, JANET SHENK, ADELE SIMMONS, GANESH SITARAMAN, WILLIAM SPRIGGS, PAUL STARR, MICHAEL STERN SUBSCRIPTION CUSTOMER SERVICE STEPHEN WHITESIDE, 202-753-0937, INFO@PROSPECT.ORG PRINT SUBSCRIPTION RATES $36 (U.S.), $42 (CANADA), AND $48 (OTHER INTERNATIONAL) REPRINTS PROSPECT.ORG/PERMISSIONS VOL. 31, NO. 4. The American Prospect (ISSN 10497285) is published bimonthly by The American Prospect, Inc., 1225 Eye Street NW, Ste. 600, Washington, DC 20005. Periodicals-class postage paid at Washington, DC, and additional mailing offices. Copyright © 2020 by The American Prospect, Inc. All rights reserved. No part of this periodical may be reproduced without the consent of The American Prospect, Inc. The American Prospect® is a registered trademark of The American Prospect, Inc. Postmaster: Please send address changes to The American Prospect, 1225 Eye St. NW, Ste. 600, Washington, DC 20005. PRINTED IN THE U.S.A.

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Prospects

A National Failure to Protect

BY PAUL STARR

O

ne crisis this year has been followed by another, the COVID-19 pandemic by the crisis over police violence and Black lives. But a single theme unites them. Call it the failure to protect—the failure of American institutions to perform the first and most fundamental requirement of a government, to protect its citizens from unnecessary suffering and death.

In the immediate case of the pandemic, the responsibility for the failure to protect Americans lies with Donald Trump. The immediate responsibility for the failure of the police to uphold their obligations to protect Black lives lies with the police themselves. When they took their official oaths, the public duty to protect became their personal obligation.

But we know that the causes do not lie with Trump or the police alone. COVID-19 is new, but the racial and socioeconomic profile of its victims is not.

While Black people make up 13 percent of the U.S. population, they accounted for 21 percent of COVID deaths (as of June 25), a ratio that ought to ring like an alarm bell in the night about long-standing racial disparities in health and mortality. The impunity of whites in official positions in the murder of Blacks also has deep roots in our past. It is a crisis now only because the Black Lives Matter movement has been able to use videos shot by witnesses to force whites to look squarely at racial killings and acknowledge the truth of what Black people have long been telling them.

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Pandemics, historians have said, are stress tests for societies. They show whether a nation’s institutions and its leaders can meet their supreme responsibility to protect their people. With life itself at stake, pandemics reveal whose lives get protected and whose do not. Our institutions and leaders have catastrophically failed on both counts—their overall responsibility to protect the American people and their specific moral obligation to protect the most vulnerable among us.

Trump was elected in large part on a promise to protect—a phony promise, with an obvious racial subtext, to protect citizens from immigrants. The wall on the southern border that he insisted on building now symbolizes how he misdirected both the public’s anxieties and the nation’s resources. When a real threat materialized in the form of the coronavirus in the first months of 2020, he was unable to recognize it, much less mobilize the country to fight it.

That failure to prepare was long in the making. Republicans, the conservative media, and Trump himself had for years weakened scientific and public-health agencies, denying them resources, undercutting their credibility, and driving capable scientists out of leadership positions. Trump’s disbanding of the pandemic response unit in the White House and his appointment of an ineffectual conservative to run the Centers for Disease Control were only proximate causes of the failure to mobilize against COVID.

As we move into the second half of 2020, the national failure to protect continues. The United States still has no coordinated effort to fight the pandemic. As cases surge in the South and Southwest, both Trump and some state Republican leaders have retreated into denialism.

Trump has modeled irresponsibility, turning masks and social distancing into ideological statements and attacks on his stewardship. Even now, for lack of strong leadership and clear financial and organizational responsibilities, we’re not carrying out the basics of a successful public-health strategy: easily available, rapid-turnaround testing for the virus; isolation of the infected; tracing of their contacts; quarantining of the exposed. Trump’s statement at his Tulsa rally that he had asked to slow down testing was an astonishing confession of his primary interest in the appearance of success rather than the reality.

The failure to test workers in nursing homes has been a particularly telling instance of the failure to protect. As should have been clear in March—after the first U.S. cluster of COVID19 cases emerged at the Life Care nursing home in Kirkland, Washington—the employees of nursing homes and assistedliving facilities need to be tested regularly for both the residents’ protection and their own.

But not only did federal authorities fail to act promptly; the states, too, have been slow to require and provide for regular employee testing. As of mid-June, according to The New York Times, residents and

employees of nursing homes and long-term care facilities accounted for more than 54,000 deaths from COVID-19, more than 40 percent of the total. Yet many nursing-home companies and health insurers were refusing to pay for tests of the workers. The nursing homes received $5 billion in federal aid for coronavirus expenses, including tests, but they said that that wasn’t enough. The health insurers—enjoying a boon year since so many people are avoiding medical care—insist that employee tests aren’t their contractual responsibility. So, unless the states have stepped in (and some have, belatedly), the cost of tests has sometimes fallen to the parties least capable of assuming the burden: the workers themselves.

Most of those who attend to nursing-home residents are paid at or near the minimum wage and face high risks of contracting COVID and passing it on to their families. Needless to say, those low-wage workers are predominantly African Americans and immigrants, as are many other “essential workers” who labor in close quarters where infections spread, and who often lack personal protective equipment, ready access to tests and treatment, and paid sick leave. The failure to protect them was a national statement about whose lives matter.

Perhaps the most perplexing aspect of America’s national failure to protect has been the failure to isolate the infected even when they are tested and known to be infected. People who test positive are told to stay home

Prospects

regardless of whether another member of their household is at high risk because of age or an underlying health condition. “As much as possible,” CDC recommends, “stay in a specific room and away from other people and pets in your home. If possible, you should use a separate bathroom.” But isolating at home is not possible for many people who don’t have spacious housing and multiple bathrooms.

Isolation facilities outside the home have been critical to the success of East Asian countries in controlling the pandemic, and many Americans might willingly agree to stay in alternative housing until they are no longer contagious to avoid infecting others in their family.

But while hotels, college dormitories, and other facilities have stood empty, the United States has done little to provide alternative housing where people testing positive could safely isolate and be monitored and possibly transferred to a hospital if they got seriously ill.

Actually, it gets worse. Early in the epidemic, experts recognized there would be a need for COVID-specialized facilities for patients who had been hospitalized and were still potentially infectious but no longer in need of acute care. Instead, those patients have been transferred to nursing homes—indeed, several states initially required nursing homes to take them—likely spreading the virus to other residents. The Times reports that to make room for these post-acute COVID patients (who may be highly profitable because of their insurance coverage), some nursing homes have evicted residents paid for at lower rates by Medicaid, sending some of them to homeless shelters.

Housing is now emerging more generally as a critical aspect of the national failure to protect. Earlier this year, the CARES Act froze evictions from federally subsidized housing, while moratoriums on evictions

in 42 states and the District of Columbia also provided temporary relief to renters. But onethird of the state moratoriums have now expired, and more are scheduled to be lifted. With millions of renters unemployed and unable to afford their rent, housing experts expect an “avalanche of evictions.” Those evictions will likely force many families to double up with relatives or move into homeless shelters, precisely the kind of crowded conditions likely to exacerbate the pandemic.

The racial implications of all these patterns should be clear.

Evictions are twice as common among Black households as among white. Black people have high rates of conditions such as diabetes and heart disease that raise the odds of severe illness and death from the coronavirus.

Put all the disparities together—jobs that increase exposure to the virus; crowded living conditions; high risk of eviction; high rates of underlying conditions—and any mystery that surrounds the disparate racial impact of the pandemic should be no mystery at all. People who talk about letting COVID-19 run through the population so we can get to herd immunity blithely ignore whose lives they are unconcerned to protect.

And when Trump and other right-wingers prematurely declare the health emergency over, they are saying the same thing about whose lives matter and whose lives don’t.

AMERICA has gone through an awakening about antiBlack racism this spring that is both long overdue and utterly astonishing. Despite the Trump presidency, or more likely because of it, American public opinion was already becoming more supportive of Black

Americans when the police murder of George Floyd on May 25 led to a sharp rise in approval of the Black Lives Matter movement. The shift in opinion was one of those changes that happen very slowly, and then very fast, forcing people to re-examine their previous views and sense of what is possible.

People respond differently to identifiable lives and statistical lives. An identifiable life has a name and a face; a statistical life is a number in a table.

Research on statistical lives is essential for identifying social patterns, but people can make emotional connections only with identifiable lives. Recorded at painful length, Floyd’s murder wasn’t only emotionally powerful; together with the murders of Eric Garner, Walter Scott, Philando Castile, and a growing list of victims of police violence, it was part of a pattern from which Americans could no longer avert their eyes.

This spring’s uprising over Black lives has raised at least two big issues. The familiar but no less urgent issue is the culture of impunity that shields the powerful from being held to account. The unpunished abuses in the corporate world that led to the financial crisis a decade ago raised the same questions about impunity. So did the long history of sexual abuses in institutions ranging from the Catholic Church to the film industry, where finally we have made some progress. These breakthroughs in the control of sexual assault and harassment offer some hope that the mobilization over Black lives can finally make a difference in the case of the police. By eliminating the “qualified immunity” the police enjoy from money damages

for violations of constitutional rights, Congress could take an important first step if the Court itself does not take it.

The second big issue, radically restructuring the means of reducing violence in America, is an example of how the movement to protect Black lives has already expanded the sense of the possible. The slogan “defund the police” may suggest only a withdrawal of resources; what it should convey is a need to support other anti-violence forces in a community to do much of the work that now falls to the police.

Writing in The Washington Post, my Princeton University sociology colleague Patrick Sharkey has laid out a cogent case that “residents and local organizations can indeed ‘police’ their own neighborhoods and control violence—in a way that builds stronger communities.” For example, community violence interrupters and professionals trained in mediation can resolve most altercations. Yet these alternative ways of reducing violence never get the level of financial support that goes to law enforcement. Police, Sharkey suggests, could limit their work to certain activities specifically focused on violent crime but “otherwise serve as backup to outreach workers, counselors, mediators, social service providers, unarmed traffic safety agents and EMTs, becoming involved only if the first responder requests assistance or an arrest.” This is a debate about resources and power that the country needs to have.

In both the pandemic and the crisis of police violence, Americans are waking up to how badly they have been served by the people sworn to protect their lives and safety. In election years, it sometimes seems like an exaggeration to say that the choice is a matter of survival.

But for many Americans, this year it will be.

JUL /AUG 2020 THE AMERICAN PROSPECT 5

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The George Floyd Moment: Promise and Peril From Lincoln to Obama, we have seen periods of racial progress before. Dare we be optimistic that this one will prove durable and systemic?

BY R A N DA L L K E N N E DY EVERY DAY IN EVERY part of America, people of all backgrounds, but especially people of color, are menaced by poorly regulated police. Absent the fortuity of a video recording, the circumstances of George Floyd’s death would have probably been effectively covered up and buried. Even with the evidence at hand, securing a conviction and appropriate punishment is by no means guaranteed; police caught red-handed abusing civilians have frequently escaped accountability.

At the same time, the response to Floyd’s killing has been extraordinary. People of all races, all ages, all gender identifications, and all party affiliations have raised their voices— as one. Hundreds of thousands have taken to the streets braving the risks associated with the pandemic and panicky law enforcement. They act out of grief for Floyd, determined that his killers be punished. They act out of pent-up frustration and fury, keenly aware that despite increased scrutiny of policing over the years, the grisly chronicle of avoidable police killings grows apace. They act out of solidarity with mistreated fellow demonstrators and out of a sense that their dissent is making a real difference. They act out of revulsion for the antics of President Donald Trump, who, far from displaying any compassion, tried to vilify and intimidate protesters and appeal to the nethermost instincts of his electoral base.

The breadth and intensity of the expressions of bereavement, solidarity, sympathy, and hopeful demands for reform are what have made this period feel so promising. Organizers from across the spectrum of progressive activism have, to a large extent, conducted themselves admirably, eliciting broad participation, and infusing supporters with fervor and resolve. After years of often overlooked work associated with or

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inspired by Black Lives Matter, they have clearly honed their skills and become remarkably effective agitators. These are the organizers most responsible for drawing and channeling the massed dissent.

Their ranks include people like Rasheen Aldridge, 26 years old, a Missouri state representative, who started protesting in Ferguson in the aftermath of Michael Brown’s killing. And Kwame Rose, a 26-yearold professional activist, who got his start in the agitation in Baltimore following the police killing of Freddie Gray. And Tay Anderson, a 21-year-old who was elected to the Denver Public School Board and who has been a leading voice demanding change in that city. An impressive feature of their leadership has been their loud, clear, unapologetic insistence upon disciplined militancy.

Knowing that looting and random violence is discrediting in the eyes of many people—including African Americans—to whom they want to appeal, they wisely eschew the hooliganism that right-wing commentators seize upon and exaggerate to besmirch protests that have been mostly peaceful.

That the influence of the anti-racist protest has extended far beyond the precincts of those typically present at Black Lives Matter rallies is substantiated by polling. One survey reports that in the two weeks following the killing of Floyd, “American voters’ support for the Black Lives Matter movement increased almost as much as it had in the preceding two years.” Another poll found that 76 percent of Americans consider racism and discrimination a “big problem,” up 26 points from 2015.

Figures that seldom factor prominently in polarizing racial controversies found themselves stepping forward, or being pushed, to address

The influence of the anti-racist protest has extended far beyond the precincts of those typically present at Black Lives Matter rallies.

the crisis. In a speech to graduates of the National Defense University, Gen. Mark Milley, chair of the Joint Chiefs of Staff, apologized for walking with Trump to the St. John’s Church photo op. Here was the country’s top military officer apologizing for being seen with the commander in chief!

What received too little attention, however, was the large portion of Milley’s speech in which he identified racism, condemned it, specified its legacy in the military, and committed to making the armed forces more racially equal. Displaying the reach of cultural revisionism championed by initiatives such as The New York Times’ 1619 Project, Gen. Milley declared, “What we are seeing is the long shadow of our original sin in Jamestown 401 years ago … We are still struggling with racism, and we have much work to do. Racism and discrimination, structural preferences, patterns of mistreatment, and unspoken and unconscious bias have no place in America and they have no place in our Armed Forces.”

Notable, too, was the statement by the bishop of the Episcopal Diocese of Washington, D.C., Mariann Edgar Budde, who complained loudly about Trump’s use of Bibles and churches as props in the service of his agenda.

Even organizations that are normally defiantly immune to anti-racist demands have succumbed. NASCAR announced that it was prohibiting the display of the Confederate battle flag at its events, at the prompting of Bubba Wallace, the only Black person among top-ranked drivers, who himself now races in a car emblazoned with “Black Lives Matter.” Roger Goodell, commissioner of the National Football League, also flipped dramatically: e, the NFL, condemn racism W and the systematic oppression of Black People. We, the NFL, admit we were wrong for not listening to NFL players earlier and encourage all to speak out and peacefully protest. We, the NFL, believe Black Lives Matter.

In a letter to customers, Bloomingdale’s acknowledges that “systemic racism” has been “woven into the

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fabric of our nation” but “has no place in our company” because “Black lives must matter.” Similar messages have been prominently displayed by Amazon, McDonald’s, even Walmart.

Of course, much of this is merely opportunistic branding. If these firms are sincerely committed to social and racial justice, the first thing they should do is offer decent wages and benefits, and get far more serious about hiring and promoting people of color. Their racial-justice advertising, however, is significant. It shows the gale-force energy unleashed by the protests. Clearly these profit-maximizing firms are determined to be on what they perceive as the side of these controversies that their most valued customers favor. The advertising is also important because it confers added legitimacy upon the protest. Readers of this publication might not be impressed by what Amazon likes, but large numbers of Americans are.

JOHN MINCHILLO / AP PHOTO

A GREAT CHALLENGE that faces any pro-

test movement is winning victories that can enable reformers to overcome the gravitational force of inertia. Establishmentarians know that fervor, for all its potentiality, eventually subsides. When the crowds go home, bureaucracies continue to do the prosaic tasks that society requires. It is therefore imperative to reprogram bureaucracies, through legislation and other enduring interventions. The protesters behind the George Floyd moment have succeeded in winning a few such victories, most notably a new law in New York that bans the use of chokeholds by police and repeals a policy that kept police disciplinary records secret.

That is an important, albeit belated, achievement that activists ought to celebrate. Without their pressure, that reform legislation would have continued to languish.

What other reforms are urgently needed? A good start would be getting rid of “qualified immunity,” a judge-made doctrine that insulates police from liability for violations of civil rights in circumstances in which the precise conduct in question has not previously been declared illegal.

Mayors must reject union contracts

A Black Lives Matter mural stretches along Fulton Street in Brooklyn, New York.

that thwart sensible efforts to hold police accountable. We need accessibility to data to learn about citizen complaints and the way they are resolved. Procedures should be instituted to prevent officers who are disciplined (or facing discipline) in one jurisdiction from moving on, without notice, to another. Whether these and other initiatives are put on the path to becoming binding will tell us a lot about whether the George Floyd moment will mark a sharp turning point or instead dissipate.

The obstacles facing racial-justice activists are daunting. Policing in the United States is decentralized, with some 18,000 autonomous police agencies. We saw how difficult it was to even begin to investigate, monitor, and punish priestly sexual misconduct within the centralized hierarchy of the Catholic Church. Policing the police will be a hugely more arduous enterprise. Even when overprotective laws or policies are pruned away, the essentials of due process will make difficult the timely and effective sanctioning of police misconduct.

Then there is the double-sidedness

of policing. Protection against criminality is most needed in the very communities in which uprisings against police authorities are most intense, which highlights the African American double bind. Black communities suffer from legal underprotection (as when officers fail to protect them against criminal misbehavior by fellow officers and others) and simultaneously suffer from over-policing (as when officers subject them to abuses typically absent from white communities). The situation would be less vexing if one could responsibly simply banish police.

But one cannot do that. Police are an essential public service that are especially important to the well-being of those without the means to hire private police protection.

Passing laws and promulgating new policies, though crucial, is just a beginning; afterward there remains the difficult task of enforcement, dependent on political will and in turn influenced by popular sentiment.

We need to be careful when deciphering the complexities of public opinion in this massive country of ours.

JUL /AUG 2020 THE AMERICAN PROSPECT 7

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Much attention has been focused upon whites who, prompted by Black friends and allies, have enlisted in strenuous efforts to confront their own prejudice, acknowledge their own misbegotten privilege, and subordinate their own vanity in preference to leadership undertaken by people of color who have long been marginalized. The emergence of “woke” white people is something to behold! Although the virtue-signaling of some is preposterous and annoying, overall there is much that is encouraging about this development.

Never in American history have there been more ordinary white people willing to demonstrate forcefully and publicly on behalf of Black people in the teeth of disapproving officials. But we dare not overlook those other whites who remain in deep denial about the facts of life in our pigmentocracy. This includes white downwardly mobile working-class people who live in pinched circumstances that make it difficult for them to feel privileged (though in terms of race they are). Across large swaths of America, moreover, the face of crime remains a feared Black face.

The extent of that visceral impression will, alas, play a major role in the ongoing struggle for racial justice in policing and other domains.

There has been more sustained and wide-ranging public attention to matters of race in the first two weeks of June 2020 than in any other similar period since the aftermath of the assassination of Martin Luther King Jr. That analogy, however, underlines the peril that surrounds us alongside the promise. After King’s death in 1968, there was momentarily a widespread desire to redress racial wrongs. An antidiscrimination bill that covered housing, the last federal legislation of the Second Reconstruction, had been bottled up in Congress, successfully stymied not only

by Southern segregationists but also by politicians elsewhere who feared backlash from white constituents who mouthed the rhetoric of equal opportunity but loathed the prospect of a Black neighbor. Caught up in the agony of the moment, Congress surprisingly passed the bill in the aftermath of King’s death, and President

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This moment, for all its promise, is more perilous than 1968 because of Donald Trump.

Lyndon Johnson signed it into law.

But just months later, after a bitter campaign in which the slogan “law and order” figured prominently, the electorate narrowly elevated Richard Nixon to the presidency, inaugurating a rightward shift in American politics that has, alas, retained momentum over the course of half a century, despite liberal interludes.

This moment, for all its promise, is more perilous than 1968 because of Donald Trump. The presidency, of course, is not the only source of political power in the United States.

Other branches of the federal government are important, as are local and state governments. But the president, with his control over the military, his power to shape the federal courts, and his standing at the apex of federal executive power, is singularly influential. Despite the tumult in 1968, there was no doubt but that Johnson would hand over power.

With Trump, though, all bets are off.

Fears of him attempting to hold onto power by any methods, including extralegal and illegal, are well justified. So, too, is fear that he might win a legitimate victory again in the Electoral College, replicating his win in 2016 in which he so effectively mobilized white racial resentments.

Racism, of course, was not the only thing that mattered. Millions who voted for Barack Obama turned around and voted for Trump. One should avoid overemphasizing the race angle and thus obscuring other important considerations: Economic stagnation, impatience with eight years of Democratic White House occupancy, and the terribly flawed Clinton candidacy mattered, too. But Trump’s elicitation of racism did help put him over the top. Indeed it was indispensable to his victory. He could succeed again absent a massive outpouring of support for the presumptive candidate of the Democratic Party.

Joe Biden has spoken forthrightly about the racism that is so much in evidence around the killings of African Americans at the hands of police and the police response to protests against those killings. I hope that activists and their followers will acknowledge that. If they do not, and there is a slackening in support for

Biden among those who should be part of his coalition, the consequence could be tragic. Tragedy could also ensue if rioters (abetted perhaps by right-wing agents provocateurs) commit enough mayhem to discredit the protest movement and stampede otherwise winnable voters into the Trumpist column. If Biden prevails, good ideas that have gained at least some traction in the George Floyd moment will surely receive support in a new presidential regime. If Trump prevails, it is certain that the promise of this moment will be cruelly disappointed.

As I wrote for the Prospect six years ago, I have long been a racial optimist, believing that we will overcome impediments to attaining racial decency in the United States of America. But my faith has definitely been shaken. The derangement exacerbated by the presence of a Black president figured significantly in enabling Trump to ascend to the White House, a stain on our politics that is indelible. The continuing routine racist practices of police are harrowing. The videotaped assaults and murders confront the public in a fashion that cannot be denied. And then there is the appallingly negligent response to the COVID-19 catastrophe that has, of course, cruelly burdened racial minorities disproportionately.

Amid these distressing events, I have sometimes admonished myself for remaining in the optimistic camp.

That I do so stems in part from a desperate yearning on behalf of the future of my children. It stems, too, from the solace, hope, and inspiration derived from seeing those protesters in the streets making that “necessary trouble” that the great John Lewis has so compellingly championed.

The dissidents have been the ones most responsible for making this the George Floyd Moment. And they and kindred souls are the ones who will play the leading role in redeeming America, if it is to be saved. n Randall Kennedy has been a contributing editor of the Prospect since 1995. He is the Michael R. Klein Professor of Law at Harvard University.

His several books include The Persistence of the Color Line: Racial Politics and the Obama Presidency.

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Managing Money, Changing the World Ronnie Chatterji’s insurgent campaign in North Carolina seeks to expand thinking around what a state treasurer can accomplish.

BY BR I T TA N Y G I B S O N

COURTESY OF RONNIE CHAT TER JI

STATE TREASURER IS one of those

wonky-sounding jobs that in fact carries a great deal of power.

Nowhere is this truer than in North Carolina, where Ronnie Chatterji is running for the post as a progressive insurgent. Chatterji, 41, a tenured business school professor at Duke University and former senior staffer for President Obama’s Council of Economic Advisers, was intrigued to learn that the job includes deciding where to invest the state’s $100 billion pension fund, as well as serving in several other powerful state posts, including the North Carolina State Board of Education, the State Board of Community Colleges, and the State Banking Commission.

A first-time candidate, Chatterji hopes to use the financial power of the treasurer’s office to influence issues such as climate change, economic development, diversity, and transparency of operations, both in his own office and in the companies where he’s placing state funds. This would be a new activist role for the usually sleepy office, and a new role for him. As an academic, he thought his strength was as an adviser and researcher. If Chatterji wins in November, he will be the first-ever Indian American elected to statewide office in North Carolina.

“I thought if I was going to be in public service, I would be the person running the numbers,” Chatterji says. “I think we’re probably conditioned to think of ourselves in these roles, probably to our detriment sometimes, but I didn’t see a lot of people like me running for office, so I thought I’ll be the numbers guy.”

President Barack Obama’s historic win changed his idea of who could run for office. “What I saw with President Obama was because of his diverse background—which is completely unique, out of this world, in the contemporary American political situation—people really related to him. And I thought maybe because

Chatterji would be the first-ever Indian American elected to statewide office in North Carolina.

I’m so different and there’s not a lot of people out there like me, maybe I can help create the new playbook and create some of that trust,” Chatterji says.

Almost ten years after his time in the White House, Chatterji has found a way to be both the numbers guy and the candidate, following the trend of insurgent Democratic candidates inspired to run for state and local offices across the country.

Today, Democrats hold 25 of the 51 attorney general posts, 25 of the secretaries of state, and 15 state treasurer jobs. This becomes all the more important in an era when Trump is abusing the presidency, and Democrats need to rebuild their bench.

“We’re not paying as much attention to these state and local races.

They’re not as glamorous, they’re not as sexy, and they’re really hard to do online fundraising for because the issues are very local and often people don’t know the person you’re running against. And I thought, ‘Oh my god, this is where the center of action is

with everything that we’re talking about, everything we care about,’” Chatterji says.

Besides using state pension money to influence corporate stances on climate change, Chatterji targets several other points of leverage. Through the Local Government Commission, the state treasurer is responsible for approving all state and local bonds, which can affect funding for building infrastructure, broadband, water, sewer, and roads. He can also invest state pension funds in local enterprises, functioning almost as a state investment bank—giving priority to his signature issues of diversity, transparency, and climate action, as well as local economic development.

Chatterji looks forward to working with other activist state treasurers across the country. California Treasurer Fiona Ma has used her office to fight for more women board members in the companies her state invests in. In Massachusetts, Deborah Goldberg has used her role on the Clean Water Trust to get clean drinking water in schools. And Texas’s retirement fund, run by Chief Investment Officer Jase Auby, is also home to an Emerging Manager Program, which recruits diverse and young investors right out of business school through its partnerships across Texas and with Howard University.

Through collaborating with other state treasurers and other institutional investors, Chatterji says, it will be possible not only to influence corporate impact on the global climate, but also impact future product research and development. Chatterji adds that these partnerships can also make use of shareholder resolutions to hold companies accountable on these goals.

Another issue is greater transparency when it comes to corporate political spending, also called dark money.

Companies, through creative accounting or sometimes through secondary organizations, have many ways they can hide how they’re spending money to push for a desired candidate or law. “I would demand more transparency on [dark money], because those are risks when they’re exposed on the front page of the local paper, that you’re donating to campaigns that might be at odds with what your CEO is

JUL /AUG 2020 THE AMERICAN PROSPECT 9

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saying,” Chatterji says.

Chatterji takes the responsibilities of the treasurer’s office personally. His family depended on similar state-run plans when he was growing up in Upstate New York. His father as a university professor and his mother as a schoolteacher both worked in the public system, and the family grew up on the state health care plan while his parents also paid into the state pension fund.

Chatterji says he and his sister grew up living the American dream, thanks to the stability of his parents’ professions and their benefits. However, today he’s keenly aware that not every immigrant family is as fortunate as he was. By running for treasurer, Chatterji knows he cannot impact the salaries of these public employees in the present, but he can be responsible for ensuring they have a good pension when it comes time to retire.

In fact, when Chatterji recently asked his parents about the details of those plans, he found out that they didn’t know who was in charge of those programs. “They didn’t worry that one day their pension wouldn’t be there,” Chatterji says of his parents. “They assumed someone was taking care of that. The promise we make to state employees is about the benefits you get in their pension and health care, and they assume someone will be managing that. That’s a huge responsibility.”

In March, Chatterji won a competitive three-way primary, where he earned 35.8 percent of the vote. The NC AFL-CIO, North Carolina Association of Educators, CWA, and several other labor unions endorsed Chatterji. So did several newspapers, including the influential News & Observer.

The broad coalition of support for the first-time candidate even surprised some supporters.

“I didn’t have a lot of expectation because he’s not a politician. And I didn’t know what his skill set would be in that area,” says Diane Robertson, a member of the DNC finance committee, who has known Chatterji since 2011. “I think he is a naturally positive, confident, and generous person. I think that’s his nature and he takes that nature into his work, which then makes people really

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“We’re not paying as much attention to these state and local races ... This is where the center of action is with everything we care about.”

—Ronnie Chatterji gravitate to him and really trust him.”

Chatterji also recognizes that trust is crucial in this race. Although it’s a less politically polarizing office, Chatterji has to explain to voters why he should be trusted with the state’s money. If elected to office, Chatterji sees increasing his office’s transparency, as well as statewide travel, as the key to continuing these relationships made during the campaign.

The treasurer already releases a quarterly financial report, but Chatterji would like to expand this disclosure to include metrics on his goals in incorporating equity and sustainability factors in his investing, the board member diversity in the companies he’s investing in as well as diversity in his own office staff, and updates on the coalition of investors he hopes to build.

In the general election, Chatterji will be up against Republican incumbent Dale Folwell. Usually, voters are already familiar with major state politicians on the ballot, but not this one. Most people think of the state treasurer the same way Chatterji’s parents did—not at all.

Thomas Mills, a political consultant and writer for the PoliticsNC blog, says that because the state is so competitive, down-ballot races get overshadowed and campaigning will get more challenging as November gets closer. “We don’t see Campbell’s soup ads in North Carolina in September and October, there’s sensory overload from political ads,” he says.

Not being able to hold traditional campaign rallies and in-person events because of the coronavirus adds another layer of complexity to the campaign’s strategy.

But Team Chatterji has embraced technology and social media the way other young, progressive candidates across the country have, holding Zoom events and digital town halls, and posting regular updates to his campaign social media accounts.

There are currently eight volunteers working with the campaign helping to coordinate further voter outreach, with plans to increase the team size as Election Day gets closer.

Folwell also has an online presence but does significantly fewer digital events and has fewer original posts. And the Folwell campaign website hasn’t been updated since his 2016 election (one page still says Election Day will be on November 8).

While their campaigning and outreach styles are the most immediate examples of Folwell and Chatterji’s differences, it’s representative of their policy differences as well.

At the beginning of the coronavirus crisis, Folwell bragged about how conservatively the pension fund has been managed since he took office in 2016’s bull economy. And when it comes to the coronavirus, Folwell’s advice to North Carolina residents is to spend money, if they can.

Since the start of the pandemic and its economic impact, the treasurer’s office hasn’t issued any press releases on how the office plans to adapt its pension fund management or support public education or community banks, which will depend on government leadership to recover.

Instead, Folwell has criticized Democratic Gov. Roy Cooper for temporarily prohibiting people’s utility services from being shut off.

There’s no guarantee that voters are looking for more wonky details on how the treasurer does his job, but for some people, Chatterji’s planning and enthusiasm will stand out.

“My attitude toward the whole thing is to be a happy warrior,” Chatterji says. “I try to have fun when I’m campaigning and talking to folks because there’s so much, particularly on the Democratic side … [and] I try to be pragmatic to get to the goals we want. I have progressive aims in the things I care about, and I think, ‘OK, how can we get there?’”

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Since People on Buses Are Known to Inhale ‌ Confronted with the pandemic, some (not all) transit agencies have made buses safer for drivers and passengers. Here’s how.

BY G A BR I E L L E G U R L E Y BRIAN SHERLOCK IS A hardcore geek with a fondness for deep dives into science journals. When the COVID-19 pandemic struck, Sherlock, who’d been a bus driver for 40 years, knew it would cripple mass transit and pose grave dangers to the people who drive and ride on buses. The problem, he saw instantly, is the airflows on buses, and the solution, he also saw, was a range of ways that bus drivers and riders could be protected, and the airflows redirected.

personal protective gear in short supply and bus and train operators working in enclosed spaces.

For too long, creative solutions to some of the most fundamental safety concerns facing transit operators and riders eluded transit officials or were quickly prohibited by managers who clung to ludicrous rules against simple fixes. With ridership cratering and amid growing fears of a second, harsher wave, however, transit agencies are now scurrying to step up

In a typical bus, air recirculates, endangering the driver and passengers.

Brian Sherlock proposed a safer airflow system which featured a barrier and could be deployed on older buses.

Sherlock began tackling air quality issues during his decades of navigating buses through Seattle, where his projects came to the attention of his Amalgamated Transit Union officers. Now working with the ATU as a safety specialist, Sherlock has proposed diagnoses and suggestions on mitigating the risks of coronavirus on public transit that have been informed by his work with academic and government experts. Transit systems certainly need the help, with

12 WWW.PROSPECT.ORG JUL /AUG 2020

precautions against the virus, some more successfully than others.

Much about the airborne virus was (and remains) unknown, but many transit officials mishandled the crisis early on by failing to ensure the safety of frontline transit workers compelled to confront countless touch points (doors, seats, poles, stoprequest buttons), riders who didn’t wear masks, and the impossibility of social distancing that’s inherent in the “mass� in mass transit.

Bus drivers, who endure some of the greatest daily stresses, were told point-blank in New York not to wear masks since they were not part of the Metropolitan Transportation Authority uniform. (Union leaders directed operators to wear masks anyway.) Despite the absence of masks, gloves, and hand sanitizer for bus drivers in Portland, Oregon, officials at TriMet, the Metro Portland transit agency, ordered one ingenious operator to take down a clear, dollarstore shower curtain he’d rigged up to protect himself. In Philadelphia, SEPTA workers threatened to shut the system down if their demands for limits on riders and other safety precautions were not met.

Across the country, management’s failures took an appalling toll. About 200 transit workers have died during the pandemic.

With the summer air-conditioning season now in full swing, agencies need to rethink how to handle air quality in buses. Sherlock recalls that in his early years on the job, his buses had no air-conditioning in the summer. When the heat became unbearable—temperatures in buses can rise to more than 130 degrees—he would park near a sprinkler system, jump off, and get drenched before continuing his route. Many of his co-workers suffered heatstroke or came down with respiratory ailments due to the poor conditions on buses.

Today, buses are routinely air-conditioned—but if the air-conditioning system in a bus cannot be adjusted to allow fresh air to flow into the vehicle and lacks filters or a sterilization system like ultraviolet light, virus particles and bacteria can spread throughout the bus. According to Sherlock, controlling bus airflows to maximize the circulation of fresh air from outside the vehicle and adding sophisticated filters to sterilization systems are two effective ways to minimize health risks to bus operators and passengers.

A driver who turns on the “fresh air� settings, and selectively uses roof hatches and air blowers, can reduce COVID-19 transmission risks. Installing barriers between the driver and passengers also reduces risk to drivers, who spend long hours in tight

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quarters. Buses that cannot draw in fresh air in the front of the vehicle should be taken off the road, says Sherlock, who worked on the coronavirus project with engineers at the University of Washington’s Aerodynamics Department and the Virginia Tech Transportation Institute.

John Samuelsen, the Transport Workers Union’s International president, notes that there have been productive conversations in New York about barriers to protect drivers and even about air quality and filtration solutions in bus depots, rail barns, and crew quarters where operators report to and from work. But Samuelsen adds that conversations about ways to improve filtration systems on buses for riders “are pretty much nonexistent.”

The Federal Transit Administration has stepped up with funding for the airflow-barrier design project, spearheading a wider effort to modify buses and trains that don’t have fresh-air capabilities or high-grade filters. But the transit sector itself has not been nearly as focused. “Some transit agencies and manufacturers have been slow to move on these issues,” Sherlock says. Responses have ranged from outright denial to support for the science and engineering solutions. In certain cases, bus manufacturers have been unprepared to alter their products, and struggle to deliver what is needed.

Like a number of systems across the country, Portland’s TriMet had trouble providing PPE. And when TriMet dispensed with collecting fares on its nearly 660 buses, the agency failed to adopt the rear-door boarding that many other systems implemented to protect their drivers.

Some older buses still do not have barriers between drivers and passengers, according to Shirley Block, president of the Amalgamated Transit Union Local 757, because the agency plans to take those vehicles out of service. (The driver whose shower curtain solution triggered the ire of TriMet managers remains healthy and now wears a mask, Block says.)

The mutual distrust between TriMet’s fiercely independent bus operators and their managers has undermined any sort of uniform adherence to the system’s

Maximizing the circulation of fresh air from outside the vehicle can minimize health risks to bus operators and passengers.

This article is part of our ongoing series on sustainable mobility, transportation, and climate.

air-conditioning protocols. TriMet managers directed drivers to keep windows closed and turn on the AC since it brings in fresh air, they said, and directs bacteria and virus particles outside the bus.

But few drivers believe that’s true.

For drivers in the COVID-19 universe, there’s too little certainty about what actually works. So out on the road where drivers are in control, they improvise. Some drivers do turn the AC off and open the windows; others put the AC on and open the windows.

Dallas Area Rapid Transit is one of the few transit agencies that has effective bus ventilation and filtration systems that predate the coronavirus. Most of the system’s nearly 700 buses come equipped with ultraviolet germicidal irradiation—lights placed in air-conditioning ducts that clean the air automatically as it recirculates, killing viruses.

Three years ago, following the Ebola crisis, the agency purchased more than 40 buses that feature a system using positively charged ions that continuously clean and disinfect the air on the bus. DART also cleans its buses using foggers with an ionized hydrogen peroxide cleaning solution. (The agency also operates a four-line light-rail network. Two of the lines are cleaned every 60 minutes; the two others, every 90 minutes.)

“Dallas has a history of keeping a well-maintained and updated fleet of buses,” says Kenneth Day, president of ATU Local 1338. Fights between agencies and unions are common to many cities, but the Dallas local has always had a “decent working relationship” with DART, according to Day, and has been spared some of the difficulties that have sapped the ability of many systems to deal effectively with the coronavirus threat.

Where Portland officials called a shower curtain a violation, Dallas bus drivers got the go-ahead to use clear plastic sheeting as a temporary stopgap measure, in tandem with existing barriers that had been installed to help protect drivers from physical assaults. This summer, DART is replacing those barriers with respiratory-droplet shields, which are floor-to-ceiling plexiglass

barriers. Dallas has been collecting fares and using rear-door boarding on its buses. Once all the new shields are installed, DART plans to resume front-door boarding. The agency will also soon introduce dispensers for masks and hand sanitizer on its buses.

“PPE is the bare minimum,” says DART spokesman Gordon Shattles.

“We made sure operators had everything they needed.”

Passengers and drivers are not required to wear masks on DART, but that situation could change as hospitalizations continue to surge in Dallas and in Texas overall. Some drivers, however, are still not convinced that COVID poses a threat or have wearied of the precautions. For such as these, DART has even reassigned employees who would have otherwise been laid off to go to bus depots and other work locations to hand out masks and hand sanitizer to operators and other employees. Day recognizes that while most people take the pandemic seriously, not everyone does. “That is something that we have to continue to work on,” the union leader says.

“You can’t relax.”

Fears about COVID-19 transmission on public transit could persuade riders who’ve switched to cars to continue to drive—which does not bode well for the health of public transportation and anyone’s ability to get around town. “If you have a wholesale abandonment of transit, no one will move anywhere,” says Jack Clark of the Transportation Learning Center, a national research group based in Maryland.

Convincing petrified riders that pandemic precautions are not just a new episode of safety theater will not be easy. Designating transit for essential trips only sent a powerful message about the dangers of riding on buses and trains, which time and reopenings have not dispelled.

For his part, Sherlock continues to push for air quality improvements.

The costs to transit agencies are negligible—a bus retrofitted with filters and UV lights pays for itself in about 18 months. After that, “it’s profit!” he says, his voice rising with every syllable: “Taking care of people saves you freaking money!” n

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G

eorge Floyd was murdered at the corner of Chicago Avenue and 38th Street in South Minneapolis. The neighborhood is majority-minority, in one of the most segregated cities in the country. I looked up the New Deal–era Home Owners’ Loan Corporation maps and found that the area around this block was colored in red and labeled as grade D, which meant hazardous. The reason? It was “majority colored people” as well as “poor Jews.”

During the era of redlining, race was the number one metric used in determining which areas were deemed “Hazardous” and which areas were marked “Green: Best” or “Blue: Still Desirable.” White neighborhoods were green and Black ones were red. The red neighborhoods could not qualify for Federal Housing Administration mortgage guarantees, which was the biggest wealth-building subsidy of the century, or as Ira Katznelson has called it, “white affirmative action.”

Redlining would lead to massive wealth disparities, and radically different opportunities for white communities and Black ones.

White suburbs created not just individual wealth for white families, but community wealth and social capital. Schools were better funded, parks were built, and public spaces were clean and plentiful. Much of the funding came through local property taxes, and therefore indirectly from the subsidy given to white families, employed subsequently to improve their quality of life.

In the redlined Black ghettos, by contrast, schools were underfunded, municipalities went bankrupt, and highways were sent right through the middle of the neighborhoods. But one department that was not underfunded was police. In fact it was paid for through the implicit demands of white taxpayers, who sought to keep the ghettos surrounded and their enclaves protected.

Like police kettling that encircles protesters and offers no means of escape, Black communities were caged, surveilled, and infiltrated. Formerly redlined areas became heavily policed opportunity deserts, with researchers making clear links between poverty, race, and police killing.

The city of Ferguson, Missouri, erupted after police killed Michael Brown, a Black

man, in 2014. This was one of the largest race riots the country had seen in recent years and it marked the genesis of the Black Lives Matter movement. Ferguson was a suburb of St. Louis, which was one of the most segregated cities in the United States.

It was created by the exodus of Black residents from the newly gentrified inner city of St. Louis. Ferguson’s population was two-thirds Black and predominantly lowincome, with more than one-fifth of the residents living below the poverty level.

The subpar schools were almost completely segregated: 30 percent of Blacks there were unemployed compared to 6 percent of whites.

During the Michael Brown protests, rioters destroyed white-owned commercial property. The National Guard was dispatched and Americans watched as demonstrators burned cars and buildings and police in military gear descended upon the city, enforced a curfew, and eventually quelled the protests. When Fox News interviewed one looter, he explained that the message the city had sent to its Black residents was “We’re gonna eat and you guys are gonna starve.” He replied, “It’s not gonna happen. Not in St. Louis.”

The following year, Baltimore exploded. A Harvard study found that Baltimore was the nation’s worst city with respect to childhood poverty and lack of economic opportunity.

It was also one of the most segregated cities in the country, and the financial crisis had created an acute foreclosure crisis there. The financial crisis of 2008 wiped out 53 percent of Black wealth, after subprime lenders targeting Black communities offered the worst the subprime market had to offer. Former congressman Brad Miller called it “an extinction level event.” Wells Fargo agreed to a $175 million federal settlement over housing discrimination allegations that Black people in Baltimore were subject to “reverse redlining”: intentionally targeted for predatory lending and home equity extraction.

In 2015, Baltimore was the scene of a large-scale uprising after the funeral of Freddie Gray, who died of spinal injuries while in police custody. What

BY MEHRSA BARADARAN

Underlying the nationwide protests for Black lives is the racial wealth gap.

ILLUSTRATION BY DAVID PLUNKERT

14 WWW.PROSPECT.ORG JUL /AUG 2020

JUL /AUG 2020 THE AMERICAN PROSPECT 15

began as a peaceful protest turned violent when rioters looted a CVS and destroyed a police vehicle. Soon, fires engulfed the downtown business area. “It’s regrettable, what’s happening now,” said the Rev. Jesse Jackson to The Baltimore Sun. “You’re looking at the actions of cynicism and hopelessness.” Gov. Larry Hogan called a state of emergency and about 5,000 state and national law enforcement officers descended on the city and quickly put an end to the riots.

Half a century earlier, there were the riots of 1967 and 1968—Minneapolis being one of the cities that erupted in rage. Presi-

stemmed from poverty, racism, inequality, and other social ills, but that the underlying cause was segregation. “Segregation and poverty have created in the racial ghetto a destructive environment totally unknown to most white Americans,” the report said.

“What white Americans have never fully understood—but what the Negro can never forget—is that white society is deeply implicated in the ghetto. White institutions created it, white institutions maintain it, and white society condones it.” The report was an unapologetic excoriation of white society, which the commission deemed guilty

and reconciliation.” It also looked at the root cause of a domestic uprising and it pointed its finger directly at the quiet white suburbs, the ones not rioting in the summer of 1967, the ones terrified and confused by what was happening over there in the segregated Black ghetto. Ultimately, the report was more truth than reconciliation. Johnson all but ignored its findings and later explained that it was a matter of funding. “That was the problem—money.”

The Kerner Commission Report was released in February 1968. On March 31, Johnson stunned the nation by revealing that

not just of racism, but of apathy toward Black poverty.

The report ultimately warned, “Our Nation is moving toward two societies, one black, one white—separate and unequal.”

The report advised a large-scale government program of integration and wealthbuilding for Black communities.

The Kerner Commission Report is particularly important now because it marked the closest the United States ever came to a public admission of wrongdoing or “truth

he would not seek re-election. Martin Luther King Jr. was killed four days later, while he was still in the midst of his Poor People’s Campaign. During that summer, as racial unrest heated up, Nixon promised law and order on the campaign trail and won the election based largely on anti-Black dog whistles.

We are still living in Nixon’s America, and the country remains divided along economic lines. The common thread between the Kerner Report and the flashpoints of police violence and Black protests in the

dent Johnson was caught between Black-led violence from the ghetto and a growing conservative backlash. According to a White House adviser, he was left with no recourse but to “set up a commission and say a prayer.” The Kerner Commission Report, first titled “The Harvest of American Racism,” relied on hundreds of researchers who collected testimonies and statistics, and it was the first thorough governmental exploration of Black economic disparity.

The final report determined that the riots

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PATRICK BANNON / AP PHOTO

George Floyd’s death, which spurred international protests, happened in a historically redlined community.

21st century is the continued lack of economic opportunity in communities of color.

While white people have flocked to Black Lives Matter protests this summer, that performative gesture does not fully reckon with the roots of white privilege: the abundance in their bank accounts, relative to their fellow Black Americans.

Today, Black families have a median net worth of $11,000 compared to a white family’s median of $141,900. Pew Research Center data reveals that white families have 13 times more wealth than Black families. The wealth gap exists at every income level, with a third of Black families having no assets at all. The perpetuation of poverty is stunning—75 percent of Black children who grow

THE RACIAL WEALTH GAP HAS DELETERIOUS EFFECTS ON BLACK COMMUNITIES IN PRACTICALLY EVERY DOMAIN. A RESPONSE MUST BE MULTIFACETED. up in families in the bottom wealth category remain in that same category as adults. A 2013 study found that for white families, every additional dollar they earn in income leads to $5.19 in wealth. For Black families, each dollar creates only 69 cents in total wealth. This growing divide perpetuates injustices hard to capture in the latest news of riots and protests. The racial wealth gap is where past injustice breeds present suffering.

Full justice demands a recognition of the historic breach of the social contract between America’s constitutional democ-

racy and Black Americans. And contract breach, as all first-year law students learn, requires a remedy. The post–Civil War 13th, 14th, and 15th Amendments to the Constitution promised freedmen equal protection under the law, the end of coerced labor, and the right to vote. All these promises became empty and effectively void almost immediately after they were made. If we envision these rights as a binding contractual promise, we can also envision a justification for a remedy to this breach.

In his landmark “I Have a Dream” speech, Martin Luther King Jr. framed the Black American claim to justice as rooted in a broken promise, “a promissory note to which every American was to fall heir. … [A] promise that all men … would be guaranteed the unalienable rights of life, liberty, and the pursuit of happiness.” King said that “America has defaulted on this promissory note insofar as her citizens of color are concerned.

Instead of honoring this sacred obligation, America has given the Negro people a bad check … which has come back marked ‘insufficient funds.’” Continuing in the framing of a broken contractual obligation, he lays claim to a remedy: “[W]e’ve come to cash this check, a check that will give us upon demand the riches of freedom and the security of justice.” No justice. No peace.

If the promise of equality was made by the federal government and then breached, what recourse can be envisioned for Black Americans? Typically, claims of redress are called “reparations.” Viewed through the lens of contractual breach, reparations are akin to “damages.” Constitutional rights are not treated like typical contractual claims, but this framing can help us understand why a remedy is necessary for centuries of racial oppression and how one can be designed. Black Americans have been harmed in direct contradiction to the Constitution’s promise of equal treatment, yet they have still had to contend with its demand of equal treatment in seeking a remedy. In fact, as Justice Thurgood Marshall explained, the Constitution demands redress. “Measured by any benchmark of comfort or achievement, meaningful equality remains a distant dream for the Negro.” Marshall pleaded that “bringing

the Negro into the mainstream of American life should be a state interest of the highest order” and warned that a “[failure] to do so is to ensure that America will forever remain a divided society.”

While the civil rights reforms ended explicit racial segregation and Jim Crow, the effects of those policies have never been addressed. Instead, policymakers have repeatedly proposed self-help solutions rooted in the false assumption that a wealth gap created by a failure of public policy could be remedied by private markets.

Every president since Nixon has championed one form or another of Black capitalism to promote Black banks and businesses, through tax credits and enterprise zones and other means of self-help. While these programs provided tax relief for asset holders, the racial wealth gap grew into a chasm.

Without major structural reforms, the wealth gap will continue to expand. A 2016 study glibly predicted that based on the current racial wealth gap, it would take 228 years for Blacks to have as much wealth as whites today. The prediction, though grim, is based on a false assumption: that the wealth gap will naturally close over time—albeit a very long time—without intervention. In fact, as my previous research demonstrates, it is likely that the racial wealth gap will remain in place and continue to reproduce itself. In other words, if nothing changes, no amount of time will close the wealth gap, because of the self-perpetuating effects of capital accumulation. The prediction of 228 years of stagnation also underestimates the transformative effects of policy changes that could close the racial wealth gap quickly. Heretofore untried changes can close the wealth gap very quickly.

The essential first step in dealing with the wealth gap is to acknowledge that public policy created it and must be used to address it. Once we’ve overcome this step, the rest is relatively straightforward. The first step, as Sandy Darity and Kirsten Mullen point out in their new book, would be for Congress to convene a hearing to study the program.

Despite years of advocates asking for some type of hearing, Congress has yet to schedule one. This is not surprising. Hundreds of proposals over years where it actually could have saved lives have been slow-walked; Congress

JUL /AUG 2020 THE AMERICAN PROSPECT 17

HOW TO START CLOSING THE RACIAL WEALTH GAP An obscure add-on charge for mortgages has put homeownership out of reach, disproportionately for Black Americans.

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rate sheets, they are invisible to borrowers.

Because of LLPAs, even though mortgage rates are at historic lows—around 3 percent on average—many borrowers still have to pay more than twice that amount, if they can get a mortgage at all. Simply put, LLPAs are pricing many borrowers, disproportionately borrowers of color, out of the housing market. This is exacerbated by the recent ratcheting up of lending standards in response to the coronavirus crisis, which is now preventing access to mortgage markets for many first-time homebuyers.

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The Racial Homeownership Gap

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Racial inequality in America starts with the home. The gap between white and Black homeownership rates today is the largest it has been since 1890. Because homeownership is perhaps the critical way in which Americans build wealth and transfer it to their children and grandchildren, the racial homeownership gap is a central component of the racial wealth gap. And because homeownership determines where we live, the homeownership gap also contributes to social segregation, which undermines social equality because differences in policing and all kinds of services directly relate to where people live.

Historically, federal housing policies played an important role in creating the homeownership gap. From the 1930s through the 1960s, the Federal Housing Administration refused to insure mortgages in predominantly Black neighborhoods, which made it difficult for Black buyers to get mortgages to buy homes. The effects of federal redlining are still discernible in the segregation patterns of major cities.

Federal redlining and other explicitly discriminatory policies ended with the Fair Housing Act of 1968, but today a supposedly neutral, but functionally discriminatory, federal policy undermines minority homeownership. Since 2007, the Federal Housing Finance Agency has required that Fannie Mae and Freddie Mac charge “loan-level pricing adjustments� (LLPAs) to lenders who sell them mortgages. This was intended to protect Fannie and Freddie from being stuck with ever-riskier loans from lenders, without being properly compensated for the danger.

LLPAs are fees that vary based on the borrower’s credit score, the mortgage type, and the down payment. These fees are substantial, as much as an additional 3.75 percent on a mortgage interest rate. Lenders completely pass through the LLPAs to borrowers in the form of higher mortgage interest rates, but because

LLPAs are not separately broken out on lenders’

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By Adam J. Levitin

The percentage of white people who own homes relative to Black people is at its highest rate since 1890.

of LLPAs charged, but Fannie and Freddie have purchased more than $11 trillion in mortgages since the LLPAs went into effect. Even if a small percentage of borrowers paid LLPAs, the total paid would be in the tens of billions. And even that would fail to account for those who put off a home purchase because the LLPA made the mortgage too expensive.

LLPA s may appear race-neutral, but their structure compounds existing racial wealth disparities. Because LLPAs are higher for low-down-payment mortgages, they fall more heavily on borrowers with less savings for a down payment. And because LLPAs are more costly for borrowers with worse credit

scores, they fall disproportionately on those with low and moderate incomes, who are in turn disproportionately minorities. This creates a vicious circle: Because of the racial wealth gap, LLPAs are more likely to exacerbate the racial homeownership gap, which further reinforces the racial wealth gap.

In addition to this racial stratification, LLPAs actually undermine systemic stability in the housing system. The added charges mean that riskier borrowers get priced out of the market whenever the market is stressed.

When this happens, there are fewer prospective homebuyers, which pushes down home prices across the spectrum. Therefore, LLPAs make the mortgage market more volatile, and more depressed during economic downturns.

This affects everyone, not just risky borrowers. Moreover, because of the correlated nature of home prices, lenders respond to the risk of declining home prices by charging everyone higher interest rates. We are all in it together in the housing market.

LLPA s were a response to the rise of Wall Street securitization in the early 2000s, which forced Fannie and Freddie to lower their underwriting standards to compete for market share. It was worth protecting Fannie and Freddie at that time from losses generated through risky mortgages. But by 2008, the private securitization market was all but dead. Today, LLPAs are a solution to a problem that no longer exists.

It’s easy to ignore LLPA s as a wonky, technical detail in an obscure secondary market. The harm they do is not as visceral as that done by a police baton.

Yet it is precisely this sort of functionally discriminatory pricing policy that forms the molecular structure of economic discrimination in America.

A key step toward racial equality is fixing the housing market. An impactful, concrete step that the federal government could take today to increase minority homeownership and decrease the racial wealth gap is to reform the LLPAs.

Adam J. Levitin is a professor of law at Georgetown University. He is the co-author, with Susan M. Wachter, of The Great American Housing Bubble: What Went Wrong and How We Can Protect Ourselves in the Future.

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passed its first anti-lynching bill in 2018, and another has been held up in the Senate.

Often when reparations are brought into polite conversation, opponents react skeptically, claiming “impracticability.” Yet courts often make damages determinations purely out of thin air for suits on patent violations, product liability, personal injury, and shareholder class action suits. Opioid drugmakers, tobacco companies, and oil companies have had to pay hundreds of billions in damages to remediate environmental damage, the harms of lung disease, and an overdose epidemic. So it seems possible to determine a fair remedy for Black communities for slavery, Jim Crow, redlining, segregation, police brutality, and other harms of discrimination.

Typically, contract damages are an attempt to make the breached-upon party whole. Just one way to achieve justice, as I’ve outlined in a recent law review essay, is to focus on outcomes rather than means, with a focus on closing the racial wealth gap. For example, reparations could mean that the federal government could enlist several programs and agencies at once, intended to eliminate the racial wealth gap. The means of elimination would be flexible so long as within a stated amount of time, the wealth gap was eliminated.

Several other government programs are designed in this way. For example, the Congressional Budget and Impoundment Control Act of 1974 created the Congressional Budget Office (CBO), tasked with analyzing congressional bills and agency programs with a focus on cost-cutting. The CBO has a mandate to score each bill and use a costbenefit analysis. This score is put to use when passing the bill. A similar oversight committee can be devised to score each bill and agency program on its effects on the racial wealth gap. Closing the racial wealth gap can be viewed as a specific regulatory goal and each agency can design their own program or response depending on their own specific domain. The racial wealth gap has deleterious effects on Black communities in practically every domain: environmental impact, education, credit availability, housing, and policing. Thus, a response must be multifaceted.

IN HIS LANDMARK “I HAVE A DREAM” SPEECH, MARTIN LUTHER KING SAID THAT “AMERICA HAS GIVEN THE NEGRO PEOPLE A BAD CHECK ... WHICH HAS COME BACK MARKED ‘INSUFFICIENT FUNDS.’” Madison called slavery “America’s original sin.” The sin has grown and festered and continues to infect our politics. C. Vann Woodward explained how white supremacy and Jim Crow destroyed the soul of the South. Racism destroys the soul of its perpetrators as it plunders the labor and the bodies of its victims. Frederick Douglass speaks of how he watched as the white woman who purchased him was ruined by slavery. He writes vividly about what it cost her to justify owning another human: lavery proved as injurious to her as it did S to me. When I went there, she was a pious, warm, and tender-hearted woman. … She had bread for the hungry, clothes for the naked, and comfort for every mourner that came within her reach. Slavery soon proved its ability to divest her of these heavenly qualities. Under its influence, the tender heart became stone, and the

lamblike disposition gave way to one of tiger-like fierceness. … That cheerful eye, under the influence of slavery, soon became red with rage; that voice, made all of sweet accord, changed to one of harsh and horrid discord; and that angelic face gave place to that of a demon.

Racism, its aiders and abetters, its justifiers, the cops, the white moderates are all sick with this rot at the core of our democracy. It must be rooted out and addressed. It must be held out to the light, examined honestly, and properly dealt with. For the sake of Black Americans—for the sake of the American soul. It is time to atone for this country’s original sin. No justice. No peace.

Mehrsa Baradaran, a professor of law at UC Irvine School of Law, is author of How the Other Half Banks and The Color of Money. She is a Prospect board member.

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Falling

ded Larry Summers, who The surprising survival of a rebran presidential candidate tic cra mo De a g lin se un co is ain once ag Martin Feldstein, the campus doyen of freemarket advocates. When Milton Friedman er ttn Ku rt be Ro By Secretary under Bill Clinton, and director of died in 2006, Summers gave a gushing eulo-

LARRY SUMMERS’S public career has been

marked by a carnival of policy debacles, punctuated by his brief, accident-prone tenure as president of Harvard. Yet, at 65, he is once again a senior economic adviser to another prospective Democratic president— one who has gingerly embraced transformative policies that Summers has long opposed.

Joe Biden and his handlers are aware that Summers is radioactive to much of the Democratic coalition. His campaign has downplayed Summers’s role. In fact, Summers is not only part of Biden’s senior economics policy team, but he is able to end-run other advisers a nd h ave one-on-one conversations directly with the former vice president.

Though much has been written about Summers, it’s worth reviewing the dynamics of his influence, serial repositioning, and uncanny survival. The more mistakes Summers makes, the more he is treated as a seer.

This is a complex man, with a brilliant mind and nimble political skills. He has powerful patrons and protégés. Perhaps most importantly, his views are very congenial to powerful financial elites, who have a great deal to lose should Joe Biden turn out to be another Franklin Roosevelt.

Summers has already held the two top Cabinet jobs on economic policy: Treasury

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the National Economic Council for Barack Obama. The career-capper post that has eluded him twice is Federal Reserve chair. He’s positioning himself through a familiar Summers tactic: wholesale image transformation.

Since exiting government in 2011, Summers has been engaged in a rebranding exercise, positioning himself well to the left of policies he espoused and carried out while he enjoyed actual power. A Summers trademark is never to apologize for mistakes earlier in his career, and to spin the truth to make his actual views sound different from what they were.

But the one area where he has neither altered his views, nor claimed different ones, is financial deregulation. Summers, unrepentant, continues to view it as his supreme accomplishment. That alone should give Joe Biden pause.

SUMMERS WAS BORN into economic royalty. Two of his uncles, Kenneth Arrow and Paul Samuelson, are Nobel laureates, both left of center. His parents, Robert Summers and Anita Arrow Summers, are also economists. His early work on economic theory and practice, which won him a John Bates Clark Medal for the most outstanding economist under age 40, often assessed how markets in practice were not as selfcorrecting as they are in theory.

But as a young professor at Harvard, while keeping some ties to more moderate economists, Summers attached himself to

gy, declaring, “Any honest Democrat will admit that we are all now Friedmanites.”

That certainly describes the Summers wing of the Democratic Party. We will soon find out whether it describes Biden.

Feldstein, who chaired Reagan’s Council of Economic Advisers, gave the young Summers a staff job in 1982–1983. In the 1988 presidential campaign, Summers burnished his Democratic credentials by advising Michael Dukakis. In the meantime, having been introduced by a former student working at Goldman Sachs, he had struck up a friendship with Robert Rubin.

The two men were taken with each other.

Summers was fascinated to watch a master trader at close range, and Rubin admired Summers’s brilliant capacity to rationalize Goldman’s activities as sound economics.

When Rubin became chair of Clinton’s National Economic Council, a new entity created especially for him, Summers had been serving as chief economist of the World Bank. Rubin brought him in as undersecretary of the Treasury for international economic affairs. In this post, held from early 1993 until 1999, Summers was the lead official in several key policy areas,

pw

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all involving the use of American influence to pressure Third World countries and the former Soviet Union to marketize as rapidly as possible. In every one of these areas, Summers’s advice proved disastrous.

When these market-opening policies blew up, Washington sponsored bailouts that required even more market-opening as the quid pro quo. Summers, along with Rubin and Alan Greenspan, were lionized in a famous Time magazine cover piece headlined “The Committee to Save the World.”

The more interesting question is why the world needed saving: because of the perverse, strong-arm policies inflicted on developing countries by the same Gang of Three.

The East Asian financial crisis of the late 1990s was largely the result of pressure from Washington and the IMF on small countries with successfully managed economies to fling open their capital markets. Summers was the point man. Hot money poured in, stimulated speculative booms, and led to overvalued currencies. When traders concluded that the currencies were at risk of crashing, the money poured out just as fast, creating a self-fulfilling prophecy of collapse.

The contagion hit even the strongest East Asian economies such as Korea, and spilled over onto speculation against the Russian ruble, deepening economic privation and paving the way for the rise of Vladimir Putin.

One country spared the worst was Malaysia, where Prime Minister Mahathir Mohamad rejected Western advice. Instead of letting the currency float to attract speculators, Mahathir imposed capital controls.

Western money would be welcome only as

long-term investments. In early 2002, a young Harvard Business School assistant professor, Rawi Abdelal, presented his first major case study, on Malaysia. He concluded that Malaysia’s policy had been sound. Summers, then president of Harvard, had been invited to the presentation by a colleague.

There, in front of some 900 students, he ridiculed Abdelal, indignantly declaring that capital controls were never warranted.

Walking across campus, Summers bumped into Robert Barro, a Chicago-school economist ostensibly well to Summers’s right.

He recounted the folly of Abdelal’s study.

“Larry,” said Barro, “He’s right.”

Mexico was a similar story as East Asia.

With NAFTA, Washington had pressured the Mexicans to liberalize capital accounts; the peso got overvalued, the money flow soon reversed, and the currency collapsed. The U.S. and the IMF responded with bailouts to strengthen the peso coupled with demands for further liberalization. Wall Streeters recovered their investments, but in Mexico real wages fell. Once again, Summers was the key player.

d r a w

On China policy, Summers began as a hawk. As Rubin pressured the Chinese leadership to open its markets to American investment banks, Summers became an enthusiast of admitting a pro–Wall Street China to the WTO, with few other changes to China’s mercantilist behavior. Bankers were protected; the manufacturing industry and its workers were thrown under the bus.

Summers was also a big promoter of other corporate-written trade deals such as NAFTA. The most damaging Summers policy debacle involved the rise of corrupt oligarchs as the path to the Putin dictatorship in post-Soviet Russia. I learned the details of Summers’s previously unheralded role in the extensive interviewing I did for a Prospect piece that ran this January entitled “Was Putin Inevitable?”

After Summers entered Treasury in 1993, he fought with State and Defense Department officials for control of Russia policy.

His secret weapon was the International Monetary Fund, whose assistance Russia urgently needed, as its economy was collapsing. Abrupt price decontrol, executed on January 1, 1992, had led to annual inflation rates of over 2,000 percent. Would the IMF be generous or stingy, and what conditions would be attached? As undersecretary, Summers was the main U.S. liaison with the IMF, and not shy about using that leverage.

The Clinton administration was divided.

People who knew the region best argued that Russia should be given time and large financial help to convert to a Europeanstyle, democratic mixed economy. They were opposed by military hawks who viewed post-Soviet Russia as a continuing geopolitical threat, and by free-market hawks led

by Summers, who counseled shock therapy.

JUL /AUG 2020 THE AMERICAN PROSPECT 21

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AS TREASURY SECRETARY, Summers’s

damage continued, though he has sought to obscure the realities. On the official U.S. Treasury website, the summary of Summers’s accomplishments as secretary between 1999 and early 2001 (written by Summers) claims that he led efforts to “insure the viability of the over-the-counter derivatives market. Summers also championed reforms to address corporate tax shelters and predatory lending practices.”

This claim is 180 degrees opposite from the role Summers actually played. The story

of Brooksley Born, the lonely official who foresaw the danger of derivatives, and was excoriated by Summers and other senior Clinton officials, has been recounted in several books. The title of one, Simon Johnson and James Kwak’s 13 Bankers, refers to an irate phone call Summers placed to Born, then the chair of the Commodity Futures Trading Commission (CFTC), in March 1997, after she proposed issuing a concept paper on the case for regulating derivatives.

“I have thirteen bankers in my office, and they say if you go forward with this you will cause the worst financial crisis since World War II,” Summers told her. These were not just any 13 bankers, but the heads of Wall Street’s largest commercial and investment banks—many of the same bankers who would beg for a trillion-dollar taxpayer bailout a decade later. Summers was right about one thing. The derivatives issue was indeed responsible for the worst financial crisis since World War II. But the cause was not the menace of regulating them, but the failure to regulate them.

Born was driven from the CFTC in 1999. To

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Summers pressured then-premier Boris Yeltsin to privatize state assets as rapidly as possible. So-called voucher privatization was carried out in two waves. First, in 19931994, Russian citizens were given vouchers with which to buy shares. Aspiring oligarchs bought up the vouchers, picking up the Russian extractive economy’s crown jewels for a song. Insiders at energy giant Gazprom, which was worth at least $40 billion, acquired the company for about $250 million.

In the second wave, in 1995-1996, the Yeltsin government, itself in need of cash, floated a corrupt scheme known as “loans for shares,” which delivered the rest of the state-owned economy to pro-Yeltsin oligarchs, who reciprocated with massive campaign contributions for Yeltsin’s 1996 re-election. The real economy kept faltering, living standards collapsed, and the result was big political gains for both Communists and nationalists. It was Putin who picked up the pieces.

Summers’s advice was also pockmarked by a personal conflict of interest. His close friend and longtime Harvard colleague,

Russian-born economist Andrei Shleifer, was head of a Harvard-initiated project in Moscow, which had the prime contract with USAID to help with the post-Soviet economic transition. On the side, according to federal prosecutors, Shleifer and his wife were using insider knowledge to make investments. The case was finally settled in 2004, by which time Summers was president of Harvard. Shleifer paid $2 million; Harvard, as directed by Summers, paid $26.5 million. Shleifer continued as a tenured professor, and this protection was one of the factors that led to faculty pressure for Summers’s ouster.

were part Greenspan (right) Summers and Alan from the d”— orl W the ve Sa to icted. of the “Committee infl es elv ms the y the strong-arm policies

Applying free-marke t theory where it didn ’t fi Summers’s record o t, n financial deregulatio n, Russia policy, Third World capital marke t liberalization, trade, and labor policy was marked by one avoid ab disaster after anoth le er. keep any successor from regulating custom derivatives, Summers convened a high-level task force. In November 1999, the President’s Working Group on Financial Markets issued its report, signed by Summers, Rubin, and Greenspan, as well as Securities and Exchange Commission chair Arthur Levitt and Bill Rainer, Born’s CFTC successor, recommending that such derivatives be exempted from regulation. Rainer had been co-founder of Greenwich Capital Markets, a major bundler of subprime mortgage-backed securities. This exemption was codified in the Commodity Futures Modernization Act of 2000, which prohibits derivatives from being regulated either as securities or insurance; for good measure, it prohibits states from regulating derivatives too.

So Summers did insure the “viability” of derivatives—for reckless Wall Street traders, not for the safety of the wider economy.

As for “predatory lending practices,” they proliferated on Summers’s watch, thanks to the deregulation he relentlessly promoted. The interaction of predatory subprime lending with unregulated and opaque derivatives such as credit default swaps was the single most important cause of the 2008 financial collapse.

Even Robert Rubin, architect of serial forms of deregulation that benefited both his former employer Goldman Sachs, and his future employer Citigroup, belatedly admitted to having second thoughts. “Larry

thought I was overly concerned with the risks of derivatives,” Rubin wrote in his memoir. Rubin’s after-the-fact regret was characteristically disingenuous; while in power, he used his influence to keep derivatives unregulated. But at least Rubin confessed a shred of remorse. Not Summers. It was hard to out-Rubin Rubin on liberating derivatives, but Summers managed it.

In sum, Summers’s record under Clinton on financial deregulation, Russia policy, Third World capital market liberalization, trade, and labor policy was marked by one avoidable disaster after another. The common element was to apply free-market theory where it didn’t fit the circumstances, and where it often benefited his patrons and paymasters on Wall Street. In all of these areas, Joseph Stiglitz, who repeatedly clashed with Summers, warned against these policies. His 2003 book, The Roaring Nineties, written five years before the financial collapse, reads like prophecy. Stiglitz’s views have been thoroughly vindicated. Yet Summers has been treated as the economic prophet, while Stiglitz, a Nobel laureate, has been kept far from power.

AFTER BARACK OBAMA won the 2008

election, it was clear that there would need to be two major policy thrusts—shoring up and reforming the banking sector, and a stimulus for the rest of the economy. But how large a stimulus, and for what?

As head of Obama’s National Economic Council, Summers asked Christina Romer, Berkeley economist and incoming chair of the Council of Economic Advisers, to assess the economy’s projected rate of collapse and the needed offsets. She came up with a $1.8 trillion gap. But in an options memo for the president, Summers deleted that option, narrowing the range to between $550 billion and $890 billion.

Worse, Summers also embraced a classic deficit hawk argument. In a 57-page confidential memo dated December 15, 2008, he warned the president-elect that “an excessive recovery package could spook markets or the public and be counterproductive,” with the private sector reacting to a flood of federal spending by bidding up interest rates.

Nothing of the sort happened. By 2012,

the deficit had been increased by $5 trillion—and interest rates stayed around 2 percent. Even with deficits rising dramatically to over $1 trillion a year due to Trump’s 2018 tax cuts, and then doubling again in the pandemic, interest rates have been so low that Fed officials worry more about deflation than inflation.

The memo also included a warning in bold, italics, and underlined, reportedly added at the insistence of OMB director Peter Orszag: “But it is important to recognize that we can only generate about $225 billion of actual spending on priority investments over the next two years, and this is after making what some might argue are optimistic assumptions about the scale of investments in areas like Health IT that are feasible over this period.”

This was a straw man. If Summers wanted more stimulus, simply sending the states money to offset recession-driven cuts would have directly generated over $600 billion in net economic activity. The Recovery Act provided the states just $145 billion over three years. During that period, state governments cut spending or raised taxes by well over $500 billion, according to a Brookings Institution study, and cut 641,000 jobs between 2008 and early 2012, all of which might have been spared with more federal assistance. So even without a single shovel-ready infrastructure project, the government could have generated more than twice the recovery relief that Summers and Orszag claimed was the limit, just via greater state and local aid.

When you offset the net federal stimulus against cuts in state and local outlays, the effective spending was less than half a percentage point of GDP per year. As a consequence, slow recovery and high unemployment dragged on and on.

Obama’s economic team compounded the damage with a severe avoidable error. By late 2009, Obama’s political and economic advisers were worried about his political vulnerability on the budget deficit, as well as the impact on interest rates and investor confidence. Led by Orszag and seconded

by Obama’s political team, the economists argued that deficit reduction was now a higher priority than a stronger recovery.

JUL /AUG 2020 THE AMERICAN PROSPECT 23

So Obama and his economic advisers convinced themselves that the economy would hit high gear by mid-2010, which they prematurely and disastrously dubbed Recovery Summer. With that assurance, the president could now “pivot” to deficit reduction. In his 2010 State of the Union address, Obama announced the formation of the economically perverse Bowles-Simpson Commission, to put the budget on track to deficit reduction. At the time, unemployment was 9.7 percent. It remained at 9.6 percent for the rest of the year, including on Election Day 2010, when the Democrats were crushed—the worst drubbing in a century— turning Congress over to Republican rule and precluding any further activist policies.

In this bizarre reversal from recovery to premature austerity, the best that can be said in Summers’s defense is that Orszag, not Summers, led the Bowles-Simpson faction, and Summers warned that a commission might box in the president. But he also favored significant deficit reduction, which he weirdly characterized as “recession insurance,” as if less deficit spending now would somehow create more capacity for more deficit spending later, rather than deepening the economic hole.

Summers’s concern with deficits led him periodically to f lirt with Social Security cuts. At one meeting in early 2011 of senior Obama officials with the so-called “Big Table” of progressive groups, Summers was asked about Social Security. He replied it was critical to defend Social Security “for the poor”—code for it being OK to make cuts in Social Security outlays for the middle class.

Summers also played a perverse role in the too-slow recovery when it came to mortgage foreclosures. Democrats in Congress insisted that the Wall Street bailout, known as the Troubled Asset Relief Program (TARP), include borrower relief. In a letter to congressional Democrats during the presidential transition, Summers promised that the administration would “commit substantial resources of $50-100B to a sweeping effort to address the foreclosure crisis,” as well as “reforming our bankruptcy laws” so judges could reduce principal on primary residence mortgages, a concept known as “cramdown.”

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Almost none of this happened. The foreclosure mitigation vehicle was a complicated mess of a program called the Home Affordable Modification Program (HAMP).

Instead of refinancing mortgages, a policy used extensively by the Roosevelt administration, HAMP encouraged banks to offer voluntary loan “modifications” on bankdictated terms. This tended to trap borrowers in additional debt, squeezing out a few extra payments and foreclosing on them anyway. About one million homeowners got sustained help, perhaps one-tenth of the need. Though Congress authorized $50 billion for mortgage relief, only $12 billion was ever spent, and just $2 billion in the critical first three years, when foreclosures spiked.

Meanwhile, Summers and his colleague, Treasury Secretary Timothy Geithner, actively opposed cramdown, though it had the support of most Democrats in Congress.

In short, Summers and Geithner were far more solicitous of bank balance sheets than of the fate of homeowners. Though Summers regularly convened all the players involved with HAMP to review its progress, it continued to fizzle. Leaving aside the cramdown debacle, when Summers was in a position to make HAMP work for homeowners rather than bankers, he let the program fail.

THE LAST FULL DISCLOSURE of Summers’s earnings showed that Harvard paid him just under $600,000 as a university professor in 2008. In that same year, he was paid $5.2 million by the private equity firm D.E. Shaw, where he was a managing director, plus $2.7 million in speaking gigs. So Wall Street paid him nearly ten times what Harvard did. After leaving the Obama administration in 2011, Summers returned to Shaw as well as Harvard. Liberating Wall Street is not just in his heart, but in his wallet.

Since leaving office, Summers has rediscovered Keynes. In several op-eds and longer papers, he has called for more public spending, and downplayed the risk of large deficits. But when he had the power to actually make some of that happen, he was AWOL or worse. To read his recent writings, you’d never know that he worried about bond

markets and urged only a modest stimulus in 2008-2009, when it most mattered.

In January 2019, he co-authored a piece with Jason Furman, titled “Who’s Afraid of Budget Deficits.” It contains this epic paragraph: ong-term structural declines in interL est rates mean that policymakers should reconsider the traditional fiscal approach that has often wrong-headedly limited worthwhile investments in such areas as education, health care, and infrastructure. Yet many remain fixated on cutting spending, especially on entitlement programs such as Social Security and Medicaid. That is a mistake. Politicians and policymakers should focus on urgent social problems, not deficits.

Larry, we hardly knew ye!

A stunning example of Summers’s revisionism is a paper published in May, coauthored by one of his graduate students, Anna Stansbury. The paper, “The Declining Worker Power Hypothesis: An Explanation for the Recent Evolution of the American Economy,” finds that widening inequality and disproportionate corporate capture of monopoly profits result from declining worker power. Specifically, they cite union busting; a weaker minimum wage; corporate concentration; “shareholder activism” and resulting pressure to cut wages; the fissuring of the workforce via outsourcing; and globalization. They write: “Our focus on the decline in worker power as one of the major structural trends in the US economy is in line with a long history of progressive institutionalist work exemplified by Freeman and Medoff (1984), Levy and Temin (2007), and Bivens, Mishel and Schmitt (2018).”

The mind reels. As the paper obliquely admits in this aside, progressive economists have been documenting these trends for four decades. It’s a eureka moment only because Summers decided, belatedly, that he agrees. It would have been noteworthy if Summers had written this paper around 1985—and acted accordingly in his role as a senior government official.

Where was Summers during 40 years

of corporate union bashing, wage stagnation, increasing economic concentration, and relentless globalization? Where was he on whether the government should enact labor law reform? Issue regulations to prevent wage theft and misclassification?

Use the president’s contracting power to promote a living wage? Tighten financial regulations to crack down on private equity abuses? Prevent outsourcing and hyperglobalization? These debates were not just academic. During Summers’s two stints in government, there were hard-fought battles over these issues, within both the Clinton and Obama administrations.

In every case, Summers was either actively on the wrong side, or silent. According to a Clinton official (who did not want to be quoted by name), Summers either ignored or actively opposed every proposal to help ordinary working people, including raising

DAVID ZALUBOWSKI / AP PHOTO

g effort to address Summers promised “a sweepin

the minimum wage, helping workers form unions, or being more aggressive on antitrust. He sided with Rubin on corporate trade deals and deregulating Wall Street, which increased corporate power to crush wages. Another official who worked on labor policy for Obama confirmed that Summers had displayed no constructive interest in these issues in that period as well.

Larry Cohen, then the president of the Communications Workers of America (CWA), told me, “During his tenure in the Obama White House, Summers often mentioned his support for unions to labor audiences, but then supported trade deals with Korea, Panama, and the TPP, which eroded worker power and U.S. jobs. The Obama White House never made collective bargaining a priority.”

If Summers was worried about economic concentration and the collapse of antitrust since Reagan, there is no record of it. On

the foreclosure crisis,” but stru

. ggling borrowers saw little help

the contrary, in one emblematic paper written in 2001 for the Antitrust Law Journal, Summers celebrated the ability of technology, innovation, globalization, and market competition to solve any lingering problems of concentration. He cautioned regulators against reviving antitrust enforcement: “[P]ain to competitors is somewhat suggestive of efficiency advantage rather than of the presence of monopoly power … and when antitrust divisions seek to derive political support and legitimacy by rallying competitors, there is at least some question as to the appropriateness of the position that they are taking.”

The first pro-union Summers piece I could find was published in 2015, in the runup to the 2016 presidential campaign. As the prospect of another Democratic presidency has loomed, Summers has belatedly found his inner Joe Hill.

Keynes famously wrote, “When the facts change, I change my mind. What do you

do?” But this alibi doesn’t excuse Summers, because he ignored facts that were palpable decades ago. Summers’s recent heresies as a dissenter from the church of corporate market worship seem more cases of political expediency than intellectual conversion.

Research by the Economic Policy Institute has been linking union bashing, declining worker power, and income inequality since its founding in 1986. It must be satisfying for EPI’s former president and chief economist Larry Mishel for Summers to admit he was right all along. But that doesn’t make Summers a trustworthy ally.

IN 2013, SUMMERS was running hard for

the post of Federal Reserve chair. He had already been denied the job once, when Ben Bernanke’s term expired in 2009. Tim Geithner, Summers’s sometime ally and frequent rival, had advised Obama to appoint Bernanke for a second term, and Obama did. In 2013, Summers had pressed Obama hard for the Fed job, and had something close to a commitment from the president.

In the Senate, Elizabeth Warren and Sherrod Brown were organizing other Democratic senators to warn Obama that they would oppose his confirmation.

In the middle of this fight, National Journal reporter Michael Hirsh dropped the most comprehensive Summers dossier, a cover story, that carried the title “The Case Against Larry Summers.” The cover was an unflattering photo of Summers, with a big red line through it. Among other indictments, Hirsh recounted how Summers, in an interview, had tried to spin his blockage of derivatives regulation as an effort to get derivatives traded on exchanges.

But Hirsh demonstrates from several key documents that the Clinton administration never pushed exchange trading whatsoever.

Summers, who had already figured prominently and unflatteringly in Hirsh’s authoritative 2010 book on the financial collapse, Capital Offense, was livid. He bitterly complained to the president of Atlantic Media, David Bradley, the owner of National Journal at the time. Though Hirsh’s editors backed their reporter, and no errors were ever found or corrections published, Bradley passed the word that

26 WWW.PROSPECT.ORG JUL /AUG 2020

after a decent interval, Hirsh had to go.

Within a few months, Hirsh had moved to Politico. This is another of Summers’s trademarks: vindictive retribution for those who cross him, and efforts gross and subtle to undermine potential rivals.

Meanwhile, Summers’s pattern of spinning earlier views is epidemic. In 1989, Summers co-wrote an academic paper with his then-wife Victoria, in support of taxing securities transactions, on the ground that securities markets had become too subject to short-term trading. This was the original argument of James Tobin, who had proposed such a tax as early as 1973. But in 2009, when several Obama administration officials—including the then-president— wanted to pursue an FTT, according to Ron Suskind’s investigative book Confidence Men, Summers quashed the idea.

What happened between 1989 and 2009, of course, was that Summers had become a Robert Rubin protégé and had done a lucrative stint on Wall Street. Last October, he reversed course again, writing on Twitter that “the case for a well-designed financial transactions tax like that in place in Hong Kong is stronger than the case for a wealth tax. It should be seriously considered.”

In mid-June, Summers wrote on Twitter that the U.S. should have, among other tax reforms, “full taxation of carried interest and capital gains.” Yet, as private equity billionaire David Rubenstein, the co-founder and current executive chairman of the Carlyle Group, pointed out to Summers, he made no moves to eliminate the carried interest loophole when he had the power to do so.

The prime policy area where Summers has resisted revisionism concerns financial deregulation, the signal realm where his own policy influence under both Clinton and Obama produced catastrophic results.

In a 2016 CNBC interview, Summers said, “Some parts of regulatory efforts have operated to remove many sources of income for banks, and that has had the perverse effect of when you have reduced future income, your safety declines.”

Summers has also cautioned against regulating a nascent banking industry competitor: financial technology firms,

or fintech. In a Washington Post op-ed in 2017, he wrote that he is “quite serene about the impact of fintech on financial stability.”

Summers is conflicted here, because he is an adviser and director of two fintech startups, Premise and Square.

As the 2020 Democratic nomination contest heated up, and momentum built for greater regulation, Summers belatedly began sounding like a born-again regulator.

“I am very troubled by @federalreserve Vice Chair Quarles efforts to roll back regulation … when many years into a recovery is when the dangerous lending starts and when the problems set hold. We are falling into the oldest pattern of procyclical deregulation.

It’s a serious mistake,” he wrote on Twitter in August 2019.

But of course “pro-cyclical deregulation”—reducing financial regulation as a boom becomes a bubble—was precisely Summers’s most perverse legacy in the run-up to the 2008 collapse. Nowhere does Summers acknowledge his own errors in earlier policies.

AS THE PROVERBIAL BULL in the China

shop, how does Summers survive these serial policy blunders? One answer, suggested in interviews with multiple people who’ve worked with him, is that he has innumerable allies among former students, colleagues, and Wall Street notables. Another is that he is a world-class briefer. His encyclopedic knowledge of economic issues, his boundless self-confidence, and a capacity to reduce a complex problem to policy options has impressed presidents. “Larry sucks up, and he bullies down,” says a senior official who worked with him.

This complex temperament served Summers well enough when he held senior posts in government, where he was an autocratic master in his own realm, backed by Rubin and Obama himself. It did not work so well at Harvard, where there is a tradition of power being more diffused among administrators and faculty. Once again, Summers’s way was paved by Rubin, who at the time was chair of the seven-member Harvard Corporation, the legal authority that runs the place. Rubin assured skeptics, all too familiar with Summers’s ways, that “Larry had changed.” He had not.

JACQUELINE S. CHEA / © 2018 THE HARVARD CRIMSON, INC. ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION.

A second campus tha

t Summers wa

s delayed more nted as his legacy wa

What most annoyed faculty was Summers’s imperious tendency to treat the professoriate as so many deputy assistant secretaries rather than as scholars in their own right. In one notorious episode, at a meeting with the sociology department that Summers called to try to shore up dwindling faculty support, he offered this winning analogy in response to a question about why sociologists often cite economists but economists seldom cite sociologists: People at the University of Alabama cite people from Harvard but people from Harvard rarely cite people from the University of Alabama.

The publicity surrounding Summers’s Harvard downfall focused primarily on his high-profile gaffes, such as his attack on the scholarship of Cornel West (who soon decamped for Princeton) and his outlandish suggestion that women might be underrepresented in math and science because of gender-based deficits. But other misadventures are more instructive.

When Summers became president, he virtually took over Harvard’s endowment from the university’s very well-compensated money managers. This was an astonishing act of hubris; as brilliant as Summers is, money manager is a whole other skill set than macroeconomist and part-time hedge fund trader. Summers insisted on betting not just endowment funds, but Harvard’s

than a decade by the

financial collapse.

Summers’s recent he sies as a dissente rer fr the church of corp om ora market worship se te em more cases of poli tic expediency than in al te lectual conversion l. working capital, over the objections of both the money managers and the university’s finance office.

One trade Summers personally directed was based on his assumption that interest rates would rise as the economy strengthened. When the economy began cratering in 2006-2007 and interest rates fell, Harvard had to spend half a billion dollars to buy back underwater securities that were likely to decline further. The endowment had consistently beaten the market in the years when it was managed by professionals. Summers’s mistake cost the university $1.8 billion and led to severe budget cuts.

Summers’s defenders have argued that on balance his gambles over five years made more than they lost. But notably, Summers was epitomizing the very behavior he later condemned: being part of the euphoria in the last stages of a financial bubble. It was a bubble that Summers’s own policies had helped create.

Long before Summers took charge in 2001, Harvard had begun secretly buying up 52 acres of land in Allston, across the Charles River in Boston, using property management companies as straws. When this was made public in 1997, Boston Mayor Tom Menino was furious. Allston was a jumble of affordable working-class housing, low-rise storefronts, auto repair shops, and the like. Harvard viewed it as a future second campus.

Summers enthusiastically embraced the idea, imagining that Harvard’s professional schools could be induced to join the business school, already on the Allston side. But he met fierce resistance, especially from the law school, which had just refurbished much of its cherished campus just off Harvard Yard.

Summers settled on the idea of making a science complex the heart of the new Allston satellite. Billions of dollars were borrowed and a massive excavation commenced.

But by the time construction had begun, the losses to Harvard’s endowment put the project on indefinite hold. For a decade, the suspended project was a giant hole in the ground, the perfect metaphor for the multitrillion-dollar hole that Summers’s policies dug for the U.S. economy. Construction finally resumed in 2016. The new science and engineering campus (named for hedge fund billionaire John Paulson, who bought the name with a $400 million gift) is slated to open next spring. The symbolism is apt. Paulson made his billions using financial engineering to bet on a collapse in the housing market.

Summers once again is poised to return to power. In reporting this piece, I gained one other insight about Summers’s zombie-like survival. Several officials who had served with Summers, had tangled with Summers, and even previously criticized him in print, did not want to be quoted for the record. Their off-the-record comments ranged from scathing to unprintable.

I don’t want Larry to think I’m gunning for him, said one. We are working with Biden, explained another, and I don’t want to attack one of his team. So even as a well-earned progressive pariah, Summers remains as a force to be feared.

Isn’t that the very definition of power?

JUL /AUG 2020 THE AMERICAN PROSPECT 27

3 M

MONOPOLY, MISREPRESENTATION AND MALPRACTICE Hundreds of thousands of troops suffered hearing loss from 3M’s faulty battlefield earplugs. They allege that the company and its private equity–fueled acquisition falsified data and knowingly hid evidence.

By Olivia Webb It was 2013, and Gabriel found himself

alongside dozens of other newly enlisted Marines, watching artillery rounds go off as part of a training exercise. Following standard operating procedure, Gabriel, who asked that his last name be withheld, wore earplugs.

For some reason, they didn’t seem to work.

He brushed off the pain; in the Marines, he explained, “God forbid you come off as weak.”

He wasn’t about to complain about an earache so early in his military career.

After training, Gabriel became an aircraft mechanic. Before turning 23, he rose to the rank of corporal and did a six-month tour in Bahrain. When he left the Marines, four years after his ears started ringing, an audiogram revealed that his military service had resulted in deep damage, leaving his hearing markedly worse than when he enlisted. These days, his ears constantly ring. His inability to discern the direction

28 WWW.PROSPECT.ORG JUL /AUG 2020

of noise leaves him paranoid, “especially at night, when I’m at home,” he told me.

“You’re always focused on what’s going on, is there anything in the house … [and] if you can’t hear, you’re kind of at a loss.”

Meanwhile, Elliott Berger, a division scientist at 3M, was passionate about sound.

His greatest joy, he told a corporate interviewer on the occasion of his 2018 retirement, was hearing the world’s diverse noises, “from the sounds of rain on a pane of glass to a zephyr from the west passing thru [sic] a grove of saguaros.”

Berger would probably lament Gabriel’s inability to hear a gentle breeze. But Gabriel’s hearing loss is one of the casualties of Berger’s successful career. While working at Aearo, a large, private equity–owned company eventually acquired by 3M, Berger falsified crucial test data.

By the time Berger and his bosses’ obfus-

Soldiers from the 2nd Armored Cavalry Regiment train in Baghdad in 2003.

JUL /AUG 2020 THE AMERICAN PROSPECT 29

cation was discovered in 2015, Aearo and its ciers adopted a growth-at-all-costs mind- pany employees had to cut serious corners, parent company 3M had supplied millions set. The original management team was shortcuts that ultimately cost hundreds of of earplugs to nearly all troops who served replaced wholesale in 1998. In the words of thousands of people their hearing.

Aearo’s dual-sided earplug, called the between 2006 and 2015. Each pair of ear- the new CEO Michael McLain, the old team plugs was faulty, due to a mechanical flaw had had too much of a “classical industrial Combat Arms Earplug (CAE), quickly discovered in 2000 by Berger and another orientation”—which seems to have meant became one of military procurement offilab scientist, Ronald Kieper, and subse- they sought to balance the need for profits cers’ favorite options for hearing protection. quently hidden. Now, more than 160,000 with concern for the consumer. Instead, (Aearo executives, according to internal veterans, current service members, and under McLain’s leadership, Aearo engaged emails later released, had made sure to civilians are suing 3M for hearing loss, in in a rapid push to reward shareholders, “seed” the product into recruitment proone of the largest litigations of its kind in which had serious consequences. grams.) By 2003, with an expanding U.S. U.S. history.

In 2004, Vestar Capital Partners sold military presence in the Middle East, the How 3M—the same corporation bask- Aearo to Bear Stearns Merchant Banking, CAE became indispensable. The Marine ing in a PR glow from providing masks and followed in less than two years by a sale to Corps alone ordered over 20,000 pairs. other gear to doctors and nurses during the a third private equity firm for nearly double In 2004, the CAE became standard for all COVID-19 pandemic—chose to sell flawed the price, followed in another two years by deploying service members. During the tenpersonal protective equipment to the U.S. 3M picking up the company for $1.2 billion, year period from 1999 to 2009, according to military is a story of misaligned business an additional 60 percent markup. Along internal sales figures, Aearo supplied more incentives, rapid monetithan 5.2 million pairs of zation driven by private CAEs to the military.

Until the development equity, and risk transfer by Despite being only 10 percent effective at blocking noise that could lead to hearof the CAE, earplugs had financiers onto consumers ing loss, defective earplugs were issued to all deploying U.S. service members for for financial gain. It’s also not been mandatory. With a story of monopoly, of more than ten years, until a lawsuit discovery process revealed that testing data millions of earplugs newly sole-source contracts and had been falsified. deployed in the field, milimarket power. The smoktary audiologists expected Intended to be reversible, one ing gun of 3M’s decepto see a steep decline in side was claimed to let in lowtion was only discovered medical issues. Instead, level noises, such as officer they were shocked to find after the company tried to commands, while blocking that, by 2007, almost 52 strong-arm another earlouder noises. percent of combat solplug manufacturer out of diers had at least moderthe business. ately severe hearing loss.

In some situations, the earDisability payments for Aearo, established in July plugs became more effective hearing loss and tinnitus 1995, showed the signs of a if the small rubber flanges (ringing in the ears) skyfinancialized scheme from were folded back. That rocketed by 319 percent the beginning. It was born information never made it in the five-year period when the Cabot Corporainto use instructions. between 2001 and 2006; tion, a maker of protective during at least part of equipment, was caught manufacturing faulty respirator masks. the way, McLain and a group of some 80 that time, the CAE was standard issue. The Cabot distanced itself from the situation executives were able to buy in with equity troops in question all had functioning earby bequeathing the respirator business to a stakes, incentivizing them to further maxi- plugs, researchers thought, so the cause newly formed subsidiary they called Aearo. It mize Aearo’s shareholder value. As McLain must have been the uniquely loud weapons wasn’t exactly independent, however—Cabot noted to a reporter, “Each time [Aearo turns and style of urban, modern warfare. But the retained 41 percent of Aearo, while Vestar over], everybody has done well.” researchers didn’t account for the earplugs Capital Partners, a private equity firm, held Unfortunately, by “everybody,” McLain offering a mere 10 percent of the advertised the rest. Under the terms of the agreement, only meant shareholders. levels of protection.

Cabot indemnified Aearo for respirator lawShortly after McLain became CEO, Aearo suits, so long as Aearo paid Cabot an annual began pursuing a lucrative contract to pro- Aearo’s first shortcut with the cae was its $400,000 fee. vide earplugs to the U.S. military. To get simplest: The company never tested the Sometime between 1995 and 1998, Cabot the contract, which eventually comprised earplugs’ effectiveness before selling them. and Aearo parted ways, and Aearo’s finan- a significant portion of 3M’s revenue, com- In November 1999, Elliott Berger admitted

Earplugs That Let In the Noise

30 WWW.PROSPECT.ORG JUL /AUG 2020

PREVIOUS PAGES: GREG BAKER / AP PHOTO

as much in an email to his boss, writing, “It recently occurred to us that we have no data on the actual version of the [CAE].” By that point, according to internal sales numbers, Aearo had already sold 2,000 pairs to the military, while never putting the CAE through controlled hearing tests.

Trials on the earplug didn’t begin until the following spring. Berger and Kieper decided to test the CAE in Aearo labs, using some subjects who were current Aearo employees. This gave Berger and Kieper more control over the tests and was, according to attorneys representing harmed service members, “consistent with Aearo’s ‘off-book’ practice of fishing for high [protection levels] by starting and stopping tests.” Indeed, when the CAE immediately fell short of the desired numbers, Berger and Kieper were able to stop the first trial after testing only eight subjects.

It was apparent to Berger and Kieper that something was seriously wrong with the earplugs; they were barely providing any protection at all. As Garrad Warren, the president of Aearo North America, would later testify, the results from that first test, if reported accurately, would’ve made the earplugs “impossible to sell.”

Berger and Kieper examined the CAEs and discovered a mechanical flaw. The CAE had a short stem, with large arms on each side. Each arm had three rubbery flanges that looked like small umbrellas stacked on top of each other. As designed, the stem of the CAE was too short, allowing the flanges to imperceptibly pull the earplug out of the user’s ear canal. With a longer stem, the problem might be averted.

Instead of going back to the design lab, Berger and Kieper decided to take another shortcut: They folded the flanges back. With this improvised method, they got much better lab results. The scientists took other shortcuts, too. They rounded numbers up and down as needed; in some tests, they folded back the flanges, and in others, they didn’t. The final numbers were so unreliable as to be largely fake.

Despite the unscientific methods, emails made public in subsequent lawsuits suggest that Berger thought Aearo could continue selling the CAE, as long as the instructions

A 3M scientist told his boss “the existing product has problems unless the user instructions are revised.” There was no response. included in the package recommended folding back the flanges. To his boss, Brian Myers, Berger noted that “[i]t looks like the existing product has problems unless the user instructions are revised,” referring to the need to fold back the flanges. But Myers never responded, and Berger seems to have simply let it go. He was just one scientist of many, and it wasn’t in his job description to decide instructional messaging for the military. Berger later testified that he had no written documentation that the military was advised about performance issues with the CAE at all. Myers, in later testimony, said he “did not recall” communicating with any military official about the issue.

Though they were routinely used on the

battlefield, the CAEs, up to this point, had limited military distribution. This changed in 2006, when the Defense Logistics Agency, part of the Department of Defense, formulated a Request for Proposal (RFP) with the CAE clearly in mind. The RFP requested dual-arm earplugs that coincidentally looked very much like Aearo’s model. The document provided minimal specifications, except for numerical requirements for how much noise the earplugs should block. To no one’s surprise, Aearo won the first $4.5 million contract, and several thereafter, making it the exclusive provider of earplugs for large portions of the U.S. military. (The Air Force is a notable exception; due to the constant noise of jet engines, that branch regularly issues earmuffs.)

Two years later, 3M bought Aearo, bringing it into its Personal Safety Division. 3M, formerly the Minnesota Mining and Manufacturing Company, is a throwback to the days of conglomerates, when the same firm could sell Post-it Notes and Scotch tape,

and also aircraft parts and body armor.

With $32 billion in sales last year and 96,000 employees, it’s a regular entry in the Fortune 500, a rare manufacturing stalwart with many plants in the U.S. It’s one of those boring companies that books solid sales and pays its dividends every year. (3M has increased its dividend for 62 straight years.)

But the Aearo acquisition highlighted 3M’s willingness to push the envelope. With a monopoly on the military earplug market, Aearo, and subsequently 3M, raised prices, inching upward from $5 to nearly $8 per pair. Such defense profiteering is in poor taste but not unusual. Procurement officers are not trained to evaluate technical data, audiological or otherwise, from contracted companies, and sales executives know they can take advantage of this dynamic.

CAEs were available for civilians to purchase as well, under a different brand name and at lower prices than the military (in 2006, according to a deposition, the civilian version cost approximately a dollar less per pair). With the majority of sales coming through the military, the massive profit margin of the monopoly defense contract inspired jocularity inside 3M. In one internal email later made public as part of a lawsuit, a marketing manager wrote, “$0.85 cost, $7.63 selling price … What more does he need to know? LOL.” A brand manager replied, “CAE pays the bills.”

Although 3M employees in the hearing division knew 3M was profiteering, and some knew the CAE protection data was falsified and unreliable, the earplugs indeed paid the bills for an outsized portion of 3M. Internal sales figures show that from 2003 to 2013, an average of $4 million in CAEs were sold per year. At its peak of usage, the CAE alone accounted for almost 20 percent of the

JUL /AUG 2020 THE AMERICAN PROSPECT 31

hearing division’s total operating income, according to internal emails from executives.

3M’s monopoly, though, was not safe from

outside attack. In 2011, panicked emails began to ricochet between executives. A competitor, Moldex, had decided to enter the earplug market, offering an earplug called the BattlePlug, priced below the inflated CAE. 3M got early warning thanks to its contacts in the military procurement office, and executives in charge of the contracts went into overdrive. Before switching to a phone call, the contents of which were not recorded, one emailed the others, “I can’t stress enough how important our prompt defense of 3M’s [intellectual property] is.”

What they resorted to was a frivolous patent infringement lawsuit. This is a common tactic for a monopolist looking to maintain its hold on a market. As Bert Foer, the founder and former president of the American Antitrust Institute, told me in an email, while all companies seek competitive advantage, corporations with high market share are “in the strongest position to do this because they are likely to be highly profitable, and also because they have the most to gain by expending money to exclude rivals

32 WWW.PROSPECT.ORG JUL /AUG 2020

from their market.” 3M benefited simply by filing this case; by using patent infringement claims to delay Moldex from entering the earplug market, 3M was able to extract a few more years of monopoly revenue.

But the case ultimately led to the collapse of 3M’s hold on earplug contracts.

After a process that took over a year, Moldex won the patent lawsuit—their BattlePlugs were single-armed, and the CAE was dualarmed. Shortly thereafter, Moldex reciprocated with an antitrust lawsuit against 3M. As Moldex lawyers sifted through 3M documents during the discovery phase, they discovered the startling paper trail of the falsified tests from 2000.

Hours after learning that the damning CAE test results were in Moldex lawyers’ hands, Brian Myers, who was still a vice president at the now merged company, sent a frantic, late-night email to a supply chain manager. “Kay,” he wrote, “please cease shipping immediately and put on hold indefinitely the [CAE].” After over a decade of sales, the faulty earplugs were finally off the market—but only because Aearo and 3M had been caught.

The urgency with which the CAEs were pulled from the market reflected how poorly

the plugs actually functioned, but it was about 15 years too late. Hundreds of thousands of troops had relied on the earplugs to provide protection and had suffered hearing damage. Many suffer constant ringing in their ears or have permanent hearing loss. Some can never hear high frequencies again, even with a hearing aid—which is particularly painful, because this deafness can overlap with the frequencies of the voices of their wives, children, and mothers.

Troops who never saw action in the field still returned home with damage they never anticipated. “[We] never thought, at [age] 25 that we’d be losing hearing so quickly,” Gabriel told me.

In 2016, with the information it had gathered during the antitrust case, Moldex filed a whistleblower lawsuit with the U.S. government, alleging that Aearo/3M had falsified data and obscured the faultiness of the CAE. The government negotiated a $9.1 million settlement, of which Moldex received approximately 20 percent. (The government’s settlement comprised less than two years of 3M’s average revenue on the CAE.) Under the terms of the settlement, injured soldiers received nothing. Since then, separate lawsuits brought by individual sol-

JIM MONE / AP PHOTO

3M headquarters in Maplewood, Minnesota. It’s a rare Fortune 500 company with many manufacturing plants in the U.S.

3M bought into a monopoly contract and used its monopoly power to extend it, as service members suffered hearing loss. diers have been winding through the courts.

Most of them have been organized into a mass tort, a type of class action in which every participant has their own lawyer.

As of June 2020, the mass tort represents

more than 160,000 veterans, current soldiers, and a few civilians who allege hearing loss as a result of Aearo/3M’s earplugs. A trial is expected to begin in the U.S. District Court for the Northern District of Florida, with the first bellwether cases scheduled for early April 2021.

The outcome of the mass tort remains to be seen, but 3M has remained defiant.

The corporation asserts that the military forced them to provide faulty earplugs by requesting that the plugs fit into the standard carrying case. And during depositions, executives have insisted that they had the right to withhold testing data from the military. When asked if it was OK for Aearo/3M to sell a product and conceal information that would have a negative effect on soldiers, Martin Salon, a former vice president at Aearo, replied, “Yes.” Similarly, Timothy McNamara, 3M’s sales manager for the Midwestern U.S., was asked, “You don’t believe that the combat soldier is entitled to know … he has 90 percent less protection than represented by you because it was tested differently than you are telling him to use it?” McNamara answered affirmatively.

In a lengthy emailed statement sent to me by communications manager Fanna HaileSelassie, 3M denied the mass tort allegations. “3M has great respect for the brave men and women who protect us around the world, and their safety is our priority,” the statement reads. “3M’s predecessor, Aearo, worked in close coordination with the U.S. military on the CAEv2 product and informed the military that the company’s testing had shown that the military’s deci-

sion to shorten the CAEv2 created potential fitting issues. The U.S. military was aware of those issues and the need to train users of the product to fold back the flanges on the opposite end, as needed, to get a good fit. We deny that any information was withheld from the government, and we deny that this product was defectively designed or caused injuries. We will vigorously defend ourselves against such allegations.”

Whatever the outcome, the case reveals

something striking about how large corporations imagine their role in society.

From its inception, Aearo existed as a limited liability shield between the financial well-being of its executives and the physical harm caused to hundreds of thousands of consumers. For the executives, Aearo made their career: Michael McLain made millions and now works at a private equity firm himself. For military service members, though, who trusted the U.S. government— which in turn trusted the data given to them by private contractors—to provide them with safe equipment, Aearo made their time serving more dangerous.

The case also reveals the bankruptcy of focusing on shareholder value above all else.

From the shareholders’ perspective, Aearo was a pure win; at its peak turnover between private equity firms, shareholders saw Aearo’s value nearly double every two years. With gains like that, no shareholder would want to stop the money train. And with the bigness of 3M and the complexities of military procurement, no single consumer could claim hearing loss and make a difference.

Finally, it reveals the problem of monopoly. The sole-source contract granted to Aearo and then 3M removed the need to provide superior quality as the years went by, instead relying on the same faulty product. When 3M did face competition, it used

a time-honored tactic to prevent that rival from getting to market, delaying its ultimate exposure, as service members continued to use its products and suffer hearing loss. 3M bought into a monopoly contract and used its monopoly power to extend it.

Only a private antitrust lawsuit brought the whole thing crashing down.

During the coronavirus pandemic, 3M has been hailed as a hero for providing gear to protect medical personnel, which makes its previous role with personal protective equipment all the more salient.

The contract 3M obtained from the military for N95 masks and other equipment, awarded without competitive bidding, totaled $1 billion, making it the largest federal contract related to COVID-19. The company’s past history of failing to meet expectations on government contracts didn’t deter the Pentagon.

According to Lucas Kunce, a former military officer familiar with defense procurement and an American Economic Liberties Project senior fellow (who, full disclosure, is one of my colleagues), “This appears to be another case of financiers monetizing risk.

Like the subprime mortgage crisis or the 737 MAX … They appear to have converted a risk to service members’ hearing into profit for themselves. I wish I could say this was a one-of-a-kind case, but it’s not.”

Countless other financiers have leveraged the complexities of military contracting to slip faulty products into use. In some cases, as with the CAE, real people are hurt. But the cycle of monetization and light punishment continues, business school professors keep professing the morality of shareholder value, and the risk is always passed down to the individual.

Today, Gabriel has found work in the computer industry, where he thankfully doesn’t need to hear much. The ringing in his ears bothers him, enough that he’s helped recruit new plaintiffs to the case.

“We’re going after a company that created a bad product on purpose,” he told me. “The military sued them first and won, and now it’s our turn.”

Olivia Webb is a policy analyst at the American Economic Liberties Project.

JUL /AUG 2020 THE AMERICAN PROSPECT 33

Foreign Policyfor Hire

Strategic consultants will define Biden’s relationship to the world.

BY JONATHAN GUYER

THEY HAD BEEN PUBLIC servants their

whole careers. But when Hillary Clinton lost the 2016 election, two departing Obama officials were anxious for work. Trump’s win had caught them by surprise.

Sergio Aguirre and Nitin Chadda had reached the most elite quarters of U.S. foreign policy. Aguirre had started out of school as a fellow in the White House and a decade later had become chief of staff to U.N. Ambassador Samantha Power. Chadda, who joined the Pentagon out of college as a speechwriter, had become a key adviser to Secretary of Defense Ash Carter in even less time. Now, Chadda had a long-shot idea.

They turned to an industry of powerbrokering little known outside the capital: strategic consultancies. Retiring leaders often open firms bearing their names: Madeleine Albright has one, as do Condoleezza Rice and former Secretary of Defense William S. Cohen. Their strategic consultancies tend to blur corporate and governmental roles. This obscure corner of Washington is critical to understanding how a President Joe Biden would conduct foreign policy.

He has been picking top advisers from this shadowy world.

At the outset of a new administration,

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high-ranking officials often join one of a dozen such firms, which are surprisingly bipartisan in their makeup, to help companies navigate the areas where their relationships give them power. The model was pioneered by Henry Kissinger, who through Kissinger Associates represented American Express and Coca-Cola, among other banks and transnationals. In Beijing, Washington, and developing countries, strategic consultants help corporations manage tricky regulations, potential crises, and new markets. Their behind-the-scenes work in world capitals can look a lot like lobbying.

The problem for Aguirre and Chadda was that neither young man was a marquee name. Chadda realized that the latest crop of senior officials hadn’t yet started their own named consultancies. “The thought for us was to build a living and breathing platform, with those who are enthusiastic about serving again,” he said. Staying up late one night, they drafted a plan and came up with the first target they would pitch.

Michèle Flournoy had served as undersecretary of defense for policy from 2009 to 2012. Both Aguirre and Chadda had known her well in the Obama administration. Since leaving office, she’d spent several years in

consulting and was hitting her stride. With Flournoy as senior adviser, Boston Consulting Group’s defense contracts grew from $1.6 million in 2013 to $32 million in 2016. Before she joined, according to public records, BCG had not signed any contracts with the Defense Department.

Flournoy, while consulting, joining corporate boards, and serving as a senior fellow at Harvard’s Belfer Center, had also become CEO of the Center for a New American Security in 2014. The think tank had an annual budget of about $9 million, and defense contractors donated at least $3.8 million while she was CEO. By 2017, she was making $452,000 a year.

If a Democrat were to win office, she would likely become the first woman defense secretary. She had considered an offer to serve as deputy to Trump’s first secretary of defense, Jim Mattis, but ultimately withdrew from the vetting process and stuck to consulting. “That’s more of a labor of love,” she told me. “Building bridges between Silicon Valley and the U.S. government is really, really important.”

Intrigued by Aguirre and Chadda’s idea of starting her own shop, she had one condition: find another big name, so it wouldn’t just be Flournoy and Associates.

JONATHAN ERNST / REUTERS

They needed another co-founder. Establishing a new firm was an investment and a risk, and many Obama officials were already spoken for, some headhunted by corporations or consultancies, others returning to academic appointments or finding respite in research institutions—many wearing all those hats at once.

Flournoy could carry her own private practice, but she didn’t want a firm with her name on it alone. The trio reached out to defense and intelligence honchos, but with no luck. Then a particular Washington fixture came to light.

He had been Vice President Joe Biden’s right-hand man for almost two decades and finished out the Obama administration as deputy secretary of state. He was known for his unimpeachable ethics. Having written Biden’s speeches for years, he had started to enunciate with the vice president’s drawl

when he appeared on CNN. He had never cashed in on his international connections, years of face time with Saudi, Israeli, and Chinese leaders.

His name was Tony Blinken. With his commitment to join Flournoy as founding partner, a new strategic consultancy was born. They called it WestExec Advisors.

WEST EXECUTIVE AVENUE runs along the West Wing of the White House, the connection between presidential power and the offices where aides sit and do the real work.

The name WestExec Advisors trades on its founders’ recent knowledge of the highest echelons of decision-making. It also suggests they’ll be walking down WestExec toward 1600 Pennsylvania Avenue some day soon.

The Obama campaign in 2008 made a pledge to exclude lobbyists from policy deliberations and, once in office, policy-

making. “Lobbyists are not bad people,” then-Sen. Joe Biden said. “Special interest groups are not bad people. But they are corrosive.” Biden was the most modest vice president in recent history, coming into office with a net worth of less than $150,000.

But afterward, he made big money, profiting from a multimillion-dollar book deal and earning $540,000 annually from a University of Pennsylvania center named for him that doesn’t involve any teaching. He nevertheless promoted himself as MiddleClass Joe. “I work for you—not any industry,” he tweeted last year.

But many of the people who work closely with Biden are enmeshed in the opaque world of strategic consultancies and by extension a network of the world’s biggest businesses. If they’ve been consulting for corporations with offshore interests, this spells potential conflicts. “One of the big-

Tony Blinken, second from left, has been Vice President Joe Biden’s right-hand man for almost two decades and finished out the Obama administration as deputy secretary of state.

JUL /AUG 2020 THE AMERICAN PROSPECT 35

If a Democrat were to win office, Michèle Flournoy would likely become the first woman defense secretary.

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Strategic consultants’ behind-the-scenes work in world capitals can look a lot like lobbying. the rise of ISIS. Biden ignored experts who were skeptical of Maliki and preferred to glad-hand. “He came to deal with Iraqi politicians like local political kingpins in Delaware or Pennsylvania,” said Robert Ford, who was deputy ambassador in Baghdad from 2008 to 2010.

There is no Biden Doctrine. “He’s not a guy who knows history. He’s not a guy who is intellectually curious,” said Emma Sky, who advised the U.S. military in Iraq. “It’s all about personal relationships.” Those close bonds may cloud his judgment. He has expressed “love” for Israeli Prime Minister Benjamin Netanyahu even after he

had defied the Obama administration and stood by the late Egyptian President Hosni Mubarak as he assaulted protesters.

In effect, Biden’s foreign policy is a blank slate, onto which often-conflicted advisers from the traditional national-security establishment will project actual policies.

If “personnel is policy,” as Sen. Elizabeth Warren likes to say, we can learn a lot about Biden from his team. In addition to Blinken, advisers include Nicholas Burns (The Cohen Group), Kurt Campbell (The Asia Group), Tom Donilon (BlackRock Investment Institute), Wendy Sherman (Albright Stonebridge Group), Julianne

ANDY WONG / AP PHOTO

gest gaps in ethics laws is that we don’t require strategic consultants to register as lobbyists,” said Mandy Smithberger of the Project on Government Oversight.

When it comes to foreign affairs, Biden and his advisers are nonideological and mainly transactional. In Obama’s situation room, he sometimes urged restraint, according to people who were there, and sometimes was hawkish. Rather than being associated with a particular school of statecraft or a signature policy accomplishment, Biden is known for his intimacy with world leaders.

Tasked by Obama to end the Iraq War, Biden supported Nouri El-Maliki, the leader he knew, and rescued the Iraqi prime minister’s career even though it ended up fracturing the country. When Maliki narrowly lost in 2010, Biden didn’t give Iraqi political parties time to broker a new coalition.

With Biden’s endorsement, Maliki gained a second term; he grew more authoritarian, which is now widely believed to have led to

A Biden Adviser’s Side Hustle How Jake Sullivan got a gig with Uber TO UNDERSTAND HOW strategic consultancies work, one might look at the recent career of Jake Sullivan, a former deputy national security adviser to Vice President Joe Biden.

As campaigning accelerates, Sullivan has claimed a spot in Biden’s inner circle. He was also until recently a partner at one of the biggest and most opaque global consultancies.

After working as a strategist on Hillary Clinton’s 2016 campaign, Sullivan joined the London and New York–based Macro Advisory Partners in January 2017. Run by former British spy chiefs, Macro Advisory Partners has about 30 full-time staff and reported $37 million in revenue last year.

Macro Advisory Partners has used Sullivan’s involvement as a selling point in offering “trusted counsel in a turbulent world,” with his face atop the roster on their website’s landing page. But when Sullivan publishes a magazine article about U.S. foreign policy or delivers university lectures, he almost always omits this job from his biography.

Though Macro Advisory Partners doesn’t disclose a client list, it would include mining companies in developing countries, sovereign wealth funds, and the rideshare company Uber.

Earlier this year, Sullivan spent several months representing Uber on the other side of the table from labor unions. He was trying to work out an alternative to California’s Assembly Bill 5 legislation, which extended new protections to gig workers, like minimum wage and unemployment.

As the law went into effect in January, the $61 billion company negotiated with the SEIU and the Teamsters behind the scenes to create a carve-out that would have let Uber avoid giving benefits to contractors.

Sullivan and Macro Advisory Partners declined to comment. A source familiar with the engagement told the Prospect that Sullivan’s work for Uber ended when talks failed to reach an agreement.

Maybe even more valuable to Macro

While doing a good job of keeping his name out of the press, Jake Sullivan (right of Obama) wields tremendous power within the Biden campaign.

Advisory Partners, Sullivan also provided forecasting services for corporations. For example, he used knowledge he acquired from negotiating the Iran deal in the Obama administration to help companies profit from the opening of the Iranian economy.

Information is power, and information about the future is exponential power. What corporate clients most want to know is what may happen in the next U.S. administration.

“We’ve been building this team systematically,” said David Claydon, who served as the co-CEO of Macro Advisory Partners until June. “If we’re in a post-Trump world after November, businesses are going to be spending enormous amounts of money and markets are going to be transformed.”

The campaign told me that strategic consultants who are also Biden advisers don’t share insider information with clients. But even those in the corporate world are skeptical about such a firewall. “This is a step up from the military-industrial complex,” said a source familiar with Macro Advisory Partners’ work. “It’s the information-industrial complex.”

This spring, Jake Sullivan has been busy working as Biden’s policy gatekeeper. He manages the vice president’s working groups and has been directing hundreds of experts who develop Biden’s policy ideas.

Some believe his work for corporations and foreign governments precludes him from shaping the policy platform of a Biden presidency. “Jake Sullivan’s work at Macro Advisory Partners should be disqualifying from service in a Democratic administration,” said an adviser to the Biden campaign, who declined to be identified for fear of retribution. “We don’t need a tool of hedge funds and mining companies in the White House.”

The campaign declined to answer detailed questions for this story. A spokesperson said Sullivan stopped taking a paycheck from Macro Advisory Partners after his appointment to the Biden team was announced, but wouldn’t specify further.

In July, days after the Prospect submitted questions to Sullivan and the campaign, Macro Advisory Partners removed Sullivan from its website. —Jonathan Guyer

JUL /AUG 2020 THE AMERICAN PROSPECT 37

AGUIRRE AND CHADDA RENTED an office

suite three blocks from the White House.

The newly hired operations director drove over card tables, folding chairs, and a Wi-Fi router in the trunk of her car. But this was hardly a scrappy startup.

WestExec promised to be more boutique than conventional consultancies like Albright Stonebridge Group or RiceHadleyGates. Most clients would have direct access to either Blinken or Flournoy. They also recruited an assortment of former colleagues as contractors to chip in, among them Deputy Secretary of Defense Robert Work, Ambassador to Israel Dan Shapiro, and Deputy CIA Director Avril Haines, who had helped design Obama’s program of using drones for extrajudicial killings.

Now, they needed clients. The first step was hosting a party.

At their April 2018 launch, Aguirre and Chadda stood with drinks across the hall from WestExec’s now furnished suite. It had a clubby feel thanks to purple lights and concrete walls. It must have been heartening to look across the room at Susan Rice, Tom Donilon, and Denis McDonough eating canapés as a DJ spun.

The next day, they were back to reaching out to venture capitalists and corporate leaders. Their whole approach was based on word of mouth and the power of their founders’ reputations. Initially, WestExec’s website, with its cool black-and-white portraits in dark suits, simply listed Blinken by his role in the firm. By April, a boldfaced title had been added under his name: “Former Deputy Secretary of State and Former

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Deputy National Security Advisor to the President.” It must have appealed to clients.

To look more established, WestExec found partners in a private equity group and a Google affiliate.

The private equity firm Pine Island Capital Partners was incorporated a year earlier

by John Thain. Blinken and Flournoy joined a startlingly high-profile roster of former policymakers, including four retired senators and the former chair of the Joint Chiefs.

(Pine Island declined to comment.) Thain, an investment banker, had tanked Merrill Lynch, sold it off to Bank of America, and paid himself several bonuses along the way.

At the height of the subprime mess, he spent $1.2 million remodeling his office, installing a $35,000 golden toilet. He seemed like a less-than-ideal partner for public servants.

Another partnership was with Google’s inhouse think tank, Jigsaw. WestExec’s Robert Work, during his time at the Pentagon, collaborated with the tech company in an artificial-intelligence venture, as first reported by The Intercept. That AI initiative, known as Project Maven, led to an insurrection among Google staff upset about collaborating with the military. Though Jigsaw has since been removed from WestExec’s list of partners, the Prospect has learned that Blinken and Flournoy have continued to work quietly and informally with Google engineers and executives, spitballing potential geopolitical threats. Schmidt Futures, Google founder and billionaire Eric Schmidt’s philanthropy, has also hired WestExec.

The founders told executives they would share their “passion” for helping new companies navigate the complex bureaucracy of winning Pentagon contracts. They told giant defense contractors how to explain cutting-edge technologies to visitors from Congress. Their approach worked, and clients began to sign up.

One was an airline, another a global transportation company, a third a company that makes drones that can almost instantly scan an entire building’s interior. WestExec would only divulge that it began working with “Fortune 100 types,” including large U.S. tech; financial services, including global-asset managers; aerospace and defense; emerging U.S. tech; and nonprofits.

Biden with Brazilian President Dilma Rousseff and Deputy Secretary of State Tony Blinken in 2015 (left); Biden meets with an Iraqi delegation, flanked by advisers Blinken and Avril Haines in 2016 (top right); Biden with Israeli Prime Minister Benjamin Netanyahu in 2010 (bottom right).

The Prospect can confirm that one of those clients is the Israeli artificial-intelligence company Windward. With surveillance software that tracks ships in real time, two former Israeli naval intelligence officers established the company in 2010. Gabi Ashkenazi, former chief of staff of the Israel Defense Forces, serves on its board. Windward also claims former CIA director David Petraeus as an investor, as well as a Hong Kong billionaire (most U.S. military-tech companies avoid money from China, experts told me, so they turn to investing in Israel).

WestExec says they do not lobby. “We’ll tell you who to go talk to, but we’re not going to go in there for you, and we’re not going to

ARIEL SCHALIT, CAROLYN K ASTER , MANUEL BALCE CENETA / AP PHOTOS

Smith (WestExec Advisors), and Jake Sullivan (Macro Advisory Partners). They rarely discuss their connections to corporate power, defense contactors, private equity, and hedge funds, let alone disclose them.

I asked a Biden spokesperson if the campaign would commit to more transparency and expand the Obama-era pledge to strategic consultants. “There’s a difference between consulting and lobbying,” he told me. “There’s a pretty strong line there … So, presumably we don’t have a ban on people who were consultants at one time or another, since I’m one myself.”

facilitate the introduction,” said one staffer.

One of their offerings that attracted corporations, the same staffer told me, is an “oncall National Security Council.”

It wasn’t until companies renewed contracts in December 2018 that Aguirre and Chadda felt that their strategic consultancy was in place. The plan was paying off. WestExec didn’t need to do any marketing. CEOs had recommended them to other CEOs. LAST YEAR, WESTEXEC’S corporate inter-

ests and their policymaking at last collided. On January 7, 2019, Tony Blinken and Michèle Flournoy chaired the biannual meeting of the liberal organization Foreign

Policy for America. Over 50 representatives of national-security groups gathered in a boardroom at the Madison hotel in Washington. Blinken and Flournoy’s roles with WestExec were not listed on the invitation or on the FP4A website.

The group worked through 24 agenda items, and the last one was “The War in Yemen.” Many Obama diplomats had expressed remorse for enabling Saudi Crown Prince Mohammed bin Salman’s destructive campaign in the Arab world’s poorest country. In 2015, Obama had dispatched Blinken to tell Mohammed Bin Salman that the U.S. supported Saudi Arabia’s right to defend itself and nothing more.

But four years later, the U.S., through its arms sales, was party to an ongoing war.

The death toll was over 100,000 in an asymmetric conflict, and the defense contractor Raytheon had sold Saudi Arabia more than $3 billion worth of bombs.

Four hours into the marathon policy discussion, many former officials joined progressive advocates in urging an end to weapons sales. The starting point, per FP4A’s agenda, was to “ask Congress to halt U.S. military involvement in the conflict.”

Most participants supported cutting all weapons sales, but one person stood apart: Flournoy tried to persuade the group that an outright ban on arms sales to Saudi Arabia wouldn’t be a good idea. Putting conditions on their use was a better compromise, she said, one that defense contractors wouldn’t lobby against, according to two attendees. Flournoy told me she had made a distinction between offensive and defensive weapons, saying that Saudi Arabia needed advanced Patriot missiles to protect itself.

It was an argument she had been making around the capital, but it didn’t resonate among the left-leaning room and didn’t affect the group’s recommendation. To two people present, it sounded like Flournoy was working for Raytheon, which produces Patriot missiles.

Flournoy would not confirm whether WestExec currently works for them. “Raytheon was not being considered as a client at that point,” she said. “When I take a policy position, I do so because I think it is in U.S. interests, and the views I express are solely my own, no one else’s.”

Another WestExec staffer wouldn’t comment on whether the consultancy has Raytheon as a client but would only say the defense contractor is “in the ballpark,” noting they work for a “defense prime,” meaning one of the top five defense firms among which Raytheon ranks. (WestExec’s own Robert Work has served on Raytheon’s board since 2017.)

WestExec is only one of Blinken and Flournoy’s overlapping roles, which keep them updated on trends that others lack access to. Flournoy, for instance, previously served on the Pentagon’s Defense Policy Board, the President’s Intelligence Advisory

JUL /AUG 2020 THE AMERICAN PROSPECT 39

Biden’s foreign policy is a blank slate, onto which often-conflicted advisers from the national-security establishment will project actual policies.

Board, and the CIA director’s External Advisory Board; each of these positions gives members access to sensitive information, which in turn provides insights useful to attracting and serving corporate clients.

Membership requires ethics disclosures, though none of those documents are publicly available, adding another layer of opacity.

Flournoy also joined the board of Booz Allen Hamilton in October 2018, and it has signed 61 contracts with the Defense Department since. Last year, the role earned her $192,474 ($76,986 as cash, $115,488 in equity). She previously was a board member of the nonprofit Mitre Corporation, the IT company CSRA, and Rolls-Royce North America. She now serves on the board of Amida Technology Solutions and is a stra-

40 WWW.PROSPECT.ORG JUL /AUG 2020

tegic adviser to SparkCognition Government Systems, a new subsidiary that feeds the company’s AI to government agencies.

“When we do take on a defense firm, we’re careful and just thoughtful about the nature of the work that we do,” Flournoy told me. “There’s work we would do, and there’s work we wouldn’t do.”

AGUIRRE AND CHADDA FELT their strategic consultancy had far surpassed their hopes. As Joe Biden launched his presidential campaign in spring 2019, they were committed to the firm they had built. If Democrats took the White House, they won’t close up WestExec.

“Think about it: If Biden were to win, we do think that companies will start

coming to WestExec, for ‘Hey, what is the commerce secretary thinking?’” one of the firm’s members said. “Because we likely have a history with that person or that staffer in our network somewhere. That will be something we can provide that we just don’t provide right now.”

Blinken is back to consulting for the vice president. In a video on Biden’s Twitter feed this April, he was introduced as senior foreign-policy adviser, explaining the candidate’s China policy. At the same time, WestExec advertises on its website that it will “develop a strategy for expanding market access in China” for clients. And a recent post on WestExec’s LinkedIn page displays Obama and Blinken chatting at the end of the board table.

Chadda denied that Blinken was having it both ways. “Volunteering for a political campaign, much like any other private pursuit, is done outside of formal employment and should never be implicated,” he told me.

Despite multiple requests, neither the firm nor the Biden campaign would provide WestExec Advisors’ client list.

“Transparency is very important to us,” said a Biden spokesperson. Blinken had recused himself from work at WestExec, according to the campaign, yet his profile remains on the consultancy’s website as well as on Pine Island Capital Partners’.

Unmentioned on either page is his role in the campaign. After requests for comment from the Prospect, a Biden campaign official responded that Blinken will take a leave of absence from WestExec effective August 1. He is also in the process of leaving Pine Island Capital Partners, the campaign official added.

Such representational juggling is likely to influence how decisions are made. “Registered lobbyist is a bullshit distinction,” a former Obama official said. “For me it’s: Are you making a living based on monetizing a set of relationships or a policy domain with personal interest?”

At the end of June, the campaign announced who would oversee foreign policy for Biden’s transition team. It was Avril Haines, another former security chief whom Aguirre and Chadda had hired, now aiming to return with her WestExec colleagues back to West Executive Avenue.

CAROLYN K ASTER / AP PHOTO

As deputy CIA director, Avril Haines (left) helped design Obama’s program of using drones for extrajudicial killings.

CLEVELAND – On March 9, health officials confirmed the first case of the novel coronavirus in Cuyahoga County.

At the hometown newspaper The Plain Dealer, health reporter Ginger Christ jumped in her car and headed to City Hall for a press briefing. While listening to officials address the situation, her phone rang. It was top PD editor Tim Warsinskey, with totally unrelated news: a courtesy call to her, the paper’s Guild chair, that they would be announcing layoffs for 18 editorial staffers, over half the Guild, and four non-union managers. Warsinskey, on his ninth day on the job, gave the Guild only a 30-minute warning before he went public.

Frantically, Christ phoned in her story to the newsroom, and alerted Guild members about the layoffs. “I was walking through City Hall so unfocused I couldn’t remember where to find my car,” she recalled in an April 22 interview.

As the pandemic intensified, Christ’s life grew frenzied. She was working 60-hour weeks to cover the steps health officials and community members were taking to slow the spread. For a health reporter, it was the story of a lifetime. But as Guild chair, she was meeting with lawyers, bargaining with management for furloughs or

pay cuts instead of layoffs, and attempting to allay her colleagues’ anxiety. No one knew who would be let go.

On a Friday morning in late March, management instructed Plain Dealer employees to wait by their phones. If Warsinskey called you, you were gone. If Mary Lou Brink, another editor, called, you stayed. Christ and 13 others got a call from Brink, and that afternoon, Warsinskey met with them. “He said just keep doing what you’re doing, and I thought, ‘OK, I’ll just keep covering coronavirus because the whole staff was covering coronavirus,’” Christ said.

She filed three coronavirus stories on Monday, April 6, when Warsinskey called another staff meeting. He gave remaining reporters a false choice: Cover the outlying counties (which the PD had abandoned covering decades ago) and give up beats they had developed over years, or volunteer to be laid off. Advance Publications, the out-of-state conglomerate that owns the PD and dozens of other media outlets across the country, framed the move as expanding coverage. Reporters, and much of the public, disagreed. Unionized reporters’ beats—and the knowledge and contacts that made them good at their

JUL /AUG 2020 THE AMERICAN PROSPECT 41

jobs—were being pilfered by cleveland.com, the newspaper’s Advance-owned, non-union companion.

Christ and nine others, including her vice chair Rachel Dissell, departed, leaving just four PD journalists. Just like that, the plan to expand coverage to the outer counties was dead—despite Warsinskey’s insistence that the layoffs would not weaken local journalism. “We will continue to be the leading source for news and information here in Northeast Ohio,” he wrote. “And we are not going anywhere.”

A month later, on May 12, the Guild announced that it would decertify, after coming to an agreement with management whereby the four remaining Guild members would be rehired at cleveland.com in non-union positions. Under the agreement, Northeast Ohio Newspaper Guild promised that it would not try to unionize cleveland.com for one year—though other unions, even the International, are not subject to the bar.

National media saw the downfall of the PD as part of an emerging barren landscape for journalism during the

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coronavirus outbreak. Indeed, at least 36,000 journalists and support staff have lost jobs since the crisis began, exacting a huge toll on local and national news coverage.

Those lucky enough to have a union were at least able to deliver better outcomes for their members. Some unions averted layoffs through furloughs and pay cuts, and for those laid off, unions made sure they got expanded severance or continuation of health coverage. The PD Guild was able to secure these types of benefits, contingent on journalists signing non-disparagement agreements.

But what has happened in Cleveland is not due to the pandemic. It reflects the final acts of Advance’s longterm, systematic plan to bust the Guild, recounted by dozens of former Plain Dealer reporters, Guild leaders, and labor experts. (Some Guild members spoke with the Prospect for this article before they signed the nondisparagement agreements and some refused to speak at all, citing the agreements.) At a time when media unions are seen as a lifeline in an uncertain industry, Advance has created a union-busting model for media

conglomerates to follow, honed through nearly a century of hostility to labor. This is the story of how Advance destroyed the nation’s oldest newspaper union, and how it deeply wounded a daily newspaper Clevelanders have been picking up since 1842.

THE NEWHOUSE LEGACY

For decades, the Plain Dealer Guild was the biggest unit in Local 1 of the American Newspaper Guild, which included the PD, the Akron Beacon Journal, The Canton Repository, and the Massillon Independent. At the high point in the 1990s, Local 1 had more than 700 members, with the PD unit boasting at least 340. Unions had long enjoyed a strong foothold at the PD. The Pressmen represented the men and women laying out each day’s pages, and the Teamsters represented those who delivered the paper seven days a week. In 1944, editorial reporters joined Local 1. The three unions lined up their contracts to expire at the same time, so they could sit at the bargaining table together. This “unity council” lasted for more than a half-century.

But the story of The Plain Dealer and the Guild’s demise begins back on March 7, 1967, when media mogul Samuel I. Newhouse bought the 125-year-old publication for a record-breaking $54.2 million, entrusting day-today operations to his brother Norman. At the time, the Newhouse family empire, Advance Publications (named after its first purchase, the Staten Island Advance), controlled 22 newspapers in 16 cities. Today, Advance grosses $2 billion in revenue per year and remains a private family-run enterprise, with principal ownership resting with Newhouse family members. In addition to newspapers, it owns Condé Nast, makers of top magazines like Vanity Fair and The New Yorker, along with large stakes in Discovery, Inc., and social media site Reddit.

Unlike other newspaper families such as the Sulzbergers or the Grahams, making money was the Newhouses’ main objective, contends biographer Carol Felsenthal in her book Citizen Newhouse. A former PD editor told Felsenthal that Norman Newhouse’s visits to Cleveland “reminded me of a guy who collects rent in the old days.” The Newhouse family also brought in anti-union leadership, such as Leo Ring, known to Guild members as “The Enforcer.” Ring “negotiated the elimination of more than half of the 600 positions in The Plain Dealer’s composing room, arranged for the installation of plenty of modern, labor-saving equipment, and regularly faced down the paper’s Guild unit,” wrote Richard Meeker, another Newhouse biographer.

Still another Newhouse chronicler, Thomas Maier, detailed the origins of Advance’s union-busting strategies, a playbook it would return to in Cleveland. “At the Long Island Press in the 1930s, Newhouse set up a special spy network to find, harass, and sometimes fire

those who thought of unionizing his newsroom,” Maier wrote. “For this, the spies received bonuses and better hours and assignments.”

In the 1940s, “Newhouse supervised the creation of something called the Allied Bi-County News Service— ABC for short,” Meeker wrote. Every reporter at the Long Island Press started at ABC as copy boys, off the regular Guild payroll. This enabled Newhouse to “maintain a night shift at the Press without paying Guild wages or overtime.” Newhouse also paid an outside picture service for photos, rather than Guild photographers.

Reporters were paid so poorly that some took public relations jobs while still working for the paper, and printed positive stories about their employers in the Press. Meeker wrote that “Newhouse was so blinded by his hatred of the paper’s unions that he would stop at nothing to keep his employees’ wages and benefits down.”

The two-newsroom model and relentless violations of journalism conventions so depressed standards of quality that readership suffered and subscriptions plummeted, and the Press shuttered in 1977.

After the Portland Oregonian won a Pulitzer for investigative reporting, staff struck in 1959 for better wages and benefits. Newhouse brought in “nearly five dozen strikebreakers from Oklahoma, some with rifles and shotguns, and trained his nonunion supervisors to run the newspaper in the event of a walkout,” according to Maier’s book.

Strikers were joined by staff of the city’s afternoon daily, the Oregon Journal, and for four years they published their own daily paper, the Portland Reporter.

Newhouse bought the Journal in 1961, but the strike continued until 1965, when both newspapers were forced to become open shops. In 1982, Advance shut down the Oregon Journal, leaving Portland a one-newspaper town.

This was a Newhouse business strategy: create newspaper monopolies, and enjoy the positive side effect of kneecapping the unions.

JUL /AUG 2020 THE AMERICAN PROSPECT 43

When Samuel I. Newhouse began his career in 1911, few newspapers were chain-owned. By 1977, nearly twothirds of all U.S. daily newspapers were. Cities with two or more competing newspapers fell from over 500 to 35.

“Newhouse did not cause this remarkable consolidation alone, but he certainly profited from it. And, in the end, he helped legitimize it,” wrote Meeker in his biography.

Consolidation led to fewer newspaper jobs and more owner power. As Meeker concludes, “during the course of his career, Newhouse put more newspaper people out of work than any other publisher in history.”

KELLY GREEN JACKETS WITH HORSESHOES

When Newhouse acquired the PD, the union was strong.

But a strike in 1972 to raise wage scales revealed some of the new owner’s tactics. PD editors called City Hall, and shortly thereafter the Cleveland mounted police charged the picket line. At the time, Cleveland was very much a union town—250,000 members strong—and a private company, even one as influential as the local newspaper, enlisting local government on the side of management in a labor dispute was shocking, and trig-

44 WWW.PROSPECT.ORG JUL /AUG 2020

gered a backlash. The city council soon adopted a city ordinance banning mounted cops from strike scenes.

The Guild remembered the mounted-police assault as a “day of infamy,” and later donned kelly green jackets whose crests included a pair of horseshoes.

In 1974, another strike made Guild members of the Cleveland Press and the PD allies, despite the two papers’ rivalry. It quickly became clear that management planned to import strikebreakers. In response, on the strike’s sixth day, the Press printed a double masthead with the PD, and instructed their drivers to deliver papers to both Press and PD stops. The Teamsters refused, and Press reporters struck, joining The Plain Dealer in what would become a seven-week strike.

The Guild gave reporters a voice—such as when The Plain Dealer retracted a hard-hitting investigative story in 1981. The story, by Walt Bogdanich and the late Mairy Jayn Woge, proved that Teamsters leader Jackie Presser, who was also affiliated with the Cleveland mafia, was taking kickbacks and acting as an FBI informant. Presser was campaigning to be the Teamsters’ next president, but “there’s no way the mafia, which still controlled the

Teamsters, would allow that to happen if the Teamsters knew that Presser was an informant,” Bogdanich, now an investigative reporter at The New York Times, said in an interview with the Prospect.

The two-part series ran in August 1981, and Teamsters delivered the papers without comment. But after publication, Presser contacted the Cleveland mafia, who contacted Anthony “Fat Tony” Salerno in New York, who contacted Roy Cohn, who contacted the Newhouses, who instructed Plain Dealer editors to retract the story.

When the retraction ran a year later, the Guild organized a picket line. “The slogan for The Plain Dealer at the time was ‘When the news breaks, we put it together,’ and so [the union] had signs printed that said, ‘When the news breaks, we apologize,’” Bogdanich said.

The threat of the strike gave PD reporters leverage.

But there hasn’t been a walkout since 1991. Bill Meyer, a PD copy editor laid off in 2019, told me he picketed the former PD building downtown and the paper’s printing press in protest of the April 2020 layoffs. He invited others to join, but they told him they feared violating the non-disparagement agreements attached to severance and future health care benefits. So Meyer picketed alone.

AS THE 1970S CAME to a close, The Plain Dealer and the

Cleveland Press were in a heated circulation war. Despite the Press’s more than 300,000 subscribers, it was looking for a buyer. Before Newhouse could snap it up and consolidate the Cleveland market, in swooped multimillionaire local industrialist Joseph Cole, who bought the

Press in 1980 for $1 million. “Give a publisher—or anyone else for that matter—a monopoly and you run a very real risk of seeing a square deal converted into a rigged deal … Simply said, I don’t like monopolies,” Cole said in a speech at the time. But just two years later, Newhouse abruptly paid Cole $22.5 million for the Press’s circulation list and a subsidiary bulk-mailing company—allegedly in exchange for Cole agreeing to shut down the Press.

John Funk, who worked at the Press from 1978 to 1982, said that Press reporters got “less than a day’s notice the paper was closing.” Police told reporters leaving the newsroom that Cole “don’t want you to take nothing like your typewriter or whatever,” Funk said. After 103 years, the Press ceased publishing. If you wanted to work for a daily, there was now just one gig in town: the PD. In 1984, federal investigators began to investigate the Cole-Newhouse transaction. An article ran in the Akron Beacon Journal headlined “Plain Dealer Offered Cole $14.5 Million to Fold Press,” revealing a contract with Newhouse which included that promise. But though a federal grand jury in Cleveland was impaneled, for reasons that remain unclear, the Justice Department probe ended in 1987 with no charges being filed.

With the Press’s demise, the PD’s circulation jumped: The paper raised advertising rates 47 percent in less than two years and added more than 80,000 subscribers.

Circulation peaked in 1983 at 497,386 daily and 501,042 on Sundays.

Despite the boost, the heavy-handed, penny-pinching Newhouse ways had sapped public trust in Cleveland newspapers. A 1980 Cleveland Magazine story that surveyed readers found them “brutally critical … ranging from a belief that the papers deliberately cover up and distort the news, to a feeling that their writers and editors are simply incompetent.” In the mid-1970s, More, a journalism review, published a list of the ten worst papers in the U.S. The Plain Dealer, along with three other Newhouse papers, made the list.

Perhaps the community’s low regard for its daily stemmed from the PD’s unwillingness to offend anyone in pursuit of its stories. “The PD’s failure to even examine Power in the community, let alone challenge it or present a countervailing influence, tips the scale of justice and equality time and time again against the ordinary person and deforms its responsibility in its most important task— to inform citizens in a free society,” wrote Roldo Bartimole, a local media critic, in 1993. Yet after the 1982 loss of the Press, Clevelanders had no choice for their news.

THE GOOD TIMES GO BAD

Initially buoyed by the lack of competition, The Plain Dealer expanded throughout the 1990s. Dozens of journalists were hired to cover and edit news from Lorain,

JUL /AUG 2020 THE AMERICAN PROSPECT 45

Lake, Geauga, Portage, Summit, and Medina Counties, joining a staff of over 400. “It was so much fun, you could write for days because it was such a thick fat paper, they had so much room and they were begging people to write giant stories,” recalled former PD reporter Joan Mazzolini.

But the absence of a second newspaper in town, while good for subscriptions, weakened worker power, and the Guild knew it. In 1996, the Guild, alone at the bargaining table without the Pressmen or the Teamsters, signed its first ten-year contract—an unprecedented length for the industry. It was mostly a long-term extension of existing terms. It offered stability, but in exchange, the contract included a no-strike clause, something increasingly common in Guild contracts at the time.

“We felt, quite candidly, that we were in a better position to extend what we had rather than take the risk of it and start from scratch,” explained Scott Stephens, who helped negotiate the 1996 contract for the Guild.

“It’s a classic case for the Guild that we were a so-called professional union. We were at the bargaining table as, in a sense, as amateurs … The Teamsters are the muscle [who could] shut the place down in the event of a labor dispute and to give you that kind of upper hand.”

During that stretch, health care costs and pension costs doubled for the union. The more people laid off, the more expensive health care became for those who remained. But locked into a ten-year deal, nothing could be changed to relieve that strain.

In the late 1990s, Newhouse also introduced new rates that charged Cuyahoga County residents 25 cents at a newsstand and double that for those in the outer counties.

The decision lost the PD swaths of subscribers. “As far as I’m concerned they’ve been sliding ever since,” said Local 1 president and Canton Repository reporter Edd Pritchard.

Advance virtually priced themselves out, Pritchard added.

Today, the weekday newsstand price is $2.

Former Guild members cite these decisions as examples of where Newhouse management went wrong. At the same time, the industry started down a path of turmoil as the internet matured. Historically, daily newspapers were a money machine for local advertising and classifieds, but the shift of readership online and the rise of Craigslist (and later, Google and Facebook) slashed revenues. Local media ran stories on how Advance was “slow to recognize the vast disruption of the internet and failed to adequately monetize its digital offerings.” Advance underlined its commitment to print by building a new PD editorial office building and printing plant in the early 2000s. This kind of lumbering transition was fairly typical in media, particularly for legacy chains accustomed to monopoly profits. But rather than seek new revenue models or digital subscribers, Advance reacted to this new reality through brutal downsizing.

46 WWW.PROSPECT.ORG JUL /AUG 2020

In 2006, the paper offered incredibly generous buyouts to people who had been at the paper at least 20 years, with two and a half years of full pay and health care.

Between the Guild and management, over 60 people took the buyouts. Up to that point, Plain Dealer jobs were for life. The wages were enough that you could buy a house, raise a family, and make a good life in Cleveland. Even during the Great Depression, the PD never had layoffs, one former staffer told me. “It was the first cold slap in the face that the fat days of newspapers were over,” said Harlan Spector, PD Guild unit chair at the time. “It was just unheard of to try to cut the staff like that.”

At their non-union publications, Advance Publications adhered to what they described as “The Pledge,” vowing never to lay off an employee. Spector recalled people saying the Newhouses never did layoffs and doubted that they would really go through with it. “And it turns out that they went further than anybody else and they destroyed the union,” he said.

As the Great Recession hit in 2008, another 50 Guild members were laid off, and remaining staff accepted a 12 percent pay cut. Guild members’ pensions had been frozen for five years, and members were hit with annual double-digit increases of their health care costs. Scott Stephens volunteered to be laid off. “[The PD] had a number on a piece of paper and they wanted to get there one way or another,” he said. As other former reporters told the Prospect, Stephens said he felt that if he left, someone who needed the job more would be able to stay.

Meanwhile, Advance Publications was cutting jobs and journalism across the country. In 2012, the New Orleans Times-Picayune, a non-union Advance paper around since 1837, moved from a daily paper to three days a week. Two hundred employees lost their jobs, including half the newsroom staff. (Eventually the Times-Picayune

would resume daily printing, but in 2019 Advance sold it to the Baton Rouge–based Advocate, consolidating the two newsrooms. The Times-Picayune’s entire staff was laid off, and only a handful were rehired.) Consolidation, layoffs, and decline marched on in Cleveland, and Advance prioritized busting the union.

THE RISE OF CLEVELAND.COM

The Guild’s decertification became virtually inevitable in 2013 with the creation of a split newsroom: the unionized Plain Dealer and non-union cleveland.com. The dot-com side originated with just a few tech staff to complement the print product in 1996, mostly as a vehicle for ads. Its physical location was “across the river,” as former energy reporter John Funk put it.

Unlike most digital-print operations, the operations were completely segregated. All PD content was produced by PD journalists, and the same for cleveland.com.

The Guild contract didn’t allow for content sharing until 2013, when Advance proposed allowing reporters from cleveland.com—technically a separate subsidiary—to create content for print. In effect, Advance wanted to create a competing non-union newsroom owned by the same company. There’s little precedent for this at other papers; The New York Times or Washington Post didn’t build a scab operation inside their organizations.

Management touted the digital platform as the future of Cleveland news, albeit years after other organizations had beefed up their digital operations. Cleveland.com reporters were urged to contribute multiple stories a day, stressing quantity over quality. PD staffers grumbled about a lot of writing up of press releases. Especially for some young reporters, the breakneck pace made sense for their future careers. But the jobs often lacked the security, benefits, and wage scale of Plain Dealer union jobs. Bill Meyer says he knew of at least one person at cleveland.com in 2013 who was also driving for Uber to make ends meet.

The 2013 contract negotiations came on the heels of years of pay cuts, furloughs, and pension freezes, during which the Guild had lost many members through attrition. Management said that its digital-first strategy required drastic cost-saving. And if the Guild did not accept management’s offer, Advance would lay off at least 80 people—about half the unionized staff—and would saddle remaining staff with new pension and health care costs of up to an additional $100 a week, while continuing the 12 percent wage cut.

“By 2013, they could dictate a lot of terms,” said then– unit chair Harlan Spector. “It wasn’t exactly a fair fight.”

In the end, 58 journalists were laid off and another five people were promoted to management. Another 13 reporters took job offers at cleveland.com and left The

Plain Dealer and the Guild. The PD dropped from sevenday to four-day home delivery as part of the reorganization, contributing to a dramatic loss of circulation.

Advance did restore the 12 percent pay cuts for remaining employees, made health and pension funds whole, and included a six-year no-layoff guarantee. But the cuts left the Guild at just over 100 members, with the non-union newsroom waiting in the wings.

The two-newsroom strategy, which Advance executed across the country in its local newsrooms, has resulted elsewhere in consolidations and job cuts. In 2012, columnist Ryan Chittum described Advance’s digital strategy as “disinvesting in journalism behind a digital smokescreen.”

In another 2013 piece, he pointed to The Ann Arbor News, where Advance shut down the daily, replaced it with a website and biweekly newspaper, halved the newsroom, and required reporters to churn out as much content as possible because clicks are the model.

The difference in Cleveland was that the PD was the one remaining union shop in the stable of Advance Publications. And the digital strategy was obviously tied to diminishing the union’s power. The company told the Guild that layoffs were an economic necessity. “But economic necessity would not permit the ramp-up such as what really happened at cleveland.com,” said Bill Meyer, the former PD copy editor. Within a few weeks of the layoffs, “Advance had hired almost person to person the positions that we gave up—maybe even in excess of the numbers that we gave up.” Among the new reporters hired at cleveland.com were a cadre of laid-off PD reporters.

To some former reporters, they were scabs, but “many or maybe even most of them do not know it,” said John Funk.

“By being reasonable, we got rolled and it was because we allowed ourselves to believe that there was a shred of honor and integrity from the company, and did not realize that this was basically the Long Island Press model being rolled out here in Cleveland from the Advance Publications playbook,” Meyer concluded.

Because this was textbook union busting, the Guild could have filed a grievance at the National Labor Relations Board. But with a dwindling member base, it would have been virtually impossible to fight against Advance’s deep pockets. “What are you fighting over when the membership is dwindling?” asked Roland Dreussi, a professional union bargainer who began working with the Guild in 1997. “Say you win that. So, what’s to stop them from just closing the newspaper?” The union did get a settlement from the NLRB preventing cleveland.com from pilfering more than 20 people from the PD without Advance hiring replacements for the newspaper.

“I remember telling our members that after this agreement [in 2013] all bets are off,” Harlan Spector told me the day after the Guild announced decertification. “This

JUL /AUG 2020 THE AMERICAN PROSPECT 47

buys us six years and after that they can start coming after people and it could be the beginning of the end.”

Spector recalled sending the offer to the International for an outside opinion. “Their lawyers looked at it and they said, ‘Do it now before they change their mind.’”

Spector himself volunteered for the layoffs. “I just felt like the walls were caving in. I kind of got tired of living that way—constantly looking over your shoulder for layoffs, pay cuts, pension problems, and health care costs,” he said. “There were people who were really physically affected by the stress.”

At the time, Spector recalled a copy editor summing up the contract: “Well, it’s a shit sandwich but at least it has lettuce and tomato.”

CHANGING NEWSROOMS

After 2013, Meyer began an effort to reach out to the newly hired—often very young—cleveland.com reporters, in an effort to organize them. He was met with fear. One person who expressed public support for the union allegedly received a dressing down from top brass, Meyer said.

As cleveland.com began its hiring spree, The Plain Dealer clearly became “the stepchild,” as one former reporter put it. Former reporters on both sides said that the newsrooms frequently both sent reporters or photographers to the same events. The PD stories were often buried on the website. Cleveland.com reporters were told not to communicate with PD reporters directly and vice versa, to only channel coordinating efforts through editors.

News Guild President Jon Schleuss explained that the arrangement pitted reporters and editors against each other. “The way that you fight a union is you divide people,” said Schleuss. “You lift some people up, you bring some people down. You exploit racism, you exploit ageism. It’s really about trying to break individuals down.”

Management booted PD staff out of the Plain Dealer building downtown to another, smaller downtown office space. Cleveland.com reporters were moved into the former PD building, still located at Plain Dealer Plaza.

Then, PD staff were moved out of downtown entirely—15 miles away to Brooklyn, Ohio, at the paper’s printing press. From the parking lot to the newsroom was roughly a quarter-mile walk. “Hardly anyone would come to the office … or to the editorial meetings,” said Christ. “There was a weird smell in the building, it was cold, you had to go through security to get in.”

The divided staffs were never together. “It was all traceable back to the union thing,” said Guild Vice Chair Rachel Dissell in an April 15 interview. “If we were all in the same room, some magical union dust would get on people.”

Advance issued laptops and cellphones, eliminated personal desks, and transformed the newsrooms into shared working spaces, described by some as “backpack

48 WWW.PROSPECT.ORG JUL /AUG 2020

journalism.” While it worked for some reporters, for PD staff who had recently been ousted from their own building, it seemed to reflect management’s disdain. “Everybody was expected to work on card tables and on folding chairs. We were treated like crap,” said John Funk. “People felt like they weren’t valued because they weren’t!

They were just seen as people who cost too much.”

As staff was decimated, institutional knowledge and collaboration—hallmarks of big metro newsrooms— largely disappeared. “In 2013, I was looking around for an old fart who knows something and I realized that I was the old fart and there’s no one here who knows more than me,” said former Plain Dealer reporter Mike Sangiacomo.

While Advance was making cuts at the PD, it was also reorganizing the Sun papers, a chain of 11 local weeklies serving Cleveland’s suburbs. Advance added the Sun papers to its media empire in 1998, and in 2013 it laid off dozens of staff, bringing them back as stringers. Rates for these stringers are currently $35 per story with a $10 bonus if the story receives 3,000 or more web hits, and $15 per photo. Such low rates make it virtually impossible for reporters to cover communities the way they once did.

Vigorous local reporting can unveil a corrupt underbelly and expose a city’s ills. But dividing the newsroom and slashing staff diminished the paper’s ability to produce reporting that holds power to account. Readers may have made no distinction between cleveland.com and The Plain Dealer, but they could see that the journalism in their community was deteriorating.

“A newspaper has a lot to do with how a community is operated,” said Roldo Bartimole, who for 32 years published lucid critiques of city power brokers in his biweekly newsletter “Point of View.” “There isn’t really any sharp criticism of what’s going on. The paper is very obliging

to the mayor, it doesn’t seem to [run] the kind of stories that you would expect out of City Hall.”

Newsroom diversity also became less of a priority, especially with no Guild at cleveland.com to force the issue. “The Plain Dealer now has no African-American, Asian-American or other journalists of color,” wrote Olivera Perkins in a May 5 email. Perkins was part of the April layoffs prior to the Guild’s decertification. At cleveland.com, journalists of color are also scarce. “I think of all of the stories I and my Plain Dealer colleagues would have told to add depth and context to how the coronavirus is impacting the residents of Northeast Ohio.”

Chris Quinn, cleveland.com editor and now, with the Guild’s end, Plain Dealer editor, said in a Zoom forum with the Press Club of Cleveland on May 19 that diversity is his newsroom’s biggest problem. “Because we don’t do a lot of hiring, [increasing diversity is] taking much longer than it should and it is embarrassing and it’s really bad,” he said. “You cannot cover a city that is 50 percent African American when you don’t have African Americans on your staff in any kind of significant number.”

THE FINAL BLOW

Last year, Bill Meyer was part of a round of layoffs that reduced the Guild by a third. The company outsourced the “Pub Hub,” where copy editors like Meyer and page designers produced the paper. Twenty-eight other copy editors, page designers, and illustrators were also laid off and told they could reapply to non-union positions.

Ginger Christ said that the Guild approached management with a production plan to save jobs, but that the company had no interest.

Fourteen reporters and photographers also lost their jobs. John Funk, an energy reporter until he volunteered for last year’s layoffs, said that since his departure his beat has been left uncovered.

A year later, Advance closed the trap and the Guild was gone; the PD had gone from hundreds of journalists and Guild members to zero in just two decades.

Neither Warsinskey, briefly the editor of The Plain Dealer and a former Guild member himself, nor Quinn, also a former Guild member, responded to requests for comment. CEO of Advance Local Randy Siegel deferred comment to Quinn through a spokesperson.

The fact that the final settlement stipulated that the Guild couldn’t organize cleveland.com for a year gives the game away: This was about busting a union that was seen as too cumbersome. “When the company needed to evolve, it did not have time to negotiate every change with the Guild,” said cleveland.com editor Chris Quinn at the Press Club of Cleveland forum in May. “We are way too nimble for that.”

Scott Stephens, the former union chair, said that he thinks the Guild did the best they could for their mem-

bers at the time. After the Guild’s collapse this year, Spector confided that he worried the union had signed its own “death warrant” in 2013. But Stephens insists that the Guild’s work bought reporters seven more years to do journalism. “Any number of people have had awardwinning work during that period, and had it not been for the astute judgment of the bargaining unit in 2013, then they would not have had that great work.”

When the first Guild charter was distributed to Local 1 in 1933, at the bottom of the Depression, many of the same factors plaguing newspapers today dogged them.

Newspapers were constantly merging and eliminating jobs; employers hired and fired at will; reporters worried that a union might compromise their integrity; and without a tradition of organizing, they viewed themselves as white-collar workers with no need for a union.

“The issues of the 1930s, media consolidation, massive inequality, and the collapse of the free press—we’re dealing with the same thing 90 years later,” said News Guild President Jon Schleuss.

The Newhouse model of union busting and profit extraction dates back just as long, and it has been studiously copied by a new vanguard of financial newspaper owners.

GateHouse Media, which recently purchased Gannett and is the largest newspaper chain in America, is operated by private equity firm Fortress Investment Group. GateHouse immediately announced its intention to cut $300 million a year from its budget, which likely means firing journalists and support staff. Hedge fund Alden Global Capital has slashed its 12 unionized outlets to one-third the staff they had in 2012. Alden appears more concerned with redeveloping newspaper and printing offices through its real estate affiliates than reporting the news.

The worry is that every newspaper owner is a budding S.I. Newhouse. At the Press Club of Cleveland forum, a reporter asked Quinn why the Newhouse family, worth $18 billion, is so focused on penny-pinching. “One of the ways they got to be people that have that much money is to not run money-losing businesses,” Quinn said. “This isn’t a charitable organization. This is a business. It’s always been a business. They started 100 years ago.”

The recent growth of unions at online platforms and a few local papers suggests that journalists are perhaps beginning to understand that unions not only help them as workers, but might help bring new life to the industry.

But amidst the economic fallout of a global pandemic, the crisis for local news and mass media alike has intensified. For individual journalists, the loss of a job—when for so many it means switching professions—can mean the loss of an identity.

“You know,” Spector told me, “to this day, I have newsroom dreams pretty much every night. Yeah, I do. It never leaves you.”

JUL /AUG 2020 THE AMERICAN PROSPECT 49

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C U Why We’re Still Fighting the South The irrepressible conflict continues to be between oligarchy and democracy.

BY R I C H A R D R . J O H N B

“T

O O

he South lost the war but won the peace.”

Discuss.

In How the South Won the Civil War, Heather Cox Richardson gives this classroom perennial a provocative twist.

College history students have long encountered some version of this prompt on their exams.

Typical responses begin with the existential threat that the slaveholders’ insurrection posed to the Union and the incalculable benefit that flowed from the emancipation of four million slaves. But students then describe the white supremacist backlash that followed the Confederacy’s military defeat—a backlash that included the proliferation of white supremacist terrorist cells (the Ku Klux Klan); the failure of land reform (“forty acres and a mule”); the gutting of the Civil Rights Act of 1875; the withdrawal of federal troops from the ex-Confederate states; and the restoration throughout the South of oneparty Democratic rule. Students sometimes also point to the continuing systematic denial of rights to African Americans that had been guaranteed by the 14th and 15th Amendments.

Richardson reframes the question in space and time. No longer is the fate of the Confederacy decided in the South. On the contrary, its champions— the “oligarchs”—would fan out throughout the United States to fight another day. Twice in American history, a tiny cabal of “extraordinarily wealthy men” have conspired to undermine the “genius” of America that is

K

S

the promise of freedom, a “profoundly exciting, innovative, and principled notion” that has

L

T U R

E

betrayal of the nation’s soul, first by the slaveholders whose secession from the Union in 1861 convulsed the nation in civil war; and second, by the “movement conservatives” in the 1950s who challenged the “liberal consensus” behind desegregation and paved the way for the Republican Party of today.

Richardson is a prolific historian—this is her sixth book—who specializes in the political history of the Civil War and Recon-

Richardson’s heroes—not only the usual suspects such as Washington, Lincoln, and FDR but also a multitude of women and people of color—champion freedom, equality, and democracy. Her villains, who are invariably wealthy white men, are status-anxious revanchists terrified of change. To an extent that is rare among professional historians today, she frames her narrative around the core commitments of the major political

struction eras. Best known for her lean and lucid history of the Republican Party, To Make Men Free (2014), she is a frequent commentator on contemporary affairs and since late 2019 has published a much-admired daily online newsletter on contemporary politics entitled “Letters from an American.”

How the South Won the Civil War is a fast-paced, engaging, and morally impassioned survey of American political history that does not pull any punches.

parties, reinventing for our age a venerable genre of historical writing that predated the late19th-century emergence of the historical profession. In the early Republic, historians wrote as they voted. George Bancroft’s History of the United States of America (1834) was staunchly Democratic, while Richard Hildreth’s History of the United States (1860) defended the Whigs. Richardson lionizes the party of Lincoln and the mid-20th-century political

Civil war officers at a battlefield headquarters.

Freedom for the Confederacy was inconceivable in the absence of unfreedom for Blacks.

since the 16th century shaped the DNA of the inhabitants of the patch of earth that would become the United States. The promise of freedom has evolved over time; at a minimum, it has found expression in the democratic idea that George Washington called the “Great Experiment,” that is, the establishment of a government based on the idea that “human beings had the right to determine their own fate.” A present-day Jeremiah, Richardson laments the

JUL /AUG 2020 THE AMERICAN PROSPECT 51

C

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consensus that birthed the civil rights movement, the equal-rights wing of the women’s movement, and the Great Society.

Political history written by academic historians today often focuses more on what lawmakers did than on how politicians justified their positions. For Richardson, in contrast, partisan jousting remains the primary concern. Administrative agencies, state (and municipal) politics, Congress, and the courts are mostly offstage. When it comes to the ballot box, Richardson is no “plague on both your houses” cynic. A fervent admirer of the original, mid-19th-century Republican Party, she has positive things to say about Theodore Roosevelt and Dwight D. Eisenhower and loathes mid-19th-century Democrats and the post-Eisenhower-era Republican Party.

Richardson’s drama unfolds in three acts. Act One foregrounds the “American paradox,” which turns out provocatively to be no paradox at all.

Everyone knows that the preamble to the Declaration of Independence— which trumpeted the “radical idea” that “all men were created equal”— was drafted by a slaveholder who regarded Indians as savages and women and paupers as his inferior.

How could this be? While seemingly inconsistent, this “apparent contradiction” was a “key feature of the new democratic republic.” Like most political elites throughout history, the authors of the Declaration remained wedded to the “traditional idea” that, despite their rhetorical commitment to human equality, a few wealthy men should control the government and rule the lives of women, the poor, and people of color. “This is the paradox that sits at the heart of our nation.”

Richardson is hardly the first historian to ponder this paradox.

Gordon Wood has long contended hopefully that, though the primary beneficiaries of the War of Independence were white men, the egalitarian promise of the Revolution, as expressed in the Declaration of Independence, would eventually be extended to groups other than themselves. Richardson is less sanguine. Like Wood, she praises white male equality as an “extraordinary”

52 WWW.PROSPECT.ORG JUL /AUG 2020

idea. Unlike Wood, she believes that, from the standpoint of the authors of the Declaration, the exclusion of Blacks, women, and Indians was a feature, not a bug. White male equality for them was inconceivable in the absence of white male dominance over their inferiors. Freedom for all meant no freedom for white men.

It was this peculiar syllogism that explained why the American paradox was so pernicious: It gave a small group of wealthy men the language they needed to “undermine our democracy, and to replace it with an oligarchy.”

How could wealthy white men—a tiny minority of the electorate—persuade a majority of voters to back their cause? Like their present-day successors, they silenced dissenters, broadcast fake news, and rigged the electoral process. In the 1850s, the slaveholding oligarchs who dominated Southern politics went even further, linking racism, sexism, and eventually classism to the “uplifting ideal” that had inspired the Founders—“faith in the possibilities of equality.” Enslaved African Americans, as South Carolina Sen. James Henry Hammond explained in 1858, were an “inferior” class at the “mudsill” of society, whose labor permitted well-connected, educated, and wealthy whites to advance. The authors of the Declaration of Independence had made a grave error, warned Confederate Vice President Alexander Stephens in 1861, when they proclaimed that “all men are created equal.” On the contrary, the “cornerstone” of the Confederacy rested on the “opposite idea”: the “great truth” that “the negro is not equal to the white man; that slavery subordination to the superior race is his natural and normal condition.” The poor whites who backed Hammond and Stephens were simultaneously vicious racists and fervent democrats.

Freedom for them was inconceivable in the absence of unfreedom for Blacks. And so the war came.

Act Two foregrounds the Civil War, which the Republican Party of Abraham Lincoln fought to “banish the idea that a few wealthy white men should rule society.” The abolition of slavery was a means to this

HOW THE SOUTH WON THE CIVIL WAR: OLIGARCHY, DEMOCRACY, AND THE CONTINUING FIGHT FOR THE SOUL OF AMERICA

BY HEATHER COX RICHARDSON

Oxford University Press

end. Emancipation—the “new birth of freedom”—vindicated the egalitarian promise of the Declaration of Independence, and, for a time, Republicans used the “might of the newly powerful federal government” to “guarantee that equality.”

The Republicans won the war but lost the peace, just as the history textbooks have long contended. Yet their egalitarian crusade met with defeat not only in the South, but also in the West. The West, far from being the land of freedom of myth and legend, was from the 1850s onward rigidly structured by race—with whites at the top, and Blacks, Indians, and Mexicans at the bottom. Brutal wars of extermination against Indian tribes during the Civil War only “reinforced” the tragic fact that it was not just in the South, but also in the West, that the “oligarchic ideas of the defeated South would thrive.”

Act Three opens in the East, with the transmogrification of the Republicans into the party of landgrabbing railroad barons and tariffhungry industrialists. Republican maverick Theodore Roosevelt briefly challenged the party’s embrace of big business by insisting that corporations pay fair taxes and not monopolize public resources. Yet he too favored white men over people of color, independent women, and the indigent poor.

The contest between oligarchy and democracy took a different form during the New Deal. Committed to government activism, the Democratic Party of Franklin Roosevelt promoted policies that “privileged white men over women and people of color.” FDR’s fight against fascism changed the political calculus, leading to a revival of the civil rights movement that had been stalled after the Civil War, and, for a brief moment, a liberal consensus challenged the American paradox. Following the 1954 Brown v. Board of Education Supreme Court ruling that found school segregation unconstitutional, however, the “drive for universal equality” emboldened movement conservatives such as journalist William F. Buckley to demonize the liberal consensus as an attack on white male prerogative,

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emulating the James Henry Hammonds of the 1850s.

Movement conservatives scored a temporary victory in 1964 with the nomination of Arizona Sen. Barry Goldwater as the Republican presidential candidate. Often photographed wearing a ten-gallon hat, Goldwater symbolized the ascendancy of the South-West coalition that had coopted the egalitarian vision of Lincoln’s Republican Party.

not likely to find favor among, libertarians, white nationalists, or MAGA true believers. But is it persuasive?

The answer to this question is in large part a matter of personal conviction. If one affirms that America has a soul that was “born in idealism” to uphold the “profound principle” that “all human beings had a right to self-determination,” Richardson has written a compelling account of the betrayal of this ideal. Politi-

Once again, oligarchs trumpeted the “fundamental American idea” that admitting people of color and women to “positions of equality with white men” would “by definition, destroy American freedom.”

Goldwater’s defeat proved to be a setback, but only a temporary one. By widening the gap in the Republican Party between ideology and reality, Goldwater’s candidacy paved the way for the ascendancy of Ronald Reagan, Newt Gingrich, and Donald Trump.

How the South Won the Civil War provides liberals with a riveting “just so” story. It is not written for, and is

cal theorists for centuries have pondered whether equality and liberty can be reconciled. Must liberty for some demand inequality for others?

Richardson, taking inspiration from uber-Republican Abraham Lincoln, has written a testament for everyone who shares her belief that—despite all of the white supremacist evils that the nation has confronted, and is confronting—the circle can be squared.

Richardson’s strong suit is ideology, party warfare (especially for the 19th century), and cultural criticism. She makes an intriguing case, for example, for the influence of TV

Barry Goldwater’s failed candidacy in 1964 paved the way for Ronald Reagan, Newt Gingrich, and Donald Trump.

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Westerns on the worldview of the Republican Party of Ronald Reagan.

A comprehensive political history would pay more attention to public policy, international relations, the nonfederal state, and the bipartisan embrace of social norms that cut across party lines. But this is not the book Richardson intended to write.

How the South Won the Civil War is a bracing wake-up call for Americans who have forgotten, or were never taught, that white male ressentiment is powerful, immoral, and un-American, that powerful white men have twice tried to destroy the Republic, and that patriotic Americans have an obligation to educate themselves to help ensure that this never happens again.

If Lincoln were alive today, he would be a Democrat, Mario Cuomo once said. In an age in which electoral politics is showing signs of strain reminiscent of the crisis of the 1850s, Richardson has doubled down on party genealogy. Nineteenth-century defenders of African American rights—and there were many, white as well as Black— would understand why Richardson finds so much to admire in Lincoln’s Republican Party, yet today’s readers may have trouble imagining any Republican Party other than Donald Trump’s. This summer’s protests for racial justice are one promising sign that at least some Americans are upholding the fight that Lincoln’s Republicans began. Let us hope that the “better angels of our nature” that Lincoln invoked in his First Inaugural will make their voices heard in November. n Richard R. John is a professor of history at Columbia University, where he teaches courses in the history of communications and the history of capitalism. His publications include Network Nation: Inventing American Telecommunications. He is currently working on a history of the American anti-monopoly tradition.

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A Leader Without Leading Nancy Pelosi is an expert at obtaining power.

But what does she want to use it for?

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ancy Pelosi was upset. Her blitz of cable news appearances as a high-profile counterpart to Donald Trump had taken her to CNN in late April. And Jake Tapper had the temerity to question that which is not typically questioned: Pelosi’s legislative acumen.

Congress had just passed its fourth bill responding to the coronavirus crisis. Republicans wanted more money for forgivable loans for small businesses. Democrats had a host of liberal priorities left out of prior legislation that could have been paired with the extension. But Pelosi and her Senate colleague Chuck Schumer chose to go along with the Republican framework, leaving everything else for later.

Immediately afterward, Senate Majority Leader Mitch McConnell hit the pause button on future legislation. It felt like the Democrats were played. And governors were sounding alarms about the lack of federal aid to cover massive state and local government revenue shortfalls, which triggered a loss of 1.5 million jobs in April and May alone.

“Was this a tactical mistake by you and Senator Schumer?” Tapper asked Pelosi.

“Just calm down,” she replied sternly, pivoting to tout getting more small-business money than McConnell even wanted. (As of mid-June, about $130 billion in authorized funding had not been claimed, and a May survey found that half of all small businesses expected to fail, even with federal support.) Pelosi vowed to obtain state and local fiscal relief eventually. “There’s no use going into what might have been.”

It was an interesting exchange, because it highlighted a Pelosi critique that rarely makes it into conventional accounts. Molly Ball’s biography Pelosi emphasizes more-common narratives, which

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throughout her accomplished career the Speaker has been able to surmount: whether a woman can compete in the typically male terrain of high-stakes politics, or whether she can withstand the caricature of a “San Francisco liberal.”

Ball, a national reporter for Time, also tries to make the case that Pelosi, underestimated by official Washington, constantly fleeces her foes at the negotiating table. Much of this is true. She stopped a newly re-elected George W. Bush from dismantling Social Security, a strategic masterstroke. Willing the Affordable Care Act forward when Democrats wanted to pull back was a signature achievement. During the interregnum between speakerships when John Boehner and Paul Ryan ran the House, she was consistently relied on for votes when they faltered, protecting liberal social programs and obtaining additional funding. And Pelosi always did it with remarkable caucus discipline, bringing together a disparate set of legislators to strengthen her hand.

But the past few months of hurried legislative output, long after Ball completed her draft, frustrate that analysis. In our endlessly gridlocked politics, real governing occurs mainly in the crucible of crisis, which forces urgent action beyond the usual game of inches. What you do in those moments matters infinitely more than how sassy you look clapping during the State of the Union address, or how you rip up that address after it’s read.

During the pandemic, Pelosi centralized control to an unprecedented degree, placing responsibility for crisis governance entirely in her own hands. Yet the result mainly protects corporate interests while throwing temporary life rafts to everyone else.

The caucus dominance and tactical savvy and leverage over Republican

opponents failed her in this case. It’s worth wondering why, which is inextricably tied to one question: What does Nancy Pelosi really believe?

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bservers often assume that, because Pelosi represents San Francisco, she must position herself on the party’s left wing.

But that’s not where her politics comes from. Her father, Thomas D’Alesandro Jr., was a machine pol, a congressman and later mayor of Baltimore, whose wife maintained a “favor file” to organize which strings needed to be pulled at which city agencies to assist important constituents. She married Paul Pelosi, a college classmate who became a wealthy financier, and while raising five children, stayed connected to politics mostly because her house was big enough to host fundraisers. The early chapters of Ball’s book teem with stories of Pelosi fraternizing with politicians as a donor and converting this into power. Pelosi was Rep. Sala Burton’s chief fundraiser; while stricken with colon cancer, Burton handpicked Pelosi to replace her five days before she died.

In that first race, Pelosi spent $1 million in six weeks, more than all her challengers combined. Confronted by one about buying the election, Pelosi replied, “I don’t think you have to be sick to be a doctor, or poor to understand the problems of the poor.”

She did understand the problems of some constituents; Pelosi sent mailers into conservative pockets of San Francisco vowing to “fight all efforts to raise the personal income tax.” She won by fewer than 4,000 votes.

After just two years, Pelosi became the House’s leading fundraiser.

Though Ball insists that Pelosi’s money and connections were “camouflage for a revolutionary soul,” there’s little evidence of this. In the book, Pelosi names her top political motivation as “concern for the world’s children,” an almost perfectly nondescript concept.

Early in her House career, Pelosi took a vocal role in tackling the AIDS crisis and condemning China’s human rights record. She is to be commended for both stances, though they also can both be seen as nods

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to large constituencies back home.

But issues don’t quite animate her; Pelosi’s eye was always on leadership. And she’s extremely good at mustering her caucus, often through a palpable rule-by-fear approach.

Time and again in the book, House Democrats shrink from crossing her, mindful that Pelosi’s grudge will endure. This discipline provides the kind of leverage that defeats opponents, especially ones as inept as the Republicans she has faced.

But Pelosi getting famously fractious Democrats to consistently vote her way, while no mean feat, matters less than what she gets them to vote for.

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hen the coronavirus spread and lockdowns buckled the economy, Republicans knew exactly what they wanted—protect large corporations and investors— and pursued it unerringly. Pelosi had no coherent agenda to fall back on.

During the pandemic, Pelosi’s caucus dominance and tactical savvy and leverage over Republican opponents failed her.

She’d spent the past year advancing complex, multifaceted bills and watching them wither in Mitch McConnell’s legislative graveyard.

H.R. 1, the House’s signature legislation during this Congress, which attempted to nationalize voter registration, establish nonpartisan redistricting commissions, add ethics standards to the Supreme Court, add a voluntary public-financing option for campaigns, require presidents to release tax returns, disclose donors for super PACs, make Election Day a holiday, and about 20 other things in a single bill, is a perfect example of this syndrome. There’s no single narrative to grab onto, just a mélange of advocacy group–approved planks. This left House leadership unprepared as the pandemic began its march.

History reveals that economic and social crises reflect badly on the party in the White House, not the legislative opposition. There was leverage, which Ball notes is Pelosi’s

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favorite word, to make real and lasting demands for coronavirus relief: forgiveness on consumer debts or rental payments, federal benefits that automatically expand when the jobless rate rises, massive long-term infrastructure spending. An embattled Trump facing a perilous re-election might have agreed to plenty to prevent economic disaster. If politics is the art of the possible, then in this moment possibilities were bursting.

But Pelosi, nevertheless, hesitated.

When some economists advised sending every American a check, Pelosi shot that down, arguing against money for millionaires. This culminated in a means-tested $1,200 stimulus payment. You only got the money if your earnings were under $100,000 per year, based on earnings data as far back as 2018. This deprived people who subsequently may have lost their job from getting relief.

A separate legislative response purported to provide sick leave to

Pelosi and colleagues, clad in kente cloth, introduce the Justice in Policing Act in June 2020.

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Pelosi and the Democratic leadership in Congress celebrate regaining the House and Senate in 2006.

workers, except employers with more than 500 workers and those with fewer than 50 were exempted from the requirement. When asked about this, Pelosi said large employers should provide sick leave themselves, without government subsidies (workers needing paid time off might not have minded). Meanwhile, several legislative efforts promised free COVID-19 testing for all, but the health care industry has managed to find loopholes there too: Reporters keep finding people paying thousands of dollars.

Meanwhile, while Pelosi took the lead on the initial, smaller bills, she allowed Mitch McConnell to write the vehicle for economic relief, known as the CARES Act. McConnell casually drew up a $4.5 trillion “money cannon” corporate bailout, which rapidly rescued the investor class before it was even spent. Who drafts the baseline legislation makes a big difference: If Pelosi had written the CARES Act, it could have included such ideas from her caucus as government-provided payroll support, increased food stamps, guaranteed vote-by-mail to ensure voting rights during the pandemic, significant state and local aid, free coronavirus treatment, assistance for the U.S.

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Postal Service (which may go bellyup come September), a national contact tracing program, and much more. Instead, they just got to tweak McConnell’s work, without altering its tilt toward the powerful.

Relief for individuals, like the one-time stimulus checks and boosts to unemployment insurance, was clumsily implemented and, most important, temporary. Pelosi and Schumer touted stringent corporatebailout oversight, but Trump fired the inspectors general charged with monitoring it, and Pelosi and McConnell spent months failing to name a chair of the only entity Trump couldn’t meddle with, the Congressional Oversight Commission.

These failures were Pelosi’s alone.

She deliberately slowed allowing members to vote remotely or through a proxy while lawmakers were locked down at home. Because of this, during the crucial months of March and April, Pelosi became a one-woman House of Representatives, unilaterally writing legislation or negotiating with Republicans, and presenting the finished product to House members, take it or leave it. This effectively disenfranchised hundreds of millions of Americans and limited the Democratic Caucus to issuing

press releases while Pelosi did the work of governing. But this power grab wasn’t put toward anything resembling a clear goal.

After four bills passed, Pelosi got around to putting together a bill, the HEROES Act, which included all of the important pieces she deferred in other legislation. But by this time, Republicans had their corporate bailout and could ignore further efforts. The HEROES Act was another unfocused wish list, which Democratic leaders telegraphed as a messaging bill to set up future negotiations. As of press time, those negotiations hadn’t begun.

The bill also included random giveaways. It extended small-business grants to K Street lobbyists, even though lobby firms were still as busy as ever trying to win perks for their clients. This would amount to Congress donating to the groups that devise campaigns intended to influence them, and as former members often gravitate to K Street, would have lawmakers handing over money to their future employers, which is about as corrupt as you can get.

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nderlying this all, incredibly in the midst of a crisis, was a Pelosi tendency that had grown over the years: obsessive concern with deficits. Pelosi rolled back student debt relief in the HEROES Act after learning that it would cost $100 billion more than expected. This was a $3.2 trillion messaging bill not designed to become law, yet an additional 3 percent cost was considered unacceptable. Pelosi also declined to add “automatic stabilizers” that would maintain expanded benefits until economic stress dissipated, blaming a Congressional Budget Office scoring quirk that made the cost appear artificially larger.

So with over 30 million out of work, the important thing to Pelosi was that her pie-in-the-sky, goingnowhere bill was “reasonable,” based on some ineffable standard of reason.

It matches the worldview of a Democratic leader who, just two years ago, made a lugubrious elegy on the House floor after the death of Pete Peterson, who bankrolled the deficit hysteria industry for decades and

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relentlessly targeted Social Security for cuts. (Ball does reveal that Pelosi told Obama during his “grand bargain” talks that she would support his aims, “even if it meant agreeing to entitlement cuts.”)

Devotion to deficit hawkery in normal times is unwise policy. It’s downright fatal during an economic crisis, where relief could be yanked away from needy families prematurely simply because of an unwillingness to challenge CBO’s scoring model. But here we finally see the contours of Pelosi’s governing framework, not just on the budget, but on everything.

Pelosi believes that the nation’s resources are scarce, and what sadly passes for the modern welfare state must be protected at all costs, rather than raised to greater heights. The goal is, at best, a less bad world than Republicans want. It’s a defensive crouch dating back to Pelosi’s initial

entry into Congress under President Reagan, and it has dominated her thinking ever since.

Progressives who dream too big are to be sat in a corner, and antigovernment conservatives are to be bargained with and mollified.

Official Washington’s approval is craved. Pelosi hosts an annual ideas conference at her own vineyard for a group of elite donors. That’s who gets to scale the fortress she has built around her desiccated ambitions. Her thoughts today on activism date back to something she said during her first campaign: “Someday they will realize just how insignificant they are.”

Pelosi demands total control; you can argue that she never groomed a successor for this purpose, to keep everyone reliant on her. She finds this to be the best method to gain leverage over the legislative process. But to what end is this leverage employed?

The coronavirus crisis has revealed the damaging nature of Pelosi’s growing concern with deficits.

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Pelosi fights intensely to obtain power, but she seems to consider power so fragile and fleeting that it shouldn’t be used for very much.

Democrats captured the House in the 2018 midterms on a promise to counter Trump’s lawlessness and corruption. Yet today we have an unchecked kleptocracy, with very little sustained oversight coming from the House. Trump’s wars were not discontinued and his border camps were not shut down; even his border wall, which caused a prolonged government shutdown in 2019, was still funded through repurposing military money, something the House has never attempted to reverse.

Now, we have a crisis recovery limited to the wealthy and connected, threatening economic disaster for ordinary people. Leverage for a better solution was squandered. John Boehner was an incompetent leader, but even in divided government, he succeeded in his caucus’s primary aim of cutting spending. During his tenure, public investment fell to its lowest portion of GDP since Eisenhower. Pelosi is clever and sharp, yet astonishingly little has changed.

Pelosi’s deal to gain the Speaker’s gavel a second time requires her to step down after 2022. If Joe Biden wins the election, and Democrats gain a governing trifecta, she’ll have one final chance to write her legacy.

The circumstances dictate a far different course than she appears capable of steering. The past 40 years have seen endless stagnant wages, sinking economic mobility, collapsing trade unionism, and soaring income and wealth inequality, to say nothing of even more enduring structural racism and the persistent Black-white wealth gap.

A desperate need for solutions has shifted the policy orientation of the party to the left. Throwing a little charity at society’s losers while tending to moneyed interests doesn’t cut it anymore, especially since the twin crises of coronavirus and George Floyd’s death exposed America’s essential inadequacies. Change can build from the bottom, but leaders must translate into policy those cries for action. Will Nancy Pelosi, cloistered in her office, hear them?

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Can We Create All the Money We Need?

Stephanie Kelton attempts to educate the public on a novel economic theory.

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ver the past decade, government debt in the U.S. and elsewhere has reached unprecedented heights. Yet the supposed costs of this debt are nowhere to be seen. Excessive debt, we’ve been warned, will lead to mass flight by investors and spiking interest rates, or else spiraling inflation and a collapse in the currency. But in the U.S. and elsewhere, recordhigh public debt has been accompanied by record-low interest rates and low inflation.

These developments have opened the door for a revival of old-fashioned Keynesian views, in which government deficits are seen not as a problem to be solved but a useful tool of demand management—and today an essential source of economic recovery.

Many mainstream economists have backed away from the view that deficit-financed public spending is necessarily risky or counterproductive. Space has also opened in public debate for non-mainstream thinkers who argue fullthroatedly for a bigger, more active public sector, freed from imaginary financial constraints. The most visible of these today is the school called Modern Money Theory or Modern Monetary Theory (both terms are used), or MMT. Both supporters and opponents tend to present MMT as a monolith, a doctrine that breaks radically with established schools of thought and must be accepted or rejected in its entirety. But in my view it’s better—both more accurate and more productive—to see it as a body of arguments within an older Keynesian tradition of economics. Contrary to the sense you might get from both supporters and detractors, it’s not a crystalline logical structure where, if you remove one piece, the whole

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thing collapses. Rather, like most emerging bodies of thought, it’s a ramshackle assemblage of parts built at different times for different purposes, tied together with loose solder of association and inference rather than tight bonds of deduction.

Stephanie Kelton is among the most prominent of the dozen or so economists associated with MMT. Her new book The Deficit Myth is intended to bring MMT to a broader audience. In addition to an impassioned call for a bigger, more active public sector, The Deficit Myth contains a number of distinct economic arguments.

The most important of these is that a government with its own currency can spend as much as it needs to without worrying about the bond markets. The constraint on public spending is not debt but real resources. Only when government borrowing leads to more purchases than what the economy can produce is it necessary to cut spending, raise taxes, or otherwise rein in demand. Or as Keynes long ago put it, “anything we can actually do, we can afford.” One can share this conclusion without necessarily accepting all the arguments Kelton uses to reach it.

The book begins with a claim that all money originates with the government. “MMT takes as its starting point a simple and incontrovertible fact: our national currency, the US dollar, comes from the US government, and it can’t come from anywhere else.” Government spending, in this perspective, creates money, while taxes destroy it. Thus the function of the budget isn’t to get the government the money it needs, but “to add or subtract dollars from the rest of us.” And since a deficit for the government must be matched by a surplus for the private sector, an

THE DEFICIT MYTH: MODERN MONETARY THEORY AND THE BIRTH OF THE PEOPLE’S ECONOMY

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PublicAffairs

increase in government debt must equal an increase in “net financial wealth” for everyone else.

The next set of arguments concerns government debt specifically.

First, the growth of public debt over time depends not only on government spending and taxes, but on growth, inflation, and interest rates.

In the decades after World War II, for example, debt-to-GDP ratios fell steeply in the U.S. and most other advanced countries. This was not because they were paying the debt down with surpluses, but because the combination of strong growth, moderate inflation, and low interest rates eroded the burden of debt over time even as governments continued to spend more than they took in in taxes. Second, government debt is not only a liability for the government, but an important asset for the financial system. As Kelton notes, when it seemed like the U.S. might pay off the national debt in the late 1990s, there was considerable worry about how the financial system would function without its safest and most liquid asset—Treasury debt.

On the policy level, the most important claim is that what limits government spending is the productive capacity of the economy, not the state of government finances. Inflation, not rising debt, is the sign that the government is spending too much.

It’s sometimes suggested that MMT’s inflation constraint is just a budget constraint under a different name. (I’ve been guilty of this myself.) But while every dollar of spending adds exactly one dollar to the deficit, the amount of demand it adds depends on what it is spent for.

As Kelton notes, buying up carbonemitting power plants to decommission wouldn’t directly add to the demand for labor or other real resources, so there’s no reason to think it should be offset with higher taxes. Spending on new public services—universal health care or child care, say—does add to demand, so it’s likely that higher taxes would also be needed.

Policy orthodoxy holds that stabilizing inflation is primarily the responsibility of the Federal Reserve.

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Kelton argues that, for a country that issues its own currency, there is never a danger of debt spiraling out of control.

But Kelton is skeptical: Many other factors also influence the borrowing choices of businesses and households. In a depressed economy, it’s unlikely that even very low interest rates will call forth much new spending. (People sometimes describe this as “pushing on a string.”) Public spending, by contrast, creates demand directly. Kelton is, however, also skeptical about conventional fiscal policy, which involves adjusting spending or taxes to keep the economy at potential: “there’s just no way for Congress to react to changing economic conditions … quickly enough.” Instead, she argues for more robust automatic stabilizers, which directly adjust public spending in response to unemployment or other macroeconomic indicators. Her preferred stabilizer is a job

guarantee program, which would offer employment to anyone who wants it at a stipulated wage.

The policy conclusions are mostly convincing; the route by which they’re arrived at is less so.

The big weakness is the book’s central theoretical claim that government has a monopoly in money creation, a theory known as “chartalism.” This claim has a serious problem: the existence of banks. It is true that government has a monopoly on currency. But most of the money we use in our daily lives is not coins and bills issued by the government, but ledger entries created by banks.

Banks are money issuers every bit as much as the government. Government has tools to influence how much money is created by private banks, but its control isn’t absolute.

And when its control is effective, that’s a function of the regulations and institutions of the financial system; it has nothing to do with the government monopoly on currency.

The private financial system is hardly mentioned in this book—in a typical graphic, the economy is divided into the “currency issuing” federal government and “currency using” businesses, households, and state and local governments, with no mention of banks. And there’s good reason for that—bringing banks into the story would make it clear that the fact that currency comes from the government tells us nothing about where money comes from. Kelton, to be clear, never says anything factually untrue, but she gives the strong impression that the government is the only source of money that we

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use for transactions, which is not true at all. Similarly, while Kelton is right that federal debt is an important asset for the financial system, the stronger claim that government deficits necessarily correspond to increased private wealth is true only if we tautologically define “net financial wealth” as the negative of government deficits. In any economically relevant sense of wealth, it is false—asset values go up and down without any change in the government budget position.

For many MMT critics, the holes in the foundation make the whole structure unsound. I don’t agree. I think there are real insights here, which can stand on their own without the support of the overarching theory of money.

One strength of Kelton and her colleagues is not so much that they start from different assumptions, but their insistence that those assumptions be applied consistently. For example, one puzzle of economic orthodoxy is the coexistence of different concepts of the interest rate.

There is an interest rate on loans under the control of the central bank,

The book shows little interest in the private financial system, though banks are money issuers every bit as much as the government.

and a long-term “natural” interest rate determined by the fundamentals of thrift and technology. There is also an interest rate set by financial markets. But if the Fed can always set the short-term interest rate where it wants, it’s not clear how markets can influence the interest rate on public debt, or how the natural rate comes into play. Kelton cuts this Gordian knot by insisting that “the interest rate is a policy variable,” full stop. If spending and taxes are at the right level to match demand with supply (and the central bank cooperates), then the government can pay whatever interest rate it chooses.

Non-economists may be surprised to hear that inflation just depends on whether aggregate demand lines up with aggregate supply, and has nothing to do with money printing.

So it’s important to stress that there is nothing radical or distinctively MMT about this position. What’s unusual about Kelton’s version is how stable and predictable the relationship between demand and inflation is supposed to be. At one point, she even suggests that the Congressional Budget Office (CBO) could, rather

than calculating the effect of spending bills on the deficit, instead calculate their effect on inflation.

This suggests a more reliable link between spending and inflation than historical experience supports. We can agree in a general way that an economy running at full potential is more likely to experience inflation than one with a great deal of slack. But past efforts to use this relationship to shape macroeconomic policy have shown it to be an unreliable tool in practice.

Kelton correctly observes that the Federal Reserve has repeatedly overestimated how close the economy is to potential, and sacrificed full employment for the sake of inflation fears that turned out to be unfounded. It’s not clear why these judgments would be made any better by the CBO. Here as elsewhere, my concern is that Kelton has taken a reasonable argument and expressed it as if it were an absolute logical relationship and not a historical, contingent one. The variety in macroeconomic dynamics between countries and over time calls for skepticism about how far economic policy can be guided by deductive, syllogistic reasoning, whether it’s the reductive “Econ 101” that dominates so much of our political discourse, or the counter-101 that MMT offers.

There are, of course, benefits to telling a simple, logical story. Kelton and her colleagues have brought a great many non-economists into the economic conversation in a way that no other contemporary branch of heterodox economics has been able to. No, MMT is not a Copernican revolution that is going to refound economic thought. But that’s setting the bar awfully high. We may have to reject Kelton’s broader theoretical arguments, but she’s dead right about a central political fact of our times: A large, active public sector is more needed today than ever, and unfounded fears of public debt are a big reason we haven’t gotten it.

Which means her eloquent, accessible book is performing an important public service. n J.W. Mason is assistant professor of economics at John Jay College, CUNY and a fellow at the Roosevelt Institute.

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Cate Blanchett as Phyllis Schlafly and Rose Byrne as Gloria Steinem in FX’s Mrs. America.

The ERA and the Dynamic of Deafness The Equal Rights Amendment was defeated less

by Phyllis Schlafly than by an inward-looking failure to listen. Are we now in a moment when potential movement allies at last listen to one another?

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he Mrs. America miniseries, which premiered in mid-April on FX, is cleverly done, with engaging portrayals of Phyllis Schlafly by Cate Blanchett and Bella Abzug by Margo Martindale. It gets a fair amount of detail wrong in order to make its somewhat heavy-handed points, including Gloria Steinem’s allegedly saying, “Revolutions are messy; people get left behind.” (This sounded so unlikely that I emailed Steinem to ask; she did not say it.) It has Phyllis Schlafly allegedly saying, “We are living in a feminist totalitarian nightmare,” and gives us a cringe-inducing and entirely madeup scene of Fred Schlafly having his way with his exhausted spouse. The

series also portrays the movement, at least at the beginning, as a catfight.

Yet it gets the big picture more or less right—and provides a reason to revisit the 1970s and early ’80s to consider why, although the ERA helped galvanize the feminist movement and steadily connect it with much of Middle America, the amendment did not get through the last three states.

The lesson for today is simple: Pay attention to what a majority of Americans want.

The ERA movement fell short in 1972–1982 for many reasons. Only one of these, but one that holds a lesson for our own time, was the focus in my 1986 book, Why We Lost the ERA. Lani Guinier informally dubbed

my focus “the dynamic of deafness.”

In that dynamic, the very energy that motivates social activists to forgo other commitments and the pleasures of everyday life to throw themselves into the cause also leads them to listen only to one another. Their echo chamber reinforces their commitment but increases their distance from the people they have to convert.

Because the feminist movement privileges the experience of every woman, it is less susceptible than most social movements to looking inward. The ERA is thus a “best-case analysis.” If the dynamic of deafness reared its head here, it is even more likely to cripple other social movements. Predictably, it is happening again today, as diverse social movements have proliferated. A dynamic of turning a deaf ear to outsiders and self-reinforcement among insiders tends to take over any group that needs to mobilize its members.

Most Americans supported the principles of the Equal Rights Amendment in 1970 and in 1980, as they do today. However, they did not support at least one of the policies

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that many ERA activists were saying would be the consequence of the amendment. In 1980, only 22 percent of Americans thought women should be drafted and eligible for combat. In fact, the Supreme Court would have been very unlikely to insist, over the objections of Congress and the military, that the amendment required this result (due to the long-standing “doctrine of military necessity” by which members of the armed forces do not have many rights of the civilian population). Yet many proponents of the ERA wanted the amendment to make women equal to men in the armed forces, because they thought that outcome was just. Reinforcing one another in this commitment, they did not put themselves in the shoes of the ordinary non-politicized women of the states that had to ratify the amendment or the legislators who worried about what adding it to the Constitution might entail.

Today, ironically, with a conservative Supreme Court, the chances of any untoward interpretation of the ERA are even smaller than they were in 1982. In addition, public opinion in the country has moved much further in a feminist direction. Today, if a woman leader on the right began her description of herself on a muchwatched television show by saying she was “submissive” toward her husband, as the real Schlafly did, she would lose much of her audience immediately. (In Mrs. America, this description was voiced by Schlafly’s husband, perhaps because it did not suit the dignified and self-contained image that Cate Blanchett projected.)

Only ten years later, feminist ideas had spread so broadly that 63 percent of women in the Chicago area, responding to a survey question, said that they had called someone a male chauvinist, either to his face or talking about him to someone else. More than half of women with only a high school education had done so. So had more than half of Black women, and more than half of women who called themselves “conservative.” Feminist thinking had crossed lines of class, race, and politics. The struggle for the ERA itself helped cause this sea change in attitudes. Today, the recently rejuvenated ERA can garner

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votes in the heartland and even in somewhat Southern states because the principle remains strong, many feminist sentiments have become mainstream, and most of the reasons against it have evaporated.

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he resurrection of the ERA is, by the way, a delightfully democratic story. It begins when a sophomore at the University of Texas at Austin named Gregory Watson discovered, while writing a paper about the ERA in an undergraduate government course, an unratified amendment introduced to Congress by James Madison as part of the original set of 12 amendments in what became the Bill of Rights, only ten of which made it through the states. Watson argued that the remaining states could still ratify the “Madison Amendment,” specifying that no increase in salary for members of Congress could go into effect until after the following election, which gave voters a chance to retaliate. He got a C on the paper from a teaching assistant, appealed the grade to the professor teaching the course, and was turned down.

Smitten with the idea, however, he began a one-man crusade to bring the amendment again before the unratified states. One by one, unratified states voted for the amendment.

By 1992, there were enough, and the 27th Amendment was entered into the Federal Register. It became part of the U.S. Constitution. No one paid much attention.

That year, however, a professor at NYU noticed, and later three feminist legal scholars at William and Mary in Virginia, supported by the association of women at their law school, argued in a full journal article that if the Madison Amendment could be ratified after all those years, so could the ERA. The original sevenyear deadline for ratification, after all, was not in the amendment but was only a majority act of Congress, and Congress had already acted once (in 1978) to extend it for three years.

If Congress had the power to extend the deadline for three years, it could extend the deadline indefinitely.

States could go forward and ratify, then pressure Congress to extend

the deadline. Although five states had voted to rescind, precedent was against them. Ohio and New Jersey had rescinded their ratifications of the 14th Amendment but were nevertheless listed among the ratifying states. With this argument inspiring them, feminists in the least Southern of the unratified states went to work.

First Nevada ratified. Then Illinois.

Then Virginia. That made up the three remaining states needed for passage. The issue is now in the hands of Congress, where both houses must extend the deadline, and the courts, which must decide on the status of the states that have voted to rescind.

Mrs. America takes us back to the second half of that first decade of struggle. The ERA sailed through the states from 1972, when it passed Congress, to 1977, when Indiana ratified, leaving only three more states to go before reaching the required 38. Then it stopped dead. The reason was Mrs. Schlafly. Mrs. America shows how a woman whose book A Choice Not an Echo had been highly influential in the Goldwater campaign for president turned her sights on the ERA. She used her long-honed political skills to exploit the fact that Illinois, where she lived much of her life, had a state constitution that required a three-fifths vote in each house of the legislature, not a simple majority as in most states, for any U.S. constitutional amendment. She got that minority vote both by organizing homemakers and, more significantly, by helping to channel the wrath of the evangelical churches in the south of the state.

As Robert Wuthnow has pointed out, the evangelical churches in the U.S. had traditionally been “quietist,” a stance that prescribed separation from politics. Then in 1973, the Supreme Court decided in Roe v.

Wade that abortion in the first trimester must be legal on grounds of privacy, a right that was not itself in the Constitution but that the justices had previously found in the “penumbra” of the other rights in the Constitution. This decision brought the evangelical churches into politics, with fateful consequences. When I went to Springfield in June 1980 to lobby for the ERA and interview activists

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Bella Abzug (Margo Martindale) was a congresswoman and leader of the women’s movement.

there on both sides, I found that all but one of the STOP ERA homemakers with whom I talked was from a fundamentalist church group. (The outlier thought the ERA was a communist plot sponsored by the Trilateral Commission.) These evangelical women, believing literally in St. Paul’s dictum that women must be subject to men, were the main STOP ERA troops in Illinois, not the middle-class homemakers that the Mrs. America credits, repeated in each episode, show vacuuming the ERA away.

Schlafly, a Catholic, did not start out embracing Protestant fundamentalists, but she knew she needed them for her movement. So too the Trump coalition brings together, fatefully for the Republic, both Wall Street billionaires and small-town evangelicals who otherwise have little regard for one another.

As Marjorie Spruill has shown, first Roe v. Wade and then the larger feminist movement let what was then called the “New Right” move from a primarily anti-communist stance to one defending the “American family.”

This move broadened the appeal of the right. It now took as its enemies the “crazy” feminists and their allies, who wanted to upend all traditional

values. In response, the National Organization for Women banned socialist and lesbian banners in their ERA demonstrations. NOW even set up a separate ERA storefront in Chicago, where only ERA literature could be found, sequestering their other causes in their main NOW storefront.

But Schlafly successfully linked the ERA with those other causes, as well as claiming that the amendment would mandate women in combat, the end of alimony, unisex bathrooms, and other unpopular outcomes.

As the final episode shows, Schlafly’s success prefigured Ronald Reagan, who latched on to these social issues and used the power of the federal government to redouble the strength of the conservative movement and reverse social gains.

With evangelicals now strongly active in politics, the traditional Republican Party, which as the party of Lincoln had been a far stronger supporter of the ERA than the Democrats, no longer exists.

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hat can we learn from this saga? The producers of Mrs. America would have us learn that one woman—at least one as beautiful and determined as Cate

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Blanchett—can stop a bunch of East Coast feminists, white or Black, in their tracks. It gets right both the political shrewdness of Schlafly and the surprise of the feminist elites. It doesn’t capture well, however, that the ERA movement was truly a movement. The series is all about the top, not about the base. Each of the first seven episodes is even named for a woman at the top. This makes for good TV drama, but it doesn’t get where the real action was—in the states. And that is where the action is today. Each state has its own set of cultures, its own priorities, and its own grassroots activists. That’s how the ERA got through the last three states recently. The top should provide those actors with information, money, and coordination.

What else can we learn? Avoid the dynamic of deafness. We see the echo chamber today in social media and siloing, as well as in schisms in the progressive movement. The dynamic is accentuated when activists begin to give up their work and home life for the cause. The reinforcement of others in the movement keeps activists going. It also often keeps them deaf to the concerns of people outside their self-invigorating culture, their geographic confines, and their class. That deafness is not immoral or condemnable. It’s natural. But it causes mistakes. An extraordinary historical moment, such as the vicious police murder of a Black man, caught forever on video, can open ears and hearts.

Polls show more white support for Black grievances than in decades.

As I write, there is reason to hope that this could be the rare moment when people turn from their inward-facing enclaves and begin to listen to one another. As always, the risk is that differing interpretations of events and experiences will once again widen divisions even among people of goodwill. The lesson from the ERA struggle continues to be: Listen.

Jane Mansbridge is the author of Why We Lost the ERA (1986), a professor at the Harvard Kennedy School, and the recipient of the 2018 Skytte Prize in Political Science.

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Parting shot

The Greater Quiet When I began feeling overwhelmed by the number of cases at the beginning of this pandemic, I thought it would be valuable to highlight some of the lives and faces of those we were losing. And perhaps linger for an extra moment and appreciate how profound is this loss. Pretty soon it became a daily

practice, and as we came to understand the number of lives lost to police violence, I decided to include those faces as well.

The title “The Greater Quiet” conveys the idea of going to the silences, finding the faces and voices that are overlooked and underreported in the rush of daily news. —Steve Brodner

For more of Steve Brodner’s “The Greater Quiet” series, visit https://www.instagram.com/sbrodner/

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‘I can’t breathe’

By Randi Weingarten, President AMERICAN FEDERATION OF TEACHERS

hen a person gasps “I can’t breathe,” it is incomprehensible that there would not be a rush to help. Yet this was the lived experience of George Floyd, Eric Garner and so many Black men before them. Black people have endured unending grief, fear, anger and trauma caused by racism and racial violence. They are tired of trying to convince others that these murders were not isolated incidents by bad cops but examples of the systemic racism deeply rooted in America. This is a moment to really listen. But it is also a moment of reckoning that requires us—all of us—to act.

Cellphone videos showing Black Americans being murdered are often viewed thousands and even millions of times. But even visual proof of these horrendous acts has not resulted in sufficient action to address racial terror, revealing a shameful indifference to the value of Black lives.

We live in a world in which neither George Floyd’s murderer nor his colleague accomplices seemed concerned they were killing him, even when bystanders filmed them and pleaded with them to stop. A world in which the president of the United States stokes racial divisions and planned to launch his re-election campaign on Juneteenth in Tulsa, Okla., the site of one of America’s worst racial massacres nearly a century ago.

But we also live in a world in which the demand for change, evident in weeks of overwhelmingly peaceful protests against racial injustice in all 50 states and across the globe, is leading to results. A world in which Black people—many of them young people—are leading these protests, joined by people of every race, age, creed and walk of life. Leaders of the American Federation of Teachers and the National Education Association sent a letter to America’s students, reinforcing our message that racial equity is the great unfinished work of this country.

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Police brutality captured on cameras led to near-immediate suspensions and firings of officers in Buffalo, Atlanta and other cities.

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New York banned chokeholds by law enforcement and made police disciplinary records public.

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The street in front of the White House was renamed “Black Lives Matter Plaza.”

discriminatory policing and mass incarceration.

My union recently passed a resolution renewing our commitment to end systemic racism in America, laying out 19 commitments to combat racism and violence against Black people, including the separation of school safety from policing.

Communities are reconsidering how to make schools safer, both in response to the coronavirus and in response to the need to ensure all students feel welcome. Many are looking to add guidance counselors, cultural competency and cultural bias training, and mediation and restorative justice programs and to end zero tolerance programs that disproportionately punish youth of color.

Criminal justice must change. There must be more pathways to opportunity. But more must be done.

Even if we are LGBTQ or a religious minority, most white people can move through the world unmindful and unworried about race. Even those of us who are determined to be allies and to do the work of being anti-racist—to read and inform ourselves; attend protests; and examine, question, challenge and wrestle with our biases—can compartmentalize that part of our lives. But we must acknowledge the emotional labor of being Black in America, and that simply living can be wrenching and exhausting. White people must do real soul-searching about the depths of their support for racial equality, which necessarily requires giving up some of their privilege and changing the power dynamic between Black and white people. Otherwise our claims to support true equality are platitudes.

Entire systems must change, because racial bias is built into virtually every system in the United States.

Bias is evident in underfunded schools, inadequate healthcare and racial health disparities, voter suppression, lack of housing, food deserts, unemployment and disproportionately low wages, and

It should not have taken a video of Derek Chauvin nonchalantly murdering George Floyd to spur more of us to demand an end to racial violence and terror. But now that we have seen it, we cannot look away. We must look, we must listen, and we must act with urgency like never before.

And congressional Democrats introduced the Justice in Policing Act of 2020, which would ban police departments from using chokeholds, develop a national standard for use of force, establish a national police misconduct registry and limit qualified immunity, which protects officers from lawsuits over alleged misconduct.

All Americans must demand an end to racial violence and terror.

Look at what happened in just the first weeks of sustained protests against the wrongful killings of Black Americans: ■

Minneapolis banned the use of chokeholds.

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Charges were upgraded against the officer who killed George Floyd, and the officers who failed to intervene were arrested and charged.

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Dallas adopted a “duty to intervene” rule that requires officers to stop other cops who are engaging in inappropriate use of force.

Photo: Matthew Jones

Weingarten with the Rev. Dr. William Barber II, co-chair of the Poor People’s Campaign.

Follow AFT President Randi Weingarten: www.twitter.com/RWeingarten

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