Third World America (19 page)
Read Third World America Online
Authors: Arianna Huffington
In the run-up to the war, General Eric Shinseki, a heroic combat officer who had risen to become the army’s chief of
staff, told Congress that a successful occupation of Iraq would require “several hundred thousand” troops on the ground.
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U.S. deputy secretary of defense Paul Wolfowitz told Congress he found that “hard to imagine.”
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But when defense secretary Donald Rumsfeld’s attempt to win the war on the cheap failed, everyone acted shocked. Who could have known?
The Bush administration also told the public that the rebuilding of Iraq would cost taxpayers no more than $1.7 billion.
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To say the administration massively underestimated would be a massive understatement.
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The
New York Times
described our reconstruction efforts there as “an effort crippled before the invasion by Pentagon planners who were hostile to the idea of rebuilding a foreign country, and then molded into a $100 billion failure by bureaucratic turf wars, spiraling violence and ignorance of the basic elements of Iraqi society and infrastructure.”
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Who could have known?
At the same time the warning signals about Iraq were being ignored in Washington, many on Wall Street were ignoring the signs of their own impending disaster.
In late 2002, Charles Prince was put in charge of Citigroup’s corporate and investment bank.
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The banking giant was already knee-deep in toxic paper and aggressively looking the other way.
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Prince was so successful at averting his eyes that, five years later, when he was told that his bank owned $43 billion in mortgage-related assets, he claimed it was the first he’d heard of it. Isn’t that something he should have known? Or did he prefer not knowing?
Prince had plenty of help ignoring the obvious, particularly from Robert Rubin. According to a former Citigroup executive, despite ascending to the top of the Citi food chain, Prince “didn’t
know a CDO from a grocery list, so he looked for someone for advice and support.
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That person was Rubin.”
But when it all came tumbling down, both Rubin and Prince portrayed themselves as helpless victims of circumstance, because, well … who could have known?
“I’ve thought a lot about that,” Rubin said when asked if he made mistakes at Citigroup.
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“I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.” What he means, of course, is the facts as he chose to know them at the time.
Former Fannie Mae CEO Franklin Raines suffered from the same affliction.
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According to Raines, he can’t be blamed for what happened at Fannie Mae because mortgage stuff is so, well, complicated. In fact, he can’t even understand his own home mortgage: “I know I can’t and I’ve tried,” Raines told a House committee. “To this day, I don’t know what it said.… It’s impossible for the average person to understand.” In other words, who could have known?
But isn’t it interesting that the complexity and opacity of these things somehow always redounds to the benefit of those in charge?
We saw a familiar insistence on ignoring all warnings in the Bernie Madoff scandal.
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“We have worked with Madoff for nearly twenty years,” said Jeffrey Tucker, a former federal regulator and the head of an investment firm that lost billions to Madoff. “We had no indication that we … were the victims of such a highly sophisticated, massive fraudulent scheme.” Who could have known?
Well, financial fraud investigator Harry Markopolos, for
one. Not only did he know, he did everything he could to make sure everybody else knew as well.
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In 1999, after researching Madoff’s methods, Markopolos wrote a letter to the SEC saying, “Madoff Securities is the world’s largest Ponzi Scheme.” He pursued his claims with the feds for the next nine years, with little result.
One would think the “Who Could Have Known?” excuse has been exposed as a sham enough times to render it obsolete, but there are always new incentives to not know.
In the wake of 9/11, Condoleezza Rice assured us nobody “could have predicted” that someone “would try to use an airplane as a missile.”
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Except, of course, the 1999 government report that said “Suicide bomber(s) belonging to al-Qaeda’s Martyrdom Battalion could crash-land an aircraft packed with high explosives (C-4 and semtex) into the Pentagon, the headquarters of the Central Intelligence Agency (CIA), or the White House.”
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After Katrina, the Bush White House read from the “Who Could Have Known?” hymnal: No one could have predicted that the storm would be a Category 5, and that this could result in the levees being breached.
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We now know, of course, that plenty of people knew that the levees could be breached and said so before the storm hit.
Then there is the high priest of “Who Could Have Known?”, Alan Greenspan, who, looking back in October 2008 on the makings of the financial crisis he helped create, delivered this “Who Could Have Known?” classic: “If all those extraordinarily capable people were unable to foresee the development of this critical problem … we have to ask ourselves: Why is that? And the answer is that we’re not smart enough as people.
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We just cannot see events that far in advance.”
In other words, it’s simple biology: We humans are only smart enough to create situations in which the rich are beneficiaries of huge wealth transfers from the middle class—but we have not yet evolved to the point where we can foresee that this is what we’re doing.
In truth, the problem is not that we are “not smart enough as people.” As we’ve seen time after time, smart enough people are all too willing to ignore facts they don’t like or that don’t happen to benefit them in the short term. And to lessen personal culpability, they institutionalize not knowing—constructing oversight systems deliberately designed to be ineffective and accordingly unable to provide those in power with information they don’t really want to know.
We had our warning signals for the financial crisis: They were called Enron and WorldCom and Global Crossing. Those outrages set the stage for the much larger, more sophisticated, and much more dangerous excesses that drove the housing and banking meltdown.
But the broken system that allowed the scandals at Enron and the rest was never really reformed. Yes, there were window-dressing changes and Band-Aid legislation. But the guiding philosophy—that the free market would regulate itself, and that corporate America always knew best—remained in place. Indeed, it was given much freer rein.
So it’s been déjà vu all over again, with one big difference that makes this latest crisis so painful: the scale of it all. The impact on average Americans has been so much more devastating and long lasting. And here’s the bottom line: If we don’t reform the system—really reform it—the next financial collapse will surely be more than we can withstand.
It’s the thing that will send us over the edge, making the
idea of Third World America more than just a scary harbinger of things to come. It will be our reality. So it’s time to say good-bye to the “Who Could Have Known?” era. It’s time to know things again—and to acknowledge that we know them. And to make things right before it is too late.
LINDA D. WILSON
Perhaps my story is no different from that of millions of other middle-class workers who are experiencing an enormous test of their faith. I have an MBA and more than twenty-five years of human resources experience. I worked for the same company in Louisiana for twenty-two years. Despite countless layoffs and downsizings, I was either promoted or changed positions every two to three years, expanding my HR skills and knowledge. I can honestly say I never concerned myself with getting a pink slip. I served on local boards and committees, volunteered for good causes, donated to charities, and served at my church. My near-perfect credit score and disposable income allowed me to live with little debt and pay down my mortgage from thirty to seven years.
I overcame a birth defect—a cleft palate. After surgery, I had to learn to talk again. I attended college on a track scholarship, and in my senior year I competed in the U.S. Olympic Track & Field trials. From there, I earned my bachelor’s degree and started my career. While working full-time and successfully climbing the corporate ladder, I had an idea for an event planning system. I filed for and received a U.S. patent. However, working full-time in a competitive environment left me with little time to launch a business and new product, so I put it on the back burner. Instead, I focused on a seemingly safer and more stable corporate career path—guaranteed paychecks, benefits, pension, and a 401(k). Like most other members of the middle class I believed that with enough hard work and
determination I would be successful. It was what my parents taught me by example and what they expected me to demonstrate in everything I did.
In 2005, I adopted two girls—sisters. My ten-year-old was diagnosed with HIV and works
extra
hard to learn and be successful in school. I set them up with a financial plan and invested in real estate, which I planned to leave them for their inheritance.
Then, Hurricane Katrina destroyed my home and rental properties in New Orleans. My family and friends were displaced and scattered across the country. So after working for the same company for twenty-two years, I resigned and relocated to Texas, along with my parents and five sisters. I put my career on hold to rebuild our lives. Two years later, I’m still unable to land a suitable full-time position (at any level)—despite more than twenty-five years of expertise.
The world has obviously changed for the middle class. Now the only guarantee that today’s worker can expect is that you put in a day’s work, you get a day’s pay—that’s it.
So, like millions of other middle-class workers, I’m being forced to reexamine my career, lifestyle, priorities, interests, goals, and future. Although I’ve exhausted my savings and face insurmountable debt, I’ve decided to step out in faith—or better yet, take a leap. I’m managing my own business full-time, designing products to help people plan and organize their everyday lives. I’m determined to establish a business as an inheritance for my children.
SAVING OURSELVES FROM A THIRD WORLD FUTURE
A
nd now for something completely different … some good news:
Third World America is not a done deal
.
Despite the overwhelming evidence that the wheels are coming off our national wagon, I believe deeply that America can still accomplish great things: that our greatness is not necessarily a thing of the past—indeed, that our best days can still lie ahead of us.
I realize that coming after the litany of all the ways America is falling apart, this might sound overly optimistic. Or delusional. Or the result of hitting the ouzo in despair. I understand that the initial response to the first four parts of this book might be to walk onto one of our crumbling bridges and contemplate jumping off.
But that’s not how the American psyche works. We’ve always been a positive, forward-looking people. A can-do attitude is part of our cultural DNA. And that mind-set is a prerequisite for turning things around. Without it, the seeds of change and innovation will wither in a soil that is an arid mix of negativism and defeatism. With it, we can shake off our cynicism and avoid the slow slide to Third World status.
As a country, we have an unparalleled track record for marshalling our forces and rising to meet great challenges. It is one of our greatest strengths.
After Pearl Harbor, America’s naval force was decimated. But just three years later, as John Kao points out in his book
Innovation Nation
, “America had a hundred aircraft carriers fully armed with new planes, pilots, tactics, and escort ships, backed by new approaches to logistics, training methods, aircraft plants, shipyards, and women workers” along with “such game changing innovations as the B-29 … and nuclear fission.”
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