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Part of the problem with economic statistics is that they are statistics—blunt approximations of the way people live. For example, that 6 percent unemployment rate doesn’t sound so catastrophic, does it? It seems okay until you think about the fact that the terminally unemployable don’t show up in the statistics, since they are no longer looking for work. Hundreds of thousands of these people fell off the rolls throughout the supposed recovery. And when you factor in the underemployed, who don’t get enough hours, or don’t get paid enough for the hours they do get, the numbers are not so swell.
The Atlantic Monthly,
which adjusted the figures for part-time and minimum-wage work, estimated that there were actually 21 million underemployed, not 7 million. And even that figure doesn’t account for an entire incarcerated underclass, the millions crammed in the big houses of jail-crazy America.

During the last long boom, the one that ran throughout the sixties, average wages increased across the board. This was due in part to growth in sectors that offered steady, well-paid work, such as manufacturing and civil service. But since the 1980s, both of these sectors have been in decline, and have been supplanted by the more polarized wage scale of the service industry. When my pops and his pals graduated from high school and were ready to enter the workforce, they had few problems finding steady work at the shipyard or the plant or on fishing boats. Throw in a couple of super-cheap years of college, and they could teach or join the civil service. By the time I graduated from high school, the shipyard was automated, the plant was on half-time, and the fishing industry was belly up. The government wasn’t hiring, either. College was no longer cheap—nor was it optional, since a BA had become the equivalent of a high-school diploma in my dad’s day.

The nineties’ boom did not look like the last long boom, the real long boom. Wage distribution for that boom looks like a bell curve, with a few people on the bottom and top, and the vast majority falling in the middle. Income inequality actually declined steadily from the postwar period to the seventies. From 1947 until the late seventies, everybody’s income, from the lowest quintile to the top five percent, went up. The gains for those at the bottom, the middle, and the top income brackets are comparable, too, at 116 percent, 111 percent, and 86 percent, respectively. But since the 1980s, wealth distribution looks more and more like a flat line, with a sharp vertical spike representing the very rich.

Income gaps have only been exacerbated by recent tax policy. Bush’s tax policies are, despite their phony populist veneer, overwhelmingly slanted toward the richest of the rich. Sure, Average Q. Taxpayer has gotten a couple of hundred bucks of his hard-earned dough back from the greedy grasp of the state, but this is chump change compared to the millions in breaks for wealthy individuals and corporations. Even the pragmatics of tax policy favor the wealthy. A front-page story in the
New York Times
noted that the Internal Revenue Service was far more zealous in auditing the working poor than wealthy investors, even though the latter have more to hide and better resources to help them hide it. Bush admitted as much in a campaign town hall session: “Real rich people figure out how to dodge taxes.” I guess all those tax breaks, like the war in Iraq, are merely preempting the inevitable.

The growth of income inequality is also the result of a shift in the business of business. The big success stories of the past couple of decades, such as Wal-Mart, are more likely to have a few very highly paid workers (CEOs, etc.), a lot of ill-paid workers (cashiers, sweatshop laborers, etc.), and not a lot in the middle. And even though the stock market went up and up, and productivity kept on rising, wages were never allowed to rise at the same pace, for fear that this would lead to inflation. If the minimum wage had inflated as much as CEO pay or margin debt, cashiers and rib-joint ladies would be making hundreds of dollars an hour.

After the bubble burst, and the boom busted, corporations all over North America cravenly used September 11 as an excuse to fire people by the hundreds of thousands. At the same time, leaders such as Bush and Giuliani insisted that the best thing people could do for New York, and the economy in general, was to shop till they dropped. And though all the yackity-yack about a stimulus package to reboot the troubled economy might have seemed like some Keynesian flashback, Bush’s idea of aid takes the form of direct cash transfers and tax credits to some of the wealthiest individuals and corporations in America—the very entities least likely to need, or for that matter, spend them. Call me a crank, but the only things I see trickling down are pink slips and platitudes.

One of the things that help sustain the illusion that there is still a thriving middle class is the increase in consumer debt. People are going into hock to maintain a middle-class lifestyle, racking up thousands in credit card debt, at positively usurious rates. One could argue, in fact, that personal debt has generated the consumer spending that has kept us from spiraling further into recession. Much of this is mortgage refinancing, which means that people are putting their homes on the line in order to overspend—and I suspect there will be beaucoup de foreclosures when interest rates rise above their current record lows. American debt service ratios are holding steady at about 13 percent because the rising worth of real estate and record homeownership have helped offset the growth of debt, but real estate prices cannot rise forever, and interest rates cannot go lower without resorting to negative integers. Depending on usury also helps accelerate the growth of inequality, since credit costs, and does so regressively. The poorer you are, the more expensive it is. Payday lenders, for example, charge triple-digit rates that would embarrass a loan shark. If, however, you are one of the super-rich, then usury is your friend, and one of your primary sources of wealth.

I’m not saying that we should beat our Palm Pilots into plowshares and go back to the mills. There was nothing inherently magical about digging for coal or working in a car plant. These industries enjoyed better pay and job security thanks to union workers who for years bled in the streets. But union membership is on the wane: The service and retail sectors remain largely untainted by the blight of collective bargaining; and the tech sector, with its 401Ks, encouraged workers to stop thinking of themselves as brother and sister and become shareholders instead. It’s been downhill since Reagan told the air traffic controllers to go pound sand. One of market fundamentalism’s articles of faith is that unions are awful, and that belief is one thing that
has
managed to trickle down.

How do I know people think unions are bad? Well, brothers and sisters, plenty of people told me as much when, working for a teaching assistants’ local, I ran around begging them to please, pretty please, come to the union meeting tonight. Nobody beat me with a lead pipe—this was no old Rockefeller mine. But a few grumbled about wasted dues, and the rest remained indifferent, as though I were trying to get them to come to the chess club or a Tupperware party. Everyone sat around the bar and griped about being broke as shit, but only a handful of folks wanted to get together and mention that fact to our august employers. Most people just didn’t see what was in it for them.

The prevailing worldview at grad school seemed to be that you busted your hump to publish as much stuff and get as much funding as you could, scraping by on part-time jobs and loans until the mystical moment around middle age when you got tenure and were set for life, like your profs. But those profs didn’t just have the advantage of getting their PhDs at the same time as all that sweet, sweet sixties’ government funding. They also organized and represented themselves. In my grad school, on the other hand, people conducted themselves as individuals in competition, not as members of a class.

This phenomenon isn’t limited to grad school: In the high-profile professions that ruled during the boom, Xtreme competition was the rule. Unionization is actively discouraged in the service industry, where employees are encouraged to feel they’re part of a team, loyal to the brand and the leadership. Union work became a lazy-Teamster joke, not nearly as cool as Brave New Work—the flex-time telecommunications job with the stock options. And because unions are only as strong as their members, the “unions are bad” idea has become a self-fulfilling prophecy. The less people believe in unions, the less power they have. The less power they have, the less people believe in unions. Without the unions to exert pressure on wages, there’s no good reason for employers to raise them, even as all the other economic indicators float up, up, and away.

The boom might have been unprecedented, but it wasn’t entirely unfamiliar. The super-rich continued to get super-richer, the moderately rich did well, the middle class lost ground, and the poor were left, to bum a phrase from Donald Barthelme, sucking the mop. Bush dismissed critics of his pro-plutocrat tax giveaway by insisting his detractors were trying to stir up class warfare. And his rhetoric was effective. Most Americans labor under the delusion that they live in a classless society, where such Euro-commie talk does not apply. They cling to the myth of upward mobility, the sense that anyone, if sufficiently blessed with astounding bone structure, a boffo idea, and a willingness to work themselves to the very marrow, can be a billionaire. Since Reagan, who declared that he wanted to live in an America where everyone could be rich, the atmosphere has been more like class bullying than class war, with everyone disdaining their immediate inferiors and aspiring to become their superiors. We labor under the collective misapprehension that we are pre-rich. This is one of the reasons why so many people rushed out and bought stock, and one of the reasons why people continue to vote against their own economic interests. However, despite widespread and contagious delusions of impending wealth, people are less likely to move on up the class ladder than they were before the boom. As income inequality has increased, class mobility has declined. When
The Economist
—hardly a socialist rag—is bemoaning the decline of meritocracy and fretting about a calcifying American class system, as they did in December of 2004, it would appear things have taken a definite turn for the dynastic.

Throughout the ages, there have been choruses of warnings against the corrosive effects of income inequality. You’ll find the message in golden oldies like the Bible, Plato’s
Republic,
and in Francis Bacon’s admonition that wealth is like muck—useless unless you spread it around. Founding Fathers like Jefferson and Madison had strong words about the impact of an excessive income gap on the body politic. For a more timely take, consult the Princeton professor and
New York Times
columnist Paul Krugman, who rightly rails against the Bushies’ mendacious math. The U.S. might be home to the majority of the world’s billionaires, but using the wealth of the CEOs as a measure of the health and vitality of the economy makes about as much sense as basing crop predictions on the health of the king. The further the rich float into a scrubbed bubble of entitlement, and the longer the less-than-rich are left to seethe under a heap of debt and resentment, the worse this joint gets for each and every one of us.

Which would you rather have, an enclave of fantastically wealthy CEOs, enjoying a lifestyle that makes Versailles look like a rustic commune, or good schools, good health care, and a living wage? This is a choice that the government is currently making on your behalf, and they’ve picked the billionaires every time, no matter how platitudinous they wax about leaving no child behind. Did Americans really throw off the yoke of English tyranny so they could bow down to a set of new kings—monarchs of Mammon like those self-lavishing cheats Dennis Kozlowski, Jack Welch, and Ken Lay?

CHAPTER FOUR

When abuses like this begin to surface in the corporate world, it is time to reaffirm the basic principles and rules that make capitalism work: truthful books and honest people, and well-enforced laws against fraud and corruption. All investment is an act of faith, and faith is earned by integrity. In the long run, there’s no capitalism without conscience; there is no wealth without character.

P
RESIDENT
G
EORGE
W. B
USH

W
hen booms go bust, they tend to flush out companies that have, in the giddy spirit of bullish excess, been less than forthright about their books. The last bust was no exception. The Enron scandal, the ur-fraud, began coming to public consciousness in fall 2001, and Enron declared bankruptcy by December. That was the biggest such bankruptcy ever until July of 2002, when WorldCom finally tumbled into its own fantastic imploding sinkhole. Those two remain the heavyweight champions of corporate fraud, but throughout 2002 and 2003, a wave of lesser corporate scandals, from Adelphia to Xerox, revealed “accounting irregularities” in the billions of dollars. “Accounting irregularities” is North American euphemese for senior executives and their chums on the board contriving utterly bogus financial statements, swindling their shareholders, employees, and the public, and absconding with millions and millions of dollars. Marketeers were quick to characterize the collapse of these behemoths of bullshit as the market correcting its own excesses, outing the truth in its inimitable market way. “Companies come and go. It’s part of the genius of capitalism,” enthused Paul O’ Neill, the then secretary of the Treasury.