Down the Up Escalator

by Barbara Garson

  Copyright © 2013 by Barbara Garson

  All rights reserved. Published in the United States by Doubleday, a division of Random House, Inc., New York, and in Canada by Random House of Canada Limited, Toronto.

  www.​doubleday.​com

  DOUBLEDAY and the portrayal of an anchor with a dolphin are registered trademarks of Random House, Inc.

  “The Mystery of the Missing Unemployed Man” was previously published in slightly different form on TomDispatch.com.

  Jacket design by Emily Mahon Cashier totaling grocery purchases © PhotoAlto/James Hardy/Getty Images; business people exiting Wall Street Station © Fuse/Getty Images; woman on cell phone © Blend Images/SuperStock; male factory worker © Corbis/SuperStock; seamstress, Hispanic small business owner © Bipolar/Getty Images; factory worker © Blend Images/SuperStock; cleaning up a theater © Pedro Castellano/Getty Images; auto factory worker © Cultura/Limited/SuperStock; petroleum workers © Corbis/SuperStock; Hispanic businessman working on computer © JGI/Tom Grill/Getty Images

  Library of Congress Cataloging-in-Publication Data

  Garson, Barbara.

  Down the up escalator : how the 99 percent live in the Great Recession / Barbara Garson.

  p. cm.

  1. Income distribution—United States—History—21st century.

  2. Equality—United States—History—21st century.

  3. Global Financial Crisis, 2008–2009. I. Title.

  HC110.15G376 2013

  339.2’20973—dc23

  2012020359

  eISBN: 978-0-385-53275-4

  v3.1

  CONTENTS

  Cover

  Title Page

  Copyright

  Author’s Note

  Introduction: What Caused the Great Recession

  (in Three Scenes and One Phone Call)

  I: OUR JOBS

  One: The Pink Slip Club

  Two: Down by the Banks of the Ohio

  Three: Innovating the Jobs Away

  Four: Even Bankers Can Be Unemployed

  II: OUR HOMES

  Five: Show Me the Mortgage

  Six: Bubble Birth Control

  Seven: Underwater and Up the Creek

  Eight: Strategic Default

  Nine: An Upright Man

  Ten: The House Belongs to Them

  Eleven: An Old-Fashioned Foreclosure with a Modern Twist

  III: OUR SAVINGS

  Twelve: Three Investors

  Thirteen: Rich or Poor, It’s Good to Have Money

  Fourteen: The Perfect Twofer

  Conclusion: Down Is a Dangerous Direction

  To Be Continued …

  Influences, Debts, and Love

  Other Books by This Author

  About the Author

  AUTHOR’S NOTE

  In order to protect the identities of most of the people I interviewed for this book, I did not use their real names. Money is such a sensitive subject that I eventually changed all names except for a couple of people who spoke in their official capacities and one media-savvy fellow whose own blog reveals far more intimate things about him than I do here. I also changed the location of a small town, and I regretfully concealed a few corporate names that it would have been fun to mention. Despite these bits of camouflage, none of the people you’re about to meet are composites. They’re individuals speaking in their own words.

  INTRODUCTION

  What Caused the Great Recession (in Three Scenes and One Phone Call)

  I met a man about forty years ago and caught up with him on three more occasions. These four scenes, spanning four decades of his life, should have been enough for me to predict the Great Recession. But I didn’t put it together till now.

  SCENE I

  In the late 1960s I worked at a coffeehouse near an army base from which soldiers shipped out to Vietnam. A lot of the GIs who frequented our place were putting out antiwar newspapers and planning demonstrations—one group was even organizing a union inside the army.

  But I often sat with a young man back from Vietnam who was simply waiting out the time till his discharge. Duane had floppy brown hair, lively eyes, a sweet smile, and was slightly bucktoothed. He was handy and would fix our record player or show up with a part that made our old mimeograph machine run more smoothly.

  He rarely spoke about the war except to say that his company stayed stoned the whole time. “Our motto was ‘Let’s not and say we did.’ Me and this other guy painted that on a big banner. It stayed up for a whole day,” he noted with a mix of sardonic and genuine pride.

  That was the extent of Duane’s antiwar activism. He didn’t intend to become a professional Vietnam vet like John Kerry. His plan was to return to Cleveland and make up for time missed in the civilian counterculture.

  I enjoyed my breaks with Duane because of his warm, self-aware humor, but thousands of GIs passed through the coffeehouse, and I didn’t particularly notice when he left.

  SCENE II

  In the early 1970s General Motors set up the fastest auto assembly line in the world in Lordstown, Ohio, and staffed it with workers whose average age was twenty-four.

  The management hoped that these healthy, young, and inexperienced workers would handle 101 cars an hour without balking the way longtime autoworkers surely would have. But the pace and monotony were just as oppressive to the younger workers. What GM got at Lordstown instead of balkiness, however, was a series of slowdowns and snafus aimed at the speed of the line. The management publicized this as systematic “sabotage”—until it realized that that could hurt car sales.

  I visited Lordstown the week before a strike vote, amid national speculation about the generation of “hippie autoworkers” whose talk about “humanizing the assembly line” was supposed to change forever the way America works.

  On a guided tour of the plant (how else could I get inside?), I spotted Duane shooting radios into cars with an air gun. We recognized each other, but in the regimented factory environment we both instinctively thought it better not to let on. In lieu of a greeting, Duane slipped me a note with his phone number. At home that evening he summarized life since his discharge.

  “Remember you guys gave me a giant banana split the day I ETSed [got out as scheduled]. Well, it’s been downhill since then. I came back to Cleveland, stayed with my dad, who was unemployed. Man, was that ever a downer. But I figured things would pick up if I got wheels, so I got a car. But it turned out the car wasn’t human and that was a problem. So I figured, ‘What I need is a girl.’ But it turned out the girl was human and that was a problem. So I wound up working at GM to pay off the car and the girl.”

  And he introduced me to his pregnant wife, of whom he seemed much fonder than it sounded.

  The young couple had no complaints about the pay at GM. Still, Duane planned to quit after his wife had the baby. “I’m staying so we can use the hospital plan.” After that? “Maybe we’ll go live on the land.” If that didn’t pan out, he’d look for a job where he’d get to do something “worthwhile.”

  To Duane worthwhile work didn’t mean launching a space shuttle or curing cancer. It meant getting to see something he’d accomplished like fixing the coffeehouse record player, as opposed to performing his assigned snaps, twists, and squirts on cars that moved past him every thirty-six seconds.

  He also wanted to escape the military atmosphere of the auto plant. “It’s just like the army,” he told me. “They even use the same words, like ‘direct order.’ Supposedly, you have a contract, so there’s some things they just can’t make you do. Except if the foreman gives you a direct order, you do it or you’re out.”

  So despite the high pay, Duane and his friends talked about moving on. This wasn’t just a pipe dream. In
the early 1970s there was enough work around that if a friend moved to Atlanta or there was a band you liked in Cincinnati, you could hitchhike there and find a job in a day or two that would cover your rent and food.

  That made it hard to run a business of course. The GM management echoed many other U.S. employers when it complained about Monday/Friday absenteeism and high turnover among young workers. At just about that time U.S. manufacturers began feeling competition from German and Japanese products, and for the first time in decades they saw a slight dip in profit rates. In retrospect I wonder if this wasn’t the historic moment when many companies determined to do something about their labor problem.

  But neither Duane nor I had any premonition of the outsourcing and off-shoring soon to come. For us it was a time when jobs abounded and Americans talked not about finding work but about humanizing it.

  SCENE III

  In the 1980s I spoke at a university in Michigan and spotted Duane in the audience. When the talk ended, I asked him to come out with us—me and the professors who’d invited me there. But Duane had to collect his children from their schools and drop them with the sitter in time to get himself to his 4:00 p.m. shift. His wife would pick them up when her day shift ended an hour later.

  “Complicated logistics,” I said.

  “It’s a tighter maneuver than my company in Nam ever pulled off,” he quipped. But he and his family pulled it off every day.

  In the minutes we had, Duane told me that he no longer worked in auto. “Too many layoffs.” In order to “keep ahead of it,” he’d become a machinist. And to keep ahead of that, he’d upgraded his skill to the point where “I program the machines that program the other machinists.” His shrug said, “What are you gonna do?”

  At that time, computers were being introduced into machine shops in a way that took the planning away from the operators at their benches and centralized it in the office or planning department. Duane was helping to fine-tune the automation that would reduce many of his skilled co-workers to machine tenders. He understood that he was “keeping ahead of it” by rendering other men cheaper and more replaceable. Hence his apologetic shrug.

  His wife apparently hadn’t managed to keep ahead of computer automation. She processed data at an insurance company and came home most evenings with a headache from staring into the era’s immobile, blinking CRT screens.

  “Office work is getting to be worse than those factories you wrote about,” Duane told me. “By the way, I liked the book.” He meant my book All the Livelong Day, with a chapter on Lordstown in which he appears.

  A Phone Call

  In the summer of 2008 a man called to say that he and his sisters were contacting names in their father’s address book to let them know that he had passed away.

  Duane died suddenly in Arizona, where he’d moved a few years earlier to work in a specialized shop that had something to do with industrial lasers. (He “kept ahead of it” till the end, it seems.) The funeral was scheduled for Saturday, and there was plenty of room for out-of-town guests. “Dad built these beautiful built-in sleeping spaces,” his son told me.

  Duane’s children (the kids who’d been shuttled between shifts with such split-second timing) were trying to figure out how to keep the house in the family instead of selling it to a stranger who might not appreciate their father’s craftsmanship. But all of that was still “up in the air.”

  I didn’t go to the funeral, but I did at least manage to send a timely note of condolence.

  Lehman Brothers collapsed two months later, and I began interviewing people who’d lost jobs, homes, or savings in the Great Recession for this book. It took me two years of talking to recession victims to see how Duane’s pre-crash history, the parts I’d been privy to, explained the crisis that hit the rest of us after he died.

  Once I realized that Duane and his family belonged in a history of the Great Recession, I tracked his son down. He told me that his sisters, both living in Michigan, had toyed with the idea of moving to Arizona, maybe together, though one was married and the other wasn’t. They’d even begun to explore the employment situation out there. (One of Duane’s daughters is a medical receptionist and the other a delivery truck driver.)

  Then came the crash, and who would give up a steady job? Unfortunately, while they’d waited, house values dropped to the point that even if they managed to sell Duane’s house at its post-crash price, they’d still owe the bank over $200,000. The house, with all Duane’s beautiful built-ins, was now “underwater.”

  Since their mother was by then off the scene and their father had left no other significant inheritance beyond a $15,000 death benefit and a $6,000 credit card debt, his children couldn’t afford to keep paying the mortgage. So, on the advice of a lawyer, they mailed the keys to the bank and walked away.

  “Dad would make some joke,” his son said. “ ‘When I was alive, I once stopped you from running away from home, but I taught you to walk away from a home after I was dead.’ Something like that. Only he’d make it come out funny.”

  There is probably some way to make it come out funny, but I can’t work out the wording either.

  This is not to say that Duane led a deprived or worthless life. His estate may have fallen victim to the recession, but he himself worked fairly steadily at increasingly skilled and, let’s hope, “worthwhile” jobs. He raised three children who get along with one another and admire their father. And he seems to have retained his self-aware but not self-deprecating humor to the end.

  On the other hand: here’s a workingman, part of a two-income family, who kept ahead of off-shoring, kept ahead of automation, worked for four decades, and died with no savings, negative equity in his house, and a $6,000 credit card debt.

  Apropos of that credit card, Duane’s son insisted on telling me that his dad derided “consumerism” to the end. While he was growing up, the family never bought a big-screen TV, a new car, or the season’s must-have sneakers on credit. Most of the $6,000 debt, he thought, was left from Duane’s last move from Illinois to Arizona, a career investment, one might call it, that he’d been paying down.

  All of this suggests to me that while his skills went up, Duane’s real wages stayed level or may even have gone down over his lifetime. But down is an un-American direction.

  From 1820 to 1970, real hourly wages in America rose every decade—even over the course of the 1930s. That extraordinary century and a half (probably unique in history) ended in the 1970s. From then till now—in other words, throughout the course of Duane’s working life—U.S. hourly wages stagnated or declined.*

  Duane seems to fall into the high end—the stagnant end, that is—of that income statistic. During the years when so much work was moved abroad and so much industrial skill was transferred from human to computer, Duane was one of the foresighted or fortunate Americans who managed to “keep ahead of it.”

  Why, then, do I say that his life predicted the Great Recession?

  Over the decades during which Duane’s earnings were close to flat and his less skilled or less fortunate colleagues lost ground, U. S. productivity rose immensely. To put that statistically, between 1971 and 2007, U.S. productivity increased by 99 percent; that is, it nearly doubled. Over those same years hourly wages rose by 4 percent. (That’s not 4 percent a year; it’s 4 percent over thirty-six years.) In other words, the average worker’s productivity rose twenty-five times more than his pay.† People like Duane and his computerized white-collar wife produced more and more per hour even as their wages stayed constant or declined.

  But the United States is a consumer economy. Duane used that word “consumer” to chide his children’s craving for the in thing. But to economists “consumer economy” is a neutral term to describe a society that sells most of what it produces internally. In the United States we sell 70 percent of the goods and services we make to each other. But if the majority of Americans was earning less and producing more, who was going to buy all the stuff?

  When Hen
ry Ford raised assembly line wages to a fabulous $5 a day in 1914, he explained that his company couldn’t grow unless Americans earned enough to buy the cars it made. When the companies Duane worked for began to cut wages, they reasoned that instead of paying their workers enough to buy stuff, they could lend them the money. Or perhaps they didn’t so much reason as fall into the practice of necessity.

  When Duane worked for General Motors in the early 1970s, it was an automaker that had gotten into auto loans to promote sales of its own products. By the time Duane died, General Motors Acceptance Corporation was not only an auto lender but the fourth-largest home mortgage lender in America. The TARP program bailed it out of massive subprime mortgage losses.

  Similarly, that other industrial icon, General Electric, established its lending arm, GE Capital, to help midsized manufacturers finance their purchases of GE generators. But as real wages fell and real sales growth slowed, it too morphed into a financial firm. By 2007, the year before the crash, GE Capital contributed half of GE’s profits.

  Corporations that didn’t become banks themselves deposited their profits in outside banks or returned them to shareholders who did the same. Thus Main Street money became Wall Street money. To put it another way, our economy became financialized. But what were financial institutions doing with all the money that was accumulating in fewer and fewer hands?

  In my book Money Makes the World Go Around, I tried tracing my own bank deposit as it flowed out into the global economy in the mid-1990s. Most of my money, I discovered, coursed round and round through closed circuits for the trading of currencies, securities, and more abstract derivatives. The little that seeped out into what bankers call the “real sector” might be used to buy things like third-world water and power systems (without making any material improvements in them). A lot of the rest was lent to companies, countries, and private citizens who seemed to have no expanding business or rising income with which to pay that money back.