by Thomas Frank
So disjunctive does this spectacle appear that onlookers naturally assume the newest Right’s motivations must lie elsewhere, as we have noted. The movement’s positions bear so little relation to lived reality that observers sometimes feel they need pay its actual statements no mind at all.
But this is a mistake. If we wish to understand this latest right-wing triumph, we must begin by taking seriously what the Right actually says at its rallies, and prints on its signs, and shouts from its podiums. We must pick our way through the tangle of conspiracy dreams and libertarian fancies that make up the right-wing renaissance. And by all means, we must read the conservative texts themselves—the words of the politicized TV newsmen, the orotund phrases of the radio talkers, the end-of-the-world rhetoric that one noticed at the Tea Parties.
* * *
This is a book that seeks to explain hard-times conservatism, to understand the enthusiasm for an anything-goes economic arrangement that persists in spite of all the failures and bank-breaking catastrophes that our previous efforts to achieve such an arrangement have inflicted upon us.
Free-market capitalism is not the sort of system for which people rally in the streets, even in prosperous times. That they would do so in the months after the freest part of the market deposited so many of their fellow citizens onto the scrap heaps of unemployment and bankruptcy tells us much about the genuine disgust abroad in the land, about the raw need to raise one’s voice.
It also tells us much about the way the resurgent Right has capitalized on the nation’s anguish to create a protest movement that virtually promises to make the anguish worse. This is the story of a swindle that will have terrible consequences down the road. And though it sounds curious to say so, the newest Right has met its goals not by deception alone—although there has been a great deal of this—but by offering an idealism so powerful that it clouds its partisans’ perceptions of reality.
Now, constructing an alternative reality would normally put a worldly political movement at a profound disadvantage. But this case is different. The reborn Right has succeeded because of its idealism, not in spite of it; because idealism in the grand sense is precisely what our fallen economic world calls for.
CHAPTER 1
End Times
For the people of the most prosperous nation in the world, recessions are often existential crises, times when everything we believe is called into question. In fat years we think of our economic life in almost magical terms—the visionary wisdom of the stock-picking crowds, the brand spirit that is supposed to inhabit our sneakers—but in hard times the fantasies lie in shards on the ground, and the awful reality is that much harder for the shimmering dreams that preceded it.
In 2008 and 2009, the middle-class world came apart. Every time we checked, the value of our retirement fund had fallen by another third; friends lost their jobs; industries like construction and auto manufacturing came to a standstill; and we discovered, with a sickening feeling, that we owed far more on our mortgage than our house was worth. The landmark institutions of middle-class life were crumbling around us. General Motors and Chrysler declared bankruptcy; Merrill Lynch, broker to the common man, desperately sold itself one weekend in 2008; IndyMac, Wachovia, Washington Mutual, Bear Stearns, and Lehman Brothers disappeared. It looked like society itself was disintegrating, and for the first time in our comfortable suburban lives, we felt the atavistic touch of panic.
For our parents and grandparents, however, these events may have seemed a little more familiar. The country went down virtually the same road in the years 1929–33, with stock markets crashing, banks failing, factories closing, and foreclosures mounting. So similar were the two disasters that comparisons to the Great Depression became a media commonplace in 2008, the inevitable model to consider when looking to make sense of the current debacle.
The literary critic Edmund Wilson called his book of Depression essays The American Earthquake, and though I’ve read it several times over the course of my life it wasn’t until 2009 that I really understood what he meant by that phrase. Had you been one of the many who put your savings in stocks in the twenties, you would have watched your investments lose half their value, then lose half of what remained, then half again. Had you bought your stocks on margin, you would have lost it all at the very beginning.
Had you been one of the responsible ones who kept your savings in the bank, you may well have lost it anyway. Financial institutions were exposed to the disaster by definition, and when your local bank failed—as almost half of American banks did in the years after the 1929 crash1—it was a pretty sure bet that no nice man from the FDIC would show up to make it all better. You simply lost most of your savings. And when your town bank went down, your town went down, too.
In 1933, the fear among bank depositors grew so contagious that state governors tried to stop the runs on the banks by forcing them to close, or take a “bank holiday”—a move that brought economic activity to a stop in the United States. Manufacturing and construction were moribund by that time anyway, and the economy had already shrugged off about a third of the labor force. A huge part of the population now had no way of earning a living no matter how hard they tried; and, as the once-famous labor historian Irving Bernstein pointed out in a once-famous history of the period, “no one knows what proportion of the others were on part time.” We do know that people stopped leaving jobs voluntarily, regardless of how badly their boss treated them—times were too desperate for gestures like that. We know that marriages declined, as did the birthrate; that the suicide rate rose, and that newspapers published sensational stories on starvation in America.2
Unemployment relief, back then, was an entirely local matter, and after the first year or so of the downturn it essentially no longer existed. There was “organized looting of food” in the big cities, Bernstein tells us, and in a number of places unemployed people set up economies based on barter rather than on dollars—even though the dollars of the day were fully backed by gold and no one feared inflation. Per capita income fell so far that by 1933 it was lower than it had been in 1900.3 What’s more, there was no guarantee that things would ever return to “normal.” Economists of the time were enchanted by the idea of “equilibrium”—of the coming day when the free fall would stop and supply and demand resume their happy orbits—but it slowly dawned on them that economies could find a kind of equilibrium with 33 percent unemployment just as naturally as they could with 3 percent unemployment.4
And so the catastrophe of 1929–33 did to the certainties of laissez-faire economics what science did to nineteenth-century religion and what the slaughter of World War I did to old-fashioned patriotism: it knocked out the props. “Everything nailed down is coming loose,” people used to say back then: The Depression made business leaders into laughingstocks and transformed economic orthodoxy into so many fairy tales.5 It flattened a century of bankerly wisdom and shook to pieces the country’s consensus knowledge, the sacred principles upon which everyone from postman to president had once agreed. “Like the forces of war,” wrote Peter Drucker in his 1939 classic, The End of Economic Man, “depression shows man as a senseless cog in a senselessly whirling machine which is beyond human understanding and has ceased to serve any purpose but its own.”6
When we recall that Drucker was an eminent management theorist, his statement can be read as a fairly harsh indictment of classical economic arrangements. But it was scarcely the harshest. That was supplied by the headlines of the day: Bankers who contrived to reward their friends and rescue themselves as the floor caved in. Wall Street heroes who went to prison. Men of substance whose reassuring predictions were almost immediately contradicted by events.
Disintegration was the great literary theme of those days, and writers returned again and again to imagery of desolation and hopelessness: Express trains making their runs with just one or two passengers while armies of tramps traveled in boxcars. Fruit rotting on the ground in the countryside while people starved in the cities
. Settlements built of trash down at the city dump. The economist John Maynard Keynes famously compared the collapse to the Dark Ages. The editor of Nation’s Business saw “fear, bordering on panic, loss of faith in everything, our fellowman, our institutions, private and government.”7 Even Calvin Coolidge, the figurehead of the business civilization, gave up. Once he had been so confident in the old system that he had declared, “The man who builds a factory builds a temple.” Four days before he died in 1933, Coolidge pondered the panorama of waste surrounding him and told a friend, “In other periods of depression it has always been possible to see some things which were solid and upon which you could base hope, but as I look about, I now see nothing to give ground for hope—nothing of man.”8
The Hard-Times Scenario
The social patterns of hard times are supposed to be a simple thing, as impersonal and as mechanical as the forces that shutter our factories and bid down the price of our stocks. Markets disintegrate, layoffs mount, foreclosures begin, and before you know it, the people are in the streets, yelling for blood. We grow desperate, anxious, rebellious. The idols of our past become targets of derision. We demand that the government do something about it—punish the perps, rescue the victims. We look for insurance against further catastrophe, and stricter supervision of the economy, to make sure it doesn’t happen again.
Or so it was in the thirties. And once the crisis was past, Americans came to believe that the course they had followed in the Depression was a universal pattern, a template for how people behave in hard times. Like the economists’ “automatic stabilizers”—the government spending that kicks in when unemployment crosses a certain line—the public’s reaction to severe recessions is supposed to be predictable, automatic. The economy stumbles, the people scream, and the politicians of both parties rush to rescue us from the disaster: one leads to the other by a process as natural and as reliable as gravity.
When the catastrophe comes, the thirties taught us, certain legislative deeds will follow swiftly. Unemployment insurance will be extended, and extended again. There will be massive investment in public works. Commissions will be named to investigate the causes of the crisis. Agencies will be set up to keep people from losing their houses to foreclosure.
Those hurt by the downturn will start to take action themselves. Union organizing and a wave of strikes will sweep the country in response to the complete breakdown of capitalism’s promise. The people will protest, of course, voicing their discontent in public places and maybe descending on Washington like the “Bonus Army” of unemployed World War I vets who took to the road in 1932.
In the larger culture, fundamental matters of subsistence will take precedence over noble principles. That was true in the thirties, anyway, as economic calamity induced Americans to abandon Prohibition, their great national experiment in federal uplift. They turned away from the preceding decade’s strange fads in art and religion. Dabblers in Dada came home from Paris to write “reportage” about coal miners in Kentucky.
As the economy falls apart, the assumption goes, we will also rediscover a certain neighborliness, a sense of community and even collectivism that comes from shared privation. “The 1930s,” writes the historian Warren Susman, “was the decade of participation and belonging.” The “rugged individualism” extolled by Herbert Hoover gave way to the generosity and social solidarity documented by Studs Terkel in his oral history Hard Times. Writers and intellectuals grew anxious to be part of a larger group, to escape the economy’s sense of futility with collective action. Being a “good neighbor” became one of the great themes of the Roosevelt presidency. According to Robert McElvaine, an eminent historian of the Depression, all of these developments expressed a larger shift in values, “a search for a life of community and sharing, as opposed to the acquisitive individualism of modern industrial capitalism.”9
In politics, class issues will become paramount. When Huey Long won his first race for the governorship of Louisiana in 1928,* notes the historian Alan Brinkley, the politics of the state were completely reconfigured. Suddenly, traditional cultural divides ceased to count. “It no longer seemed to matter whether the parish was Protestant or Catholic, northern or southern,” Brinkley writes in a history of thirties protest movements. “What mattered was its wealth, or lack of it.”10
This new mood will naturally make pariahs of the business class. Let the unemployment rate hit 10 percent, let our pension funds lose their value, and suddenly we no longer thrill to hear about the fabulous lifestyles of the wealthy, the amazing earnings of the investment bankers, or the wonderful cars and homes and private planes that fill the hearts of tycoons with joy. In the thirties, the public even resisted recovery measures when they seemed to benefit the politicians’ business-class cronies more than the common people.
Above all, there will be a grand shifting of the philosophical plates. The economic collapse of the thirties cleared the way for economic ideas that had been marginalized before. “The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success,” wrote the British economist Keynes, a leader of the new school, in the awful year 1933. “It is not intelligent, it is not beautiful, it is not just, it is not virtuous—and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it.”11 Americans, for their part, were willing to try almost anything. Economists entertained new schools of thought. The Keynesian doctrine of countercyclical deficit spending began to overtake laissez-faire orthodoxy, and an amazing assortment of less memorable ideas enjoyed their brief moments of glory.
If the hard-times pattern is fixed, so are the moves it supposedly forbids. Here the lessons come not from the successful Roosevelt presidency but from the disastrous administration of his predecessor, Herbert Hoover. Never again, it has always been thought, would a hard-times president pine for balanced budgets in the Hoover manner or chase the illusion of stability represented by the gold standard. Nor would there be any audience for views like those of Treasury Secretary Andrew Mellon, who famously advised Hoover to “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” Such actions, according to Mellon, “will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted and enterprising people will pick up the wrecks from less competent people.”12 Mellon’s advice reflected the orthodoxy of the day: let the downturn take its course, let the failures fail, let the weak be purged, and have confidence that the strong will emerge stronger than ever.
Mellon’s idea was disastrous where it was tried13 and politically poisonous where it was spoken. It rightly followed Mellon into political oblivion. From the enlightened heights of 1954, it was possible for the economist John Kenneth Galbraith, in a passage about Mellon’s famous advice, to declare that “a developing depression would not now be met with a fixed determination to make it worse.”*
The Millionaire’s Union
The recurrence of the hard-times scenario isn’t really a matter of political opinion; both liberals and conservatives expect economic downturns to bring specific, predictable consequences.
For those on the left, of course, hard times have always served as the great moment of vindication, the period when it becomes impossible for anyone to deny the old order’s viciousness. When the system ruins investors and tells workers to hit the bricks, those investors and workers begin to question said system. That’s why economic crisis automatically gives rise to a “legitimacy crisis” in which the established order of things is shaken to the foundations. This effect is thought to be almost mechanical in its certainty. After all, as the old saying goes, when corn is two dollars a bushel, the farmer is a conservative; when it’s one dollar a bushel, the farmer is a radical.
Radicalism of the dollar-a-bushel kind was everywhere in the “Red Decade,” and leftists have always assumed that a second collapse of the business civ
ilization would bring a second dose of the same. “If another Depression came, we’d have a revolution,” the crusading Texas congressman Wright Patman assured Studs Terkel in 1970. “People wouldn’t take it any more. They have more knowledge.”*
For conservatives, the scenario is equally inevitable, but it comes laden with dread rather than vindiction. It was the economic collapse of the early thirties, after all, that ended capitalism’s golden age, that destroyed the credibility of laissez-faire orthodoxy, and that transformed business leaders from heroes into goats. The decade that followed was, for them, an unequaled disaster. It saddled bankers and merchants with taxes of every description, it launched an invasive regulatory regime, and, of course, it ushered in the prickly presence of organized labor.
Conservative panic ran riot in those days. Establishment types famously feared revolution in the early thirties; they saw communist influence behind every squeak of protest. “More communistic than the communists” was the verdict pronounced in 1934 by the newspaper baron William Randolph Hearst on the Roosevelt administration, and in that same year a group of superwealthy industrialists came together to form the American Liberty League, which denounced the deeds of FDR as so many assaults on the Constitution. “The New Deal represents the attempt in America to set up a totalitarian government,” blustered the league’s president in a typical 1936 radio speech, “one which recognizes no sphere of individual or business life as immune from governmental authority and which submerges the welfare of the individual to that of the government.”14
