Authors: Kurt Andersen
Restrain Wall Street? Bah. Regulation? This was the great new age of
freer and freer markets, big business and finance unbound! But Born persisted, publicly announcing an inquiry into derivatives and their risks—prompting her fellow task force members to put out a joint statement that they had “grave concerns” about her rogue regulatory inquiry. Rubin’s deputy Lawrence Summers, soon to replace him as secretary of the treasury, warned Congress that by suggesting official skepticism of this latest financial innovation, Born had cast “a shadow of regulatory uncertainty over an otherwise thriving market.”
She lost and resigned. The guys won and joined with the Republicans running Congress to write two big new laws, a kind of final grand spasm of the deregulation mania that allowed the financial industry to get even wilder and crazier. The first of those Modernization Acts eliminated the rule, instituted after the 1929 Crash, that prohibited regular banks from investing citizens’ money in the riskier ways that Wall Street firms did. For years, the financial industry had lobbied for that change, and the former Fed chair Paul Volcker had fought it, but in 1999 only seven of forty-five Democratic senators and a single Republican voted against it. The other Modernization Act explicitly outlawed proper regulation of derivatives such as credit default swaps. The House in 2000 passed that one 377 to 4, and the Senate didn’t even bother to take a roll call vote.
In other words, Clinton’s Wall Street–bred economic brain trust helped encode into the system the increased recklessness that Wall Street demanded and that would keep feeding inequality and insecurity and soon lead to the financial meltdown and Wall Street bailout and Great Recession. Congratulations, modern bipartisan Democrats!
To be fair
begins this next section, inevitably.
To be fair, when Microsoft executives said they were looking to get their vig from every interaction on the Internet, the Clinton Justice Department filed an antitrust suit against the company for trying to rig and dominate the new Internet business. Antitrust enforcement did briefly spring back to life under Clinton: the number of actions tripled, criminal fines increased from $27 million to $1.1 billion in three years, many big mergers were blocked, and some executives even went to prison for price-fixing.
And to be fair, the 1990s were in so many ways a decade of blithe good times that it was easy for people on the reasonable, rational, responsible, respectable, realistic center-left to consent to the rich and the right continuing to redesign and ravish the political economy. Starting in the 1980s but especially the ’90s, Americans used and internalized the phrase
Laissez les bons temps rouler,
with which they could justify almost any sort of indiscipline and selfishness. After a quick recession at the start, America’s general prosperity felt pretty good through the 1990s, especially but not only to the prosperous. Americans’ median household income, more or less flat during the 1970s and ’80s, really popped between 1993 and 1999, finally rising from the equivalent of $55,000 to $63,000. Cellphones appeared and proliferated, and the masses were invited onto the Internet, which was still an entirely thrilling and useful thing, not yet an omnipresent, inescapable, often sinister big-business-controlled leviathan. The spectacle of young technologists starting start-ups and getting rich overnight by being
had the effect of further ratifying the virtue of the free market among affluent liberals and cosmopolitans. A generation after
became the aren’t-we-awesome catchphrase of the economically and professionally comfortable, it got its digital updating: a Harvard Business School professor’s 1995 article about the tech industry coined the phrase
and thereby made the digital
of any and every industry the supposed goal of every capitalist hotshot.
To more and more Americans in the 1990s as in the ’80s, what was going on in Silicon Valley—and in Seattle and Boston, in Los Angeles and New York, for better or worse in action-packed
seemed more interesting and important than anything that might happen in Washington, D.C., particularly after the Cold War ended. The collapse of the Soviet Union and Communism at the beginning of the decade was very good news, but it had the unfortunate effect of making almost
left critique of America’s new hypercapitalism seem not just quixotic but kind of corny.
Sudden victory in the apparently unwinnable and endless Cold War after forty-four years—USA! USA!—unfortunately pushed America’s reborn self-congratulatory instinct deeper into complacency and hubris. It was not hard in the 1990s to believe that the United States and its allies were not just the champions of the world in this latest round, but that this was the
round, game over, we won. As the millennium approached, invented-in-America political and economic freedom was triumphing globally and for good, because—in the words of an unknown Reagan State Department dweeb in 1989—we’d arrived at “the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.” Francis Fukuyama turned his essay into a bestselling and enormously influential book,
The End of History,
It was a moment of supreme self-satisfaction for America’s educated upper middle class in particular. One of their own, a Rhodes Scholar who’d graduated from Yale Law School, was about to be elected president. As the Harvard political philosophy professor (and baby boom Rhodes Scholar) Michael Sandel puts it, “Meritocracies…produce morally unattractive attitudes among those who make it to the top. The more we believe that our success is our own doing, the less likely we are to feel indebted to, and therefore obligated to, our fellow citizens.”
The zeitgeist was the zeitgeist, but not everybody in the chattering class in the 1990s was sanguine about the emerging future, or as oblivious as I still was to the unfairness that had been built into the economy since 1980, or as complacent as I was about the millions of Americans losing out in the go-go globalizing digitizing frenzy.
One was the late Michael Elliott, an extremely smart journalist who’d expatriated from Britain to America in the 1980s as a correspondent for
The Day Before Yesterday
in 1996, he argued that the extraordinary thirty years after World War II had been an anomaly, and instead of moping nostalgically, we needed to accept that it was over and carry on. I read Mike’s book just a decade ago, at his suggestion, after I’d described some of my embryonic notions for this book. I was struck by his ahead-of-the-curve clarity, a quarter-century ago, about what was happening to America.
Between 1973 and 1993 median family income saw virtually no growth at all. Moreover, such gains as were made after 1970 were skewed toward the rich. The working class started to get left behind. Those who were left in declining industries and declining areas would start blaming anyone in sight. Playing off blacks, foreign competition, and immigrants, a degree of class and racial resentment would eventually develop in the white working class. After the 1994 election, it became briefly fashionable to note the rage and alienation of the “angry white male.”
Around that same time in 1996, a lead editorial in
New York Times,
not a bastion of economic leftism, warned that Republican presidential candidates needed to understand that
America is bedeviled by growing economic inequality in the midst of plenty. The efficient, post-industrial economy is brutal in the way it separates winners from losers. The bulk of the population, which has less than a college education, is falling further and further behind….When people are worried about being laid off from their jobs, losing their health care or not being able to give their children a better future, every statistic that shows the economy doing well makes them feel worse.
Even earlier in the 1990s, the conservative Charles Murray, of all people, published an essay in the conservative
of all places, about the specter of inequality haunting America. It was clear-eyed and prescient. “The numbers of the rich will grow more rapidly in the coming years,” Murray wrote.
Real wages for low-skilled jobs will increase more slowly, if at all….I fear the potential for producing something like a caste society, with the implication of utter social separation….All the forces which I can discern will push American conservatism toward the Latin American model….The Left has been complaining for years that the rich have too much power. They ain’t seen nothing yet.
Right around then a forty-seven-year-old law school professor and bankruptcy expert, until recently a registered Republican who’d been affiliated in the late 1970s with the conservatives’ Law and Economics movement, began to see the light. Elizabeth Warren said in a recent interview that she didn’t vote for Reagan but realized only in the ’90s that
starting in the ’80s, the cops were taken off the beat in financial services….I was with the GOP for a while because I really thought that it was a party that was principled in its conservative approach to economics and to markets. And I feel like the GOP party just left that. They moved to a party that said,
No, it’s not about a level playing field
….And they really stood up for the big financial institutions when the big financial institutions are just hammering middle class American families.
One reason I like Warren is because I identify with her middle-aged illumination concerning the political economy, and with her shift leftward around the turn of the century. I find it telling and amusing that as recently as 2004, in her book
The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke,
she scrupled to point out that she wasn’t suggesting anything very
like “that the United States should build a quasi-socialist safety net to rival the European model.”
I’m betting that at the end of 1999, Warren didn’t feel complete solidarity with the thousands of demonstrators in Seattle outside the biannual World Trade Organization meeting. Their grievances were various—from AFL-CIO folks pissed off about U.S. companies manufacturing more and more things overseas to anarchists smashing store windows and otherwise acting out their hatred for The System. A few days before the anti-WTO rioting, I’d published an unconnected
op-ed envisioning the new century in which I said that complacent Americans were now “bask[ing] happily and stupidly in the glow of our absolute capitalist triumph,” but I was also probably rolling my eyes at the Gen-X kids in Seattle chaining themselves together and getting off on the tear gas; at their lack of a feasible agenda or nuance or even coherence; and at the belief of so many of them in a shadowy, multitentacled conspiracy of the omnipotent elite to tyrannize the little people and subvert democracy.
Yet around the same time, a private meeting was held in Chicago that looks in retrospect an awful lot like a prime node of the conspiracy of the elite economic right committed to subverting democracy. Except it was not shadowy, because a transcript of their conversation was soon published in
The University of Chicago Law Review
. The group consisted of some of the principal founders of Law and Economics, the movement that was busy encoding the preferences of the economic right into the legal and judicial system. (Not present was Robert Bork’s Yale Law School pal Guido Calabresi, another founder of the movement who’d just become a federal appeals court judge appointed by…President Clinton.
) This supremely august group of conservative legal scholars had assembled in a room at the law school for a conversation about all that their little group had accomplished during the previous couple of decades, and about what remained to be done in the future. The gathering had a distinctly celebratory air.
One of the five, the Nobel Prize–winning economist Gary Becker—whose mentor Milton Friedman considered him “the greatest social scientist” of the late twentieth century, and who was in turn a mentor to the junk bond felon Mike Milken—fretted that victory was not yet total. In particular, he was peeved by some new federal rules that made it a bit easier for employees who’d been fired or forced to quit to claim discrimination.
But his fellow pioneer Richard Posner, a judge on the federal appeals court based in Chicago, told his comrade to relax. With the indiscriminate deregulation of big business, they’d helped enable “the near collapse of the labor movement,” and “the effect of these developments has been to make this a freer country than it was in the 60s. These [new] labor laws are in the category of annoyances.”
At this, according to the transcript, the eminent old men actually
just as sinister suit-and-tie conspirators gathered in a wood-paneled room in a movie would do.
The digital revolution notwithstanding, as 2000 approached, the American political economy was looking more and more like that of the previous fin de siècle, the good old days of the 1890s. Any last-ditch Democratic efforts now to reempower workers, Judge Posner told his compatriots, would be merely “irritants that good lawyers reduce to where there is only a very minor impact.”
In addition to being a true social democrat on healthcare and helping the poor, Moynihan shared organized labor’s skepticism of Clinton’s gung-ho free trade policies. He was also one of only fourteen senators who voted against the 1996 bill that prohibited national recognition of legal same-sex marriage, which Clinton signed into law.
His nephew Steven Calabresi, by the way, was a cofounder of the Federalist Society and clerked for both Judge Bork and Justice Scalia. In 2019 he co-wrote an article called “Why Robert Mueller’s Appointment as Special Counsel Was Unlawful.”