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Metropolitan Books

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Copyright 2012 by Thomas Frank

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Brother, Can You Spare a Dime? by E. Y. Yip Harburg and Jay Gorney

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tered by Next Decade Entertainment, Inc. All Rights Reserved. Used by Permission.

Library o Congress Cataloging-in-Publication Data

Frank, Thomas, 1965

Pity the billionaire : the hard-times swindle and the unlikely comeback o the

Right / Thomas Frank.1st ed.p. cm.

Includes bibliographical reerences and index.

ISBN 978-0-8050-9369-8

1. United StatesPolitics and government2009 2. Political culture

United StatesHistory21st century. 3. ConservatismUnited States

History21st century. 4. Global Financial Crisis, 20082009Political

aspectsUnited States. 5. Global Financial Crisis, 20082009Social

aspectsUnited States. 6. United StatesEconomic conditions2009

7. United StatesSocial conditions21st century. 8. Rich peopleUnited

StatesPublic opinionHistory21st century. 9. Free enterprise

United StatesPublic opinionHistory21st century. 10. Public opinion

United StatesHistory21st century. I. Title.

E907.F72 2012

973.932dc23 2011035346

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First Edition 2012

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For the people o the most prosperous nation in the world,

recessions are oten existential crises, times when everything

we believe is called into question. In at years we think o our

economic lie in almost magical termsthe visionary wisdom

o the stock-picking crowds, the brand spirit that is sup-

posed to inhabit our sneakersbut in hard times the anta-

sies lie in shards on the ground, and the awul reality is that

much harder or the shimmering dreams that preceded it.

In 2008 and 2009, the middle-class world came apart.Every time we checked, the value o our retirement und had

allen by another third; riends lost their jobs; industries like

construction and auto manuacturing came to a standstill;

and we discovered, with a sickening eeling, that we owed

ar more on our mortgage than our house was worth. The

landmark institutions o middle-class lie were crumbling

around us. General Motors and Chrysler declared bankruptcy;

Merrill Lynch, broker to the common man, desperately sold

itsel one weekend in 2008; IndyMac, Wachovia, Washing-

ton Mutual, Bear Stearns, and Lehman Brothers disappeared.

C H A P T E R 1

End Times

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14 | Thomas Frank

It looked like society itsel was disintegrating, and or the frst

time in our comortable suburban lives, we elt the atavistic

touch o panic.For our parents and grandparents, however, these events

may have seemed a little more amiliar. The country went

down virtually the same road in the years 192933, with

stock markets crashing, banks ailing, actories closing, and

oreclosures mounting. So similar were the two disasters that

comparisons to the Great Depression became a media com-

monplace in 2008, the inevitable model to consider whenlooking to make sense o the current debacle.

The literary critic Edmund Wilson called his book o

Depression essays The American Earthquake, and though

Ive read it several times over the course o my lie it wasnt

until 2009 that I really understood what he meant by that

phrase. Had you been one o the many who put your savings

in stocks in the twenties, you would have watched your invest-

ments lose hal their value, then lose hal o what remained,

then hal again. Had you bought your stocks on margin,

you would have lost it all at the very beginning.

Had you been one o the responsible ones who kept your

savings in the bank, you may well have lost it anyway. Finan-

cial institutions were exposed to the disaster by defnition,and when your local bank ailedas almost hal o American

banks did in the years ater the 1929 crash1it was a pretty

sure bet that no nice man rom the FDIC would show up to

make it all better. You simply lost most o your savings. And

when your town bank went down, your town went down, too.

In 1933, the ear among bank depositors grew so conta-

gious that state governors tried to stop the runs on the banks

by orcing them to close, or take a bank holidaya move

that brought economic activity to a stop in the United States.

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Pity the Billionaire | 15

Manuacturing and construction were moribund by that

time anyway, and the economy had already shrugged o

about a third o the labor orce. A huge part o the popula-tion now had no way o earning a living no matter how hard

they tried; and, as the once-amous labor historian Irving

Bernstein pointed out in a once-amous history o the period,

no one knows what proportion o the others were on part

time. We do know that people stopped leaving jobs volun-

tarily, regardless o how badly their boss treated themtimes

were too desperate or gestures like that. We know that mar-riages declined, as did the birthrate; that the suicide rate rose,

and that newspapers published sensational stories on starva-

tion in America.2

Unemployment relie, back then, was an entirely local

matter, and ater the frst year or so o the downturn it essen-

tially no longer existed. There was organized looting o ood

in the big cities, Bernstein tells us, and in a number o places

unemployed people set up economies based on barter rather

than on dollarseven though the dollars o the day were ully

backed by gold and no one eared ination. Per capita income

ell so ar that by 1933 it was lower than it had been in 1900.3

Whats more, there was no guarantee that things would ever

return to normal. Economists o the time were enchanted bythe idea o equilibriumo the coming day when the ree

all would stop and supply and demand resume their happy

orbitsbut it slowly dawned on them that economies could

fnd a kind o equilibrium with 33 percent unemployment just

as naturally as they could with 3 percent unemployment.4

And so the catastrophe o 192933 did to the certainties o

laissez-aire economics what science did to nineteenth-century

religion and what the slaughter o World War I did to old-

ashioned patriotism: it knocked out the props. Everything

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16 | Thomas Frank

nailed down is coming loose, people used to say back then:

The Depression made business leaders into laughingstocks

and transormed economic orthodoxy into so many airytales.5 It attened a century o bankerly wisdom and shook to

pieces the countrys consensus knowledge, the sacred princi-

ples upon which everyone rom postman to president had

once agreed. Like the orces o 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 toserve any purpose but its own.6

When we recall that Drucker was an eminent management

theorist, his statement can be read as a airly harsh indict-

ment o classical economic arrangements. But it was scarcely

the harshest. That was supplied by the headlines o the day:

Bankers who contrived to reward their riends and rescue

themselves as the oor caved in. Wall Street heroes who went

to prison. Men o substance whose reassuring predictions

were almost immediately contradicted by events.

Disintegration was the great literary theme o those days,

and writers returned again and again to imagery o desola-

tion and hopelessness: Express trains making their runs with

just one or two passengers while armies o tramps traveledin boxcars. Fruit rotting on the ground in the countryside

while people starved in the cities. Settlements built o trash

down at the city dump. The economist John Maynard Keynes

amously compared the collapse to the Dark Ages. The edi-

tor oNations Business saw ear, bordering on panic, loss

o aith in everything, our ellowman, our institutions, pri-

vate and government.7 Even Calvin Coolidge, the fgurehead

o the business civilization, gave up. Once he had been so

confdent in the old system that he had declared, The man

who builds a actory builds a temple. Four days beore he

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Pity the Billionaire | 17

died in 1933, Coolidge pondered the panorama o waste sur-

rounding him and told a riend, In other periods o depres-

sion it has always been possible to see some things whichwere solid and upon which you could base hope, but as I

look about, I now see nothing to give ground or hope

nothing o man.8

The Hard-Times Scenario

The social patterns o hard times are supposed to be a simplething, as impersonal and as mechanical as the orces that

shutter our actories and bid down the price o our stocks.

Markets disintegrate, layos mount, oreclosures begin, and

beore you know it, the people are in the streets, yelling or

blood. We grow desperate, anxious, rebellious. The idols o

our past become targets o derision. We demand that the gov-

ernment do something about itpunish the perps, rescue the

victims. We look or insurance against urther catastrophe,

and stricter supervision o the economy, to make sure it doesnt

happen again.

Or so it was in the thirties. And once the crisis was past,

Americans came to believe that the course they had ollowed

in the Depression was a universal pattern, a template or howpeople behave in hard times. Like the economists automatic

stabilizersthe government spending that kicks in when

unemployment crosses a certain linethe publics reaction to

severe recessions is supposed to be predictable, automatic. The

economy stumbles, the people scream, and the politicians o

both parties rush to rescue us rom 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 ollow switly. Unemployment insurance

will be extended, and extended again. There will be massive

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18 | Thomas Frank

investment in public works. Commissions will be named to

investigate the causes o the crisis. Agencies will be set up to

keep people rom losing their houses to oreclosure.Those hurt by the downturn will start to take action them-

selves. Union organizing and a wave o strikes will sweep the

country in response to the complete breakdown o capital-

isms promise. The people will protest, o course, voicing their

discontent in public places and maybe descending on Wash-

ington like the Bonus Army o unemployed World War I

vets who took to the road in 1932.In the larger culture, undamental matters o subsistence

will take precedence over noble principles. That was true in

the thirties, anyway, as economic calamity induced Ameri-

cans to abandon Prohibition, their great national experi-

ment in ederal uplit. They turned away rom the preceding

decades strange ads in art and religion. Dabblers in Dada

came home rom Paris to write reportage about coal min-

ers in Kentucky.

As the economy alls apart, the assumption goes, we will

also rediscover a certain neighborliness, a sense o community

and even collectivism that comes rom shared privation. The

1930s, writes the historian Warren Susman, was the decade

o participation and belonging. The rugged individualismextolled by Herbert Hoover gave way to the generosity and

social solidarity documented by Studs Terkel in his oral his-

tory Hard Times. Writers and intellectuals grew anxious to be

part o a larger group, to escape the economys sense o utility

with collective action. Being a good neighbor became one

o the great themes o the Roosevelt presidency. According to

Robert McElvaine, an eminent historian o the Depression, all

o these developments expressed a larger shit in values, a

search or a lie o community and sharing, as opposed to the

acquisitive individualism o modern industrial capitalism.9

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Pity the Billionaire | 19

In politics, class issues will become paramount. When

Huey Long won his frst race or the governorship o Louisi-

ana in 1928,* notes the historian Alan Brinkley, the politicso the state were completely reconfgured. Suddenly, tradi-

tional 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 o thirties

protest movements. What mattered was its wealth, or lack

o it.10

This new mood will naturally make pariahs o the businessclass. Let the unemployment rate hit 10 percent, let our pen-

sion unds lose their value, and suddenly we no longer thrill to

hear about the abulous liestyles o the wealthy, the amazing

earnings o the investment bankers, or the wonderul cars and

homes and private planes that fll the hearts o tycoons with

joy. In the thirties, the public even resisted recovery mea-

sures when they seemed to beneft the politicians business-

class cronies more than the common people.

Above all, there will be a grand shiting o the philosoph-

ical plates. The economic collapse o the thirties cleared the

way or economic ideas that had been marginalized beore.

The decadent international but individualistic capitalism,

in the hands o which we ound ourselves ater the war, isnot a success, wrote the British economist Keynes, a leader

o the new school, in the awul year 1933. It is not intelli-

gent, it is not beautiul, it is not just, it is not virtuousand

it doesnt deliver the goods. In short, we dislike it, and we are

beginning to despise it.11 Americans, or their part, were will-

ing to try almost anything. Economists entertained new schools

* O course, 1928 was not a Depression year. But Louisiana was so poor even

beore the crash, and Huey Long would soon become such an archetypal Depres-

sion fgure, that we include this episode as an honorary example.

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20 | Thomas Frank

o thought. The Keynesian doctrine o countercyclical defcit

spending began to overtake laissez-aire orthodoxy, and an

amazing assortment o less memorable ideas enjoyed theirbrie moments o glory.

I the hard-times pattern is fxed, so are the moves it sup-

posedly orbids. Here the lessons come not rom the successul

Roosevelt presidency but rom the disastrous administration

o his predecessor, Herbert Hoover. Never again, it has always

been thought, would a hard-times president pine or balanced

budgets in the Hoover manner or chase the illusion o stabilityrepresented by the gold standard. Nor would there be any

audience or views like those o Treasury Secretary Andrew

Mellon, who amously advised Hoover to liquidate labor,

liquidate stocks, liquidate the armers, liquidate real estate.

Such actions, according to Mellon, will purge the rottenness

out o the system. High costs o living and high living will

come down. People will work harder, live a more moral lie.

Values will be adjusted and enterprising people will pick up

the wrecks rom less competent people.12 Mellons advice

reected the orthodoxy o the day: let the downturn take its

course, let the ailures ail, let the weak be purged, and have

confdence that the strong will emerge stronger than ever.

Mellons idea was disastrous where it was tried13 andpolitically poisonous where it was spoken. It rightly ollowed

Mellon into political oblivion. From the enlightened heights

o 1954, it was possible or the economist John Kenneth Gal-

braith, in a passage about Mellons amous advice, to declare

that a developing depression would not now be met with a

fxed determination to make it worse.*

* A curious echo o Mellons dictum about hard times orcing people to live a

more moral lie occurs in Robert Borks mournul meditation, Slouching

Towards Gomorrah, in which he briey considers a deep economic depres-

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Pity the Billionaire | 21

The Millionaires Union

The recurrence o the hard-times scenario isnt really a mattero political opinion; both liberals and conservatives expect

economic downturns to bring specifc, predictable conse-

quences.

For those on the let, o course, hard times have always

served as the great moment o vindication, the period when

it becomes impossible or anyone to deny the old orders

viciousness. When the system ruins investors and tells work-ers to hit the bricks, those investors and workers begin to

question said system. Thats why economic crisis automati-

cally gives rise to a legitimacy crisis in which the estab-

lished order o things is shaken to the oundations. This eect

is thought to be almost mechanical in its certainty. Ater all,

as the old saying goes, when corn is two dollars a bushel,

the armer is a conservative; when its one dollar a bushel, the

armer is a radical.

Radicalism o the dollar-a-bushel kind was everywhere in

the Red Decade, and letists have always assumed that a

second collapse o the business civilization would bring a

second dose o the same. I another Depression came, wed

have a revolution, the crusading Texas congressman WrightPatman assured Studs Terkel in 1970. People wouldnt take

it any more. They have more knowledge.*

sion as one way o bringing about moral regeneration. The idea is immedi-

ately discarded or lacking broad public support. See Slouching Towards

Gomorrah: Modern Liberalism and American Decline (New York: Harper-

Collins, 2003), p. 336. The Galbraith quote appears in The Great Crash: 1929(Boston: Houghton Miin, 1955), p. 199.

* Then again, maybe they would take it. Patman was a fery let-wing populist

during the Depression, but today his congressional district is represented by

Louie Gohmert, a Tea Party avorite who has become amous or proposing a

zero percent corporate tax rate and or his trademark ear: that terrorists are

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22 | Thomas Frank

For conservatives, the scenario is equally inevitable, but it

comes laden with dread rather than vindiction. It was the

economic collapse o the early thirties, ater all, that endedcapitalisms golden age, that destroyed the credibility o laissez-

aire orthodoxy, and that transormed business leaders rom

heroes into goats. The decade that ollowed was, or them, an

unequaled disaster. It saddled bankers and merchants with

taxes o every description, it launched an invasive regulatory

regime, and, o course, it ushered in the prickly presence o

organized labor.Conservative panic ran riot in those days. Establishment

types amously eared revolution in the early thirties; they saw

communist inuence behind every squeak o 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 o

superwealthy industrialists came together to orm the Ameri-

can Liberty League, which denounced the deeds o FDR as so

many assaults on the Constitution. The New Deal represents

the attempt in America to set up a totalitarian government,

blustered the leagues president in a typical 1936 radio speech,

one which recognizes no sphere o individual or business lie

as immune rom governmental authority and which submergesthe welare o the individual to that o the government.14

But the Right just couldnt catch a break. Not even

totalitarian-baiting could turn the tide o the awul thirties;

the public was ar more interested in mocking the Million-

aires Union, as the league was lampooned, than in rallying

around its spectacular ears o the Constitution laid waste.15

planning to have jihadist babies born in the United States. The Patman quota-

tion comes rom Terkel, Hard Times: An Oral History of the Great Depression

(New York: Pantheon, 1970), p. 285.