Third World America (3 page)

Faye Harris was laid off from her accounting job at Emory University Hospital in Atlanta last year. She had been diagnosed with cancer and was fighting it successfully. But as soon as the time off she was guaranteed by the Family and Medical Leave Act expired, she received a letter of termination and her
health insurance was canceled. “Do I just lie down and die? Am I not worthy anymore?” she asked herself. “I’ve worked all my life. Put myself through school, raised four children, played by the rules, saved money, and this one illness has just wiped me out.”

Ricky Macoy of Quinlan, Texas, is a fifty-two-year-old electrician who found himself among the long-term unemployed. With little work since late 2008, he began pawning his possessions, including his tools, and holding yard sales to get enough money to feed his family. “The thing that hurt the most was we had to hock my son’s PlayStation 3, his Wii, his electric guitar,” Macoy says. “We lived a good life. Middle-income America, man. I’m used to construction, the booms and the busts … [but] I was not expecting to be laid off this long.”

Heather Tanner of Pacifica, California, put herself through law school, working during the day and attending classes at night—dreaming of one day being able to move her family out of their apartment and buy a house. In August, she was laid off from her $100,000-a-year job as an attorney—and then struggled to find a new position. “I applied for jobs at Target, Macy’s, as a camp counselor,” she says. “I’ve been on many interviews, but the comments I get at nonlegal jobs are, ‘Why do you need this kind of job?’ I mean, I have a family to support.” She and her husband cashed in their 401(k)s and used their savings to pay off bills. “The kids don’t understand,” she says, explaining that the thing that hurt the most was having to disappoint her children when it came to things such as birthday visits to Disneyland the family could no longer afford. “I’d love to make their dreams come true, but right now we just have to focus on getting by.”

There are, sadly, millions of these stories. Stories crying
out to be told. Stories that, if told often enough, will bring the human element to the fore of the debate—and grab the public’s imagination.

In the last chapter of Michael Herr’s
Dispatches
, he speaks of conventional journalism’s inability to “reveal” the Vietnam War: “The press got all the facts (more or less).…
²⁰
But it never found a way to report meaningfully about death, which of course was really what it was all about.” And Tom Wolfe, in “The Birth of ‘The New Journalism’: Eyewitness Report,” discusses conventional journalism’s inability to capture the turbulence of the 1960s: “You can’t imagine what a positive word ‘understatement’ was among both journalists and literati.…
²¹
The trouble was that by the early 1960s understatement had become an absolute pall.” Well, it’s happening again—we are failing to capture the turbulence of our times with narratives that allow the public, and force our leaders, to connect with the pain and suffering that should be fueling the fight to change direction while there’s still time.

Before becoming prime minister of England, Benjamin Disraeli wanted to issue a wake-up call about the horrible state of the British working class. So, in 1845, he wrote a novel,
Sybil
, which warned of the danger of England disintegrating into “two nations between whom there is no sympathy … as if they were inhabitants of different planets.”
²²
The book became a sensation, and the outrage it provoked propelled fundamental social reforms.

In the nineteenth century, one of the most effective ways to
convey the quiet desperation of the working class to a wide audience was via a realistic novel. In 2010, it’s through reality TV.

Now, I realize that most of what we are served up under that rubric is actually the farthest thing from reality. The exploits of Snooki, Jake the Bachelor, and all those Real Housewives hardly reflect life as most of America knows it and lives it.

The real America is hurting—not jetting off to an exotic location for “fantasy suite” canoodling. But no matter how sobering the statistics we are getting on a regular basis (and I’ll offer up some bracing ones in a moment), the hardships and suffering tens of millions of Americans are experiencing are almost entirely absent from our popular culture. This is a shame, because drama and narrative have the ability to move people’s perceptions in a way that raw numbers never can.

Enter
Undercover Boss
, the CBS reality show in which corporate CEOs don disguises and spend a few days experiencing what it’s like to be a low-level worker at their companies. It’s the kind of popular entertainment that can start out as one thing—a fun, high-concept reality show—but morph into something that affects the zeitgeist by shining a spotlight on just how out of touch America’s corporate chiefs are. And their cluelessness is not just about the jobs their workers do—it’s about the lives their workers lead.

Ever since
Roseanne
went off the air, the stories of working-class Americans have been all but invisible on network TV. But now, week in and week out, millions can see what downsizing and Wall Street’s demands for ever-greater productivity and earnings margins did to the lives of so many Americans, even before the economic crisis.

The chasm between America’s classes has reached Grand Canyon–esque proportions. Forty years ago, top executives at
S&P 500 companies made an average of thirty times what their workers did—now they make three hundred times what their workers make.
²³
That’s the kind of statistic a show like
Undercover Boss
can bring to life. Here are a few others:

• Between 2007 and 2008, more than 800,000 additional American households found themselves trying to make do on under $25,000 a year, bringing the total to nearly 29 million.
  ²⁴
  
• In 2005, households in the bottom 20 percent had an average income of $10,655, while the top 20 percent made $159,583—a disparity of 1,500 percent, the highest gap ever recorded.
  ²⁵
  
• In 2007, the top 10 percent pocketed almost half of all the money earned in America—the highest percentage recorded since 1917 (including, as Business Insider editor Henry Blodget noted, in 1928, the peak of the stock market bubble in the “roaring 1920s”).
  ²⁶
  
• Between 2000 and 2008, the poverty rate in the suburbs of the largest metro areas in the United States grew by 25 percent—making the suburbs home to the country’s biggest and most rapidly expanding segment of the poor.
  ²⁷
  

Making matters even worse is the fact that while the classes are moving farther apart—with the middle class in real danger of disappearing entirely—mobility across the classes has declined. The American Dream is defined by the promise of economic and social mobility—but the American Reality proves just how elusive that dream has become. Indeed, Canada, Germany,
Denmark, Norway, Finland, Sweden, and even the often-reviled France have greater upward mobility than we do.

Here are the numbers:

• Almost one hundred million Americans are in families that make less in real income than their parents did at the same age.
  ²⁸
  
• The percentage of Americans born to parents in the bottom fifth of income who will climb to the top fifth as adults is now only 7 percent.
  ²⁹
  
• If you were born to wealthy parents but didn’t go to college, you’re more likely to be wealthy than if you did go to college but had poor parents.
  ³⁰
  

In other words, as the middle class is squeezed and more and more people are being pushed down, it’s becoming harder than ever to move up. In a study of economic mobility, Isabel Sawhill of the Brookings Institution and John E. Morton of the Pew Charitable Trusts wrote, “The inherent promise of America is undermined if economic status is—or is seen as—merely a game of chance, with some having the good fortune to live in the best of times and some the bad luck to live in the worst of times.
³¹
That is not the America heralded in lore and experienced in reality by millions of our predecessors.”

And yet it’s certainly the reality being experienced now, and, at least in part, the reality being shown on
Undercover Boss
. Now, I’m not suggesting that the show is going to foment a working-class rebellion or directly lead to a raft of social reforms. But it might lead to a conversation we, as a nation, desperately need to have—especially in Washington.

Maybe if our elected representatives went undercover for a little while and experienced the reality of millions of American families that are measurably worse off because of Washington’s actions and inactions, we might get some real change.

Since the recession began in late 2007, we’ve lost more than 8.4 million jobs.
³²
Over 2 million of those were manufacturing jobs, the kind of jobs that have traditionally delivered American families into the middle class—and kept them there.
³³
We lost 1.2 million manufacturing jobs in 2009 alone.
³⁴
And while job numbers go up and down, the loss of these blue-collar jobs has been going on for decades.

In 1950, manufacturing accounted for more than 30 percent of nonfarm employment.
³⁵
As of last year, it’s down to 10 percent. Indeed, one-third of all our manufacturing jobs have disappeared since 2000.
³⁶
This devastating downward trend has contributed greatly to the erosion of the middle class.

There have been a number of recessions over the past few decades, and our economy has rebounded after each one. But each time it has bounced back in a way that made it harder for those in the middle class to stay there—and even harder for those aspiring to become middle class to get there.

The way that the useful section of our economy is being replaced by the useless section of our economy is rarely talked about in Washington. But the numbers don’t lie: The share of our economy devoted to making things of value is shrinking,
while the share devoted to valuing made-up things (credit-swap derivatives, anyone?) is expanding. It’s the financialization of our economy.

According to Thomas Philippon, professor at New York University’s Stern School of Business, the financial industry made up 2.5 percent of America’s GDP in 1947.
³⁷
By 1970, it had grown to 4 percent. By 2006, just before the meltdown, it was 8.3 percent.

The trend is even starker when you look at the financial sector’s share of U.S. business profits. As MIT professor Simon Johnson recounted in the
Atlantic
, between 1973 and 1985, the financial industry’s share of domestic corporate profits topped out at 16 percent.
³⁸
In the 1990s, it spanned between 21 percent and 30 percent. Just before the financial crisis hit, it stood at 41 percent.

That’s right—over 40 percent of the profits of the entire U.S. corporate sector went to the financial industry.
³⁹
James Kwak, coauthor of the Baseline Scenario, a leading blog on economics and public policy, explains why this is a problem: “Remember that financial services are an intermediate product—that is, we don’t eat them, or live in them, or put them on in the morning.
⁴⁰
They are supposed to enable a more efficient allocation of capital, so that the nonfinancial economy is more productive. But what we saw since the 1980s was the unmooring of the financial sector from the rest of the economy.”

In other words—it’s supposed to serve our economy, not
become
our economy.

The expansion of the financial industry has come at a significant cost to the rest of us. And those who have paid the highest price are the members—and former members—of America’s middle class. According to
New York Times
⁴¹
columnist Paul
Krugman, “A growing body of analysis suggests that an oversized financial industry is hurting the broader economy. Shrinking that oversized industry won’t make Wall Street happy, but what’s bad for Wall Street would be good for America.”

It’s no wonder that Wall Street breathed a deep sigh of relief when the Senate passed the Restoring American Financial Stability Act in May 2010. It was considered mission accomplished for financial reform.

Unfortunately, it was more of a Bush 43 mission accomplished than an
Apollo 13
mission accomplished. That’s because the bill passed by the Senate, like Bush’s ship-deck ceremony, was more notable for what it left undone.

First, it didn’t do enough to rein in Wall Street. It didn’t end too-big-to-fail banks, didn’t create a Glass-Steagall-style firewall between commercial and investment banking, kept taxpayers on the hook for future bailouts, and left open dangerous loopholes in the regulation of derivatives. In D.C., crafting a bill without loopholes would be like baking bread without yeast. Though you can’t see them, they’re what makes a Washington bill rise.

Despite its name, this bill will not be restoring financial stability to the tens of millions of Americans whose lives have been turned upside down by the economic crisis.

On nearly every front in the real economy—from jobs to consumer spending to foreclosures—we’ve made virtually no progress. While Washington and the media were consumed with the titanic debate over this reform bill, talk of the actual suffering by actual people in the actual economy was virtually a taboo subject, at least judging by how rarely it made the front pages or led the TV news.

But the data points are all around us.
⁴²
In a speech, Sandra
Pianalto, president of the Cleveland Fed, surveyed the landscape and described an economy facing serious and long-term challenges, partly because of the huge loss of skills that is being suffered by the long-term unemployed. “Research … tells us that workers lose valuable skills during long spells of unemployment, and that some jobs simply don’t return,” she said. “Multiply this effect millions of times over, and it has the potential to dampen overall economic productivity for years.”