You Can't Go Home Again
August 14, 2004
By T.W. Croft
town was burgeoning rapidly and pushing out into the wilderness,
people were confident of a golden future, no one gave a second thought
to a reckless increase in public borrowing. Bond issues involving
staggering sums were being constantly "floated" until the credit
structure of the town was built up into a teetering inverted pyramid
and the citizens of Libya Hill (N.C.) no longer owned the streets
they walked on.
In the early 1930s, Thomas Wolfe wrote You Can't Go Home Again,
quoted here. In it, he recalled the investment bubble and the frenzy
of riches (or, hoped-for-riches) that was the bullish culture of
America, circa late 1920s.
The protagonist of the story returned home to find himself a stranger
in a strange town that had boomed beyond recognition. The banks
had developed frothy and untenable real estate projects. Across
the country, rapid conglomeration and growth were shadowed by corporate
corruption. New "citizen investors" fueled the boom, pulling on
a sense of false wealth like an overly expensive new suit. Communities
went crazy vying for growth.
And, then of course, it all changed. Black Monday on Wall Street
was followed by a Great Depression. Main Street was thrown into
a tragic downturn, as one quarter of all Americans lost their jobs,
and the depression spread around the world.
"…To deny the evidence of their senses"
When the bubble of their unreal world suddenly exploded before
their eyes, many of them were so incapable of facing harsh reality
and truth that they blew their brains out or threw themselves from
the high windows of their offices into the streets below... All
that, however, was in the future. It was very imminent, but they
did not know it, for they had trained themselves to deny the evidence
of their senses. In that mid-October of 1929, nothing could exceed
their satisfaction and assurance.
In 2001, another bubble collapsed, dragging the U.S., Canada and
elsewhere into a global recession. The world was stunned by Enron
and similar scandals, amid the greatest speculative implosion since
'29. The crash destroyed over $7 trillion in public equities. The
follow-on 2002 corporate scandals morphed into the largest bankruptcies
in history in North America and Europe. The mutual fund scandals
unfolded in 2003. Generations of workers lost their jobs, and many
more watched helplessly as their retirement funds became victim
to "Grand Larceny."
And to put a circle around just how bad this melt-down turned
out to be, Securities and Exchange Commission Chairman William H.
Donaldson was quoted last year asserting that the stock market's
decline over the past three years has had a more dramatic impact
on a larger number of investors than did the crash of 1929. His
speech to the New York Economic Club called for a fresh "fundamental
examination" of the way companies are run, including the manner
in which executives are paid and corporate performance is measured.
Meanwhile, the collapse and its hangover devastated the manufacturing
and basic economy sectors, resulting in 2.8 million job losses in
the U.S. Manufacturers have suffered their longest period of job
loss in 80 years. The ripple effect has been horrible, as many older
industrial towns and farm-industry communities face a terrible decline.
Dragged down by the downturn, an exorbitant military adventure
abroad and absurd tax cuts for the rich, larger cities in the U.S.
heartland like Pittsburgh, Cleveland, and Buffalo are near bust.
The "feds," cities, states and provinces on both sides of the border
have been firing hundreds of thousands of public workers to pay
for the war (in the U.S.), adopting austerity measures, and urging
privatization and "public-private partnerships" (the dreaded P3's).
The collateral damage to working people, particularly to their
retirement programs, has been steep. As Dean Baker pointed out in
a 2003 study commissioned by the Steelworkers, the impact has been
especially severe for industries where under-funded pension obligations
put workers' pensions at risk, damaged corporate balance sheets,
and undermined companies' ability to finance operations. Worse,
the report made it clear that the sweeping damage done to pension
funds didn't have to happen. Pension fund managers were blind to
the economic bubble and the heretofore mythical prowess of the so-called
Richard Minns in "Collateral Damage, The International Consequences
of Pension Funds" (from Money on the Line; Workers' Capital in
Canada) argued that pension funds contributed to financial speculation
and a "herd" mentality, often with negative results for productive
investment, economic growth, employment, and incomes, affecting
entire populations. He asserts that pensions' socio-economic impacts
must be assessed, especially in light of the role of pension funds
in global financial integration.
The False Recovery?
Who should cavil, then, at the fact that a banker might derive
a portion of his income from the work of children in the textile
factories of the south? - from the labor of sharecroppers in the
tobacco fields? - from steel mills in the Middle West where armed
thugs had been employed to shoot into the ranks of striking workers?
A banker's business was to invest money wherever he could get the
It's been two and a half years since the U.S. recession ended.
A tsunami of cheap imports and corporate off-shoring spurred on
a vicious global deflationary cycle in the last three years. Once
limited to "old industries", outsourcing has now spread to every
sector and occupation in the economy. America's trade deficit grew
to half a trillion dollars by 2003.
Earlier this year, Morgan Stanley's Stephen Roach coined the hoped-for
rebound the "false recovery." Job creation had lagged by half that
of the last six recoveries, on average. Roach blamed offshoring
and the "IT enabled global labor arbitrage." New York Times
reporter Louis Uchitelle noted that American companies have been
hiring "just-in-time", temporary/contract workers, investing gains
Even as the economy finally picks up, the nation's investors and
workers can't suddenly rest easy. As Roach put it, "Suddenly, there's
another perfect storm on the horizon... - surging oil prices, the
China slowdown, and the onset of a Fed tightening cycle; a general
sense of geopolitical angst" arises from the Iraq/terror wars.
And, just as gigantic new M&A's began queuing up, Investor's
Daily reported that 72% of the 25 biggest mega-deals since 1998
destroyed value for its shareholders. New scandals and old fallout
continue: Worldcom's $70 billion+ re-statement, Boeing's contracting
games, the RiteAid accounting scandal, etc.
Internationally, Shell drastically re-stated its oil reserves and
Parmalat somehow misplaced $8-10 billion. Sadly, the record of federal
prosecutors regarding the corporate kleptocrats has been abysmal;
New York's Elliot Spitzer and activist pension funds have been much
more active. A new award-winning movie that opened recently in Canada
titled, The Corporation, is subtitled: The Pathological Pursuit
of Profit and Power.
Unless corporate governance takes root and capital investment
is greatly expanded, the economy will have a difficult time fully
recovering. Venture funds were underwater for the last three years
and only now recovering, and investors in general are very cautious.
Banks are still consolidating and playing it safe. Meanwhile, the
White House has cut back domestic investment programs and has gutted
the manufacturing extension programs. Where will Main Street find
new investment capital?
The Mystic Qualities of Capital
I do not think the enemy was born yesterday... I think the
enemy is old as Time, and evil as Hell, and that he has been here
with us from the beginning. I think he stole our earth from us,
destroyed our wealth, and ravaged and despoiled our land. I think
he took our people and enslaved them, that he polluted the fountains
of our life, took unto himself the rarest treasures of our own possession,
took our bread and left us with crust, and not content, for the
nature of the enemy is insatiate - tried finally to take from us
In the 1930s, President Hoover's Treasury Secretary Andrew Mellon
formulated tax reduction for the wealthy as the nation was plunged
into depression. Using his family banking fortune (made in Pittsburgh)
to advance his interests in coal, aluminum and oil while in the
White House, Mellon and his cronies spun endless myths to explain
the lack of jobs. Not a single net new job was created during Hoover's
term, and he was ousted.
Today, another seemingly ironclad set of "market myths" have fallen
hard. In a March 2004 article in Harpers Magazine, John Ralston
Saul explained "The Collapse of Globalism." "We have scarcely noticed
this collapse, however, because Globalization has been asserted
by its believers to be inevitable - an all-powerful god; a holy
trinity of burgeoning markets, unsleeping technology, and borderless
managers... (but)... Once belief was gone, the churches began to
Maybe Bill Greider, in The Soul of Capitalism, put the contradiction
If capitalism were someday found to have a soul, it would probably
be located in the mystic qualities of capital itself. The substance
begins simply enough as personal savings and business profits,
then flows like oxygen through labyrinthine channels into the
heart and muscle of economic life…With a few important exceptions,
the agents of capital operate with dedicated blindness to capital's
collateral consequences, an indifference to the future of society
even as they search for the future's returns. The great contradiction--and
the reason reform is possible--is that Wall Street works with
other people's money, mainly the retirement savings of ordinary
Americans whose values it ignores, whose common interests are
During the recent Presidential primaries, American voters increasingly
turned away from the faith-based economics of the roaring '90s.
Money on the Line
I think the true discovery of America is before us. I think
the true fulfillment of our spirit, of our people, of our mighty
and immortal land, is yet to come. I think the true discovery of
our own democracy is still before us. And I think that all these
things are certain as the morning, as inevitable as noon.
As the editors of Money on the Line put it, "...trade unions and
their pension funds are on the threshold of developing more innovative
practices of long-term benefit to members as well as the broader
community…Indeed, it can be pointed out that the country itself
will benefit from more productive approaches to investment with
goals of job creation, community development, corporate accountability,
and long-term sustainable growth."
Greider also described this rising power of "Labor's Capital":
Leo Gerard, now president of the United Steelworkers of America,
became an early apostle for mobilizing labor's capital as he saw
small manufacturers in the industrial Midwest decimated either
by financial maneuvers or their inability to raise capital. Gerard,
who is Canadian… created the Heartland Labor Capital Network,
which promotes the goal of replicating Canada's successful labor-sponsored
investment funds (Quebec's Solidarity Fund, by attracting small
investors with tax incentives, has become the largest source of
venture capital in the province). Gerard envisions a growing galaxy
of like-minded investment firms that do "control investing" for
corporate rehabilitations, with union pension funds putting up
some of the capital. In return, the takeover insiders would have
to agree at a minimum to honor employees and their rights: to
remain neutral on union organizing and guarantee speedy recognition
of new locals through card-check registration by a majority of
These developments coincide with the revolt of a new breed of
"gray panthers" who are concerned about the destruction of retirement
security and the need for longer-term, productive investment traditions.
Senator Ted Kennedy, in a major address at City University of New
York in March, 2004, charged that:
Progressives cannot continue to play defense in the battle of
ideas. The stakes are too high. Nor can we allow ourselves to
be cast as mere defenders of the status quo. We must make the
debate between our vision of the future versus theirs.
And part of Kennedy's vision?
At least a small portion of the trillions of dollars in pension
funds could be invested in public projects. If just five percent
of the nation's pension funds were invested, at competitive rates,
directly in job-creating and economy-building activities, more
than $300 billion in assets could be made available, in a manner
consistent with both the security and growth of the pension funds...The
nation's pension funds can help achieve such a goal.
Labor and communities are increasingly taking a stand, and "voting"
with their money. Joined by New York Attorney General Elliot Spitzer,
and led by California Treasurer Phil Angelides and other progressive
Treasurers, state and union pension funds climbed to the forefront
of the corporate scandal lawsuits. And CalPERS, with over $150 billion
in assets, implanted labor and human rights standards into its emerging
market investment practices, and pulled its investments out of Burma
in the last two years.
Even business owners - so-called "small republicans" - are waking
up to the brutality of unchecked corporate power as it "out-sources"
everything in sight. Labor and business coalitions for "trade sanity"
are emerging in states like Connecticut, Pennsylvania, and Wisconsin,
fighting extreme off-shoring and unfair trade agreements. Midwest
governors are demanding that the Administration and Congress address
the jobs crisis and unfettered trade, and Lou Dobbs is nailing corporate
reprobates exporting North American jobs every night on CNN.
Some, like Senator Kerry, are listening and proposing new manufacturing
investment and trade strategies. Canada's NDP Leader Jack Layton
has been particularly pointed:
The WTO has been called the 'mother of all backroom deals' -
the greatest transfer of economic and political power in history...
from communities and nation states into the hands of a small number
of global corporations.
A counterattack is now in full swing. The Republicans and the
Chamber in California have attacked CalPERS and the labor coalitions
that challenged the grocery chains during the recent strikes. NYSE
Chair John Thane, in op-ed pieces in the Wall Street Journal,
is leading an incredibly vapid and dangerous backlash to the corporate
governance reforms of Sarbanes-Oxley, claiming they have gone too
far and cost too much. And, the national chamber and Business Roundtable
and other national corporate groups have formed lobbying and educational
fronts to counter the grass-roots revolts against offshoring, trying
to put a friendly face on mass job loss.
In the last half-decade, another generation of workers have suffered
the destructive consequences of a finance capital regime that was
out of control. It is tragic so many have had to suffer to expose
this mass swindle. The sharks-in-suits must be stopped from orchestrating
yet another Wall Street putsch; once again pilfering the savings
and assets of working families. Workers in France took to the streets
to protect their retirement programs; maybe it's time we all did.
We really can't go home again.
T.W. Croft is the Director of the Heartland
Labor Capital Network. Read about the evolution of the Network,
and a good collection of labor/capital articles, in Money on
the Line: Workers Capital in Canada, edited by Isla Carmichael
and Jack Quarter, published by Canadian
Centre for Policy Alternatives .
(Quotes in italics from Thomas Wolfe, You Can't Go Home