December 2012, Week 1


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Mon, 3 Dec 2012 21:55:26 -0500
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The Archeology of Decline Debtpocalypse and the
Hollowing Out of America 

By Steve Fraser

The National Museum of Industrial Homicide

Tomgram: Steve Fraser, December 2, 2012.


"Debtpocalypse" looms.  Depending on who wins out in
Washington, we're told, we will either free fall over
the fiscal cliff or take a terrifying slide to the pit
at the bottom.  Grim as these scenarios might seem,
there is something confected about the mise-en-scene,
like an un-fun Playland.  After all, there is no fiscal
cliff, or at least there was none -- until the two
parties built it.

And yet the pit exists.  It goes by the name of
"austerity." However, it didn't just appear in time for
the last election season or the lame-duck session of
Congress to follow.  It was dug more than a generation
ago, and has been getting wider and deeper ever since. 
Millions of people have long made it their home. 
"Debtpocalypse" is merely the latest installment in a
tragic, 40-year-old story of the dispossession of
American working people.

Think of it as the archeology of decline, or a tale of
two worlds. As a long generation of austerity politics
hollowed out the heartland, the quants and traders and
financial wizards of Wall Street gobbled up ever more
of the nation's resources. It was another Great
Migration -- instead of people, though, trillions of
dollars were being sucked out of industrial America and
turned into "financial instruments" and new, exotic
forms of wealth.  If blue-collar Americans were the
particular victims here, then high finance is what
consumed them.  Now, it promises to consume the rest of

Scenes from the Museum

In the mid-1970s, Hugh Carey, then governor of New
York, was already noting the hollowing out of his part
of America.  New York City, after all, was threatening
to go bankrupt.  Plenty of other cities and states
across what was then known as the "Frost Belt" were in
similar shape.  Yankeedom, in Carey's words, was
turning into "a great national museum" where tourists
could visit "the great railroad stations where the
trains used to run."

As it happened, the tourists weren't interested.
Abandoned railroad stations might be fetching in an
eerie sort of way, but the rest of the museum was
filled with artifacts of recent ruination that were too
depressing to be entertaining.  True, a century
earlier, during the first Gilded Age, the upper crust
used to amuse itself by taking guided tours of the
urban demi-monde, thrilling to sites of exotic
depravity or ethnic strangeness. They traipsed around
"rag-pickers alley" on New York's Lower East Side or
the opium dens of Chinatown, or ghoulishly watched poor
children salivate over toys in store window displays
they could never hope to touch.

Times have changed.  The preference now is to entirely
remove the unsightly.  Nonetheless, the national museum
of industrial homicide has, city by city, decade by
decade, grown more grotesque.

Camden, New Jersey, for example, had long been a
robust, diversified small industrial city.  By the
early 1970s, however, its reform mayor Angelo
Errichetti was describing it this way: "It looked like
the Vietcong had bombed us to get even.  The pride of
Camden... was now a rat-infested skeleton of yesterday,
a visible obscenity of urban decay.  The years of
neglect, slumlord exploitation, tenant abuse,
government bungling, indecisive and short-sighted
policy had transformed the city's housing, business,
and industrial stock into a ravaged, rat-infested
cancer on a sick, old industrial city."

That was 40 years ago and yet, today, news stories are
still being written about Camden's never-ending decline
into some bottomless abyss.  Consider that a measure of
how long it takes to shut down a way of life.

Once upon a time, Youngstown, Ohio, was a typical
smokestack city, part of the steel belt running through
Pennsylvania and Ohio.  As with Camden, things there
started turning south in the 1970s.  From 1977 to 1987,
the city lost 50,000 jobs in steel and related
industries.  By the late 1980s, the years of Ronald
Reagan's presidency when it was "morning again in
America," it was midnight in Youngstown: foreclosures,
an epidemic of business bankruptcies, and everywhere
collapsing community institutions including churches,
unions, families, and the municipal government itself.

Burglaries, robberies, and assaults doubled after the
steel plants closed.  In two years, child abuse rose by
21%, suicides by 70%. One-eighth of Mahoning County
went on welfare.  Streets were filled with dead
storefronts and the detritus of abandoned homes: scrap
metal and wood shingles, shattered glass, stripped-away
home siding, canning jars, and rusted swing sets.  Each
week, 1,500 people visited the Salvation Army's soup

The Wall Street Journal called Youngstown "a
necropolis," noting miles of "silent, empty steel
mills" and a pervasive sense of fear and loss.  Bruce
Springsteen would soon memorialize that loss in "The
Ghost of Tom Joad."

If you were unfortunate enough to live in the small
industrial city of Mansfield, Ohio, for the last 40
years, you would have witnessed in microcosm the
dystopia of destruction unfolding in similar places
everywhere.  For a century, workshops there had made a
kaleidoscope of goods: stoves, tires, steel, machinery,
refrigerators, and cars. Then Mansfield's rust belt
started narrowing as one plant after another went shut
down: Dominion Electric in 1971, Mansfield Tire and
Rubber in 1978, Hoover Plastics in 1980, National
Seating in 1985, Tappan Stoves in 1986, a Westinghouse
plant and Ohio Brass in 1990, Wickes Lumber in 1997,
Crane Plumbing in 2003, Neer Manufacturing in 2007, and
Smurfit-Stone Container in 2009.  In 2010, General
Motors closed its largest, most modern U.S. stamping
factory, and thanks to the Great Recession, Con-way
Freight, Value City, and Card Camera also shut down.

"Good times" or bad, it didn't matter.  Mansfield
shrank relentlessly, becoming the urban equivalent of
skin and bones.  Its poverty rate is now at 28%, its
median income $11,000 below the national average of
$41,994.  What manufacturing remains is non-union and
$10 an hour is considered a good wage.

Midway through this industrial auto-da-fe, a journalist
watching the Campbell Works of Youngstown Sheet and
Tube go dark, mused that "the dead steel mills stand as
pathetic mausoleums to the decline of American
industrial might that was once the envy of the world."
This dismal record is particularly impressive because
it encompasses the "boom times" presided over by
Presidents Reagan and Clinton.

The "Pit" Deepens

In 1988, in the iciest part of the Frost Belt, a Wall
Street Journal reporter noted, "There are two Americas
now, and they grow further apart each day."  He was
referring to Eastport, Maine.  Although the deepest
port on the East Coast, it hosted few ships, abandoned
sardine factories lined its shore, and its bars were
filled with the under- and unemployed.  The reporter
pointed out that he had seen similar scenes from a
collapsing rural economy "coast to coast, border to
border": shuttered saw mills, abandoned mines, closed
schools, rutted roads, ghost airports.

Closing up, shutting down, going out of business: last
one to leave please turn out the lights!

Such was the case in cities and towns around the
country. Essential public services -- garbage
collection, policing, fire protection, schools, street
maintenance, health-care -- were atrophying.  So were
the people who lived in those places.  High blood
pressure, cardiac and digestive problems, and mortality
rates were generally rising, as was doubt, self-blame,
guilt, anxiety, and depression.  The drying up of
social supports, even among those who once had been
friends and workmates, haunted the inhabitants of these
places as much as the industrial skeletons around them.

In the 1980s, when Jack Welch, soon to be known as
"Neutron Jack" for his ruthlessness, became CEO of
General Electric, he set out to raise the company's
stock price by gutting the workforce.  It only took him
six years, but imagine what it was like in Schenectady,
New York, which lost 22,000 jobs; Louisville, Kentucky,
where 13,000 fewer people made appliances; Evendale,
Ohio, where 12,000 no longer made lights and light
fixtures; Pittsfield, Massachusetts, where 8,000
plastics makers lost their jobs; and Erie,
Pennsylvania, where 6,000 locomotive workers got green

Life as it had been lived in GE's or other one-company
towns ground to a halt. Two travelling observers, Dale
Maharidge and Michael Williamson, making their way
through the wasteland of middle America in 1984 spoke
of "medieval cities of rusting iron" and a largely
invisible landscape filling up with an army of
transients, moving from place to place at any hint of
work.  They were camped out under bridges, riding
freight cars, living in makeshift tents in fetid
swamps, often armed, trusting no one, selling their
blood, eating out of dumpsters.

Nor was the calamity limited to the northern Rust Belt.
 The South and Southwest did not prove immune from this
wasting disease either.  Empty textile mills, often
originally runaways from the North, dotted the
Carolinas, Georgia, and elsewhere.  Half the jobs lost
due to plant closings or relocations occurred in the

In 2008, in the sunbelt town of Colorado Springs,
Colorado, one-third of the city's street lights were
extinguished, police helicopters were sold, watering
and fertilizing in the parks was eliminated from the
budget, and surrounding suburbs closed down the public
bus system. During the recent Great Recession
one-industry towns like Dalton, Georgia ("the carpet
capital of the world"), or Blakely, Georgia ("the
peanut capital of the world"), or Elkhart, Indiana
("the RV capital of the world") were closing libraries,
firing police chiefs, and taking other desperate
measures to survive.

And no one can forget Detroit. Once, it had been a
world-class city, the country's fourth largest, full of
architectural gems.  In the 1950s, Detroit had a
population with the highest median income and highest
rate of home ownership in urban America.  Now, the
"motor city" haunts the national imagination as a ghost
town. Home to two million a quarter-century ago, its
decrepit hulk is now "home" to 900,000.  Between 2000
and 2010 alone, the population hemorrhaged by 25%,
nearly a quarter of a million people, almost as many as
live in post-Katrina New Orleans.  There and in other
core industrial centers like Baltimore, "death zones"
have emerged where whole neighborhoods verge on medical

One-third of Detroit, an area the size of San
Francisco, is now little more than empty houses, empty
factories, and fields gone feral.  A whole industry of
demolition, waste-disposal, and scrap-metal companies
arose to tear down what once had been. With a jobless
rate of 29%, some of its citizens are so poor they
can't pay for funerals, so bodies pile up at
mortuaries.  Plans are even afoot to let the grasslands
and forests take over, or to give the city to private

Even the public zoo has been privatized.  With staff
and animals reduced to the barest of minimums and
living wages endangered by its new owner, an associate
curator working with elephants and rhinos went in
search of another job.  He found it with the city --
chasing down feral dogs whose population had
skyrocketed as the cityscape returned to wilderness.
History had, it seemed, abandoned dogs along with their
human compatriots.

Looking Backward

But could this just be the familiar story of
capitalism's penchant for "creative destruction"?  The
usual tale of old ways disappearing, sometimes
painfully, as part of the story of progress as new
wonders appear in their place?

Imagine for a moment the time traveler from Looking
Backward, Edward Bellamy's best-selling utopian novel
of 1888 waking up in present-day America.  Instead of
the prosperous land filled with technological wonders
and egalitarian harmony Bellamy envisioned, his
protagonist would find an unnervingly familiar world of
decaying cities, people growing ever poorer and sicker,
bridges and roads crumpling, sweatshops a commonplace,
the largest prison population on the planet, workers
afraid to stand up to their bosses, schools failing,
debts growing more onerous, and inequalities starker
than ever.

A recent grim statistic suggests just how Bellamy's
utopian hopes have given way to an increasingly
dystopian reality.  For the first time in American
history, the life expectancy of white people, men and
women, has actually dropped.  Life spans for the least
educated, in particular, have fallen by about four
years since 1990.  The steepest decline: white women
lacking a high school diploma.  They, on average, lost
five years of life, while white men lacking a diploma
lost three years.

Unprecedented for the United States, these numbers come
close to the catastrophic decline Russian men
experienced in the desperate years following the
collapse of the Soviet Union.  Similarly, between 1985
and 2010, American women fell from 14th to 41st place
in the United Nation's ranking of international life
expectancy. (Among developed countries, American women
now rank last.)  Whatever combination of factors
produced this social statistic, it may be the rawest
measure of a society in the throes of economic

One other marker of this eerie story of a developed
nation undergoing underdevelopment and a striking
reproach to a cherished national faith: for the first
time since the Great Depression, the social mobility of
Americans is moving in reverse.  In every decade from
the 1970s on, fewer people have been able to move up
the income ladder than in the previous 10 years. Now
Americans in their thirties earn 12% less on average
than their parents' generation at the same age.  Danes,
Norwegians, Finns, Canadians, Swedes, Germans, and the
French now all enjoy higher rates of upward mobility
than Americans.  Remarkably, 42% of American men raised
in the bottom one-fifth income cohort remain there for
life, as compared to 25% in Denmark and 30% in
notoriously class-stratified Great Britain.

Eating Our Own

Laments about "the vanishing middle class" have become
commonplace, and little wonder.  Except for those in
the top 10% of the income pyramid, everyone is on the
down escalator.  The United States now has the highest
percentage of low-wage workers -- those who earn less
than two-thirds of the median wage -- of any developed
nation. George Carlin once mordantly quipped, "It's
called the American Dream because you have to be asleep
to believe it." Now, that joke has become our waking

During the "long nineteenth century," wealth and
poverty existed side by side.  So they do again.  In
the first instance, when industrial capitalism was
being born, it came of age by ingesting what was
valuable embedded in pre-capitalist forms of life and
labor, including land, animals, human muscle power,
tools and talents, know-how, and the ways of organizing
and distributing what got produced.  Wealth accumulated
in the new economy by extinguishing wealth in the older

"Progress" was the result of this economic metabolism.
Whatever its stark human and ecological costs, its
achievements were also highly visible.  America's
capacity to sustain a larger and larger population at
rising levels of material well-being, education, and
health was its global boast for a century and half.

Shocking statistics about life expectancy and social
mobility suggest that those days are over.  Wealth,
great piles of it, is still being generated, and
sometimes displayed so ostentatiously that no one could
miss it.  Technological marvels still amaze. Prosperity
exists, though for an ever-shrinking cast of
characters.  But a new economic metabolism is visibly
at work.

For the last 40 years, prosperity, wealth, and
"progress" have rested, at least in part, on a
grotesque process of auto-cannibalism -- it has also
been called "dis-accumulation" by David Harvey -- of a
society that is devouring its own.

Traditional forms of primitive accumulation still exist
abroad.  Hundreds of millions of former peasants,
fisherman, craftspeople, scavengers, herdsmen,
tradesmen, ranchers, and peddlers provide the labor
power and cheap products that buoy the bottom lines of
global manufacturing and retail corporations, as well
as banks and agribusinesses. But here in "the
homeland," the very profitability and prosperity of
privileged sectors of the economy, especially the
bloated financial arena, continue to depend on slicing,
dicing, and stripping away what was built up over

Once again a new world has been born.  This time, it
depends on liquidating the assets of the old one or
shipping them abroad to reward speculation in
"fictitious capital."  Rates of U.S. investment in new
plants, technology, and research and development began
declining during the 1970s, a fall-off that only
accelerated in the gilded 1980s.  Manufacturing, which
accounted for nearly 30% of the economy after the
Second World War, had dropped to just over 10% by 2011.
 Since the turn of the millennium alone, 3.5 million
more manufacturing jobs have vanished and 42,000
manufacturing plants were shuttered.

Nor are we simply witnessing the passing away of relics
of the nineteenth century. Today, only one American
company is among the top ten in the solar power
industry and the U.S. accounts for a mere 5.6% of world
production of photovoltaic cells.  Only GE is among the
top ten companies in wind energy. In 2007, a mere 8% of
all new semi-conductor plants under construction
globally were located in the U.S.  Of the 1.2 billion
cell phones sold in 2009, none were made in the U.S. 
The share of semi-conductors, steel, cars, and machine
tools made in America has declined precipitously just
in the last decade.  Much high-end engineering design
and R&D work has been offshored. Now, there are more
people dealing cards in casinos than running lathes,
and almost three times as many security guards as

The FIRE Next Time

Meanwhile, for more than a quarter of a century the
fastest growing part of the economy has been the
finance, insurance, and real estate (FIRE) sector.
Between 1980 and 2005, profits in the financial sector
increased by 800%, more than three times the growth in
non-financial sectors.

In those years, new creations of financial ingenuity,
rare or never seen before, bred like rabbits.  In the
early 1990s, for example, there were a couple of
hundred hedge funds; by 2007, 10,000 of them.  A whole
new species of mortgage broker roamed the land,
supplanting old-style savings and loan or regional
banks.  Fifty thousand mortgage brokerages employed
400,000 brokers, more than the whole U.S. textile
industry.  A hedge fund manager put it bluntly, "The
money that's made from manufacturing stuff is a
pittance in comparison to the amount of money made from
shuffling money around."

For too long, these two phenomena -- the eviscerating
of industry and the supersizing of high finance -- have
been treated as if they had nothing much to do with
each other, but were simply occurring coincidentally.

Here, instead, is the fable we've been offered: Sad as
it might be for some workers, towns, cities, and
regions, the end of industry is the unfortunate, yet
necessary, prelude to a happier future pioneered by
"financial engineers." Equipped with the mathematical
and technological know-how that can turn money into
more money (while bypassing the messiness of producing
anything), they are our new wizards of prosperity!

Unfortunately, this uplifting tale rests on a
categorical misapprehension.  The ascendancy of high
finance didn't just replace an industrial heartland in
the process of being gutted; it initiated that gutting
and then lived off it, particularly during its
formative decades.  The FIRE sector, that is, not only
supplanted industry, but grew at its expense -- and at
the expense of the high wages it used to pay and the
capital that used to flow into it.

Think back to the days of junk bonds, leveraged
buy-outs, megamergers and acquisitions, and asset
stripping in the 1980s and 1990s.  (Think, in fact, of
Bain Capital.)  What was getting bought and stripped
and closed up supported windfall profits in
high-interest-paying junk bonds.  The stupendous fees
and commissions that went to those "engineering" such
transactions were being picked from the carcass of a
century and a half of American productive capacity. The
hollowing out of the United States was well under way
long before anyone dreamed up the "fiscal cliff."

For some long time now, our political economy has been
driven by investment banks, hedge funds, private equity
firms, real estate developers, insurance goliaths, and
a whole menagerie of ancillary enterprises that service
them.  But high times in FIRE land have depended on the
downward mobility of working people and the poor, cut
adrift from more secure industrial havens and
increasingly from the lifelines of public support. They
have been living instead in the "pit of austerity." 
Soon many more of us will join them.

Steve Fraser is a historian, writer, and
editor-at-large for New Labor Forum, co-founder of the
American Empire Project, and TomDispatch regular. He
is, most recently, the author of Wall Street: America's
Dream Palace. He teaches at Columbia University. 


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