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Citation: Harper's Magazine Dec 1998, 11(1)
Author: Lapham, Lewis H.
Title: Sucking at straws. by Lewis H. Lapham
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COPYRIGHT 1998 Harper's Magazine Foundation
I hope we shall ... crush in its birth the aristocracy of our moneyed
corporations, which dare already to challenge our government to a trial of
strength, and bid defiance to the laws of our country.
--Thomas Jefferson
As recently as last May it was all but impossible to open a newspaper or
walk into a cocktail party in Washington or New York without coming across a
testimonial to the benevolence of the new world economic order. The good old
invisible hand was filling everybody's glass with festive rounds of foaming
profit, and the uses of the world's governments had been reduced to those of
attentive waiters, mindful of their duty to lower taxes, stay off the backs of
the people and out of the way of the band, and leave the markets--the free,
unfettered, life-giving markets--well enough alone.
The hum of self-congratulation was so complacent that I sometimes felt
constrained to raise a doubt or ask a question--not because I knew the
difference between a derivative and a hedge fund but because I objected to
what I took to be the unspoken assignment to money of the powers properly
associated with the human intellect and imagination. Although I was only an
occasional reader of the dispatches from the frontiers of the global economy,
I couldn't kelp but notice occasional anomalies. South Korea was reporting
unpaid wages of $334 million, stores of unsold wheat were rising like Egyptian
pyramids on the Dakota plains, and an alarming number of Ralph Lauren polo
shirts were stranded an the docks of Canton. In Indonesia the general
population was eating mostly insects. The rioting in Jakarta had quickened in
intensity throughout the month of April--students burning flags; looters
ransacking Wal-Mart, Dunkin' Donuts, and Pizza Hut; rich Chinese merchants so
frightened of the mob that they were attempting to rent a column of tanks--and
on May 21, the rupiah having lost another 40 percent of its value in almost as
many days, General Suharto at last resigned.
None of the observations disturbed the fortunate consensus gathered on the
editorial page or the lawn. Yes, of course, certain difficulties remained, and
maybe it was true that 30 million Indonesians had been forced to retire from
the middle class into the mud of poverty, that the Japanese banks, stubbornly
refusing the program of healthy financial exercise recommended by the
therapists at the International Monetary Fund, continued to confuse the arts
of accounting with the symbolic movements of the Kabuki theater. So what?
Difficulties always remained--like the peanut shells under the field-level
boxes at Yankee Stadium--but by and large and most things considered, last
year's crisis had been averted; the global economy had weathered the storm of
the Asian currency devaluations, had recovered its composure in Russia, was
looking brightly forward not only to the birth of the euro but also to the
prospect of stability in Nigeria, prosperity in Italy, equilibrium in Brazil.
Prices continued to move firmly upward on the Wall Street stock exchanges, and
Alan Greenspan, that great and good chairman of the Federal Reserve Bank named
de facto captain of the American ship of state since President Clinton had
fallen overboard with Monica Lewinsky, saw nothing on the calm horizon but
blue sea and white sailboats.
The optimism didn't survive August's calendar of political and economic
events. Terrorist bombs destroyed the American embassies in Kenya and Tanzania
on August 7, and within the brief span of the next twenty-four days Iraq once
again dismissed the U.N. arms inspectors, calamitous flooding in China forced
the evacuation of 13 million people and the abandonment of 5 million
dwellings, civil war in Kosovo chased 200,000 ethnic Albanians into starvation
or the forest, American cruise missiles obliterated a barracks in Afghanistan
and a chemical factory in Khartoum, the Japanese banks acknowledged
non-performing loans in the amount of $550 billion, and prices on the world's
stock markets fell into steep decline, the Dow Jones Industrial Average posted
a loss of 1,344 points, and the Russian economy collapsed, what little was
left of Yeltsin's government devaluing the ruble and suspending repayment of
its foreign debt.
By the first week in September the American State Department was advising
its dependents to flee their embassies in Albania, Pakistan, East Africa, and
Congo, and the American news media were wondering why roughly $1.5 trillion of
the world's wealth had vanished as mysteriously as the last unicorn.
Historians presented analogies, politicians expressed hopes, economists
recommended policies, moralists passed judgment. Nobody was singing any more
hymns to Mammon. The lamps of allegiance had been extinguished in the
electronic twinkling of 10,000 computer terminals, as stock market prices
drifted further downward into the abyss, and nearly everybody with access to a
microphone recanted his or her faith in the infallibility of free, unfettered,
life-giving markets. Governments apparently were more important than one might
previously have supposed, and so fervent was the hope of rescue, and so rapid
the conversion to the new socio-economic revelation, that over the course of
the next few weeks the only investments deemed to be both wholesome and safe
were those in American Treasury bonds.
Greenspan was hastily outfitted with powers and divinities not unlike those
once awarded to a Roman consul leaving for the wars against Hannibal and the
Carthaginian elephants. The chairman looked somewhat startled, but he didn't
shirk his duty to the Wall Street banks, and mindful of the urgency of the
task at hand, he delivered an uncharacteristically forthright speech at the
University of California on September 4, drawing the attention of his audience
to the great truth of the great platitude about the nature of the postmodern
geo-economic order. "It is just not credible," he said, "that the United
States can remain an oasis of prosperity unaffected by a world that is
experiencing greatly increased stress."
Various ad hoc committees of experts supposedly knowledgeable about the mood
and behavior of the world's money meanwhile were busy arranging symposia meant
to explain, or at least account for, the accident in the engine room of the
global economy. Now that trouble had come so close to the American shore they
could see, as if with the eyes of little children, that the world was short of
cash. Too much product on the markets, and not enough money in the hands of
people willing and able to buy another Korean motorcycle, another Italian
suit, another Swiss watch.
Within the space of ten days I received invitations to as many conferences,
and for reasons informed by nothing other than convenience I accepted the one
announced for September 21 at New York University's School of Law. The title
of the program was suitably robust ("Strengthening Democracy in the Global
Economy: An Opening Dialogue"), and the advance publicity promised a cast of
eminent authorities (among them Bill and Hillary Clinton as well as Tony
Blair, the British prime minister, and the director of the London School of
Economics) addressing matters of no small pith and moment--"The world is
aflame with great challenges ... roller coaster markets, unprecedented
bankruptcies, cross-border crime, terrorism, rigged elections, gruesome human
rights violations, increasing income gaps between rich and poor, ethnic and
communal violence, vast countries in deep decline."
The all-day dialogue divided into three parts, and when I arrived in time
for the first of the two afternoon sessions I found 300 dignitaries and thirty
television cameras gathered in a handsomely wainscotted room on Washington
Square. The important media people in the crowd, television anchorpersons as
well as syndicated newspaper columnists, supplied a flattering sense of
significant occasion, and the panelists seated at a polished library table,
next to an antique globe and around a centerpiece of cut flowers, furnished
the solemn expressions of grave concern. All present agreed to the naming of
Japan as Public Enemy Number One, the last seven years of Tokyo's
mismanagement blamed for the economic wreckage on four continents, but the
immediate causes of the current turmoil were Russian. Crony capitalists in
Moscow apparently had stolen most of the $4.8 billion provided by the IMF as
recently as July, and as soon as it became clear that no benevolent government
was going to make good the losses suffered by foreign banks and financial
speculators (in the way that the U.S. Treasury had made good the same kind of
losses in Mexico in 1995), investors everywhere in the world began to hustle
their money out of markets suddenly perceived as both fallible and
treacherous, and it was this sudden flight of capital into the safe harbor of
American bonds that had prompted the specter of catastrophe to rise, like
Godzilla, from the sea of alien debt.
As is customary at conferences intended for broadcast on C-Span, the
panelists presented their remarks as a decorous exchange of exquisite
euphemism--urgent need to shift assets from short-term speculation to
long-term value, general lack of civic responsibility, capitalism encouraged
to show a human face, urgent need for new financial architecture built to the
specifications of the new Information Age, fear of contagion in Latin America,
transparency still in short supply, multinational morality a must, etc.--and
the steady drone of their voices soon blurred into a sound not unlike the
murmur of contented bees.
Because it was hard to stay awake, much less take responsible notes, I
passed the time trying to remember what had been said on most of the same
topics at last winter's meeting of the World Economic Forum in Davos,
Switzerland. The conversations had taken place on a much larger scale,
distributed among as many as 2,000 discussants (corporate executives, policy
intellectuals, heads of state, Nobel Prize-winning physicists, etc.) across
the span of five days and six nights, but they had exhibited a similar
fondness for dialogue and had run aground on the same reef of contradiction.
As devout capitalists, the participants affirmed their belief in the free
market--dynamic, glorious, the source of all our blessings--but then again,
when one got to really thinking about it, the free market lacked a Christian
conscience, and sometimes it could be very, very cruel. Not only cruel, but
also stupid. No less a figure than George Soros, the Great Khan of currency
speculators and patron saint of Prague, had compared the world's capital
market to a gigantic wrecking ball, swinging out of control with increasing
speed, knocking over national economies like bowling pins. Left to its own
devices, Soros had said, the global market would undoubtedly destroy itself.
Not for any ideological reason, not because it resented rich people or failed
to vote Republican, but because it obeyed the laws of motion rather than the
rule of reason, and it didn't know how to do anything else except destroy
itself.
But who then would teach the market the rules of proper conduct and
deportment? The delegates at Davos didn't know, and neither did the panelists
on Washington Square. The making of rules implied equipping government with
powers well beyond the ones ordinarily entrusted to waiters, which was both a
problem and a blasphemy.
About three o'clock in the afternoon the panelists reached the question of
transparency in Asia, the appalling lack of it attributed to poor market
supervision (a shortfall of regulatory agencies, not enough data in the
computers, inadequate means of democratic oversight, etc.), and when somebody
unexpectedly paused to consult a note, Laura Tyson, the former chairperson of
President Clinton's Council of Economic Advisers, interrupted the discussion
to observe that the heavy capital flows that had drowned the Asian economies
didn't come from Asia. They came from Europe and the United States, from fully
developed industrial countries well equipped with sufficient data and the
instruments of democratic oversight. What we are talking about here, she said,
is greed ... stupidity, cowardice, and greed ... about investors in London and
Paris and New York seizing the prey of easy profits and then, when the luck
went bad, seeking to transfer their markers to a government ... about
privatizing the gains, socializing the losses.
The distinguished company didn't pursue Ms. Tyson's line of argument. A
gentleman associated with Goldman, Sachs coughed discreetly into his
microphone, Hillary Clinton smiled at a television camera, two media hierarchs
adjusted their ties, and the murmuring resumed.
President Clinton walked into the room at 4:30 P.M. with a swarm of
photographers, and possibly because he hadn't been having a happy
day--beginning at about 10:00 A.M. the networks had been broadcasting all four
hours of his grand-jury testimony in the matter of Monica Lewinsky--the guests
in the law-school library welcomed him with an especially cheerful show of
sustained applause. Clinton acknowledged the courtesy with a wan smile,
introduced the three other participants on his panel (the prime minister of
Italy, the president of Bulgaria, "my good friend Tony Blair") and deftly
forestalled the possibility of further embarrassment by escaping into his
character as the country's supreme policy expert.
The President spoke for the better part of two hours, playing the double
roles of moderator and principal participant, drawing the distinction between
"internationalists" and "isolationists," favoring "mega-choices" and
"micro-loans," endorsing the wisdom of the Noble Greenspan ("America is not
immune! ... We cannot remain an island of prosperity in a sea of despair!"),
recommending wide distribution of "the tools of empowerment," calling for
"fresh perspectives," and ending with a well told homily about the importance
of global warming.
It was an impressive recitation made more impressive by the circumstances in
which it was performed, but as I listened to the President speak, his display
of utmost concern precisely matched to the current measure of public alarm, I
understood that he was addressing the prospect of worldwide recession with
nothing other than a set of empty abstractions and no weight of
authority--moral, intellectual, political, or spiritual--that might inform his
words with meaning and force. His fine pose of high presidential seriousness
was exactly that--a pose, a department-store-window display. By his own all
too recent admission, his words were counterfeit, made, like his presidency,
to be seen and not heard. Despite his sometimes picturesque rhetoric to the
contrary, Clinton always had been a politician who could be relied upon not to
quarrel with the geo-economic theory that now suddenly threatened to
demonstrate the downside of its nature in American as well as Asian grocery
stores, and the longer I listened to him talk, the more clearly I saw him as a
free-market song-and-dance man, strutting the year-end numbers, juggling the
projections, glad to accept the premise that democracy was a public-affairs
program made possible by a grant from the corporate sponsors. He had as little
notion of how to get out of the way of George Soros's wrecking ball as did
George Soros (whose Quantum Fund had lost $2 billion of its investment in the
illusion of a sturdy Russian ruble), and his bewilderment was a measure of the
extent to which what Jefferson once called "the aristocracy of our moneyed
corporations" had crushed the country's political spirit.
The seminar concluded with a farewell round of long applause--for Hillary's
show of strength in the face of scandal as well as for the President's lecture
on global economics--and among the participants pushing toward the doors, I
looked for Ingo Walter, the director of the Salomon Center at NYU, whom I
remembered having heard at Davos saying that international bankers were
supposed to perform "a function similar to that of a zookeeper, managing wild
animals." I wanted to ask him how and why it had happened that so many of the
animals had escaped from their cages. Where would they be going next, the
animals, and on whom would they be feeding? I couldn't find Walter in the
crowd, but in Washington Square I came across two gentlemen seated on a bench
and dressed in garbage bags, talking to themselves in what I took to be an
illegal dream of heaven, and I couldn't help but notice that the grins on
their faces were not less fixed or distant than those in the faces of the
participants in the law-school library, sucking at the straws of dialogue.
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